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Item 1A. Risk Factors

2023-03-17 compared with 2022-03-08 · 699 added, 765 removed, 488 unchanged (75% of the section changed)

Any of the following risks could harm our business, results of operations and financial

condition and an investment in our

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

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among other things, may affect us in 2023:

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

The COVID-19 pandemic disrupted the economy beginning late in the first quarter of 2020.

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

Hotels, motels, restaurants,

retail and shopping centers were especially affected.

Supply chains

continue to be disrupted and labor markets remain tight.

Hotels, motels, restaurants, retail and shopping centers

were especially affected.

COVID-19 continues, but with diminishing direct economic effects

due to population

health, generally.

President Biden has terminated the COVID-19 national emergencies

effective May 11, 2023.

Extraordinary monetary and fiscal stimulus in 2020 and in early 2021

have offset certain of the pandemic’s

adverse economic effects.

Inflation is running at levels unseen in decades and the Federal Reserve is

contemplating raising target interest rates and reducing its securities

The nature and timing of any future

changes in monetary and fiscal policies and their effect on us cannot be

offset certain of the pandemic’s adverse

economic effects, but together with supply chain disruptions,

continued consumer demand, Russia’s invasion

Ukraine and its effects on energy and food prices, and tight labor

markets, have resulted in inflation.

running at levels unseen in decades and well above the Federal Reserve’s

long term inflation goal of 2.0%

Beginning in March 2022, the Federal Reserve has been raising target

federal funds interest rates and

reducing its securities holdings in an effort to reduce inflation.

The nature 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, and changes,

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

declines in serious COVID-19

cases, and Russia’s invasion of Ukraine affect

consumer confidence levels, economic activity and inflation.

Changes in payment behaviors and payment rates may increase in delinquencies and

default rates, which could

affect our earnings and credit quality.

including those resulting from Russia’s invasion

of Ukraine affect consumer confidence levels, economic activity

and inflation.

Increases in market interest rates, inflation and consumer and business confidence

changes in savings and payment behaviors, including potential increases in loan delinquencies

and default rates.

These could affect our earnings and credit quality.

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

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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

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 on LIBOR.

predictable as a result of inflation and higher market

interest rates

CECL on January 1, 2023 as required by generally accepted accounting principles

CECL changed the loss model to take into account current expected credit losses in

incurred loss method used historically under GAAP.

This changes the process we use to estimate losses inherent

in our credit exposures.

The process for estimating expected losses 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.

Changes in economic conditions and factors

used in our CECL models may increase the variability of our provisions for loan losses and

our earnings.

Although we had no assets or liabilities that use LIBOR reference rates at the end

the end of the LIBOR

reference rate, scheduled for most tenors by June 30, 2023, could adversely affect

our counterparties and financial

Nonperforming and similar assets take significant time to resolve

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2022, and we had $2.7 million in other real estate

owned (“OREO”).

Non-performing assets may adversely affect our net income in various

not record interest

income on nonaccrual loans or OREO and these assets require higher loan administration

and other costs, thereby adversely

owned as result of foreclosures or otherwise in full or partial payments in respect of loans (“OREO”).

Non-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 of time from management, which can be detrimental

to the performance of their other

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 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 the future, much of which is affected

by the economy and the levels of interest rates,

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

certain that our allowance for loan losses will be adequate over time to

cover credit losses in our

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

the future, much of which is affected by the economy and the levels of interest rates,

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,

values and credit quality indicators, including past charge-off experience and

levels of past due loans and nonperforming

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 and

fiscal and monetary response to COVID-19, loan modifications and deferrals,

market conditions or events adversely

affecting specific customers, industries or markets, including

disruptions of supply chains and war, and changes

borrower behaviors.

Certain borrowers may not recover fully or may fail as a result of COVID

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, a new accounting standard for estimating loan losses, is effective

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

fiscal and monetary response to COVID-19 and the shift beginning in March 2022

from an extraordinarily expansionary

monetary policies to a tightening monetary policy to fight inflation, loan

modifications and deferrals, market conditions or

events adversely affecting specific customers, industries or markets,

including disruptions of supply chains and the war in

Ukraine, and changes in borrower behaviors.

Certain borrowers and their businesses and real estate and commercial

projects and businesses may be adversely affected by inflation

and higher interest rates, and economic slowdowns arising

from tighter monetary policies.

businesses will be unable to fully pass on increased costs due to inflation, and their

profits may shrink.

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, a new accounting standard for estimating

expected future loan losses, is effective for the Company beginning January

1, 2023, and its effects upon the Company have

not yet been determined.

The CECL model incorporates various economic condition elements,

where changes in fiscal and

monetary policy, as well as

market interest rates, could result in more volatility in our provisions for loan losses under

CECL, which could adversely affect our net income.

Changes in the real estate markets, including the

secondary market for residential mortgage loans, may continue

adversely affect us.

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.

Beginning in March 2022, inflation and the Federal monetary policies to increase interest rates

to fight inflation have

caused mortgage rates to increase significantly.

Higher interest rates and the increased level of housing costs as a result

the COVID-19 pandemic, have caused housing starts and sales to slow.

House prices have begun to decline in certain

markets from their earlier highs.

This adversely affects our mortgage loan productions and the value of residential

mortgage collateral.

Commercial real estate projects economic assumptions may be adversely affected,

and certain projects

with short term and/or unhedged variable rate debt may be especially affected

by increased interest rates and a slower

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

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rules are reportedly being reconsidered.

The Tax Cuts and Jobs

Act’s (the “2017 Tax

The Tax Cuts and Jobs Act’s

(the “2017 Tax

Act”) limitations on the deductibility of residential mortgage interest and state

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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 of our OREO.

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.

We may be contractually

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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.

including to Fannie Mae, a government sponsored entity (‘GSE”) and other GSEs and

government agencies.

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, we may have to establish reserves for possible

repurchases and adversely affect our results of

operation and financial condition.

Mortgage servicing rights requirements

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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

difficult and costly to timely realize the value of collateral securing

such loans upon a borrower default.

In contrast, rising

interest rates would be expected to reduce mortgage refinancings and extend the duration

The effects of reduced housing starts and mortgage activity due to

higher market interest rates, have decreased our

generation of new mortgage loans and related MSRs.

This may be offset by decreases in mortgage prepayments and

refinancings, and corresponding increases in the duration of our existing MSRs and their

This net effect could

reduce our aggregate 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 Basel III Rules relating to MSRs may also increase the

potential capital required as a result of MSRs, when considered with other capital rule adjustments

and deductions.

The soundness of other financial institutions could adversely affect us.

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Our ability to engage in

routine investment and banking transactions, as well as the quality and values of our investments

in holdings of other

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.

and profitability of such other financial institutions, including the FHLB and

our correspondent banks.

Financial services

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other relationships.

defaults by, or failures of, the institutions

we do business with could adversely affect our holdings of the equity in

other institutions, our participation interests in loans originated by other institutions,

and our business, including our

liquidity, financial condition and

LIBOR reference interest rates used by many financial institutions to price

extensions of credit will no longer be quoted

beginning June 30, 2023 and their use has been strongly discouraged by regulatory agencies.

Most banks did not adopt

CECL until January 1, 2023.

These changes, together with any exposures other institutions may have

to crypto or digital

assets, could cause disruption and unexpected changes in the industry.

Any losses, 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 earnings.

Our concentration of commercial real

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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

levels and the 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,

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Excluding owner occupied commercial real estate, we had

50.0% of our portfolio in CRE loans at year-end 2021 compared to 43.6% at year-end 2020.

of our portfolio in CRE loans at year-end 2022

compared to 42.6% at year-end 2021.

The banking regulators

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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

At year-end 2021, 21% of our total loans were CRE loans to

hotels/motels, retail and shopping centers and restaurants,

businesses that were severely affected

by the effects of COVID-19.

Increases in interest rates beginning

in March 2022 may adversely affect the assumptions and performance

of CRE, and the ability of borrowers to refinance on

terms that CRE borrowers and their projects can support.

Lower demand for CRE, and reduced availability of, and higher

interest rates and costs for, CRE loans could adversely affect

our CRE loans and sales of our OREO, and therefore our

earnings and financial condition, including our capital and liquidity.

Our future success is dependent on our ability

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markets we serve in Alabama.

economic conditions in our markets have a significant effect on our

commercial, real estate and construction loans, the

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, 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 markets and

Auto sales are cyclical and are affected

adversely by higher interest rates.

Attractive acquisition opportunities may not be available to us in

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

economic conditions of the Southeastern United States in general, or in one or more of our

local markets, including the

effects of higher market interest rates and inflation, supply chain disruptions,

changes in customer behaviors and in the

workforce and demand for space since the COVID-19 pandemic, and the timing and

magnitude of future inflation and

interest rates, 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

markets and nearby.

Auto sales and housing

sales are cyclical and are affected adversely by higher interest

Attractive acquisition opportunities may not be available to us in the

While we seek continued organic growth, including loan 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,

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,

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.

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

The regulatory agencies are carefully scrutinizing financial institution

the merger application process has lengthened.

Future acquisitions and expansion activities may disrupt

our business, dilute shareholder value and adversely affect

operating results.

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other offices.

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

we will be able to adequately or profitably manage this

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

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unanticipated costs and delays;

risks that acquired new businesses will not perform consistent with our growth

and profitability expectations;

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

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;

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

institutions;

potential disruptions to our business;

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potential short-term decreases in profitability;

diversion of our management’s

time and attention from our existing operations and business.

diversion of our management’s time and

attention from our existing operations and business.

Technological

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technological improvements.

The financial services industry is undergoing rapid

technological changes with frequent introductions of new technology

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

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payments businesses, and have increased competition in these businesses.

future success will depend, in part, upon our

success will depend, in part, upon our

ability to use technology to provide products and services that meet our customers’ preferences

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efficiencies in operations, while avoiding cyber-attacks

and disruptions, data breaches and anti-money laundering

The COVID-19 pandemic and 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,

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.

As a result, our competition from service providers not

located in our markets has increased.

and disruptions, data breaches and anti-money laundering and other

potential violations of law.

COVID-19 pandemic and increased remote work has accelerated electronic

activity and the need for increased operational efficiencies.

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.

competitors have substantially greater resources to invest in technological improvements

and, increasingly,

firms are using technology to compete with traditional lenders for loans, payments,

and other banking services.

our competition from service providers not located in our markets has increased.

Operational risks are inherent

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internal audit procedures;

errors by employees or third parties, including our

vendors, failures to document transactions

errors by employees or third parties, including our vendors,

failures to document transactions

properly or obtain proper authorizations;

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jurisdictions where we do business or have customers;

failures in our estimates

models that rely on;

failures in our estimates models

that rely on;

equipment failures,

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or other essential utility outages;

continuity and data security system failures, including those caused by computer

viruses, cyberattacks, unforeseen

continuity and data security system failures, including those caused by computer viruses, cyberattacks,

problems encountered while implementing major new computer systems or,

failures to timely and properly upgrade and

patch existing systems or inadequate access to data or poor response capabilities in

light of such business continuity and

patch existing systems or inadequate access to data or poor response capabilities in light of

such business continuity and

data security system failures;

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counterparties.

The COVID-19 pandemic presented operational challenges to

maintaining continuity of operations of

customer services while protecting our employees’ and customers’ safety.

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 and

potential environmental risks, it is not possible to be certain that such actions

have been or will be effective in controlling

these various operational risks that evolve continuously.

The COVID-19 pandemic presented operational challenges to maintaining

continuity of operations of

customer services while protecting our employees’ and customers’ safety and

similar situations may occur in the future.

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 and potential environmental risks, it is not possible

to be certain that such actions have been or

will be effective in controlling these various operational risks that evolve

continuously.

Potential gaps in our risk management policies and internal audit procedures

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mitigate material risks and loss to us.

developed and continue to develop risk management and internal audit policies

and procedures to reflect the ongoing

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.

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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 framework.

Many of our risk management models and

estimates use observed historical market behavior to model or project

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 timely in our risk management framework.

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.

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

business, including the new CECL models, are based on assumptions and

These models may not operate

properly or our inputs and assumptions may be inaccurate, or changes in economic and

market conditions, customer

behaviors or regulations.

As a result, these methods may not fully or timely predict future exposures,

significantly greater and/or faster 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 procedures

regulation changes.

For example, the Federal Reserve and the OCC are in the initial stages of proposing

management criteria and potential climate risk stress tests.

The SEC is expected to require more disclosure on climate

All of these could adversely affect our financial condition and results

of operations.

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.

In addition, we may have to

implement more extensive and perhaps different risk management

policies and procedures as our regulation changes.

example, the Federal Reserve and the OCC are in the initial stages of proposing climate risk

management criteria and

potential climate risk stress tests.

The SEC is expected to require more disclosure on climate risks, also.

All of these could

adversely affect our financial condition and results of operations.

Any failure to protect

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merchants who accept credit or debit cards for payment.

If we fail to

maintain adequate internal controls, or if our

If we fail to maintain adequate

internal controls, or if our

employees fail to comply with our policies and procedures, misappropriation

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information could occur.

internal control inadequacies or non-compliance could materially damage our

Such internal control

inadequacies or non-compliance could materially damage our reputation,

lead to remediation costs and civil or criminal penalties.

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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.

Any failure, interruption, or security breach of these systems could result in failures or

which could affect our customers’ privacy and our customer relationships,

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.

including those of our service providers, for back-up and service restoration, 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, and may

increase as a result of the Russia invasion of Ukraine.

Other 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

their business partners, effect unauthorized fund transfers, obtain unauthorized

access to confidential information, destroy

data, disable or degrade service, or sabotage systems.

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

Hacking and identity theft risks,

in particular, could cause serious reputational harm.

susceptible to disruption through cyber-attacks, such as denial of service attacks, hacking,

terrorist activities, or identity

Cybercrime risks have increased as electronic and mobile banking activities increased

as a result of the COVID-19

pandemic, and may increase as a result of the Russia invasion of Ukraine and tensions

with mainland China.

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

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.

identity theft risks, in particular, could cause serious reputational

Despite our cybersecurity policies and procedures and our Board

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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 recognize

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

such as external service providers, organized crime affiliates,

ensure the integrity of the systems 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

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.

may increase in the future as the use of mobile banking and other internet electronic banking continues

Security breaches or failures may have serious adverse financial and other consequences,

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damage to systems operated by

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

counterparties.

us or our third-party service providers, as well as damages to our customers and our counterparties.

In addition, these events

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to civil litigation and possible financial liability,

any of which could have a material adverse effect on

our financial

any of which could have a material adverse effect on our

condition and results of operations.

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with other financial services

companies for people primarily on the basis of compensation and benefits,

support services and financial position.

companies for people primarily on the basis of compensation and benefits, support

services and financial position.

competition exists for key employees with demonstrated ability,

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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.

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

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Severe weather and natural disasters, including

as a result of climate change, pandemics, epidemics,

acts of war or

terrorism or other external events could

have significant effects on our business.

as a result of climate change, pandemics, epidemics, acts

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 of

war or terrorism or other external events could have a significant effect on our ability to conduct

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

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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

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 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,

The COVID-19 pandemic, trade wars, tariffs, sanctions 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 during 2020, and remain low,

but may begin increasing in early 2022 due to inflation.

also may adversely affect business and consumer confidence,

Market interest

rates have changed significantly and suddenly.

Federal Reserve target federal funds rates declined to 0-0.25%

2020, where these remained until March 2022.

As of March 7, 2023, this had increased to 4.50-4.75% due to inflation.

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

by rising costs and shortages of needed equipment and

Any such adverse changes may adversely affect our profitability,

growth asset quality and financial condition.

respective suppliers, vendors and processors may be adversely affected

by rising costs and shortages of needed equipment

and supplies and tight labor markets.

The continuation or worsening of these conditions may adversely affect

profitability, growth asset quality and

financial condition.

Financial Risks

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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.

We are allowed to carry

-back losses for two years for Federal income tax purposes.

As of December 31, 2022, we had a

net deferred tax asset of $0.4 million with gross deferred tax assets of $1.7

net deferred tax asset of $13.8 million with gross deferred tax assets of $15.6 million.

These and future deferred tax assets

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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

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.

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of general economic conditions, interest rates, inflation

and competitive

The Federal Reserve shifted to a more accommodating monetary policy in

and changes in customer

behaviors and competitive pressures.

The Federal Reserve shifted to a more accommodating monetary policy in Summer

During 2020, the Federal Reserve

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mortgage-backed securities to help stimulate the economy.

market 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, and

anticipated changes by the Federal Reserve to a less accommodative monetary policy.

Beginning March 2022, as inflation became more persistent, the

Federal Reserve started increasing interest rates and reducing its holdings of U.S government,

agency and agency

mortgage-backed securities.

Our costs of funds may increase as a result of general economic conditions, increasing interest

rates and competitive pressures, and inflation, and anticipated future changes by the Federal

Reserve to reduce inflation.

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 borrowings.

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

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

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.

Our profitability and liquidity may be

affected by changes in interest rates and interest

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

such as the FHLB, which we believe are a cheaper and more stable source of funds than borrowings,

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 potentially 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.

See “Supervision and Regulation – Fiscal and Monetary Policy.”

Our 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

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 interest rate changes, fiscal and monetary policies and the shape of the

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

Conversely, a

flattening yield curve could further pressure our net interest margin

as our cost of funds increases

relative to the spread we can earn on our assets.

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

Net interest income

will be adversely affected if market

interest rates and the interest we pay on deposits and borrowings increases faster than the

interest earned on loans and

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 interest rate changes, fiscal

and monetary policies and the shape of the yield curve.

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 further pressure our net interest margin as our cost of funds

increases relative to the spread we can earn on our assets.

The yield curve was inverted at the beginning of March 2023,

and this results in a lower spread between our costs of funds and our interest income.

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.

interest rate reductions by the Federal Reserve and the effects of the

COVID-19 pandemic have reduced market rates,

which adversely affected our 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

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.

Higher market interest rates and sales of securities held by the Federal

Reserve to reduce

inflation generally reduce economic activity and may loan demand and growth.

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 MSR

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.

values and promote economic growth.

Increases in market interest rates tend to decrease mortgage originations, increase

MSR values, decrease the value and liquidity of collateral securing loans, and potentially

increase net interest spread

depending upon the yield curve and the magnitude and duration of interest rate

increase, and constrain economic growth.

Increases in market interest rates have also caused unrealized losses in our securities

portfolio as our available for sale

investments are carried at fair value and market prices have declined as

market interest rates increase.

Although these

unrealized losses do not adversely affect our regulatory capital, these do

reduce our reported GAAP tangible stockholders’

Sales of securities with unrealized losses would result in realized losses

regulatory capital and tax

Increases in interest rates may also change depositor behaviors as customers

seek higher yielding deposits.

may adversely affect our net interest income and net income and

may also adversely affect our liquidity.

Liquidity risks could affect operations and jeopardize

our financial condition.

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

while reducing the interest rates

earned on loans and securities.

Such excess liquidity and the resulting balance sheet growth requires capital support

reduced returns on assets and equity.

Inflation and tightening monetary policies beginning in early 2022 have increased

interest spreads, but may change the mix and costs of our deposits over time.

The growth in deposits exceeded our loan

growth and the difference was invested in high-quality,

marketable U.S.

government and government agency securities,

including agency mortgage-backed securities.

Liquidity is essential to our business.

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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.

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.

Our funding sources include deposits (primarily core deposits), federal

funds purchased, securities sold under

repurchase agreements, and short-

and long-term debt.

We maintain a portfolio

of marketable high-quality securities that

can be used as a source of liquidity.

As market interest rates have risen, however,

we have experienced unrealized losses

on such securities, which would become realized losses upon the sale of such securities,

and such sales at a loss would

reduce our net income and our regulatory capital.

members of the FHLB and the Federal Reserve Bank, and we can obtain advances collateralized

with eligible

assets, and maintain uncommitted federal funds lines of credit with other banks.

On March 12, 2023, the Federal Reserve

established a new Bank Term

Funding Program (“BTFP”), which offers loans of up to one year to banks, savings

associations, credit unions, and other eligible depository institutions pledging U.S.

Treasuries, agency debt and mortgage-

backed securities, and other qualifying assets as collateral.

These assets will be valued

The BTFP will be an

additional source of liquidity against high-quality securities, eliminating

an institution's need to quickly sell those securities

in times of stress.

In addition, the discount window will apply the same margins used

for the securities eligible for the

further increasing the value of investment securities at the discount window.

Other sources of liquidity available to the Company or the Bank, if needed, include 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 us

could be impaired by factors that affect us specifically,

or the financial services industry or the economy in general.

upon market conditions, to otherwise borrow money or issue and sell debt

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,

the economy and market interest rates and fiscal and monetary policies.

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 rates

earned on loans and securities.

Such excess liquidity and the resulting balance sheet growth requires capital support

may reduce returns on assets and equity.

expectations about the prospects for the financial services industry could adversely affect

Changes in accounting and tax rules applicable to banks could adversely

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preparation of our financial statements.

These changes can be difficult to predict and can materially impact

how we record

These changes can be difficult to predict and can materially impact how

and report our financial condition and results of operations.

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

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.

losses over the life of loans and other instruments and the CECL models include inputs

based on economic and market

conditions, all of which 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

to raise additional capital in the future, but that capital

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We anticipate that our current

capital resources will satisfy our capital requirements for the foreseeable

capital resources will satisfy our capital requirements for the foreseeable future

currently effective rules.

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If we cannot raise additional

capital on acceptable terms when needed, our ability to further expand our

operations through internal growth and

capital on acceptable terms when needed, our ability to further expand our operations

through internal growth and

acquisitions could be limited.

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Our executive officers and other members of management,

intermediaries, investment professionals, product managers, and

other associates, make decisions and choices that involve

intermediaries, investment professionals, product managers, and other

associates, make decisions and choices that involve

exposing us to risk.

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to monitor associates’ business decisions and

prevent them from taking excessive risks, these controls and procedures

may not be effective.

prevent them from taking excessive risks, these controls and procedures may not be effective.

If our associates take

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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 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 limited 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

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

Although our common stock is quoted on the Nasdaq Global Market under the trading symbol

“AUBN,” our trading

volume 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 limited 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

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

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with the Bank are limited by Sections

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

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

dividends, which are limited by law and regulatory policies and actions, for cash to pay the Company’s

obligations, and to pay dividends to our shareholders.

If the Bank’s ability to pay dividends to the Company

terminated or limited, the Company’s liquidity

and financial condition could be materially and adversely affected.

terminated or limited, the Company’s liquidity and

financial condition could be materially and adversely affected.

Legislative and regulatory changes

The Biden Administration is appointing new members to FDIC and Federal

Reserve Board, and has appointed an acting

Comptroller of the Currency and a new full time CFPB director.

This Administration and its appointees propose changes to

bank regulation and corporate tax changes that could have an adverse effect

on our results of operations and financial

The Biden Administration has appointed new members to the FDIC and Federal Reserve

boards, and has appointed an

acting Comptroller of the Currency, and

a new full time CFPB director and FDIC Chairman, a new Federal Reserve Vice

Chairman for Supervision and will nominate a new Vice

Chair to replace Lael Brainard.

The Administration and its

appointees 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

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the SEC and the FDIC.

Although not regulated or supervised by the CFPB, we are subject to the regulations and

interpretations of the CFPB and the Federal Reserve’s

supervision of our compliance with such regulations and

pronouncements.

Our success is affected by state and federal laws and regulations affecting

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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.

position of the President and his administration that took office

in January 2021 with respect to

regulation of banks and bank holding companies is not yet fully known, but

their views and actions could have a material

adverse effect on financial services regulation, generally.

regulations are primarily intended to protect depositors, and the FDIC’s

DIF, not shareholders.

The financial services

industry also is subject to frequent legislative and regulatory changes and proposed

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.

regulators could have a material adverse effect on financial services

regulation, generally.

Litigation and regulatory actions could harm

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inquiries or investigations,

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

legal and other costs, divert management

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

effect on our ability to expand on our existing

could harm our reputation, result in material fines or penalties, result in significant legal and

other 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

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.

Regulatory inquiries and litigation

may also adversely affect the prices or volatility of

Regulatory inquiries and litigation may also adversely affect the prices or volatility of

our securities specifically, or the

securities of our industry,

As a participating lender in the PPP,

the Bank is subject to additional risks of litigation from the Bank’s

customers or other

parties regarding

processing of loans for the PPP and risks of potential

SBA or bank regulatory claims.

The Bank participated as a lender in the PPP and made a total of $56.7 million of PPP loans in 2020

and 2021, generally to

support existing customers in the Bank’s

All PPP loans made by the Bank have been forgiven by the SBA, except

for one credit where the borrower is voluntarily repaying the loan.

Since the beginning of the PPP,

various banks have

been subject to litigation regarding the processes and procedures used in processing applications

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 that we extended.

The SBA, the Department of Justice and the bank regulators are investigating

various PPP lenders and borrowers with

respect to potential fraud or improper activities under the PPP loan programs.

Although the SBA has not indicated any

issues with the Bank’s participation in the PPP

program and honored all PPP forgiveness requests, the Bank could have

potential liability if the SBA later 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 its forgiveness of a PPP

properly, including those related

to the ambiguities in the laws, rules and guidance regarding the PPP’s

The Bank is unaware of any such investigation or claims.

If any such claims are

made against the Bank and are not resolved

favorably to the Bank, it may result in financial liability or adversely affect

our reputation.

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.

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.

required to maintain

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would be adversely affected.

We and the Bank

must meet regulatory capital requirements and maintain sufficient

We and the Bank must

meet regulatory capital requirements and maintain sufficient

liquidity, including liquidity

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

including meeting the Basel III capital conservation buffers,

for bank regulatory purposes, could affect customer

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 may no longer meet the requirements for

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

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

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

“Supervision and

Regulation—Basel 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 various reasons, which may include:

losses and/or increases in the Bank’s credit

risk assets and expected losses resulting from the deterioration in the

“Supervision and Regulation—Basel 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 and/or maintain our liquidity for various

reasons, which may include:

losses and/or increases in the Bank’s credit risk assets

and expected losses resulting from the deterioration in the

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

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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

reduced total earnings on our assets will reduce our internal generation of capital available

to support our balance

sheet growth;

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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 Rule’s

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

Basel III Capital Rule’s

conservation buffer, could adversely affect

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flexibility if we become subject to prompt corrective action restrictions;

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

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

that may be then outstanding.

The Federal Reserve may require

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As a matter of policy, the Federal

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

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.

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bank holding company to make capital injections into a troubled subsidiary bank.

In addition, the Dodd-Frank Act amended

the Dodd-Frank Act amended

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

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Our operations are subject to risk of loss from

unfavorable fiscal, monetary and political developments in the

Our businesses and earnings are affected by the fiscal, monetary and other

policies and actions of various U.S.

unfavorable fiscal, monetary and political developments in

Our businesses and earnings are affected by the fiscal, monetary and other policies

and actions of various U.S.

governmental and regulatory authorities.

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government shutdown may inhibit

our ability to evaluate the economy,

generally, and affect

government workers who are not paid during such events, and

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

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We face risks of litigation

and regulatory investigations and actions in the ordinary course of operating

our businesses,

and regulatory investigations and actions in the ordinary course of operating our

including the risk of class action lawsuits.

Plaintiffs in class

action and other lawsuits against us may seek very large and/or

Plaintiffs in class action and

other lawsuits against us may seek very large and/or

indeterminate amounts, including punitive and treble damages.

4 unchanged sentences

any material pending litigation or regulatory matters affecting

Failures to comply with the fair lending laws, CFPB regulati

ons or the Community Reinvestment Act, or CRA, could

Failures to comply with the fair lending laws, CFPB regulations

or the Community Reinvestment Act, or CRA, could

adversely affect us.

3 unchanged sentences

color, religion, national origin, sex and familial status

in any aspect of a consumer, commercial credit or

residential real estate transaction.

in any aspect of a consumer, commercial credit or residential

real estate transaction.

The DOJ and the federal bank

1 unchanged sentence

in Lending have provided guidance to

financial institutions to evaluate whether discrimination exists and how the

agencies will respond to lending discrimination,

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 practices.

Failures to comply with ECOA, the Fair

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.

regulations or interpretations, could subject us to

enforcement actions or litigation, and could have a material adverse effect

on our business financial condition and results of

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

3 unchanged sentences

and moderate-income neighborhoods.

Our CRA ratings could

be adversely affected by actual

or alleged violations of the fair lending or consumer financial protection

Even though we have maintained an

Our CRA ratings could be

adversely affected by actual

or alleged violations of the fair lending or consumer financial protection laws.

we have maintained an

“satisfactory” CRA rating since 2000, we cannot predict our future CRA ratings.

3 unchanged sentences

acquisitions.

The Federal banking regulators jointly proposed comprehensive revisions to their CRA

regulations on May 5, 2022, and

which may be adopted in the first half of 2023.

These revisions have not been finalized but could have significant effects

on our compliance costs and activities.

See “Supervision and Regulation -

Community Reinvestment Act and Consumer

COVID-19 Risks

The COVID-19 pandemic may continue to adversely affect our business, financial

condition and results of operations.

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

normal economy.

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.

The 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 businesses.

Though various of these measures

have been relaxed or eliminated, the pandemic has moved in disruptive and unpredictable

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 session.

The auto industry’s production

and sales continue to

be adversely affected

by supply chain disruptions.

Hyundai and Kia are major direct and indirect employers in our area.

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.

These 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-19

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

Sustained closures of our branch lobbies or the offices of our customers;

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,” volatility in various assets and

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, but is

considering raising interest rates and reducing its securities holdings as a result of inflation

that is substantially

higher than the Federal

Reserve’s target range;

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

credit losses;

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

travel, hospitality, restaurants

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 of

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

generally, and on our

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

The spread, intensification and duration of

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 stock market’s gains due to a concentration

of high growth companies has

been adversely affected by inflation and expectation of higher interest rates and

the Russia invasion of Ukraine in February

The COVID-19 global pandemic could result in

deterioration of asset quality and an increase in credit

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

flows and many consumers will have lower

income as a result of COVID-19.

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 affected.

As a participating lender in the PPP,

the Bank is subject to additional risks of litigation from the

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

Department of the Treasury.

Under the PPP,

eligible small businesses and other entities and individuals can apply for loans from existing

and other approved PPP lenders, subject to numerous limitations and eligibility

The Bank is participating as a

lender in the PPP and made a total of $56.7 million of PPP loans in 2020 and 2021.

The PPP loans charge 1% interest

Forgiveness of these loans has been slow,

and PPP loans earn less than market rates.

Since the opening of the

various banks have been subject to litigation regarding the process and procedures used in processing applications

and greater 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

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

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

the PPP’s operation.

In 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.

At December 31, 2021 we had $8.1 million PPP loans outstanding and had not realized

any losses on such loans.

The national emergencies related to COVID-19 have been terminated

by the President effective May 11, 2023.

medical and direct economic effects of COVID-19 diminished

over 2022 and are not directly affecting the Company’s

COVID-19 continues to have various indirect effects and risks, the

most important of which are described herein,

including continuing inflation and the Federal Reserve’s

change from accommodative monetary policy to a tightening

monetary policy to fight inflation following significant fiscal and monetary stimuli provided

to reduce the effects of

COVID-19 pandemic on the economy, as

well significant changes resulting from the pandemic, including supply chain

disruptions, a tight labor market, remote work away from the office, population

and business shifts within regions of the

United States, changes in real estate utilization, and shortages of housing and increases

in rents and housing costs in various

areas of the country.

These risks are discussed

in this report.

The Company’s assessment of risks related to

COVID-19 and its effects on the Company applicable

during the pandemic

are discussed in the Company‘s Annual Report on Form 10-K filed with the SEC on March

8, 2022 under the caption “Risk

Factors-COVID 19 Risks” and in our Quarterly Reports on Form 10-Qs though

September 30, 2022.

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