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Item 1A. Risk Factors

2021-03-09 compared with 2020-03-06 · 1295 added, 596 removed, 19 unchanged (99% of the section changed)

Any of the following risks could harm our business, results of operations and financial condition and an investment in our stock.

The risks discussed below

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

Market conditions and economic cyclicality may adversely affect our industry.

We are exposed to the U.S.

economy and market conditions generally.

Local employment and local economic conditions may be affected increasingly because of the

growth of automobile manufacturing and related suppliers located in our markets and nearby.

These businesses are adversely affected by higher interest rates and experience cyclicality of sales.

We believe the following, among other things, may affect us in 2019:

We expect to face continued high levels of regulation of our industry as a result of rulemaking and other

initiatives by the U.S.

government and its regulatory agencies.

Compliance with such laws and regulations may increase our costs, reduce our profitability, and limit our ability to pursue business opportunities and serve customers needs.

addition to 2018 Growth Act, various pending bills in Congress and statements by our regulators have provided some, and may provide further regulatory relief for banking organizations of our size.

We believe that comprehensive regulatory relief will

be slow and contentious.

We are uncertain about the scope, nature and timing of any regulatory relief, and its effect on us.

The Federal Reserve adopted in September 2014 a normalization of monetary policy (the Federal Reserve

Normalization Policy), which included gradually raising the Federal Reserves target range for the Federal Funds rate to more normal levels and gradually reducing the Federal Reserves holdings of U.S.

government and agency

The Federal Reserves target Federal Funds rate increased nine times since December 2015 in 25 basis point increments from 0.25% to 2.50% on December 20, 2018.

Although the Federal Reserve considers the target Federal Funds

rate its primary means of monetary policy normalization, in September 2017, it also began reducing its securities holdings by not reinvesting the principal of maturing securities, subject to certain monthly caps on amounts not reinvested.

reduction may also push interest rates higher and reduce liquidity in the financial system.

Beginning August 1, 2019, the Federal Reserve reduced its target Federal Funds rate in 25 basis point in each of August, September and October 2019, and

was 1.50% - 1.75% as of December 31, 2019.

Moreover, at the conclusion of the Federal Reserves Federal Open Market Committee (FOMC) meeting in July 2019, the FOMC announced that it intended to cease the reduction in the

Federal Reserves securities portfolio.

The nature and timing of any future changes in monetary policies and their effect on us and the Bank cannot be predicted.

If the coronavirus pandemic, or other events, has sufficient adverse effects on

the United States economy, the FOMC may determine to further reduce interest rates to stimulate the economy.

Market developments, including employment and price levels, stock market volatility and declines, and tax

changes, such as the Tax Cuts and Jobs Act (the 2017 Tax Act), may affect consumer confidence levels from time to time in different directions, and may cause adverse changes in payment behaviors and payment rates, causing increases in

delinquencies and default rates, which could affect our charge-offs and provisions for credit losses.

Our ability to assess the creditworthiness of our customers and those we do business with, and to estimate the

values of our assets and collateral for loans may be impaired if the models and approaches we use become less predictive of future behaviors and valuations.

The process we use to estimate losses inherent in our credit exposure or estimate the value

of certain assets requires difficult, subjective, and complex judgments, including forecasts of economic conditions and how those economic predictions might affect the ability of our borrowers to repay their loans or the value of assets.

The 2017 Tax Act substantially limits the deductibility of all state and local taxes for U.S.

including property taxes, lowers the cap on residential mortgage indebtedness for which U.S.

taxpayers may deduct interest.

These changes could have adverse effects on home sales, the volume of new mortgage and home equity loans and the values and

salability of residences held as collateral for loans.

Our ability to borrow from and engage in other business with other financial institutions on favorable terms or

at all could be adversely affected by disruptions in the capital markets or other events, including, among other things, investor expectations and changes in regulations.

Failures of other financial institutions in our markets and increasing consolidation of financial services

companies as a result of market conditions could increase our deposits and assets and necessitate additional capital, and could have unexpected adverse effects upon us and our business.

The Volcker Rule, including final regulations adopted in December 2013, may indirectly affect us

adversely by reducing market liquidity and securities inventories at those institutions where we buy and sell securities for our portfolio and increasing the bid-ask spreads on securities we purchase or sell.

These rules have decreased the range of permissible investments, such as certain collateralized loan obligation (CLO) interests, which we could otherwise use to diversify our assets and for asset/liability management.

The 2018 Growth Act

removed Volcker Rule restrictions generally on banks under $10 billion in assets.

In July 2019, the federal banking agencies issued a final rule to exclude community banking organizations, such as the Company and the Bank, from the Volcker

The soundness of other financial institutions could adversely affect us.

We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry,

including brokers and dealers, central clearinghouses, commercial banks, and investment funds, our correspondent banks and other financial institutions.

Our ability to engage in routine investment and banking transactions, as well as the quality and

values of our investments in equity securities and obligations of other financial institutions, could be adversely affected by the actions, financial condition, and profitability of such other financial institutions with which we deal, including,

without limitation, the FHLB and our correspondent banks.

At December 31, 2019, the amortized cost of the Banks investments in FHLB and our correspondent banks common stock was approximately $1.1 million.

Financial services

institutions are interrelated as a result of shared credits, trading, clearing, counterparty and other relationships.

As a result, defaults by, or even rumors or questions about, one or more financial institutions, or the financial services industry

generally, have led to market-wide liquidity problems, losses of depositor, creditor or counterparty confidence in certain institutions and could lead to losses or defaults by other institutions, and in some cases, failure of such institutions.

losses, defaults by, or failures of, the institutions we do business with could adversely affect our holdings of the debt of and equity in, such other institutions, our participation interests in loans originated by other institutions, and our

business, including our liquidity, financial condition and earnings.

Nonperforming and similar assets take significant time to resolve and may

adversely affect our results of operations and financial condition.

At December 31, 2019, our nonaccrual loans totaled $0.2 million, or

0.04% of total loans.

We had no properties held as other real estate owned (OREO) at December 31, 2019.

Our non-performing assets may adversely affect our net income in various ways.

record interest income on nonaccrual loans or OREO and these assets require higher loan administration and other costs, thereby adversely affecting our income.

Decreases in the value of these assets, or the underlying collateral, or in the related

borrowers performance or financial condition, whether or not due to economic and market conditions beyond our control, could adversely affect our business, results of operations and financial condition.

In addition, the resolution of

nonperforming assets requires commitments of time from management, which can xxx be detrimental to the performance of their other responsibilities.

There can be no assurance that we will not experience increases in nonperforming loans in the future.

Our allowance for loan losses may prove inadequate or we may be negatively affected by credit risk

We periodically review our allowance for loan losses for adequacy considering economic conditions and trends, collateral values and credit

quality indicators, including past charge-off experience and levels of past due loans and nonperforming assets.

We cannot be certain that our allowance for loan losses will be adequate over time to cover

credit losses in our portfolio because of unanticipated adverse changes in the economy, market conditions or events adversely affecting specific customers, industries or markets, and changes in borrower behaviors.

If the credit quality of our

customer base materially decreases, if the risk profile of the market, industry or group of customers changes materially or weaknesses in the real estate markets worsen, borrower payment behaviors change, or if our allowance for loan losses is not

adequate, our business, financial condition, including our liquidity and capital, and results of operations could be materially adversely affected.

CECL is effective for the Company beginning January 1, 2023, and its effects upon the Company

have not yet been determined.

Changes in the real estate markets, including the secondary market for residential mortgage loans, may continue to

Any of the following risks could harm our business, results of

operations and financial condition and an investment in our

The risks discussed below also include forward-looking statements,

and our actual results may differ substantially

from those discussed in these forward-looking statements.

Operational Risks

Market conditions and economic cyclicality may adversely affect

our industry.

We believe the following,

among other things, may affect us in 2021:

The COVID-19 pandemic disrupted

the economy beginning late in the first quarter of 2020, and continues.

Auburn University, government

agencies and businesses were limited to remote work and gatherings

were limited.

Supply chains continue to be disrupted and unemployment spiked

and remains high.

Hotels, motels, restaurants,

retail and shopping centers were especially affected.

Extraordinary monetary and fiscal stimulus in 2020 and in early

2021 have offset certain of the pandemic’s

adverse economic effects, and are continuing.

The Federal Reserve is maintaining a targeted

federal funds rate of

0-0.25%, and has provided stimulus by buying bonds and providing

market liquidity.

Legislation is pending to

provide an additional $1.9 trillion of fiscal stimulus, and foreclosure

moratoria have been extended.

and timing of any future changes in monetary and fiscal policies and

their effect on us cannot be predicted.

Market developments, including unemployment, price levels,

stock and bond market volatility,

including those resulting from COVID-19 and the pace of vaccination

and expected declines in serious COVID-19

cases, continue to affect consumer confidence levels and

economic activity.

Changes in payment behaviors and

payment rates may increase in delinquencies and default rates,

which could affect our earnings and credit quality.

Our ability to assess the creditworthiness of our customers and

those we do business with, and the values of our

assets and loan collateral may be adversely affected and less

predictable as a result of the pandemic and

government responses.

The accounting for loan modifications and deferrals may provide

only temporary relief.

The process we use to estimate losses inherent in our credit exposure

or estimate the value of certain assets

requires difficult, subjective, and complex judgments, including

forecasts of economic conditions and how those

economic predictions might affect the ability of our borrowers

to repay their loans or the value of assets.

The end of the LIBOR reference rate is currently scheduled for

most tenors by June 30, 2023, although U.S.

regulators informed banks November 30, 2020 that they should

stop using LIBOR for new loans and contracts and

derivatives, including hedging, and involves risks of potential marked

disruption and costs of compliance and

New hedges may not be as effective as hedges based

Nonperforming and similar assets take significant time to resolve

and may adversely affect our results of

operations and

financial condition.

Our nonperforming loans were 0.12% of total loans as of December

31, 2020, and had no other real estate owned

Twenty-five percent, or

$117.0 million, of our total loans were in hotels/motels,

retail and shopping centers

and restaurants, and $31.4 million of these had COVID-19 modifications

to require interest only payments.

performing assets may adversely affect our net income

in various ways.

not record interest income on nonaccrual

loans or OREO and these assets require higher loan administration

and other costs, thereby adversely affecting our income.

Decreases in the value of these assets, or the underlying collateral,

or in the related borrowers’ performance or financial

condition, whether or not due to economic and market conditions beyond

our control, could adversely affect our business,

results of operations and financial condition.

In addition, the resolution of nonperforming assets requires commitments

time from management, which can be detrimental to the performance

of their other responsibilities.

Our non-performing

assets may be adversely affected by loan deferrals and

modifications made in response to the pandemic and the moratoria

on foreclosures and evictions.

There can be no assurance that we will not experience increases in

nonperforming loans in

Our allowance for loan losses may prove

inadequate or we may be negatively affected by credit

risk exposures.

We periodically

review our allowance for loan losses for adequacy considering economic

conditions and trends, collateral

values and credit quality indicators, including past charge

-off experience and levels of past due loans and nonperforming

be certain that our allowance for loan losses will be adequate

over time to cover credit losses in our

portfolio because of unanticipated adverse changes in the economy,

including the continuing effects of the pandemic

fiscal and monetary response to COVID-19 loan modifications

and deferrals, market conditions or events adversely

affecting specific customers, industries or markets,

and changes in borrower behaviors.

Certain borrowers may not recover

fully or may fail as a result of COVID-19 effects.

If the credit quality of our customer base materially decreases,

profile of the market, industry or group of customers changes

materially or weaknesses in the real estate markets worsen,

borrower payment behaviors change, or if our allowance for loan

losses is not adequate, our business, financial condition,

including our liquidity and capital, and results of operations

could be materially adversely affected.

accounting standard for estimating loan losses, is effective for

the Company beginning January 1, 2023, and its effects upon

the Company have not yet been determined.

Changes in the real estate markets, including

the secondary market for residential mortgage

loans, may continue to

adversely affect us.

Notwithstanding changes made by the 2018 Growth Act, the effects of the CFPB changes to mortgage and servicing rules effective

at the beginning of 2014, the CFPBs TRID rules for closed end credit transactions secured by real property that became effective in October 2015, enforcement actions, reviews and settlements, changes in the securitization rules under the

Dodd-Frank Act, including the risk retention rules that became effective on December 24, 2016, and the Basel III Rules could have serious adverse effects on the mortgage markets and our mortgage operations.

The TRID rules have affected our current and proposed mortgage business and have increased our costs as a result of our compliance efforts.

In addition, the

CFPBs regulations that lenders determine whether a consumer has the ability to repay a mortgage loan have limited the secondary market for and liquidity of many mortgage loans that are not qualified mortgages.

Increasing interest rates and the 2017 Tax Acts limitations on the deductibility of residential mortgage interest and state and local property and other

taxes could adversely affect consumer behaviors and the volumes of housing sales, mortgage and home equity loan originations, as well as the value and liquidity of residential property held as collateral by lenders such as the Bank, and the

secondary markets for residential loans.

Acquisition, construction and development loans for residential development may be similarly adversely affected.

Fannie Mae and Freddie Mac, have been in conservatorship since September 2008, although the U.S.

Treasury released a plan in September 2019 for housing

finance reform that includes recommendations related to ending Fannie Maes and Freddie Macs conservatorship, and the FHFA established 2020 performance objectives that include preparing for Fannie Maes and Freddie Macs

eventual exit from conservatorship.

The timing and effects of their resolution cannot be predicted.

Minimal capital, the levels of risky assets at the FHA, and its relatively low capital and reserves for losses, the current levels of home sales, and

the risks of interest rates increasing materially from historically low levels, as well as the 2017 Tax Act, could also have serious adverse effects on the mortgage markets and our mortgage operations.

Such adverse effects could include, among other

things, price reductions in single family home values, further adversely affecting the liquidity and value of collateral securing commercial loans for residential acquisition, construction and development, as well as residential mortgage loans that

we hold, mortgage loan originations and gains on sale of mortgage loans.

In the event our allowance for loan losses is insufficient to cover such losses, if any, our earning, capital and liquidity could be adversely affected.

Significant ongoing disruptions in the secondary market for residential mortgage loans have limited the market for and liquidity of most mortgage loans other

than conforming Fannie Mae, Freddie Mac, and FHA loans.

Declines in real estate values, low home sales volumes, financial stress on borrowers as a result of job losses or reduced incomes, interest rate changes, generally, including resets on

adjustable rate mortgage loans, maturities of second lien mortgages or other factors have adversely affected borrowers during recent years.

Changes in interest rate and mortgage loan rules, could result in fewer mortgage originations, higher

delinquencies and greater charge-offs in future periods, as well as increased regulation capital requirement which would adversely affect our financial condition, including capital and liquidity, and our results of operations.

In the event our

allowance for loan losses is insufficient to cover such losses, if any, our earnings, capital and liquidity could be adversely affected.

On February 5, 2020, the Federal Housing Finance Authority (FHFA), which regulates Fannie

Mae and Freddie Mac, announced the transition from mortgages based on the London Interbank Offering Rate, or LIBOR, as follows:

New language will be required for single-family Uniform Adjustable Rate Mortgage (ARM) instruments

closed on or after June 1, 2020;

All LIBOR-based single-family and multifamily ARMs must have loan application dates on or before

September 30, 2020 to be eligible for acquisition;

Acquisitions of single-family and multifamily LIBOR ARMs will cease on or before December 31, 2020.

The effects of these changes could adversely affect Fannie Mae and Freddie Mac and the cost and availability of credit in the markets

for these types of mortgages.

Weaknesses in real estate markets may adversely affect the length of time and costs required to manage and dispose of, and

the values realized from the sale of our OREO.

We may be contractually obligated to repurchase mortgage loans we sold to third parties on terms

unfavorable to us.

As a routine part of its business, the Company originates mortgage loans that it subsequently sells in the secondary market,

including to governmental agencies and GSEs, such as Fannie Mae.

In connection with the sale of these loans, the Company makes customary representations and warranties, the breach of which may result in the Company being required to repurchase the

loan or loans.

Furthermore, the amount paid may be greater than the fair value of the loan or loans at the time of the repurchase.

Although mortgage loan repurchase requests made to us have been limited, if these increased notwithstanding new

repurchase procedures adopted in late 2015 and early 2016 by the FHFA, Fannie Mae and Freddie Mac, we may have to establish reserves for possible repurchases and adversely affect our results of operation and financial condition.

Mortgage servicing rights requirements may change and require us to incur additional costs and risks.

The CFPBs residential mortgage servicing standards include servicing requirements, require servicer activities and delay foreclosures, among other

These may adversely affect our costs to service residential mortgage loans, and together with the Basel III Rules, may decrease the returns on our MSRs.

The CFPB and the bank regulators continue to bring enforcement actions and develop

proposals, rules and practices that could increase the costs of providing mortgage servicing.

This could reduce our income from servicing these types of loans and make it more difficult and costly to timely realize the value of collateral securing

such loans upon a borrower default.

Fannie Mae and Freddie Mac restructuring may adversely affect the mortgage markets and our sales of mortgages we

Fannie Mae and Freddie Mac remain in conservatorship, and although legislation has been introduced at various times to restructure Fannie

Mae and Freddie Mac to take them out of conservatorship and substantially change the way they conduct business in the future, no proposal has been enacted.

Through 2017, all of Fannie Mae and Freddie Macs earnings above a specified capital

reserve have been swept into the U.S.

Treasury and have not been available to build Fannie Maes or Freddie Macs capital.

At the end of 2017, the capital reserve was increased to $3 billion for each of Fannie Mae and Freddie Mac.

In February 2018, Fannie Mae reported that the 2017 Tax Act had reduced its DTAs, and that it had a net worth deficit of $3.7 billion as of

December 31, 2017.

To eliminate its net worth deficit, the Treasury Department provided Fannie Mae with $3.7 billion of capital in the first quarter of 2018.

Fannie Mae reported that it had a net worth of $14.6 billion as of

December 31, 2019.

Freddie Mac had a net worth deficit of $312 million at December 31, 2017, and the Treasury Department provided Freddie Mac with $312 million of capital in the first quarter of 2018.

Freddie Mac reported that it

had a net worth of $9.1 billion as of December 31, 2019.

Treasurys housing finance reform plan that includes recommendations related to ending Fannie Maes and Freddie Macs conservatorship, including permitting

Fannie Mae and Freddie Mac to retain up to $25 billion and $20 billion in profits, and the FHFA established 2020 performance objectives that include preparing for their eventual exit from conservatorship.

Since Fannie Mae and Freddie Mac dominate the residential mortgage markets, any changes in their structure

and operations, as well as their respective restructurings and capital, could adversely affect the primary and secondary mortgage markets, and our residential mortgage businesses, our results of operations and the returns on capital deployed in

these businesses.

Our concentration of commercial real estate loans could result in further increased loan losses, and adversely affect our business,

earnings, and financial condition.

Commercial real estate, or CRE, is cyclical and poses risks of possible loss due to concentration levels and risks

of the assets being financed, which include loans for the acquisition and development of land and residential construction.

The federal bank regulatory agencies released guidance in 2006 on Concentrations in Commercial Real Estate

Lending. The guidance defines CRE loans as exposures secured by raw land, land development and construction (including 1-4 family residential construction), multi-family property, and non-farm non-residential property, where the primary or a significant source of repayment is derived from rental income associated with the property (that is, loans for which

50% or more of the source of repayment comes from third party, non-affiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property.

Loans to REITs and unsecured

loans to developers that closely correlate to the inherent risks in CRE markets would also be considered CRE loans under the guidance.

Loans on owner occupied commercial real estate are generally excluded from CRE for purposes of this guidance.

Excluding owner occupied commercial real estate, we had 52.3% of our portfolio in CRE loans at year-end 2019 compared to 50.9% at year-end 2018.

The CFPB’s mortgage and servicing

rules, including TRID rules for closed end credit transactions,

enforcement actions,

reviews and settlements, affect the mortgage markets and

our mortgage operations.

The CFPB requires that lenders

determine whether a consumer has the ability to repay a mortgage loan

have limited the secondary market for and liquidity

of many mortgage loans that are not “qualified mortgages.”

Recently adopted changes to the CFPB’s

qualified mortgage

rules are reportedly being reconsidered.

The Tax Cuts and Jobs

Act’s (the “2017 Tax

Act”) limitations on the deductibility of residential mortgage interest

and local property and other taxes and federal moratoria

on single-family foreclosures and rental evictions could adversely

affect consumer behaviors and the volumes of housing sales,

mortgage and home equity loan originations, as well as the

value and liquidity of residential property held as collateral by lenders

such as the Bank, and the secondary markets for

single and multi-family loans.

Acquisition, construction and development loans for residential development

similarly adversely affected.

Fannie Mae and Freddie Mac (“GSEs”), have been in conservatorship

since September 2008.

Since Fannie Mae and

Freddie Mac dominate the residential mortgage markets, any

changes in their operations and requirements, as well as their

respective restructurings and capital, could adversely affect

the primary and secondary mortgage markets, and our

residential mortgage businesses, our results of operations and

the returns on capital deployed in these businesses.

timing and effects of resolution of these government sponsored

enterprises cannot be predicted.

Weaknesses in real

estate markets the FHFA’s

moratoria on foreclosures and real estate owned evictions may adversely

affect the length of time and costs required to

manage and dispose of, and the values realized from the sale

contractually obligated to repurchase

mortgage loans we sold to third parties on terms unfavorable

As part of its routine business, the Company originates mortgage loans

that it subsequently sells in the secondary market,

including to governmental agencies and GSEs.

In connection with the sale of these loans, the Company makes customary

representations and warranties, the breach of which may result in

the Company being required to repurchase the loan or

Furthermore, the amount paid may be greater than the fair value of the

loan or loans at the time of the repurchase.

Although mortgage loan repurchase requests made to us have been

limited, if these increased, we may have to establish

reserves for possible repurchases and adversely affect our results of operation

and financial condition.

Mortgage servicing rights requirements

may change and require

us to incur additional costs and risks.

The CFPB’s residential mortgage

servicing standards may adversely affect our costs to

service residential mortgage loans,

and together with the Basel III Rules and the effects of

lower interest rates from COVID-19 stimulus, may decrease the

returns on, and values of, our MSRs.

This could reduce our income from servicing these types

of loans and make it more

difficult and costly to timely realize the value of collateral

securing such loans upon a borrower default.

The soundness of other financial institutions could adversely affect

We routinely execute

transactions with counterparties in the financial services industry,

including brokers and dealers,

central clearinghouses, banks, including our correspondent banks

and other financial institutions.

Our ability to engage in

routine investment and banking transactions, as well as the quality and

values of our investments in holdings of other

obligations of other financial institutions such as the FHLB, could

be adversely affected by the actions, financial condition,

and profitability of such other financial institutions, including

the FHLB and our correspondent banks.

Financial services

institutions are interrelated as a result of shared credits, trading, clearing,

counterparty and other relationships.

defaults by, or failures of, the

institutions we do business with could adversely affect our

holdings of the equity in such

other institutions, our participation interests in loans originated

by other institutions,

and our business, including our

liquidity, financial condition and

Our concentration of commercial real

estate loans could result in further increased

loan losses, and adversely affect our

business, earnings, and financial condition.

Commercial real estate, or CRE, is cyclical and poses risks of possible

loss due to concentration levels and risks of the

assets being financed, which include loans for the acquisition and development

of land and residential construction.

federal bank regulatory

agencies released guidance in 2006 on “Concentrations

in Commercial Real Estate Lending.”

guidance defines CRE loans as exposures secured by raw land,

land development and construction loans (including 1-4

family residential construction loans), multi-family property,

and non-farm non-residential property,

where the primary or a

significant source of repayment is derived from rental income associated

with the property (that is, loans for which 50% or

more of the source of repayment comes from third party,

non-affiliated, rental income) or the proceeds

refinancing, or permanent financing of the property.

Loans to REITs

and unsecured loans to developers that closely

correlate to the inherent risks in CRE markets are also CRE loans.

Loans on owner occupied commercial real estate are

generally excluded from CRE for purposes of this guidance.

Excluding owner occupied commercial real estate, we had

of our portfolio in CRE loans at year-end 2020 compared

to 48.0% at year-end 2019.

The banking regulators

continue to give CRE lending scrutiny and require banks with higher levels of CRE loans to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as higher levels of allowances for possible

losses and capital levels as a result of CRE lending growth and exposures.

Lower demand for CRE, and reduced availability of, and higher interest rates and costs for, CRE lending could adversely affect our CRE loans and sales of our OREO, and

therefore our earnings and financial condition, including our capital and liquidity.

Our ability to realize our deferred tax assets may be reduced in

the future if our estimates of future taxable income from our operations and tax planning strategies do not support this amount, and the amount of net operating loss carry-forwards realizable for income tax purposes may be reduced under

Section 382 of the Internal Revenue Code by sales of our capital securities.

We are allowed to carry-back losses for two years for Federal

income tax purposes.

As of December 31, 2019, we had a net deferred tax liability of $0.9 million with gross deferred tax assets of $1.7 million.

These and future deferred tax assets may be further reduced in the future if our estimates of

future taxable income from our operations and tax planning strategies do not support the amount of the deferred tax asset.

The amount of net operating loss carry-forwards realizable for income tax purposes potentially could be further reduced under

Section 382 of the Internal Revenue Code by a significant offering and/or other sales of our capital securities.

The Basel III Rules reduce the regulatory capital benefits of deferred tax assets, also.

Our future success is dependent on our ability to compete effectively in highly competitive markets.

The East Alabama banking markets in which we do business are highly competitive and our future growth and success will depend on our ability to compete

effectively in these markets.

We compete for loans, deposits and other financial services in our markets with other local, regional and national commercial banks, thrifts, credit unions, mortgage lenders, and securities and insurance brokerage

Marketplace lenders operating nationwide over the internet are growing rapidly.

Many of our competitors offer products and services different from us, and have substantially greater resources, name recognition and market presence than we do,

which benefits them in attracting business.

In addition, larger competitors may be able to price loans and deposits more aggressively than we are able to and have broader and more diverse customer and geographic bases to draw upon.

The Dodd-Frank

Act allows others to branch into our markets more easily from other states.

Failures of other banks with offices in our markets could also lead to the entrance of new, stronger competitors in our markets.

Our success depends on local economic conditions where we operate.

Our success depends on the general economic conditions in the geographic markets we serve in Alabama.

The local economic conditions in our markets have a

significant effect on our commercial, real estate and construction loans, the ability of borrowers to repay these loans and the value of the collateral securing these loans.

Adverse changes in the economic conditions of the Southeastern United

States in general, or in one or more of our local markets could negatively affect our results of operations and our profitability.

Our local economy is also affected by the growth of automobile manufacturing and related suppliers located in our

continue to give CRE lending scrutiny and require banks with

higher levels of CRE loans to implement improved

underwriting, internal controls, risk management policies and

portfolio stress testing, as well as higher levels of allowances

for possible losses and capital levels as a result of CRE lending growth

and exposures.

Lower demand for CRE, and

reduced availability of, and higher interest rates and costs for,

CRE lending could adversely affect our CRE loans and sales

of our OREO, and therefore our earnings and financial condition,

including our capital and liquidity.

At year-end 2020, 25% of our total loans were CRE

loans to hotels/motels, retail and shopping centers and restaurants,

businesses that have been severely affected by the effects

Our future success is dependent on

our ability to compete effectively in highly competitive markets.

The East Alabama banking markets which we operate

are highly competitive and our future growth and success will

depend on our ability to compete effectively in these markets.

We compete for loans,

deposits and other financial services

with other local, regional and national commercial banks, thrifts, credit

unions, mortgage lenders, and securities and

insurance brokerage firms.

Lenders operating nationwide over the internet are growing rapidly.

Many of our competitors

offer products and services different from

us, and have substantially greater resources, name recognition and

presence than we do, which benefits them in attracting business.

In addition, larger competitors may be able to

and deposits more aggressively than we are able to and have broader

and more diverse customer and geographic bases to

Out of state banks may branch into our markets.

Failures of other banks with offices in our markets could

lead to the entrance of new,

stronger competitors in our markets.

Our success depends on local economic conditions.

Our success depends on the general economic conditions in the

geographic markets we serve in Alabama.

economic conditions in our markets have a significant effect

on our commercial, real estate and construction loans, the

ability of borrowers to repay these loans and the value of the collateral

securing these loans.

Adverse changes in the

economic conditions of the Southeastern United States in general,

or in one or more of our local markets, including the

continuous effects from COVID-19 and the timing,

strength and breadth of the recovery from the pandemic,

negatively affect our results of operations and our

profitability.

Our local economy is also affected by the growth of

automobile manufacturing and related suppliers located in our

markets and nearby.

Auto sales are cyclical and are affected adversely by higher interest rates.

Our cost of funds may increase as a result of general economic conditions, interest rates, inflation and

competitive pressures.

Although the Federal Reserve raised the target federal Funds rate nine times between December 2015 and January 2018 and has

been selling securities in accordance with efforts to normalize monetary policy until it changed to more accommodating policy in Summer 2019.

At that time, the Federal Reserve stopped selling securities from its portfolio and reduced interest rates

75 basis points over three months keep interest rates relatively low, and the federal government continues large deficit spending.

Our costs of funds may increase as a result of general economic conditions, interest rates and competitive pressures,

and potential inflation resulting from continued government deficit spending, the effects of the 2017 Tax Act and monetary policies.

Traditionally, we have obtained funds principally through local deposits and borrowings from other institutional

Generally, we believe local deposits are a cheaper and more stable source of funds than borrowings because interest rates paid for local deposits are typically lower than interest rates charged for borrowings from other institutional

Increases in interest rates may cause consumers to shift their funds to more interest bearing instruments and to increase the competition for and costs of deposits.

If customers move money out of bank deposits and into other investment

assets or from transaction deposits to higher interest bearing time deposits, we could lose a relatively low cost source of funds, increasing our funding costs and reducing our net interest income and net income.

Additionally, any such loss of funds

could result in lower loan originations and growth, which could materially and adversely affect our results of operations and financial condition.

profitability and liquidity may be affected by changes in interest rates and interest rate levels, the shape of the yield curve and economic conditions.

Our profitability depends upon net interest income, which is the difference between interest earned on interest-earning assets, such as loans and investments,

and interest expense on interest-bearing liabilities, such as deposits and borrowings.

Net interest income will be adversely affected if market interest rates change where the interest we pay on deposits and borrowings increases faster than the

interest earned on loans and investments.

Interest rates, and consequently our results of operations, are affected by general economic conditions (national, international and local) and fiscal and monetary policies, as well as expectations of these

rates and policies and the shape of the yield curve.

Our income is primarily driven by the spread between these rates.

As a result, a steeper yield curve, meaning long-term interest rates are significantly higher than short-term interest rates,

would provide the Bank with a better opportunity to increase net interest income.

Conversely, a flattening yield curve could pressure our net interest margin as our cost of funds increases relative to the spread we can earn on our assets.

addition, net interest income could be affected by asymmetrical changes in the different interest rate indexes, given that not all of our assets or liabilities are priced with the same index.

The 2019 rate reductions by the Federal Reserve and the

effects of the coronavirus pandemic have reduced market rates, which may adversely affect our net interest income and our results of operations.

production of mortgages and other loans and the value of collateral securing our loans are dependent on demand within the markets we serve, as well as interest rates.

Increases in interest rates generally decrease the market values of fixed-rate, interest-bearing investments and loans held, the value of mortgage and other

loans produced and the value of loans sold, mortgage loan activities and the collateral securing our loans, and therefore may adversely affect our liquidity and earnings, to the extent not offset by potential increases in our net interest margin and

the value of our mortgage servicing rights.

The 2017 Tax Act, including its limitations on the deductibility of residential mortgage interest, state and

local taxes and business interest expenses and other changes, could have mixed effects on economic activity and reduce the demand for loans and increase competition among lenders for loans.

This Act could promote inflation and higher interest rates,

including as a result of increased fiscal deficits.

The Company is an entity separate and distinct from the Bank.

Company transactions with the Bank are limited by Sections 23A and 23B of the Federal Reserve

Act and Federal Reserve Regulation W.

We depend upon the Banks earnings and dividends, which are limited by law and regulatory policies and actions, for cash to pay the Companys debt and corporate obligations, and to pay dividends to our

shareholders.

If the Banks ability to pay dividends to the Company was terminated or limited, the Companys liquidity and financial condition could be materially and adversely affected.

Liquidity risks could affect operations and jeopardize our financial condition.

Liquidity is essential to our business.

An inability to raise funds through deposits, borrowings, proceeds from loan repayments or sales proceeds from

maturing loans and securities, and other sources could have a substantial negative effect on our liquidity.

Our funding sources include federal funds purchased, securities sold under repurchase agreements, core and

non-core deposits, and short- and long-term debt.

We maintain a portfolio of securities that can be used as a source of liquidity.

We are also members of the FHLB and the Federal Reserve Bank of Atlanta, where

we can obtain advances collateralized with eligible assets.

There are other sources of liquidity available to the Company or the Bank should they be needed, including our ability to acquire additional non-core

We may be able, depending upon market conditions, to otherwise borrow money or issue and sell debt and preferred or common securities in public or private transactions.

Our access to funding sources in amounts adequate to finance or

capitalize our activities on terms which are acceptable to us could be impaired by factors that affect us specifically or the financial services industry or the economy in general.

General conditions that are not specific to us, such as disruptions

in the financial markets or negative views and expectations about the prospects for the financial services industry could adversely affect us.

subject to extensive regulation that could limit or restrict our activities and adversely affect our earnings.

We and our subsidiaries are regulated

by several regulators, including the Federal Reserve, the Alabama Superintendent, the SEC and the FDIC.

Our success is affected by state and federal regulations affecting banks and bank holding companies, and the securities markets, and our costs of

compliance could adversely affect our earnings.

Banking regulations are primarily intended to protect depositors, and the FDIC Deposit Insurance Fund (DIF), not shareholders.

The financial services industry also is subject to frequent

legislative and regulatory changes and proposed changes.

In addition, the interpretations of regulations by regulators may change and statutes may be enacted with retroactive impact.

From time to time, regulators raise issues during examinations of

us which, if not determined satisfactorily, could have a material adverse effect on us.

Compliance with applicable laws and regulations is time consuming and costly and may affect our profitability.

The current President and members of his political party in Congress have promoted and supported regulatory relief for the banking industry.

effects and timing of administrative and legislative change, including the 2018 Growth Act, and possible changes in regulations or regulatory approach, as a result of the 2020 elections, cannot be predicted.

The federal bank regulators and the

Treasury Department, as well as the Congress and the President, are evaluating the regulation of banks, other financial services providers and the financial markets and such changes, if any, could require us to maintain more capital and liquidity,

and restrict our activities, which could adversely affect our growth, profitability and financial condition.

Our consumer finance products, including residential mortgage loans, are subject to CFPB regulations and evolving standards reflecting CFPB

releases, rule-making and enforcement actions.

Changes in accounting and tax rules applicable to banks could adversely affect our financial conditions

Auto sales are cyclical and are affected

adversely by higher interest rates.

Attractive acquisition opportunities may not be available

to us in the future.

While we seek continued organic growth, we also may

consider the acquisition of other businesses.

We expect that other

banking and financial companies, many of which have significantly

greater resources, will compete with us to acquire

financial services businesses.

This competition could increase prices for potential acquisitions that

we believe are

Also, acquisitions are subject to various regulatory approvals.

If we fail to receive the appropriate regulatory

approvals, we will not be able to consummate an acquisition that

we believe is in our best interests, and regulatory

approvals could contain conditions that reduce the anticipated

benefits of any transaction.

Among other things, our

regulators consider our capital, liquidity,

profitability, regulatory compliance

and levels of goodwill and intangibles when

considering acquisition and expansion proposals.

Any acquisition could be dilutive to our earnings and shareholders’

equity per share of our common stock.

Future acquisitions and expansion activities

may disrupt our business, dilute shareholder

value and adversely affect our

operating results.

We regularly evaluate

potential acquisitions and expansion opportunities, including new

branches and other offices.

extent that we grow through acquisitions, we cannot assure you that

we will be able to adequately or profitably manage this

Acquiring other banks, branches, or businesses, as well as other geographic

and product expansion activities,

involve various risks including:

risks of unknown or contingent liabilities, and potential asset quality issues;

unanticipated costs and delays;

risks that acquired new businesses will not perform consistent with

our growth and profitability expectations;

risks of entering new markets or product areas where we have

limited experience;

risks that growth will strain our infrastructure, staff, internal

controls and management, which may require

additional personnel, time and expenditures;

difficulties, expenses and delays of integrating the operations

and personnel of acquired institutions;

potential disruptions to our business;

possible loss of key employees and customers of acquired institutions;

potential short-term decreases in profitability;

diversion of our management’s

time and attention from our existing operations and business.

Technological

changes affect our business, and we may have fewer resources

than many competitors to invest in

technological improvements.

The financial services industry is undergoing rapid

technological changes with frequent introductions of new technology

driven products and services and growing demands for mobile

and user-based banking applications.

In addition to allowing

us to analyze our customers better,

the effective use of technology may increase efficiency

and may enable financial

institutions to reduce costs, risks associated with fraud and

compliance with anti-money laundering and other laws, and

various operational risks.

Largely unregulated “fintech” businesses

have increased their participation in the lending and

payments businesses, and have increased competition in these

Our future success will depend, in part, upon our

ability to use technology to provide products and services that

meet our customers’ preferences and create additional

efficiencies in operations, while avoiding cyber-attacks

and disruptions, and data breaches.

The COVID-19 pandemic

increased remote work has accelerated electronic banking activity

and the need for increased operational efficiencies.

may need to make significant additional capital investments in technology,

including cyber and data security,

not be able to effectively implement new technology

-driven products and services, or such technology may prove less

effective than anticipated.

Many larger competito

rs have substantially greater resources to invest in technological

improvements and, increasingly,

non-banking firms are using technology to compete with traditional

lenders for loans and

other banking services.

Operational risks are inherent

in our businesses.

Operational risks and losses can result from internal and external

gaps or weaknesses in our risk management or

internal audit procedures;

errors by employees or third parties,

including our vendors, failures to document transactions

properly or obtain proper authorizations;

failure to comply with applicable

regulatory requirements in the various

jurisdictions where we do business or have customers;

failures in our

estimates models that rely on;

equipment failures,

including those caused by natural disasters, or by electrical, telecommunications

or other essential utility outages;

continuity and data security system failures, including those caused by

computer viruses, cyberattacks, unforeseen

problems encountered while implementing major new computer

systems or, failures to timely and properly

patch existing systems or inadequate access to data or

poor response capabilities in light of such business continuity and

data security system failures;

or the inadequacy or failure of

systems and controls, including those of our vendors or

counterparties.

The COVID-19 pandemic has presented operational challenges

to maintaining continuity of operations of

customer services while protecting our employees’ and customers’

In addition, we face certain risks inherent in the

ownership and operation of our bank premises and other real

-estate, including liability for accidents on our properties.

Although we have implemented risk controls and loss mitigation actions,

and substantial resources are devoted to

developing efficient procedures, identifying and rectifying

weaknesses in existing procedures and training staff,

possible to be certain that such actions have been or will be

effective in controlling these various operational risks

evolve continuously.

Potential gaps in our risk management policies and internal

audit procedures

may leave us exposed unidentified or

unanticipated risk, which could negatively affect our business.

Our enterprise risk management and internal audit program is

designed to mitigate material risks and loss to us.

developed and continue to develop risk management and internal

audit policies and procedures to reflect the ongoing

review of our risks and expect to continue to do so in the future.

Nonetheless, our policies and procedures may not be

comprehensive and may not identify timely every risk to which we

are exposed, and our internal audit process may fail to

detect such weaknesses or deficiencies in our risk management

Many of our risk management models and

estimates use observed historical market behavior to model

or project potential future exposure.

Models used by our

business are based on assumptions and projections.

models may not operate properly or our inputs and assumptions

may be inaccurate, or changes in economic conditions, customer

behaviors or regulations.

As a result, these methods may

not fully predict future exposures, which can be significantly

greater than historically.

Other risk management methods

depend upon the evaluation of information regarding markets,

clients, or other matters that are publicly available or

otherwise accessible to us.

This information may not always

be accurate, complete, up-to-date or properly evaluated.

Furthermore, there can be no assurance that we can effectively

review and monitor all risks or that all of our employees will

closely follow our risk management policies and procedures,

nor can there be any assurance that our risk management

policies and procedures will enable us to accurately identify all

risks and limit our exposures based on our assessments.

addition, we may have to implement more extensive and perhaps

different risk management policies and procedu

regulation changes.

All of these could adversely affect our financial condition

and results of operations.

From time to time, the FASB and the SEC change the financial accounting and reporting standards that govern the

Any failure to protect

the confidentiality of customer information could adversely affect our

reputation and have a material

adverse effect on our business, financial condition and

results of operations

laws enforced by the bank regulators and other agencies protect

the privacy and security of customers’ non-public

personal information.

Many of our employees have access to,

and routinely process personal information of clients through

a variety of media, including information technology systems.

Our internal processes and controls are designed to protect

the confidentiality of client information we hold and that is accessible

to us and our employees.

It is possible that an

employee could, intentionally or unintentionally,

disclose or misappropriate confidential client information or

could be the subject of a cybersecurity attack.

Such personal data could also be compromised via intrusions into

systems or those of our service providers or persons we do business

with such as credit bureaus, data processors and

merchants who accept credit or debit cards for payment.

fail to maintain adequate internal controls, or if our

employees fail to comply with our policies and procedures,

misappropriation or inappropriate disclosure or misuse of client

information could occur.

internal control inadequacies or non-compliance could materially damage

our reputation,

lead to remediation costs and civil or criminal penalties.

These could have a material adverse effect on our business,

financial condition and results of operations.

Our information systems may experience interruptions and

security breaches.

We rely heavily on communications

and information systems, including those provided

by third-party service providers, to

conduct our business.

Any failure, interruption, or security breach of these systems could

result in failures or disruptions

which could affect our customers’ privacy and our

customer relationships, generally.

Our business continuity plans,

including those of our service providers, to provide back-up and

restore service may not be effective in the case of

widespread outages due to severe weather,

natural disasters, pandemics, or power,

communications and other failures.

Our systems and networks, as well as those of our third-party service

providers, are subject to security risks and could be

susceptible to cyber-attacks, such as denial of service attacks,

hacking, terrorist activities or identity theft.

Cybercrime risks

have increased as electronic and mobile banking activities increased

as a result of the COVID-19 pandemic.

financial service institutions and their service providers have reported

material security breaches in their websites or other

systems, some of which have involved sophisticated and targeted

attacks, including use of stolen access credentials,

malware, ransomware, phishing and distributed denial-of

-service attacks, among other means.

Such cyber-attacks may also

seek to disrupt the operations of public companies or their business

partners, effect unauthorized fund transfers, obtain

unauthorized access to confidential information, destroy data,

disable or degrade service, or sabotage systems.

service attacks have

been launched against a number of financial services institutions,

and we may be subject to these types

of attacks in the future.

Hacking and identity theft risks, in particular,

could cause serious reputational harm.

Despite our cybersecurity policies and procedures and our

Board of Director’s and Management’s

efforts to monitor and

ensure the integrity of the system we use, we may not be able

to anticipate the rapidly evolving security threats, nor may we

be able to implement preventive measures effective against

all such threats.

The techniques used by cyber criminals change

frequently, may not be recognized

until launched and can originate from a wide variety of sources, including

outside groups

such as external service providers, organized crime

affiliates, terrorist organizations or

hostile foreign governments.

risks may increase in the future as the use of mobile banking

and other internet electronic banking continues to grow.

Security breaches or failures may have serious adverse financial and

other consequences, including significant legal and

remediation costs, disruptions to operations, misappropriation of confidential

information, damage to systems operated by

us or our third-party service providers, as well as damages to

our customers and our counterparties.

In addition, these events

could damage our reputation, result in a loss of customer business, subject

us to additional regulatory scrutiny,

to civil litigation and possible financial liability,

any of which could have a material adverse effect

on our financial

condition and results of operations.

unable to attract and retain key

people to support our business.

Our success depends, in large part, on our ability to attract

and retain key people.

compete with other financial services

companies for people primarily on the basis of compensation and

benefits, support services and financial position.

competition exists for key employees with demonstrated ability,

and we may be unable to hire or retain such employees.

Effective succession planning is also important to

our long-term success.

The unexpected loss of services of one or

our key persons and failure to ensure effective transfer

of knowledge and smooth transitions involving such persons

have a material adverse effect on our business due

to loss of their skills, knowledge of our business, their years

experience and the potential difficulty of promptly finding

qualified replacement employees.

Proposed rules implementing the executive compensation provisions

of the Dodd-Frank Act may limit the type and

structure of compensation arrangements and prohibit the payment

of “excessive compensation” to our executives.

restrictions could negatively affect our ability to compete

with other companies in recruiting and retaining key personnel.

Severe weather,

natural disasters, pandemics, epidemics, acts of war or terrorism

or other external events could have

significant effects on our business.

Severe weather and natural disasters, including hurricanes, tornados,

drought and floods, epidemics and pandemics, acts of

war or terrorism or other external events could have a significant effect

on our ability to conduct business.

could affect the stability of our deposit base,

impair the ability of borrowers to repay outstanding loans, impair the value

collateral securing loans, cause significant property damage,

result in loss of revenue and/or cause us to incur additional

Although management has established disaster recovery and business continuity

policies and procedures, the

occurrence of any such event could have a material adverse effect

on our business, which, in turn, could have a material

adverse effect on our financial condition and results of operations.

The coronavirus or COVID-19 pandemic, trade wars, tariffs,

and similar events and disputes, domestic and international,

have adversely affected, and may continue to adversely affect

economic activity globally,

nationally and locally.

interest rates have declined significantly during 2020,

and remain low.

Such events also may adversely affect business

consumer confidence, generally.

customers, and our respective suppliers, vendors and processors

adversely affected.

Any such adverse changes may adversely affect our

profitability, growth asset

quality and financial

Financial Risks

Our ability to realize our deferred

tax assets may be reduced in the

future if our estimates of future

taxable income from

our operations and tax planning strategies do not support

this amount, and the amount of net operating loss carry-forwards

realizable for income tax purposes may

be reduced under Section 382 of

the Internal Revenue Code by sales of our capital

allowed to carry-back losses for two years for Federal income tax purposes.

As of December 31, 2020, we had a

net deferred tax liability of $1.5 million with gross deferred tax assets

of $1.9 million.

These and future deferred tax assets

may be further reduced in the future if our estimates of future

taxable income from our operations and tax planning

strategies do not support the amount of the deferred tax asset.

The amount of net operating loss carry-forwards realizable

for income tax purposes potentially could be further reduced

under Section 382 of the Internal Revenue Code by a

significant offering and/or other sales of our capital securities.

Current bank capital rules also reduce the regulatory capital

benefits of deferred tax assets.

Our cost of funds may increase as a

result of general economic conditions,

interest rates, inflation and competitive

The Federal Reserve shifted to a more accommodating monetary

policy in Summer 2019.

During 2020, the Federal Reserve

reduced its federal funds target to 0-0.25%

is continuing significant monthly purchases of U.S.

mortgage-backed securities to help combat the economic effect

of the COVID-19 pandemic.

Since November 2020,

interest rates have increased, possibly as a result of increased government

borrowings to finance rounds of fiscal stimulus

and increased inflation expectations resulting from such stimulus

and expected increases in economic growth from fiscal

and monetary stimulus and COVID-19 vaccinations.

Our costs of funds may increase as a result of general economic

conditions, increasing interest rates and competitive pressures, and

potential inflation resulting from continued government

deficit spending and monetary policies.

Traditionally,

we have obtained funds principally through local deposits and

borrowings from other institutional lenders, which we believe

are a cheaper and more stable source of funds than

Increases in interest rates may cause consumers to shift their funds to

more interest bearing instruments and to

increase the competition for and costs of deposits.

If customers move money out of bank deposits and into other

investment assets or from transaction deposits to higher interest bearing

time deposits, we could lose a relatively low cost

source of funds, increasing our funding costs and reducing our net interest

income and net income.

Additionally,

loss of funds could result in lower loan originations and growth, which could

materially and adversely affect our results of

operations and financial condition.

Our profitability and liquidity may

be affected by changes in interest rates and

interest rate levels, the shape of

curve and economic conditions.

Our profitability depends upon net interest income, which is the difference

between interest earned on interest-earning

assets, such as loans and investments, and interest expense on interest

-bearing liabilities, such as deposits and borrowings.

Net interest income will be adversely affected if market

interest rates on the interest we pay on deposits and borrowings

increases faster than the interest earned on loans and investments.

Interest rates, and consequently our results of operations,

are affected by

general economic conditions (national, international and local) and

fiscal and monetary policies, as well as

expectations of these rates and policies and the shape of the yield curve.

Our income is primarily driven by the spread

between these rates.

As a result, a steeper yield curve, meaning long

-term interest rates are significantly higher than short-

term interest rates, would provide the Bank with a better opportunity

to increase net interest income.

flattening yield curve could pressure our net interest margin

as our cost of funds increases relative to the spread we can earn

on our assets.

In addition, net interest income could be affected

by asymmetrical changes in the different interest rate

indexes, given that not all of our assets or liabilities are priced

with the same index.

The 2019 and 2020 rate reductions by

the Federal Reserve and the effects of the COVID

-19 pandemic have reduced market rates, which adversely affected

net interest income and our results of operations.

The production of mortgages and other loans and the value of

collateral securing our loans are dependent on demand within

the markets we serve, as well as interest rates.

Lower interest rates typically increase mortgage originations, decrease

values, and facilitate pandemic-related trends to single family houses.

Increases in market interest rates would tend to

decrease mortgage originations, increase MSR values and potentially

increase net interest spread depending upon the yield

curve and the magnitude and duration of interest rate increase.

Liquidity risks could affect operations and jeopardize

our financial condition.

Liquidity is essential to our business.

An inability to raise funds through deposits, borrowings,

proceeds from loan

repayments or sales proceeds from maturing loans and securities,

and other sources could have a negative effect on our

Our funding sources include federal funds purchased, securities sold

under repurchase agreements, core and non-

core deposits, and short-

and long-term debt.

We maintain a

portfolio of securities that can be used as a source of liquidity.

also members of the FHLB and the Federal Reserve Bank of Atlanta, where

we can obtain advances collateralized

with eligible assets.

There are other sources of liquidity available to

the Company or the Bank should they be needed,

including our ability to acquire additional non-core deposits.

We may be able, depending

upon market conditions, to

otherwise borrow money or issue and sell debt and preferred or

common securities in public or private transactions.

access to funding sources in amounts adequate to finance or

capitalize our activities on terms which are acceptable to

could be impaired by factors that affect us specifically,

or the financial services industry or the economy in general.

General conditions that are not specific to us, such as disruptions in

the financial markets or negative views and

expectations about the prospects for the financial services industry

could adversely affect us.

The COVID-19 pandemic generally has increased our deposits and at

banks, generally, while

reducing the interest rate

available on loans and securities.

Such excess liquidity and the resulting balance sheet growth requires

support and may reduce returns on assets and equity.

Changes in accounting and tax rules applicable to

banks could adversely affect our financial conditions and

From time to time, the FASB

and the SEC change the financial accounting and reporting standards

that govern the

preparation of our financial statements.

These changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations.

These changes can be difficult to predict and can materially

impact how we record

and report our financial condition and results of operations.

In some cases, we could be required to apply a new or revised

standard retroactively, resulting in us restating prior period financial statements .

The FASBs new guidance under ASU No.

standard retroactively, resulting

in us restating prior period financial statements

guidance under ASU No.

2016-13 includes significant changes to the manner in which

banks allowance for loan losses will be calculated beginning January 1, 2023.

Instead of using historical losses, the CECL model will be forward-looking with respect to expected losses over the life of loans and other instruments, and

could materially affect our results of operations and financial condition, including the variability of our results of operations and our regulatory capital, notwithstanding a three-year phase-in of CECL for

regulatory capital purposes.

The 2017 Tax Act may have adverse effects on certain of our customers and our businesses.

The 2017 Tax Act benefits the Bank by reducing the maximum U.S.

corporate income tax rate on its taxable income from 35% to 21%.

This benefit may be

diminished by the complexity, uncertainty and possible adverse effects of this legislation on certain of our borrowers, including limitations on the deductibility of:

residential mortgage interest;

state and local taxes, including property taxes;

business interest expenses.

These changes may adversely affect borrowers cash flows and the values and liquidity of collateral we hold to secure our loans.

Fewer borrowers may be

able to meet the CFPBs ability to repay standards under the Truth in Lending Act and CFPB regulations, which include the borrowers ability to pay taxes and assessments.

Demand for loans by qualified borrowers could be

reduced, and therefore competition among lenders could increase.

Customer behaviors toward incurring and repaying debt could also change as a result of the 2017 Tax Act.

As a result, the 2017 Tax Act could materially and adversely affect our

business and results of operations, at least before taking into account our lower U.S.

corporate income tax rate.

We are required to maintain capital

to meet regulatory requirements, and if we fail to maintain sufficient capital, our financial condition, liquidity and results of operations would be adversely affected.

We and the Bank must meet regulatory capital requirements and maintain sufficient liquidity, including liquidity at the Company, as well as the Bank.

fail to meet these capital and other regulatory requirements, including more rigorous requirements arising from our regulators implementation of Basel III, our financial condition, liquidity and results of operations would be materially and

banks’ allowance for loan losses will be effective for

beginning January 1, 2023.

Instead of using historical losses, the CECL model is forward-looking

with respect to expected

losses over the life of loans and other instruments, and could materially

affect our results of operations and financial

condition, including the variability of our results of operations

and our regulatory capital, notwithstanding a three-year

phase-in of CECL for regulatory capital purposes.

to raise additional capital in the future,

but that capital may not be available when it is needed or

favorable terms.

We anticipate that our

current capital resources will satisfy our capital requirements

for the foreseeable future under

currently effective rules.

however, need to raise additional capital

to support our growth or currently

unanticipated losses, or to meet the needs of our communities,

resulting from failures or cutbacks by our competitors.

ability to raise additional capital, if needed, will depend, among

other things, on conditions in the capital markets at that

time, which are limited by events outside our control, and on

our financial performance.

If we cannot raise additional

capital on acceptable terms when needed, our ability to further

expand our operations through internal growth and

acquisitions could be limited.

Our associates may take excessive risks which could negatively

affect our financial condition and business.

Banks are in the business of accepting certain risks.

Our executive officers and other members of management,

intermediaries, investment professionals, product managers, and

other associates, make decisions and choices that involve

exposing us to risk.

endeavor, in the design and implementation

of our compensation programs and practices, to avoid

giving our associates incentives to take excessive risks;

associates may nonetheless take such risks.

although we employ controls and procedures designed to prevent

misconduct, to monitor associates’ business decisions and

prevent them from taking excessive risks, these controls and

procedures may not be effective.

If our associates take

excessive risks, risks to our reputation, financial condition and

business operations could be materially and adversely

Our ability to continue to pay dividends to shareholders

in the future is subject to our profitability,

capital, liquidity and

regulatory requirements

and these limitations may prevent or limit future

Cash available to pay dividends to our shareholders is derived

primarily from dividends paid to the Company by the Bank.

The ability of the Bank to pay dividends, as well as our ability

to pay dividends to our shareholders, will continue to be

subject to and limited by laws limiting dividend payments by

the Bank, the results of operations of our subsidiaries and our

need to maintain appropriate liquidity and capital at all levels

of our business consistent with regulatory requirements and

the needs of our businesses.

See “Supervision and Regulation”.

A limited trading market exists for our common shares,

which could result in price volatility.

ability to sell or purchase common shares depends

upon the existence of an active trading market for our common

Although our common stock is quoted on the Nasdaq Global Market

under the trading symbol “AUBN,” our historic

trading volume has been limited historically.

As a result, you may be unable to sell or purchase shares of our

stock at the volume, price and time that you desire.

Additionally, whether the purchase

or sales prices of our common stock

reflects a reasonable valuation of our common stock also is affected

by an active trading market, and thus the price you

receive for a thinly-traded stock such as our common stock, may not

reflect its true or intrinsic value.

The limited trading

market for our common stock may cause fluctuations in the market value

of our common stock to be exaggerated, leading

to price volatility in excess of that which would occur in a more

active trading market.

Legal and Regulatory Risks

The Company is an entity separate and distinct from

The Company is an entity separate and distinct from the Bank.

transactions with the Bank are limited by Sections

23A and 23B of the Federal Reserve Act and Federal Reserve

Regulation W.

We depend upon the Bank’s

dividends, which are limited by law and regulatory policies and actions,

for cash to pay the Company’s debt

and corporate

obligations, and to pay dividends to our shareholders.

If the Bank’s ability to pay dividends

to the Company was

terminated or limited, the Company’s

liquidity and financial condition could be materially

and adversely affected.

Legislative and regulatory changes

The Biden Administration may propose changes to bank regulation and

corporate tax changes that could have an adverse

effect on our results of operations and financial conditions.

subject to extensive regulation

that could limit or restrict our activities and adversely

affect our earnings.

subsidiaries are regulated by several regulators, including the Federal

Reserve, the Alabama Superintendent,

the SEC and the FDIC.

Our success is affected by state and federal regulations affecting

banks and bank holding

companies, and the securities markets, and our costs of compliance

could adversely

affect our earnings.

regulations are primarily intended to protect depositors, and

the FDIC Deposit Insurance Fund (“DIF”), not shareholders.

The financial services industry also is subject to frequent legislative

and regulatory changes and proposed changes.

addition, the interpretations of regulations by regulators may

change and statutes may be enacted with retroactive impact.

From time to time, regulators raise issues during examinations of us

which, if not determined satisfactorily,

material adverse effect on us.

Compliance with applicable

laws and regulations is time consuming and costly and may

affect our profitability.

The position of the President and his administration that took

office in January 2021 with respect to

regulation of banks and bank holding companies by our new President is

not yet known, their views and actions could have

a material adverse effect on financial services regulation,

Litigation and regulatory actions could

harm our reputation and adversely affect our

results of operations and financial

A substantial legal liability or a significant regulatory action against us,

as well as regulatory inquiries or investigations,

could harm our reputation, result in material fines or penalties,

result in significant legal costs, divert management resources

away from our business, and otherwise have a material adverse effect

on our ability to expand on our existing business,

financial condition and results of operations.

Even if we ultimately

prevail in litigation, regulatory investigation or action,

our ability to attract new customers, retain our current customers

and recruit and retain employees could be materially and

adversely affected.

Our failure to remain well capitalized and well managed, including meeting the Basel III capital conservation buffers, for bank regulatory purposes could affect customer confidence, our ability to grow,

our costs of funds and FDIC insurance, our ability to raise brokered deposits, our ability to pay dividends on our common stock and our ability to make acquisitions, and we would no longer meet the requirements for becoming a financial holding

These could also affect our ability to use discretionary bonuses to attract and retain quality personnel.

The Basel III Capital Rules include a minimum ratio of common equity tier 1 capital, or CET1, to risk-weighted assets of 4.5% and a

capital conservation buffer of 2.5% of risk-weighted assets.

See Supervision and RegulationBasel III Capital Rules. Although we currently have capital ratios that exceed all these minimum levels and a strategic

plan to maintain these levels, we or the Bank may be unable to continue to satisfy the capital adequacy requirements for the following reasons:

losses and/or increases in the Banks credit risk assets and expected losses resulting from the

deterioration in the creditworthiness of borrowers and the issuers of equity and debt securities;

difficulty in refinancing or issuing instruments upon redemption or at maturity of such instruments to raise

capital under acceptable terms and conditions;

Regulatory inquiries and litigation may

also adversely affect the prices or volatility of our

specifically, or the securities of

our industry, generally.

required to maintain

capital to meet regulatory requirements,

and if we fail to maintain sufficient capital, our

financial condition, liquidity and results

of operations would be adversely affected.

We and the Bank must

meet regulatory capital requirements and maintain sufficient

liquidity, including liquidity

Company, as well as

If we fail to meet these capital and other regulatory requirements, including

more rigorous

requirements arising from our regulators’ implementation of Basel

III, our financial condition, liquidity and results of

operations would be materially and adversely affected.

Our failure to remain “well capitalized” and “well managed”,

including meeting the Basel III capital conservation buffers,

for bank regulatory purposes, could affect customer

confidence, our ability to grow,

our costs of funds and FDIC insurance, our ability to raise

brokered deposits and our ability

to pay dividends on our common stock and our ability to make acquisitions,

and we may no longer meet the requirements

for becoming a financial holding company.

These could also affect our ability to use discretionary

bonuses to attract and

retain quality personnel.

The Basel III Capital Rules include a minimum ratio of

common equity tier 1 capital, or CET1, to

risk-weighted assets of 4.5% and a capital conservation buffer

of 2.5% of risk-weighted assets.

“Supervision and

Regulation—Basel III Capital Rules.”

Although we currently have capital ratios that exceed all these minimum

a strategic plan to maintain these levels, we or the Bank may be

unable to continue to satisfy the capital adequacy

requirements for various reasons, which may include:

losses and/or increases in the Bank’s

credit risk assets and expected losses resulting from the deterioration

creditworthiness of borrowers and the issuers of equity and

debt securities;

difficulty in refinancing or issuing instruments upon redemption

or at maturity of such instruments to raise capital

under acceptable terms and conditions;

declines in the value of our securities portfolios;

revisions to the regulations or their application by our regulators that increase our capital requirements;

reductions in the value of our DTAs;

revisions to the regulations or their application by our regulators

that increase our capital requirements;

reduced total earnings on our assets will reduce our internal generation

of capital available to support our balance

sheet growth;

reductions in the value of our MSRs and DTAs;

and other adverse developments;

unexpected growth and an inability to increase capital timely.

A failure to remain well capitalized, for bank regulatory purposes, including meeting the Basel

III Capital Rules conservation buffer, could adversely affect customer confidence, and our:

A failure to remain “well capitalized,” for bank regulatory purposes,

including meeting the Basel III Capital Rule’s

conservation buffer, could adversely

affect customer confidence, and our:

ability to grow;

2 unchanged sentences

ability to raise or replace brokered deposits;

ability to pay dividends on our capital stock.

ability to make discretionary bonuses to attract and retain quality personnel;

ability to make acquisitions or engage in new activities;

flexibility if we become subject to prompt corrective action restrictions;

ability to make discretionary bonuses to attract and retain quality personnel;

ability to make payments of principal and interest on our capital instruments;

ability to pay dividends on our capital stock.

The Dodd-Frank Act restricts our future issuance of trust preferred securities and cumulative preferred securities as eligible Tier 1 risk-based capital

for purposes of the regulatory capital guidelines for bank holding companies.

We repurchased and retired all our outstanding trust preferred

securities in 2018, and the Dodd-Frank Act does not permit us to issue new trust preferred securities as Tier 1 capital.

Accordingly, should we determine it is advisable, or should our regulators require us, based upon new capital or liquidity

regulations or otherwise, to raise additional Tier 1 risk-based capital, we would not be able to issue additional trust preferred securities.

Under the Federal Reserves Small BHC Policy, the Company could issue senior or secured debt, the

proceeds of which could be down-streamed as capital to the Bank as capital.

We also could issue noncumulative preferred stock or common equity.

To the extent we issue new equity, it could result in dilution to our existing shareholders.

extent we issue preferred stock, dividends on the preferred stock, unlike distributions paid on trust preferred securities, would not be tax deductible.

Dividends on preferred stock, if any, would be payable prior to payment of dividends on our

common stock.

We may need to raise additional capital in the future, but that capital may not be available when it is needed or on favorable terms.

We anticipate that our current capital resources will satisfy our capital requirements for the foreseeable future under currently effective rules.

may, however, need to raise additional capital to support our growth or currently unanticipated losses, or to meet the needs of our communities, resulting from failures or cutbacks by our competitors, and the Basel III Rules.

Our ability to raise

additional capital, if needed, will depend, among other things, on conditions in the capital markets at that time, which are limited by events outside our control, and on our financial performance.

If we cannot raise additional capital on acceptable

terms when needed, our ability to further expand our operations through internal growth and acquisitions could be limited.

Future acquisitions and

expansion activities may disrupt our business, dilute shareholder value and adversely affect our operating results.

We regularly evaluate potential

acquisitions and expansion opportunities, including new branches and other offices.

To the extent that we grow through acquisitions, we cannot assure you that we will be able to adequately or profitably manage this growth.

Acquiring other banks,

branches, or businesses, as well as other geographic and product expansion activities, involve various risks including:

risks of unknown or contingent liabilities;

unanticipated costs and delays;

risks that acquired new businesses will not perform consistent with our growth and profitability expectations;

risks of entering new markets or product areas where we have limited experience;

risks that growth will strain our infrastructure, staff, internal controls and management, which may require

additional personnel, time and expenditures;

exposure to potential asset quality issues with acquired institutions;

difficulties, expenses and delays of integrating the operations and personnel of acquired institutions;

potential disruptions to our business;

possible loss of key employees and customers of acquired institutions;

potential short-term decreases in profitability;

diversion of our managements time and attention from our existing operations and business.

Attractive acquisition opportunities may not be available to us in the future.

While we seek continued organic growth, we also may consider the acquisition of other businesses.

We expect that other banking and financial companies, many

of which have significantly greater resources, will compete with us to acquire financial services businesses.

This competition could increase prices for potential acquisitions that we believe are attractive.

Also, acquisitions are subject to various

regulatory approvals.

If we fail to receive the appropriate regulatory approvals, we will not be able to consummate an acquisition that we believe is in our best interests, and regulatory approvals could contain conditions that reduce the

anticipated benefits of any transaction.

Among other things, our regulators consider our capital, liquidity, profitability, regulatory compliance and levels of goodwill and intangibles when considering acquisition and expansion proposals.

acquisition could be dilutive to our earnings and shareholders equity per share of our common stock.

Technological changes affect our business,

and we may have fewer resources than many competitors to invest in technological improvements.

The financial services industry is undergoing rapid

technological changes with frequent introductions of new technology driven products and services and a growing demand for mobile and user-based banking applications.

In addition to allowing us to analyze our customers better, the effective use of

technology may increase efficiency and may enable financial institutions to reduce costs, risks associated with fraud and compliance with anti-money laundering and other laws, and various operational risks.

Largely unregulated fintech

businesses have increased their participation in the lending and payments businesses, and have increased competition in these businesses.

Our future success will depend, in part, upon our ability to use technology to provide products and services

that meet our customers preferences and create additional efficiencies in operations, while avoiding cyber-attacks and disruptions, and data breaches.

We may need to make significant additional capital investments in technology, including

cyber and data security, and we may not be able to effectively implement new technology-driven products and services, or such technology may prove less effective than anticipated.

Many larger competitors have substantially greater resources to

invest in technological improvements and, increasingly, non-banking firms are using technology to compete with traditional lenders for loans and other banking services.

Operational risks are inherent in our businesses.

Operational risks and losses can result from internal and external fraud;

gaps or weaknesses in our risk management or internal audit procedures;

employees or third parties, including our vendors, failure to document transactions properly or to obtain proper authorization;

failure to comply with applicable regulatory requirements and conduct of business rules in the various jurisdictions

where we do business or have customers;

failures in the models we generate and rely on;

equipment failures, including those caused by natural disasters or by electrical, telecommunications or other essential utility outages;

business continuity and

data security system failures, including those caused by computer viruses, cyberattacks, unforeseen problems encountered while implementing major new computer systems or, upgrades or patches to existing systems or inadequate access to data or poor

response capabilities in light of such business continuity and data security system failures;

or the inadequacy or failure of systems and controls, including those of our vendors or counterparties.

In addition, we face certain risks inherent in the

ownership and operation of our bank premises and other real-estate, including liability for slip and fall and other accidents on our properties.

Although we have implemented risk controls and loss mitigation actions, and substantial

resources are devoted to developing efficient procedures, identifying and rectifying weaknesses in existing procedures and training staff, it is not possible to be certain that such actions have been or will be effective in controlling each of the

operational risks faced by us.

Potential gaps in our risk management policies and internal audit procedures may leave us exposed unidentified or

unanticipated risk, which could negatively affect our business.

Our enterprise risk management and internal audit program is designed to mitigate

material risks and loss to us.

We have developed and continue to develop risk management and internal audit policies and procedures to reflect the ongoing review of our risks and expect to continue to do so in the future.

Nonetheless, our policies

and procedures may not be comprehensive and may not identify every risk to which we are exposed, and our internal audit process may fail to detect such weaknesses or deficiencies in our risk management framework.

Many of our methods for managing

risk and exposures use observed historical market behavior to model or project potential future exposure.

Models used by our business are based on assumptions and projections.

These models may not operate properly or our inputs and assumptions may

be inaccurate.

As a result, these methods may not fully predict future exposures, which can be significantly greater than historical measures indicate.

Other risk management methods depend upon the evaluation of information regarding markets,

clients, or other matters that are publicly available or otherwise accessible to us.

This information may not always be accurate, complete, up-to-date or properly

Furthermore, there can be no assurance that we can effectively review and monitor all risks or that all of our employees will closely follow our risk management policies and procedures, nor can there be any assurance that our risk

management policies and procedures will enable us to accurately identify all risks and limit our exposures based on our assessments.

In addition, we may have to implement more extensive and perhaps different risk management policies and procedures

under new or pending regulations.

All of these could adversely affect our financial condition and results of operations.

Any failure to protect the

confidentiality of customer information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations .

Various federal and state laws enforced by the bank regulators and other agencies protect the privacy and security of customers non-public personal information.

Many of our employees have access to, and routinely process personal information of clients through a variety of media, including information technology systems.

We rely on various

internal processes and controls to protect the confidentiality of client information that is accessible to, or in the possession of, us and our employees.

It is possible that an employee could, intentionally or unintentionally, disclose or

misappropriate confidential client information or our data could be the subject of a cybersecurity attack.

Such personal data could also be compromised by third party hackers via intrusions into our systems or those of service providers or persons

we do business with such as credit bureaus, data processors and merchants who accept credit or debit cards for payment.

If we fail to maintain adequate internal controls, or if our employees fail to comply with our policies and procedures,

misappropriation or intentional or unintentional inappropriate disclosure or misuse of client information could occur.

Such internal control inadequacies or non-compliance could materially damage our

reputation, lead to civil or criminal penalties, or both, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.

Our information systems may experience interruptions and security breaches.

We rely heavily on communications and information systems, including those provided by third-party service providers, to conduct our business.

failure, interruption, or security breach of these systems could result in failures or disruptions which could affect our customers privacy and our customer relationships, generally.

Our business continuity plans, including those of our

service providers, to provide back-up and restore service may not be effective in the case of widespread outages due to severe weather, natural disasters, pandemics and epidemics or power failures.

Our systems and networks, as well as those of our third-party service providers, are subject to security

risks and could be susceptible to cyber-attacks, such as denial of service attacks, hacking, terrorist activities or identity theft.

Although we do not believe that we and our third-party service providers have been subject to a cyber-attack, other

financial service institutions and their service providers have reported security breaches in their websites or other systems, some of which have involved sophisticated and targeted attacks, including use of stolen access credentials, malware,

ransomware, phishing, structured query language injection attacks and distributed denial-of-service attacks, among other means.

Such cyber-attacks may also be

directed at disrupting the operations of public companies or their business partners, which are intended to effect unauthorized fund transfers, obtain unauthorized access to confidential information, to destroy data, disable or degrade service, or

sabotage systems, often through the introduction of computer viruses or malware, cyberattacks and other means.

Denial of service attacks have been launched against a number of financial services institutions, and we may be subject to these types of

attacks in the future.

Hacking and identity theft risks, in particular, could cause serious reputational harm.

Cyber threats are rapidly evolving and we may not be able to anticipate or prevent all such attacks and could be held liable for any

security breach or loss.

Despite our cybersecurity policies and procedures and our Board of Directors and Managements efforts to monitor and

ensure the integrity of our and our service providers systems, we may not be able to anticipate all types of security threats, nor may we be able to implement preventive measures effective against all such security threats.

The techniques used

by cyber criminals change frequently, may not be recognized until launched and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile

foreign governments.

These risks may increase in the future as the use of mobile banking and other internet-based products and services continues to grow.

Security breaches or failures may have serious adverse financial and other consequences, including significant legal and remediation costs, disruptions to

operations, misappropriation of confidential information, damage to systems operated by us or our third-party service providers, as well as damages to our customers and our counterparties.

In addition to the immediate costs of any failure,

interruption or security breach, including those at our third-party service providers, these events could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation

and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

weather, natural disasters, pandemics, epidemics, acts of war or terrorism or other external events could have significant effects on our business.

Severe weather and natural disasters, including hurricanes, tornados, drought and floods, epidemics and pandemics, acts of war or terrorism or other external

events could have a significant effect on our ability to conduct business.

Such events could affect the stability of our deposit base;

impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans,

cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses.

Although management has established disaster recovery and business continuity policies and procedures, the occurrence of any such event

could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

The coronavirus or COVID-19 pandemic, trade wars, tariffs, and similar events and disputes, domestic and

international, have adversely affected, and may continue to adversely affect economic activity globally, nationally and locally.

Market interest rates have declined significantly, with the 10 year Treasury bond falling below 1.00% on March 3,

2020 for the first time.

Such events also may adversely affect business and consumer confidence, generally.

We and our customers, and our respective suppliers, vendors and processors may be adversely affected.

Any such adverse changes may adversely

affect our profitability, growth asset quality and financial condition.

The Federal Reserve stated on February 28, 2020 that it was closely

monitoring coronavirus developments and their effects on the economic outlook, and would act appropriately to support the economy.

On March 3, 2020, the Federal Reserve reduced the target federal funds rate by 50 basis points to 1.00% to 1.25%.

The Federal Reserve also announced it was purchasing Treasury bills into the second quarter of 2020, conducting overnight repurchase agreement operations at least through April 2020, and will continue to reinvest amounts of principal received by the

Federal Reserve on its portfolio of treasury and agency debt and mortgage-backed securities.

Lastly, the Federal Reserve also reduced the interest it pays on excess reserves from 1.60% to 1.10%.

We expect that such reductions in interest rates will

adversely affect our net interest income and margins, and our profitability.

Our associates may take excessive risks which could negatively affect our financial condition and

As a banking enterprise, we are in the business of accepting certain risks.

The associates who conduct our business, including executive

officers and other members of management, sales intermediaries, investment professionals, product managers, and other associates, do so in part by making decisions and choices that involve exposing us to risk.

We endeavor, in the design and

implementation of our compensation programs and practices, to avoid giving our associates incentives to take excessive risks;

however, associates may nonetheless take such risks and our policies and procedures, generally.

Similarly, although we

employ controls and procedures designed to prevent employee misconduct, to monitor associates business decisions and prevent them from taking excessive risks, these controls and procedures may not be effective.

If our associates take excessive

risks, the impact of those risks could harm our reputation and have a material adverse effect on our financial condition and business operations.

substantial legal liability or a significant federal, state or other regulatory action against us, as well as regulatory inquiries or investigations, could harm our reputation, result in material fines or penalties, result in significant legal

costs, divert management resources away from our business, and otherwise have a material adverse effect on our ability to expand on our existing business, financial condition and results of operations.

Even if we ultimately prevail in the

litigation, regulatory action or investigation, our ability to attract new customers, retain our current customers and recruit and retain employees could be materially and adversely affected.

Regulatory inquiries and litigation may also adversely

affect the prices or volatility of our securities specifically, or the securities of our industry, generally.

We may be unable to attract and retain

key people to support our business.

Our success depends, in large part, on our ability to attract and retain key people.

We compete with other

financial services companies for people primarily on the basis of compensation and benefits, support services and financial position.

Intense competition exists for key employees with demonstrated ability, and we may be unable to hire or retain such

Effective succession planning is also important to our long-term success.

The unexpected loss of services of one or more of our key personnel and failure to ensure effective transfer of knowledge and smooth transitions involving key

personnel could have a material adverse effect on our business due to loss of their skills, knowledge of our business, their years of industry experience and the potential difficulty of promptly finding qualified replacement employees.

Proposed rules implementing the executive compensation provisions of the Dodd-Frank Act may limit the type and structure of compensation arrangements into

which we may enter with certain of our employees and officers.

In addition, proposed rules under the Dodd-Frank Act would prohibit the payment of excessive compensation to our executives.

These restrictions could negatively affect our

ability to compete with other companies in recruiting and retaining key personnel.

The Federal Reserve may require us to commit capital resources to

support the Bank.

As a matter of policy, the Federal Reserve, which examines us, expects a bank holding company to act as a source of financial and

managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank.

The Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank.

In addition, the Dodd-Frank Act

amended the Federal Deposit Insurance Corporation Act to require that all companies that control a FDIC-insured depository institution serve as a source of financial strength to their depository institution subsidiaries.

Under this requirement, we

could be required to provide financial assistance to the Bank should it experience financial distress, even if further investment was not otherwise warranted.

See Supervision and Regulation.

Our ability to continue to pay dividends to shareholders in the future is subject to our profitability, capital, liquidity and regulatory requirements and

these limitations may prevent or limit future dividends.

Cash available to pay dividends to our shareholders is derived primarily from dividends paid

to the Company by the Bank.

The ability of the Bank to pay dividends, as well as our ability to pay dividends to our shareholders, will continue to be subject to and limited by applicable laws limiting dividend payments by the Bank, the results of

operations of our subsidiaries and our need to maintain appropriate liquidity and capital at all levels of our business consistent with regulatory requirements and the needs of our businesses.

See Supervision and Regulation.

A limited trading market exists for our common shares, which could lead to price volatility.

Your ability to sell or purchase common shares depends upon the existence of an active trading market for our common stock.

Although our common stock is

quoted on the Nasdaq Global Market under the trading symbol AUBN, the volume of trades on any given day has been limited historically.

As a result, you may be unable to sell or purchase shares of our common stock at the volume, price and

time that you desire.

Additionally, whether the purchase or sales prices of our common stock reflects a reasonable valuation of our common stock also is affected by an active trading market, and thus the price you receive for a thinly-traded stock

such as common stock, may not reflect its true or intrinsic value.

The limited trading market for our common stock may cause fluctuations in the market value of our common stock to be exaggerated, leading to price volatility in excess of that which

would occur in a more active trading market.

Our operations are subject to risk of loss from unfavorable fiscal, monetary and political developments

Our businesses and earnings are affected by the fiscal, monetary and other policies and actions of various U.S.

governmental and

regulatory authorities.

Changes in these are beyond our control and are difficult to predict and, consequently, changes in these policies could have negative effects on our activities and results of operations.

Failures of the executive and

legislative branches to agree on spending plans and budgets previously have led to Federal government shutdowns, which may adversely affect the U.S.

Additionally, any prolonged government shutdown may inhibit our ability to

evaluate the economy, generally, and affect government workers who are not paid during such events, and where the absence of government services and data could adversely affect consumer and business sentiment, our local economy and our customers and

therefore our business.

Litigation and regulatory investigations are increasingly common in our businesses and may result in significant financial

ability to make payments of principal and interest on our capital

The Federal Reserve may require

us to commit capital resources

to support the Bank.

As a matter of policy, the Federal

Reserve expects a bank holding company to act as a source of financial

and managerial

strength to a subsidiary bank and to commit resources to support

such subsidiary bank.

The Federal Reserve may require a

bank holding company to make capital injections into a troubled

subsidiary bank.

In addition, the Dodd-Frank Act amended

the FDI Act to require that all companies that control a FDIC-insured

depository institution serve as a source of financial

strength to their depository institution subsidiaries.

requirements, we could be required to provide financial

assistance to the Bank should it experience financial distress,

even if further investment was not otherwise warranted.

“Supervision and Regulation.”

Our operations are subject to risk of loss from

unfavorable fiscal, monetary and political developments

Our businesses and earnings are affected by the fiscal, monetary

and other policies and actions

of various U.S.

governmental and regulatory authorities.

Changes in these are

beyond our control and are difficult to predict and,

consequently, changes in these

policies could have negative effects on our activities and results

of operations.

the executive and legislative branches to agree on spending plans and

budgets previously have led to Federal government

shutdowns, which may adversely affect the U.S.

Additionally, any prolonged

government shutdown may inhibit

our ability to evaluate the economy,

generally, and affect

government workers who are not paid during such events, and

where the absence of government services and data could adversely affect

consumer and business sentiment, our local

economy and our customers and therefore our business.

Litigation and regulatory investigations

are increasingly

common in our businesses and

may result in significant financial

losses and/or harm to our reputation.

We face risks of litigation and regulatory investigations and actions in the ordinary course of operating our

businesses, including the risk of class action lawsuits.

Plaintiffs in class action and other lawsuits against us may seek very large and/or indeterminate amounts, including punitive and treble damages.

Due to the vagaries of litigation, the

ultimate outcome of litigation and the amount or range of potential loss at particular points in time may be difficult to ascertain.

We do not have any material pending litigation or regulatory matters affecting us.

Failures to comply with the fair lending laws, CFPB regulations or the Community Reinvestment Act, or CRA, could adversely affect us.

The Bank is subject to, among other things, the provisions of the Equal Credit Opportunity Act, or ECOA, and the Fair Housing Act, both of which prohibit

discrimination based on race or color, religion, national origin, sex and familial status in any aspect of a consumer, commercial credit or residential real estate transaction.

The DOJ and the federal bank regulatory agencies have issued an

Interagency Policy Statement on Discrimination in Lending to provide guidance to financial institutions in determining whether discrimination exists and how the agencies will respond to lending discrimination, and what steps lenders might take to

prevent discriminatory lending practices.

Failures to comply with ECOA, the Fair Housing Act and other fair lending laws and regulations, including CFPB regulations, could subject us to enforcement actions or litigation, and could have a material

adverse effect on our business financial condition and results of operations.

We face risks of litigation

and regulatory investigations and actions in the ordinary course

of operating our businesses,

including the risk of class action lawsuits.

in class action and other lawsuits against us may seek very large

indeterminate amounts, including punitive and treble damages.

the vagaries of litigation, the ultimate outcome of

litigation and the amount or range of potential loss at particular

points in time may be difficult to ascertain.

any material pending litigation or regulatory matters affecting

Failures to comply with the fair lending

laws, CFPB regulations or the Community

Reinvestment Act, or CRA, could

adversely affect us.

The Bank is subject to, among other things, the provisions of

the Equal Credit Opportunity Act, or ECOA, and the Fair

Housing Act, both of which prohibit discrimination based on

race or color, religion, national origin, sex

and familial status

in any aspect of a consumer, commercial credit

or residential real estate transaction.

The DOJ and the federal

regulatory agencies have issued an Interagency Policy Statement

on Discrimination in Lending have provided guidance

financial institutions to evaluate whether discrimination exists

and how the agencies will respond to lending discrimination,

and what steps lenders might take to prevent discriminatory lending

Failures to comply with ECOA, the Fair

Housing Act and other fair lending laws and regulations, including

CFPB regulations, could subject us to enforcement

actions or litigation, and could have a material adverse effect

on our business financial condition and results of operations.

Our Bank is also subject to the CRA and periodic CRA examinations.

The CRA requires us to serve our entire communities,

including low- and moderate-income neighborhoods.

Our CRA ratings could be adversely affected by actual or alleged violations of the fair lending or consumer financial protection laws.

Even though we

have maintained an satisfactory CRA rating since 2000, we cannot predict our future CRA ratings.

Violations of fair lending laws or if our CRA rating falls to less than satisfactory could adversely affect our business,

including expansion through branching or acquisitions.

The CRA requires us to serve our entire

communities, including low- and moderate-income neighborhoods.

Our CRA ratings could be adversely affected by actual

or alleged violations of the fair lending or consumer financial

protection laws.

Even though we have maintained an

“satisfactory” CRA rating since 2000, we cannot predict

our future CRA ratings.

Violations of fair

lending laws or if our

CRA rating falls to less than “satisfactory” could adversely affect

our business, including expansion through branching or

acquisitions.

COVID-19 Risks

The COVID-19 pandemic is expected to continue

to adversely affect our

business, financial condition and results of

The ultimate effects of the pandemic on us will depend

on the severity, scope and

duration of the pandemic, its

cumulative economic effects, governmental actions

in response to the pandemic, and the

restoration of a more

The COVID-19 national health emergency has significantly disrupted

the United States and international economies and

financial markets.

expect that the COVID-19 pandemic and its effects

will continue to adversely affect our business,

financial condition and results of operations in future periods.

spread of COVID-19 has caused illness, quarantines,

cancellation of events and travel, business and school shutdowns, reductions

in business activity and financial transactions,

supply chain interruptions and overall economic and financial market instability.

The State of Alabama and many other

states have taken preventative and protective actions, such as

imposing a statewide mask mandate, restrictions on travel,

business operations, public gatherings, social distancing, advising

or requiring individuals to limit or forego their time

outside of their homes, and ordering temporary closures of non-essential

Though certain of these measures have

been relaxed or eliminated, the pandemic has moved in disruptive

and unpredictable waves.

The travel, hospitality and food and beverage industries, restaurants,

retailers and auto manufacturers, and their suppliers

have been severely affected.

A significant number of layoffs,

furloughs of employees, as well as remote work have

occurred in these and other industries, including government offices,

schools and universities.

Auburn University held

virtual classes only from March 16, 2020 through the summer

Auburn University’s

guidelines for the spring

semester of 2020 and the 2021 involve both remote and in person

instructions as well as social distancing measures and

modified class schedules.

The economic effects of these

measures is not presently known.

Montgomery and

Point, Georgia plants were closed for a portion of the first

quarter of 2020, but began a phased reopen in the

second quarter of 2020 in response to COVID-19.

The ultimate effects of the COVID-19 pandemic on the

economy, generally,

our markets, and on us cannot be predicted.

The timing and effects of the COVID-19 pandemic on

our business, results of operations and financial condition may

include, among various other consequences, the following.

effects depend on the severity,

scope and duration of the

pandemic, its cumulative economic effects, and the effectiveness

of healthcare, business and governmental actions

addressing the pandemic’s effects,

including vaccinations.

Employees’ health could be adversely affected, necessitating

their recovery away from work;

Unavailability of key personnel necessary to conduct our business activities;

Our operating effectiveness may be reduced

as our employees work from home or suffer from the COVID

Shelter in place, remote work or other restrictions and interruptions of

our business and contact with our

Sustained closures

of our branch lobbies or the offices of our

Declines in demand for loans and other banking services and products,

and reduced usage and interchange fees

on our payment cards;

Continuing large scale fiscal and monetary stimulus actions

may stabilize the economy, but

economic and market risks, including valuation “bubbles,” volati

lity in various assets and inflation;

Inflation and increases in interest rates may result from fiscal

stimulus and monetary stimulus, and the Federal

Reserve has indicated it is willing to permit inflation to run moderately

above its 2% target for some time;

Increased savings and debt reduction by consumers could reduce

demand for credit and our earning assets;

Significant volatility in United States financial markets and our

investment securities portfolio, including credit

concerns in municipal securities;

Declines in the credit quality of our loan portfolio, owing to

the effects of the COVID-19 pandemic in the

markets we serve, leading to increased provisions for loan losses and

increases in our allowance for possible

credit losses;

Declines in the value of collateral for loans, including real estate

collateral, especially in industries such as

travel, hospitality, restaura

nts and retailers;

Declines in the net worth and liquidity of borrowers, impairing their

ability to pay timely their loan obligations

Generally low market interest rates that reduce our net interest

income and our profitability;

Loan deferrals and loan modifications, and mortgage foreclosure

moratoria, including those mandated by law,

which are encouraged by our regulators, may increase our expense

and risks of collectability,

reduce our cash

flows and liquidity and adversely affect our results of operations

and financial condition;

The end of temporary regulatory accounting and capital relief for

banks regarding the effects of the COVID-19

pandemic, including loan deferrals and modifications, could

increase our TDRs and require additions to our

allowance for loan losses, which may adversely affect

our income, financial condition and capital;

Our waiver of various fees and service charges to support

our customers and communities will adversely affect

our results of operation and our liquidity and financial position;

The COVID-19 pandemic may change customer financial behaviors

and payment practices.

Electronic banking

could become more popular with less customers doing business

at our offices;

Certain of our assets, including loans and securities, may become

impaired, which would adversely affect our

results of operation and financial condition and mortgage loan foreclosure

moratoria may limit our ability to

timely act to protect our interests in the loan collateral;

Reductions in income or losses will adversely affect

our capital and growth of capital, including our capital for

bank regulatory purposes;

Losses or reductions in net income may adversely affect the

growth or amount of dividends we can pay on our

common stock;

The effects of government fiscal and monetary policies,

including changes in such policies, or the effects

COVID-19 relief programs are discontinued, on the economy and

financial stability, generally,

business, results of operations and financial condition cannot

be predicted;

Cybercriminals may increase their attempts to compromise business

and consumer emails, including an increase

in phishing attempts, and fraudulent vendors or other parties

may view the pandemic as an opportunity to prey

upon consumers and businesses during this time.

The restoration of financial stability and economic growth may

depend on the health care system developing and

deploying COVID-19 testing and contact tracing, and delivery of COVID

-19 vaccines, which promote consumer

and employee health and confidence in the economy.

These factors, together or in combination with other events or

occurrences that are unknown or anticipated, may materially

and adversely affect our business, financial condition and

results of operations.

Our stock price may reflect securities market conditions

The ongoing COVID-19

pandemic has resulted in substantial securities

market volatility, especially for

bank stocks and

has, and may continue to, adversely affect the market of

our common stock.

The spread, intensification and duration

COVID-19 pandemic, as well as the effectiveness of governmental,

fiscal and monetary policies, and regulatory responses

to the pandemic, further affect the financial markets and

the market prices for securities generally,

and the market prices for

bank stocks, including our common stock.

The COVID-19 global pandemic could result

in deterioration of asset quality and an increase

in credit losses.

Many businesses have had, and may continue to have lower revenues

and cash flows and many consumers will have lower

These could result in an inability to repay loans timely in full,

reduce our asset quality and reduce our deposits.

Loan modifications and payment deferrals may also increase

our credit risks, especially when temporary regulatory relief

for these actions expires.

Our business, results of operations,

liquidity and financial condition could be adversely

As a participating lender in the PPP,

the Bank is subject to additional risks of litigation from

customers or other

parties regarding

processing of loans for the PPP and

risks that the SBA may not fund some or all PPP loan

The CARES Act, Paycheck Protection Program and Healthcare

Enhancement Act and Economic Aid Act appropriated

more than $1 trillion in funding for PPP loans administered

through by the SBA and the U.S.

Department of the Treasury.

Under the PPP,

eligible small businesses and other entities and individuals can apply for

loans from existing SBA lenders

and other approved PPP lenders, subject to numerous limitations

and eligibility criteria.

The Bank is participating as a

lender in the PPP and made $36.5 million of PPP loans in 2020.

The PPP loans charge 1% interest annually.

of these loans has been slow, and

PPP loans earn less than market rates.

Since the opening of the PPP,

various banks have

been subject to litigation regarding the process and procedures

used in processing applications for the PPP,

governmental attention is directed at preventing fraud.

We may be exposed

to similar litigation risks, from both customers

and non-customers that approached the Bank regarding PPP

loans we extended.

If any such litigation is filed against the

Bank and is not resolved favorably to the Bank, it may result

in financial liability or adversely affect our reputation.

Litigation can be costly, regardless

Any financial liability,

litigation costs or reputational damage caused by

PPP related litigation could have a material adverse effect

on our business, financial condition and results of operations.

The Bank also has credit risk on PPP loans, if the SBA determines

deficiencies in the manner in which PPP loans were

originated, funded or serviced by the Bank, such as an issue with the

eligibility of a borrower to receive a PPP loan, or

obtain forgiveness of a PPP properly,

including those related to the ambiguities in the laws,

rules and guidance regarding

the PPP’s operation.

the event of a loss resulting from a default on a PPP loan and a

determination by the SBA that there

were one or more deficiencies in the manner in which the PPP

loan was originated, funded, or serviced by the Company,

the SBA may deny its liability under the PPP loan guaranty,

reduce the amount of the guaranty,

or, if it has already paid

under the guaranty, seek recovery of

any loss related to the deficiency from the Company.

Similar issues may also result in

the denial of forgiveness of PPP loans, which could expose

us to potential borrower bankruptcies and potential losses and

additional costs.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors