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, 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 risks facing our Company.

Inflation has remained above the Federal Reserve’s 2% target. After reducing its target federal funds rate range in late 2025, the Federal Reserve held the range at 3.50% to 3.75% through August 2026 while resuming purchases of Treasury securities to maintain an ample level of reserves. Following the Federal Reserve’s July 29, 2026 meeting, yields on longer-term U.S. Treasury securities rose to their highest levels in 24 years, and 30-year residential mortgage rates and other interest rates also increased. On September 16, 2026, the Federal Reserve increased the target range by 25 basis points to 3.75% to 4.00% and signaled that additional increases could follow if inflation remains elevated. At its October 28, 2026 meeting of the Federal Open Market Committee (“FOMC”), the FOMC did not change its target federal funds range, but noted strong economic activity, little change in unemployment rates, and that inflation remains elevated and above the FOMC’s 2% goal. These developments have affected, and further increases in market interest rates could continue to affect, our deposit costs and mix, our borrowing costs, the market values of our securities and loans and the unrealized losses reflected in our stockholders’ equity, mortgage originations and loan demand, and our borrowers’ operating costs and cash flows available to service their loans. 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 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.

During the third quarter of 2026, we entered into an additional interest rate swap and an interest rate floor designated as hedging instruments to manage our exposure to changes in interest rates, and we may enter into additional derivative instruments in the future. Our interest rate swaps have an aggregate notional amount of $102.0 million and the interest rate floor has a notional amount of $90.0 million, all with a single financial institution counterparty. Hedging strategies involve risks, including that the instruments may not be effective in offsetting changes in the fair value of, or the interest income on, the hedged assets, that a hedging relationship may cease to qualify for hedge accounting and cause volatility in our earnings or stockholders’ equity, and that our counterparty may fail to perform its obligations, including the return of collateral we have posted.

Our agreements with the counterparty provide for the daily exchange of collateral based on the net fair value of the derivative positions, with no minimum threshold. A decline in market interest rates would reduce the fair value of our pay-fixed swap positions and could require us to post collateral in amounts that could be significant. Posting cash collateral reduces our liquid assets, and posting securities would reduce the securities available to secure FHLB-Atlanta advances and public deposits. In addition, if the Bank fails to remain “well capitalized” under applicable regulatory capital requirements, the counterparty could terminate the positions and require immediate settlement at their fair value. These obligations could adversely affect our liquidity.

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-term effects of the disruption of petroleum shipments and the other costs and effects of these hostilities cannot be predicted.