AUBURN NATIONAL BANCORPORATION, INC 10-Q

Item 1A. “RISK FACTORS” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition or future results. The risks described in our annual report on Form 10-K are not the only the risks facing our Company. The persistence of inflation above the Federal Reserve’s long term targets, and the maintenance of or further increases in, tightened Federal Reserve monetary policy by increased target interest rates and/or reductions in the Federal Reserve’s securities portfolio, have and may continue to affect the levels of interest rates, mortgage originations and income, the market values of our securities portfolio and loans and have resulted in unrealized securities losses that have adversely affected our stockholders’ equity. Although inflation has remained above the Federal Reserve’s 2% target rate, since December 2025, the Federal Reserve has maintained its target federal funds range from 3.50% to 3.75% and in October 29, 2025 announced that it would end the roll-off of maturing securities it held beginning December 1, 2025 as the Federal Reserve sought to meet its dual mandate of maximum employment and 2% inflation over the longer run. Beginning December 11, 2025, the Federal Reserve began increasing its holdings of securities through purchases of Treasury bills and, if needed, other Treasury securities with remaining maturities of 3 years or less to maintain an ample level of reserves, and reinvested all principal payments on Treasury securities and reinvested all principal payment on agency securities into Treasury bills. This policy was continued at the Federal Reserve’s April 30, 2026 meeting. The reductions in the target federal funds rates and Federal Reserve purchases of additional securities may be viewed as a more accommodative monetary policy, which has affected and may continue to affect our deposit costs and mixes, and consumer savings and payment behaviors. These may also affect our borrowers’ operating costs, expected returns and cash flows available to service our loans. The Federal Reserve may or may not continue this accommodative policy, and has stated that future monetary policy action “will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.” Such changes and other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results in the future. The United States and Israel attacked Iran on February 28, 2026 and hostilities continue subject to various cease fire arrangements. As a result, shipments of oil through the Straits of Hormuz have been limited, reducing the total volumes of oil in the international markets and causing oil prices to rise significantly. Supply chains where petroleum is an input have been adversely affected, and transportation costs, prices and inflation in the United States and elsewhere have increased. The duration of these hostilities and the long-term effects of the blockage of oil through the Straits of Hormuz and the other c osts and effects of these hostilities cannot be predicted. Table of Contents 50 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The Company did not make any unregistered sales of common stock or other equity securities or any repurchases of its common stock or other equity securities during the first quarter of 2026. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.