AUBURN NATIONAL BANCORPORATION, INC

In addition to the other information set forth in this report, you should carefully

consider the factors discussed in Part I,

in the Company’s Annual

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 risks facing our Company.

The persistence of inflation above the Federal Reserve’s

long term

targets, and the maintenance of or further increases in, tightened

Federal Reserve monetary policy by increased target

interest rates and/or reductions in the Federal Reserve’s

securities portfolio, have affected and may continue to affect

the

levels of interest rates, mortgage originations and income, the market values of

our securities portfolio and loans and have

resulted in unrealized securities losses that have adversely affected

our stockholders’ equity.

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 on 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.

On July 29, 2026, the Federal Reserve

reaffirmed its commitment to price stability and its 2% inflation

target, and left the target range for the federal funds rate

unchanged at 3.50% to 3.75%.

Following this meeting, yields on longer-term U.S.

Treasury securities increased, including

the highest 30-year Treasury yields in 19 years and

higher 30-year residential mortgage rates, among increases in other

interest rates.

The timing and direction of future monetary policy actions, and the nature and

extent of the Federal

Reserve’s public communications

regarding such actions, are uncertain.

These changes and other risks and uncertainties

not currently known to us or that we currently deem to be immaterial also may

materially adversely affect our business,

financial condition, and/or operating results in the future.

Military hostilities involving the United States, Israel and Iran commenced on February

28, 2026 and continue subject to

various temporary cease fire arrangements and pauses. As a result, shipments of

petroleum products through the Strait of

Hormuz have been limited, reducing the total volumes of oil in the international

markets and causing oil prices to rise

significantly.

More recently, attacks have

been made on petroleum shipments through the Red Sea by forces aligned with

Iran. 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. These pressures may increase

our and our borrowers’ operating costs

and contribute to higher or more volatile interest rates, which could adversely

affect our net interest margin, the value of

our securities portfolio, and the ability of our borrowers to repay their

loans.

The duration of these hostilities and the long-

t

erm effects of the blockage of petroleum shipments and the other

costs and effects of these hostilities cannot be predicted.