What changed in this filing

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Item 1A. Risk Factors

2024-03-14 compared with 2023-03-17 · 642 added, 396 removed, 791 unchanged (57% of the section changed)

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from those discussed in these forward-looking statements.

Risk Factor Summary

The following summarizes the risks provided after this summary and is qualified

by the more detailed discussion of “Risk

Factors” that follows this Summary,

and which should be read in their entirety.

Our risks include operational risks,

financial risks and legal and regulatory risks, which are related and intertwined

as discussed more fully in the Risk Factors

that follow this summary.

Operational risks are inherent in our business, and include:

The effects of local, national and regional market and economic conditions and

cyclicality, including inflation,

interest rates and their effects on borrowers and markets, including real estate

The risks and costs of nonperforming assets

Our allowance for credit losses is based on estimates and judgments and may prove to be

inadequate to our credit

The soundness of other financial institutions and perceptions regarding our industry,

especially when other banks

experience difficulties or fail

Our concentrations in commercial real estate loans in our market

in a highly competitive market against a number of larger national and regional

Future acquisitions may disrupt our business, dilute shareholder value and adversely affect

our operating results

and financial condition, among other risks

Technological changes affect

our business, and we may have fewer resources than various of our larger

and unregulated competitors, inside and outside our market area,

which may increase the competition we face

Potential gaps in our risk management, including managing the risks to us of data

security and cybersecurity,

including risks to our service providers could affect our results of operations, financial

condition, customer

relationship and reputation

Our ability to attract and retain key people

Risks of severe weather, natural disasters, climate changes,

epidemics and severe health issues in the population,

wars and acts of terrorism and other events

Financial risks result in part from our operational risks and the risk of our business, and include:

Increases in costs of funds due to inflation, monetary and fiscal policies, changes in

costumer behaviors and

competitive pressures

Our results of operations and financial condition, including the values of our assets and liquidity,

may be affected

by changes in interest rates and interest rate levels, the shape of the yield curve and economic conditions

Liquidity risks, including the costs and availability of funding, and the liquidity of our assets,

including our

investment securities portfolio, and institutional lending sources

Changes in accounting and tax rules

The adequacy of our capital and availability of capital, if needed

Potentially excessive risk taking by our associates

Our ability to pay dividends depends on our earnings, liquidity and regulatory requirements

related to our capital

and our risks

A limited trading market exists for our common stock

Legal and regulatory risks include:

The Company is a legal entity separate and distinct from the Bank, and transactions

between the Bank and the

Company are limited by law

The Company is required to be a source of financial and managerial strength to

the Bank, even where further

investment in the Bank may not be warranted in the circumstances

The scope, volume and complexity of regulations and regulatory and legal changes affect

us, increase the time and

costs of compliance and may limit our business and adversely affect our

financial condition and results of

Litigation, investigations and other claims by government agencies and private parties and

regulatory actions,

including those related to assertions of compliance failures

The amount of and changes in the capital we are required to maintain in respect of our business

and risk, and

regulatory perceptions of us and our industry

Liquidity requirements

Operational Risks

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monetary and fiscal policies and their effect on us cannot be predicted.

At the end of 2023, many believed that the

Federal Reserve would loosen its monetary policy in response to inflation,

which was declining, but remained

above the Fed’s 2% long term target

Strong economic data and inflation reports since then appear to have

reduced expectations as to the number, timing and size of

any reductions in the target federal funds rate in the near

Market developments, including unemployment, price levels, stock and

bond market volatility, and changes,

including those resulting from Russia’s invasion

of Ukraine affect consumer confidence levels, economic activity

including those resulting from Russia’s

invasion of Ukraine affect consumer confidence levels, economic

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.

changes in customers’ savings and payment behaviors, including potential increases in

loan delinquencies and

default rates.

These could affect our earnings and credit quality.

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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

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

incurred loss method used historically under GAAP.

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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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Our nonperforming loans were 0.16% of total loans as of December

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

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

responsibilities.

31, 2023, and we had no other real estate 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

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 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,

assets may be adversely

affected by loan deferrals and modifications made in response

to the pandemic and the moratoria on foreclosures and

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, generally.

Our allowance for loan losses may prove inadequate

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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.

monetary policies to a tightening monetary policy to fight inflation,

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

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, and may

request or need loan modifications and deferrals.

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

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 in the current environment have not yet been determined

fully due to its short existence.

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

Changes in the real estate markets, including the

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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.

Inventories of existing homes for sale have

remained generally low, and

many believe that higher mortgage rates are adversely affecting potential

sellers from selling

their existing houses and incurring higher mortgage interest rates on their replacement

These conditions have

adversely affected housing affordability and increased

monthly mortgage payments.

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

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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

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

by increased interest rates and a

slower economy.

The CFPB’s mortgage and servicing rules, including

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The CFPB requires that lenders

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

the secondary market for and liquidity

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

secondary market for and liquidity

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

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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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and requirements, as well as their

respective restructurings and capital, could adversely affect the primary

and secondary mortgage markets, and our

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

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sells in the secondary market,

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.

generally to Fannie Mae, a GSE.

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

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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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 may be offset partially by decreases in mortgage prepayments

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

and their values.

This net effect could

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holdings of other

obligations of other financial institutions such as the FHLB, could be adversely affected

by the actions, financial condition,

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

our correspondent banks.

Financial services

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

other relationships.

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.

obligations of other financial institutions such as the FHLB-Atlanta, could be adversely

affected by the actions, financial

condition, and profitability of such other financial institutions, including the FHLB-Atlanta

and our correspondent banks.

Financial services institutions are interrelated as a result of shared credits,

trading, clearing, counterparty and other

relationships.

Most LIBOR reference interest rates used by many financial institutions to

price extensions of credit stopped

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

Most banks did not adopt

CECL until January 1, 2023.

The failures of Silicon Valley

Bank, Signature Bank and First Republic Bank in 2023 due to concentrations of deposits and

depositors holding large amounts of deposits in excess of FDIC insurance limits,

as well as flawed business models and

management, adversely affected the financial system and public confidence.

These have resulted in increased regulatory

scrutiny of bank liquidity, funding and

capital, depressed bank stock values generally,

and higher FDIC deposit insurance

premiums on the largest banks, as well as regulatory proposals to increase large

banks’ capital and expand enhanced

prudential standards starting at $100 billion of assets instead of $250 billion.

The federal bank regulators have been advocating more use of the Federal Reserve discount

window to improve bank

At the same time, these bank failures, together with the failure of the very small

Heartland State bank in Kansas

due to apparent embezzlement by its president due to losses from his personal crypto trading,

have also led to calls to

reduce Federal Home Loan Bank lending to banks.

Traditionally,

the Federal Home Loan Banks have been stable sources

of liquidity and funding for banks.

The Federal Housing Finance Agency (“FHFA)

regulates the Federal Home Loan

FHLBank System at 100:

Focusing on the Future

2023) suggest less traditional Federal

Loan Bank lending to banks, especially banks experiencing financial stress.

These changes, together with any exposures other institutions may have

to crypto or digital

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

to crypto or digital assets, or cybersecurity and data

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

Any losses, defaults by, or failures of, the

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the equity in such other institutions, our

participation interests in loans originated by other institutions, and our business, including

our liquidity, financial condition

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

including our liquidity,

financial condition

and earnings.

Failures of several banks earlier in 2023

and in early 2024 have resulted in increased

market volatility for financial service

disclosable under law.

The failures of

Silicon Valley

Bank, Signature Bank,

First Republic

and Heartland

Tri-State Bank

customers, generally,

greater bank regulatory scrutiny

of banking organizations,

especially those experiencing

Community Bank following

two acquisitions raised

market concerns and led to

replacement of management and

a dilutive equity capital raise.

resolution planning

organizations

These failures

volatility in

financial services

Regulators have

focused supervisory

activities, generally,

organizations

concentrations

regulatory examination

processes, as

nonpublic supervisory

understanding,

supervisory actions.

holding examination

processes, as

any nonpublic

supervisory actions,

“confidential supervisory information”

for regulatory purposes,

whose existence and terms,

may not be disclosed

banking organizations.

Our concentration of commercial real

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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.”

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

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generally excluded from CRE for purposes of this guidance.

Excluding owner occupied commercial real estate, we had

of our portfolio in CRE loans at year-end 2022

compared to 42.6% at year-end 2021.

The banking regulators

continue to give CRE lending scrutiny and require banks with higher levels

of CRE loans to implement improved

underwriting, internal controls, risk management policies and portfolio

stress testing, as well as higher levels of allowances

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

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.

Excluding owner occupied commercial real estate, we had 39.6% of our loan por

tfolio in CRE loans at year-end 2023

compared to 40.4% and 42.6% at year-end 2022 and 2021, respectively.

The banking regulators continue to give CRE

lending scrutiny and require banks with higher levels of CRE loans to implement improved

underwriting, internal controls,

risk management policies and portfolio stress testing, as well as higher levels of allowances

for possible losses and capital

levels as a result of CRE lending growth and exposures.

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 fewer CRE purchase and sale transactions, and reduced availability

of, and higher interest rates and costs for, CRE loans could adversely

affect CRE values and liquidity,

our CRE loans and

sales of OREO, and therefore our earnings and financial condition, including our capital and

Our future success is dependent on our ability

to compete effectively in highly competitive markets.

The East Alabama banking markets which we operate are

highly competitive and our future growth and success will

The East Alabama banking markets which we operate are highly competitive and

our future growth and success will

depend on our ability to compete effectively in these markets.

We compete for loans, deposits

and other financial services

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

mortgage lenders, and securities and

insurance brokerage firms.

Nineteen banks, including JP Morgan Chase, Wells

Truist, PNC, Regions, Valley

National and SouthState, have offices in Lee County.

Eleven of these banks are

headquartered outside of Alabama.

for loans, deposits and other financial services with other local, regional

and national commercial banks, thrifts, credit unions, mortgage lenders, and securities

and insurance brokerage firms.

Lenders operating nationwide over the internet are growing rapidly.

Many of our competitors

offer products and services different from us, and

have substantially greater resources, name recognition and market

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

In addition, larger competitors may be able to price loans

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

and geographic bases to

Out of state banks may branch into our markets.

Fintech and other non-bank competitors also complete for our

customers, and may partner with other banks and/or seek to enter the payments system.

Failures of other banks with offices

in our markets could also lead to the entrance of new,

stronger competitors in our markets.

Many of our competitors offer products and services

different from us, and have substantially greater resources, name recognition

and market presence than we do, which

benefits them in attracting business.

In addition, larger competitors may be able to price loans and deposits

aggressively than we are able to and have broader and more diverse customer and

geographic bases to draw upon.

state banks may branch into our markets.

Fintech and other non-bank competitors also compete for our customers,

partner with other banks and/or seek to enter the payments system.

The failures of other banks with offices in our markets

could also lead to the entrance of new, stronger

competitors in our markets.

Our success depends on local economic conditions.

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Our local economy is also affected by

the growth of automobile manufacturing and related suppliers located in our

markets and nearby.

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

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

Attractive acquisition opportunities may not be available to us in the

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our regulators consider our capital, liquidity,

profitability, regulatory compliance

and levels of goodwill and intangibles

profitability, regulatory

compliance and levels of goodwill and intangibles

when considering acquisition and expansion proposals.

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Future acquisitions and expansion activities may disrupt

our business, dilute shareholder value and adversely affect

operating results.

our business, dilute shareholder value

and adversely affect our

operating results and financial condition.

We regularly evaluate

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various operational risks.

Largely unregulated “fintech” businesses

have increased their participation in the lending and

Largely unregulated “fintech” businesses have increased their

participation in the lending and

payments businesses, and have increased competition in these businesses.

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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,

activity and the need for increased operational efficiencies and data security.

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

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Potential gaps in our risk management policies and internal audit procedures

may leave us exposed unidentified or

may leave us exposed to unidentified or

unanticipated risk, which could negatively affect our business.

Our enterprise risk management and internal audit program is designed to

mitigate material risks and loss to us.

mitigate material risks and losses to us.

developed and continue to develop risk management and internal audit policies and

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potential future exposure.

Models used by our

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

The models used by

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

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.

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.

properly, or our inputs and assumptions

may be inaccurate, or changes in economic and market conditions, customer

behaviors or regulations may adversely affect the accuracy

or usefulness of the models.

As a result, these methods may not

fully or timely predict future exposures, which can be significantly greater and/or faster

than historically.

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

In addition, we may have to implement more extensive and perhaps different

risk management policies and procedures as

our regulation changes.

For example, the Federal Reserve and the federal bank regulators issued

Principles for Climate-

Related Risk for Large Financial Institutions

(October 14, 2023).

The bank regulators’ guidance applies to banks with over

$100 billion in assets.

The SEC adopted a climate risk

rule on March 6, to require more disclosure on climate risks, also.

All of these could adversely affect our costs, and our financial condition and results of

Any failure to protect

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a variety of media, including information technology systems.

Our internal processes and controls are designed to protect

the confidentiality of client information we hold and that is accessible to us and our employees.

Our internal processes, policies and controls are designed to

protect the confidentiality of client information we hold and that is accessible to us and our

It is possible that an

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Such personal data could also be compromised via intrusions into our

systems or those of our service providers or persons we do business with such as credit

systems or those of our service providers or other persons we do business with such as credit

bureaus, data processors and

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information could occur.

Such internal control

inadequacies or non-compliance could materially damage our reputation,

internal control inadequacies or non-compliance could materially damage our reputation,

lead to remediation costs and civil or criminal penalties.

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financial condition and results of operations.

Our information systems may experience interruptions and

security breaches.

of this report for more information about cybersecurity and our

management and strategies.

Our information systems may experience interruptions and security brea

We rely heavily on communications

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or power, communications and other failures.

this report for more information about cybersecurity and our management and strategies.

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

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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

with mainland China and other

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.

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

Hacking and identity theft risks, in particular, could

cause serious reputational harm.

Despite our cybersecurity policies and procedures and our Board

of Director’s and Management’s efforts

to monitor and

ensure the integrity of the 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.

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

of Directors and management’s efforts to

ensure the integrity of the systems we and our third-party service providers

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.

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

These risks may increase in the future as the use of mobile banking and other

internet electronic banking

continues to grow.

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

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condition and results of operations.

In July 2023, the SEC adopted rules, effective September 5, 2023,

require reporting companies to disclose material

cybersecurity incidents they experience on SEC Form 8-K within four business days,

nature, scope, and timing of the

incident, and the material impact or reasonably likely material impact on the registrant,

including its financial condition and

results of operations.

As a smaller reporting company, the Company

has to comply with these Form 8-K reporting

requirements beginning June 15, 2024.

Annually, reporting companies are required

material information

regarding their cybersecurity risk management, strategy,

and governance, beginning for years ending on or after December

We may be unable

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The unexpected loss of services of one or more of

our key persons and failure to ensure effective transfer of knowledge

and smooth transitions involving such persons could

our key persons and failure to ensure effective transfer of knowledge and

smooth transitions involving such persons could

have a material adverse effect on our business due to loss of their skills,

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events and disputes, domestic and international, have

adversely affected, and may continue to adversely affect

economic activity globally,

nationally and locally.

adversely affected, and may continue to adversely affect economic

activity globally, nationally

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.

The Federal Reserve’s target

federal funds rates declined to 0-0.25% in

March 2020, where these remained until March 17 2022.

The Federal Reserve increased the target federal funds rates 11

from March 17, 2022

through July 27, 2023 to 5.25-5.50% due to inflation.

As of March 6, 2023, this range remained at

5.25-5.50% and inflation remains above the Federal Reserve’s

target rate of 2%.

Such events also may adversely affect

business and consumer confidence, generally.

We and our customers,

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.

and our respective suppliers, vendors and processors

may be adversely affected by rising costs and shortages of needed

equipment and supplies and tight labor markets.

continuation or worsening of these conditions may adversely affect our

profitability, growth asset quality

and financial

Financial Risks

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As of December 31, 2023, we had a

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

These and future deferred tax assets

may be further reduced in the future if our estimates of future taxable income from our

operations and tax planning

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

The amount of net operating loss carry-forwards realizable

for income tax purposes potentially could be further reduced under Section 382 of the Internal

Revenue Code by a

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

Current bank capital rules also reduce the regulatory capital

benefits of deferred tax assets.

net deferred tax asset of $10.3 million compared to $13.8 million one year earlier.

These and future deferred tax assets may

be further reduced in the

future if our estimates of future taxable income from our operations and tax planning

strategies do

not support the amount of the deferred tax asset.

The amount of net operating loss carry-forwards realizable for income tax

purposes potentially could be further reduced under Section 382

of the Internal Revenue Code by a significant offering

and/or other sales of our capital securities.

Current bank capital rules also reduce the regulatory capital benefits of deferred

Our cost of funds may increase as a result

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behaviors and competitive pressures.

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

During 2020, the Federal Reserve

reduced its federal funds target to 0-0.25% and has made significant

monthly purchases of U.S.

Treasury and agency

mortgage-backed securities to help stimulate the economy.

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.

Our costs of funds have increased 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

Traditionally,

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.

obtained funds principally through local deposits and borrowings from other institutional

lenders such as the FHLB-

Atlanta, which we believe are a cheaper and more stable source of funds than borrowings,

Increases in interest

rates have caused 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

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

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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.

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 yield curve continues to remain inverted, 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

Higher market interest rates and continuing run-off of maturing securities

held by the Federal Reserve in

furtherance of its quantitative tightening policy to reduce inflation generally reduce economic

activity and may reduce loan

demand and growth.

The production of mortgages and other loans and the value of collateral securing our

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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.

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

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reduce our reported GAAP tangible stockholders’

Sales of securities with unrealized losses would result in realized losses

Sales of securities with unrealized losses would result in realized losses for

regulatory capital and tax

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seek higher yielding deposits.

may adversely affect our net interest income and net income and

may also adversely affect our liquidity.

may adversely affect our costs of funds, growth, net interest

income and net income, and may also adversely affect our

Liquidity risks could affect operations and jeopardize

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could have a negative effect on our

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

funds purchased, securities sold under

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

securities sold under

repurchase agreements, and short-

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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

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

collateralized with eligible assets, and maintain uncommitted federal funds lines of credit

with other banks.

2023, the Federal Reserve established a new Bank Term

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

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

valued at par.

The BTFP ended

2024 and we have not used this program.

In addition, the discount window

will apply the same margins used for the

securities eligible for the BTFP,

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-

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

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

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

common securities in public or private transactions.

Our access to funding sources in amounts adequate to finance or

capitalize our activities on terms which are acceptable to us could be impaired by factors

that affect us specifically,

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, failures of other bank, such as

Silicon Valley

Signature Bank and First Republic Bank in 2023, or negative views and expectations

about the prospects for the financial

services industry could adversely affect us.

Changes in accounting and tax rules applicable to banks could adversely

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in us restating prior period financial statements

guidance under ASU No.

2016-13 includes significant changes to the manner in which banks’ allowance

for loan losses will be effective for us

beginning January 1, 2023.

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

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

may not be available when it is needed or on

to raise additional capital in the future,

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

favorable terms.

We anticipate that our current

capital resources will satisfy our capital requirements for the foreseeable future

capital resources will satisfy our capital requirements for the foreseeable

currently effective rules.

however, need to raise additional capital to

support our growth or currently

however, need to raise additional capital to support

our growth or currently

unanticipated losses, or to meet the needs of our communities, resulting from failures or

cutbacks by our competitors.

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

on conditions in the capital markets at that

ability to raise additional capital, if needed, will depend, among other things, on conditions

in the capital markets at that

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

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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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Our ability to continue to pay dividends to shareholders

and repurchase stock

in the future is subject to our profitability,

capital, liquidity and

regulatory requirements

and these limitations may prevent or limit future

capital, liquidity and regulatory requirements

and these limitations may prevent or limit

future dividends.

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

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the needs of our businesses.

See “Supervision and Regulation”.

We can only pay dividends,

repurchase stock and pay discretionary bonuses, if our capital

conservation buffer exceeds 2.5% and from our eligible retained

income over the last four calendar quarters.

believe our securities portfolio repositioning in December 2023 improved our

balance sheet and reduced our interest rate

risks, the losses on such securities sales reduced our eligible retained income available

for dividends, share repurchases and

discretionary bonuses.

See “Supervision and Regulation - Payment of Dividends and Repurchases of

Capital Instruments.”

The Federal Reserve expects bank holding companies to inform and consult

with Federal Reserve supervisory staff

sufficiently in advance of (i) declaring and paying a dividend that could raise

safety and soundness concerns, such as

declaring and paying a dividend that exceeds earnings for the period

for which the dividend is being paid);

(ii) redeeming or

repurchasing regulatory capital instruments when the bank holding company is

experiencing financial weaknesses;

redeeming or repurchasing common stock or perpetual preferred stock that

would result in a net reduction as of the end of a

quarter in the amount of such equity instruments outstanding compared

with the beginning of the quarter in which the

redemption or repurchase occurred.

Further, the Company is also required to

maintain sufficient capital, liquidity and resources to serve as a source of

managerial and financial strength to the Bank, which may limit its capacity to pay dividends

on Company common stock.

The Federal Reserve may require the Company to commit resources to the Bank, even

where it is not otherwise in the

interests of the Company or its shareholders or creditors.

A limited trading market exists for our common shares,

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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 trading

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

symbol “AUBN,” our trading

volume has been limited historically.

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

We depend upon the Bank’s

upon the Bank’s earnings and

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

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Legislative and regulatory changes

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.

The Biden Administration and its appointees to the various government agencies, including

the bank regulators, CFPB and

have proposed, and continue to propose changes to bank regulation, SEC rules

and corporate tax changes that could

have an adverse effect on our results of operations and financial condition.

The bank regulators, the CFPB and the SEC have actively developed a broad

range of new and changed rules over the last

several years , many of which are complex and lengthy,

such as the new CRA regulations and various SEC rules, including

the cybersecurity rule adopted in September

2023 and climate change rules adopted on March 6, 2024.

Some rules, such

as the SEC share repurchase modernization rules, have been struck down by the courts

and have been withdrawn, creating

more compliance uncertainty during the pendency of the litigation.

Ten states attorney

generals immediately challenged the

new climate change rules, and the Sierra Club is reported to be considering action against

the SEC rules because it was

scaled back from the original proposal.

Compliance with the volume and complexity of these rule changes is costly and imposes

material time and personnel

burdens on financial services companies, especially on smaller companies, such

as the Company.

Increasing litigation on

regulatory rules and whether these exceed the agencies’ statutory authority or have

been improperly adopted has also

created further uncertainty and risks as to the final timing, content and scope of new rules,

and business changes needed to

be made to comply with the effective or compliance dates of the new or changed rules.

For example, the SEC’s share

repurchase disclosure modernization amendments were adopted in May 2023,

with a compliance date for calendar year

issuers beginning with their 2023 annual Form 10-K report.

The SEC postponed the rule on November 22, 2023, following

a court ruling ordering the SEC to correct the defects in the rule by November 30,

In December 2023, the court

vacated the rule due to inaction by the SEC, and the SEC reverted on February 9, 2024

to its pre-existing rules.

subject to extensive regulation that could limit or restrict

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We and our subsidiaries are

regulated by several regulators, including the Federal Reserve, the

Alabama Superintendent,

regulated by several regulators, including the Federal Reserve, the Alabama Superintendent,

the SEC and the FDIC.

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of operations and financial

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

inquiries or investigations,

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

other costs, divert management

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

or investigations,

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

legal and other costs, divert management

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

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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

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

our securities specifically, or the

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As a participating lender in the PPP,

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

the Bank is subject to additional risks of litigation from the

customers or other

parties regarding

processing of loans for the PPP and risks of potential

SBA or bank regulatory claims.

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

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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

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

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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

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

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under acceptable terms and conditions;

declines in the value of our securities portfolios;

declines in the value of our securities portfolios or sales of securities for losses;

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

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ability to pay or increase dividends on our capital stock.

Ability to repurchase our common stock

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

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Our operations are subject to risk of loss from

unfavorable fiscal, monetary and political developments in

unfavorable fiscal, monetary and political developments in the

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

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and what steps lenders might take to prevent discriminatory lending practices.

to comply with ECOA, the Fair

Failures to comply with ECOA, the Fair

Housing Act and other fair lending laws and regulations, including CFPB

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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.

Violations of fair lending laws or if our

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

our business, including expansion through branching or

acquisitions.

The 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.

CRA and fair lending responsibilities

are related and mutually reinforcing.

Even though we have maintained an “satisfactory” CRA rating since

2000, we cannot

predict our future CRA ratings.

of fair lending laws or if our CRA rating falls to less than “satisfactory” could

adversely affect our business, including expansion through branching

or acquisitions.

The Federal Reserve adopted comprehensive revisions to its CRA regulations on October

The other bank

regulators jointly adopted the new CRA regulations, also, and published the new rule in the

Federal Register on February 1,

These new rules are first effective for the Bank beginning on January 1, 2026

with data reporting beginning January

The Bank will be an “intermediate bank” and will be subject to the “retail lending test” and

“intermediate bank community development test,” or if the bank elects, “the community development

financing test.”

are evaluating the new rules but cannot predict their effects on us, but these could

significantly affect our compliance costs

and activities.

See “Supervision and Regulation -

Community Reinvestment Act and Consumer

Community Reinvestment Act and Consumer Laws.”

COVID-19 Risks

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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

February 2024 the Centers for Disease Control likened COVID-19 to the flu, and recommended

continued use of booster

vaccinations.

The medical and direct economic effects of COVID-19 diminished

further in 2023 and are not directly

affecting the Company’s business.

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.

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 commercial 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

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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