AUBN 10-K & 10-Q changes, risk factors and insider trading

The risks discussed below also include forward-looking statements, and our actual results and financial condition may differ substantially from those discussed in these forward-looking statements.

Market conditions and economic cyclicality may adversely affect us and our industry.

Market developments, including unemployment,unemployment inflationrates, price and priceinflation levels, stock and bond market volatility, changes, including those resulting from Russia’s war in Ukraine and governmentalother wars and armed conflicts, tariffs and foreign policies, and government fiscal, operational and monetary policies affect consumer confidence levels, economic activity and interest rates. Increases in inflation and market interest rates and future expectations of these, and adverse changes in consumer and business confidence may change customers’ savings, payment and borrowing behaviors, and may increase in loan delinquencies and loan losses. These could affect our credit quality, our results of operations and financial condition.

Changes in market interest rates and the shape of the yield curve affect the value of our investment securities and our other accumulated other comprehensive income or “AOCI.”securities.

Our allowance for loan losses mayis proveaffected inadequateby orgeneral economic conditions and we may be negatively affected by credit risk exposures.

The Company was incorporated in 1990 under the laws of the State of Delaware and became a bank holding company after it acquired its Alabama predecessor, which was a bank holding company established in 1984. The Bank, the Company's principal subsidiary, is an Alabama state-chartered bank that is a member of the Federal Reserve System and has operated continuously since 1907. Both the Company and the Bank are headquartered in Auburn, Alabama. The Bank conducts its business primarily in East Alabama, including Lee County and surrounding areas. The Bank operates full-service branches in Auburn, Opelika, Notasulga and Valley, The Bank also operates a loan production office in Phenix City,Alabama.

Noninterest expense was $22.2$7.3 million infor 2024the full year 2025, compared to $22.6$6.4 million infor 2023.the full year 2024.

TheseThe decreasesincrease werewas partiallyprimarily offsetrelated byto increases in salaries and benefits expense ofand $0.4other million.noninterest expense.

The provision for income taxestax expense was $2.0 million for an effective tax rate of 23.82%21.24% for 2024,2025, compared to a tax benefit of $0.8$2.0 million for a negativean effective tax rate of (125.73)%23.82% for 2023.2024.

The Company’s effective income tax rate is affected principally by tax-exempt earnings from the Company’s investments in municipal securities,securities and loans, bank-owned life insurance, and New Markets Tax Credits.

Additionally, theThe provision for income tax expense and the effective tax rates for 2024 included discrete tax items associated with provision to return adjustments in conjunction with the final 2023 tax return filing and the resolution of state examination activities, which resulted in additional tax expense.

The Company paid cash dividends of $1.08 per share in 2024, unchanged from 2023. At December 31, 2024,2025, the Bank’s regulatory capital ratios were well above the minimum amounts required to be “well capitalized” under current regulatory standards with a total risk-based capital ratio of 15.81%,17.14%, a tier 1 leverage ratio of 10.49%10.71% and common equity tier 1 or (CET1) of 14.80%16.06% at December 31, 2024.2025.

. The allowance for credit losses is estimated under the CECL methodology set forth in FASB ASC 326. The allowance credit losses reflects management’s estimate of the amount of credit losses expected to be recognized over the remaining life of the loans in our portfolio. This evaluation requires significant management judgment and is based upon relevant available information related to historical default and loss experience, current and projected economic conditions, and other portfolio-specific and environmental risk factors. Losses are predicted over a reasonable and supportable forecast period, and at the end of the reasonable and supportable period losses revert to long term historical averages. The allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics, and on an individual basis for loans that do not share similar risk characteristics with the collectively evaluated pools. There are factors beyond our control, such as changes in projected economic conditions, real estate markets or particular industry conditions which may materially impact asset quality and the adequacy of the allowance for credit losses and thus the resulting provision for credit losses. The allowance is adjusted through provision for credit losses and decreased by charge-offs, net of recoveries of amounts previously charged-off. See Note 1 - Summary of Significant Accounting Policies and Note 54 - Loans and Allowance for Credit Losses in the notes to our consolidated financial statements in this report.

U.S. GAAP requires management to value and disclose certain of the Company’s assets and liabilities at fair value, including investments classified as available-for-sale and derivatives. ASC 820, Measurements and Disclosures , which defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP and expands disclosures about fair value measurements.

A valuation allowance is recognized for a deferred tax asset if, based on the weight of available evidence, it is more-likely-than-not that some portion or the entire deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. At December 31, 20242025 we had totalnet deferred tax assets of $10.2$6.9 million included as “other assets”, including $9.9$6.5 million resulting from unrealized losses in our securities portfolio.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “RISK FACTORS” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition or future results. The risks described in our annual report on Form 10-K are not the only the risks facing our Company.

The persistence of inflation above the Federal Reserve’s long term targets, and the maintenance of or further increases in, tightened Federal Reserve monetary policy by increased target interest rates and/or reductions in the Federal Reserve’s securities portfolio, have affected and may continue to affect the levels of interest rates, mortgage originations and income, the market values of our securities portfolio and loans and have resulted in unrealized securities losses that have adversely affected our stockholders’ equity.

ThisAlthough policyinflation washas continuedremained atabove the Federal Reserve’s

Federal Reserve’s April 30,

The Federal Reserve may or may not continue this accommodative policy, and has stated that future monetary policy action “will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.” SuchThese changes and other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results in the future.

Military hostilities involving the United States, Israel and Iran commenced on February 28, 2026 and continue subject to various temporary cease fire arrangements and pauses. As a result, shipments of oilpetroleum products through the StraitsStrait of Hormuz have been limited, reducing the total volumes of oil in the international markets and causing oil prices to rise significantly.

The Bank has been a member of the FHLB -of Atlanta since 1991. Certain of the statements made in this discussion and analysis and elsewhere, including information incorporated herein by reference to other documents, are “forward-looking statements” as more fully described under “Special Cautionary Notice Regarding Forward-Looking Statements” below.

The following discussion and analysis is intended to provide a better understanding of ourvarious factors related to the results of operations and financial condition of the Company and the Bank.

This discussion is intended to supplement and highlight information contained in the accompanying unaudited condensed consolidated financial statements and related notes for the quartersquarter and six months ended MarchJune 31,30, 2026 and 2025, as well as the information contained in our Annual Report on Form 10-K for the year ended December 31, 2025.2025 and our Quarterly Reports on Form 10-Q.

Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance, achievements or financial condition of the Company to be materially different from future results, performance, achievements or financial condition expressed or implied by such forward-looking You should not expect us to update any forward-looking statements.

All statements, other than statements of historical fact, could be forward-looking You can identify these forward-looking statements through our use of words such as “may”, “will”, “anticipate”, “assume”, “should”, “indicate”, “would”, “believe”, “contemplate”, “expect”, “estimate”, “continue”, “designed”, “plan”, “point to”, “project”, “could”, “intend”, “target”, “seek”, and other similar words and expressions of the future.

changes in banking, securities and tax laws, regulations and rules and their application by the regulators, including capital and liquidity requirements, greater nonbank participation in the Federal Reserve payments system, and in the coverage and cost of FDIC deposit insurance;

our future earnings and “eligible retained earnings” over rolling four calendar quarter periods may limit our d ividends,dividends, share repurchases and discretionary bonuses; and other factors and risks described under “Risk Factors” herein and in any of our subsequent reports that we make with the Securities and Exchange Commission (the “Commission” or “SEC”) under the Exchange Act.

Summary of Results of Operations (Dollars in thousands, except per share dataamounts)

See "Table 1 - Explanation of Non-GAAP Financial Measures."

The Company’s net earnings were $2.2$4.5 million for the first quartersix months of 2026, a 44%34% increase compared to $1.5$3.4 million for the first quartersix months of 2025.

Basic and diluted earnings per share were $0.63$1.29 per share for the first quartersix months of 2026, compared to $0.44$0.96 per share for the first quartersix months of 2025.

Net interest income (tax-equivalent) was $7.8$15.8 million for the first quartersix months of 2026, a 10%9% increase compared to $7.1$14.5 million for the first quartersix months of 2025.

The Company’s net interest margin (tax-equivalent) was 3.28%3.31% for the first quartersix months of 2026 compared to 3.09%3.13% for the first quartersix months of 2025.

This increase was primarily due to higher yields on interest-earningsinterest-earning assets, a decrease in our cost of interest-bearing deposits, and a more favorable asset mix.

Average loans were approximately $580.2 million in the first six months of 2026, compared to $563.1 million in the first six months of The Company recorded a negative provision for credit losses of $(76324) thousand in the first quartersix months of 2026, compared to a negativecharge to provision for credit losses of $(10)$103 thousand in the first quartersix months of 2025.

Noninterest income was $0.9$1.8 million in the first quartersix months of 2026, compared to $0.7$1.5 million in the first six months of The increase was primarily due to increased mortgage lending income and bank-owned life insurance (“BOLI”) income related to non-taxable death benefits received during the second quarter of 2025.2026.

The provision for income tax expense was $0.6 million for the first quarter of 2026 compared to $0.4 million for the first The Company's effective tax rate for the first quarter of 2026 was 21.53%, compared to 20.40% in the first The Company’s effective income tax rate is principally affected by tax-exempt earnings from the Company’s investments in municipal securities and loans, bank-owned life insurance (“BOLI”),BOLI, and New Markets Tax Credits (“NMTCs”).

The Company paid cash dividends of $0.27$0.54 per share in the first quartersix months of 2026 and 2025.

At March 31, 2026, the Bank’s regulatory capital ratios were well above the minimum amounts required to be “well capitalized” under current regulatory standards with a total risk-based capital ratio of 17.13%,17.24%, a tier 1 leverage ratio of 10.60%10.65% and a common equity tier 1 (“CET1”) ratio of 16.12%16.26% at MarchJune 31,30, 2026.