Financial Performance - Net earnings for Q3 2025 were $2.2 million, or $0.64 per share, up from $1.8 million, or $0.52 per share in Q2 2025, and $1.7 million, or $0.50 per share in Q3 2024[4] - Total revenue for Q3 2025 reached $8,401,000, up 3.3% from $8,133,000 in Q2 2025 and 10.0% from $7,636,000 in Q3 2024[24] - Net earnings for Q3 2025 were $2,227,000, representing a 21.5% increase compared to $1,833,000 in Q2 2025 and a 28.6% increase from $1,732,000 in Q3 2024[24] - Basic and diluted net earnings per share for Q3 2025 were $0.64, up from $0.52 in Q2 2025 and $0.50 in Q3 2024[24] Interest Income and Margin - Net interest income (tax-equivalent) increased to $7.6 million in Q3 2025, compared to $7.4 million in Q2 2025 and $6.8 million in Q3 2024, reflecting an 11% increase year-over-year[6] - Net interest income for Q3 2025 was $7,572,000, an increase of 3.1% from $7,344,000 in Q2 2025 and 11.5% from $6,790,000 in Q3 2024[24] - Net interest margin (tax-equivalent) improved to 3.30% in Q3 2025, up from 3.27% in Q2 2025 and 3.05% in Q3 2024, representing a 25 basis points increase year-over-year[7] Asset Quality - Nonperforming assets were $0.1 million, or 0.01% of total assets, at September 30, 2025, down from $0.3 million, or 0.03% at June 30, 2025, and $0.8 million, or 0.08% at September 30, 2024[8] - The Company recorded a negative provision for credit losses of $255 thousand in Q3 2025, compared to a charge of $113 thousand in Q2 2025 and a negative provision of $127 thousand in Q3 2024[9] - The Company's allowance for credit losses was $6.7 million, or 1.20% of total loans, at September 30, 2025, down from $7.0 million, or 1.24% at June 30, 2025[11] Efficiency and Returns - Return on assets (annualized) improved to 0.89% in Q3 2025, compared to 0.71% in Q3 2024[10] - The return on average equity (annualized) for Q3 2025 was 10.65%, up from 9.00% in Q2 2025 and 9.10% in Q3 2024[24] - The efficiency ratio for Q3 2025 improved to 68.96%, compared to 69.95% in Q2 2025 and 71.83% in Q3 2024[24] Assets and Deposits - Total assets were $1.0 billion at September 30, 2025, unchanged from June 30, 2025, and up from $990.1 million at September 30, 2024[15] - Total assets at the end of Q3 2025 were $1,011,184,000, compared to $1,029,224,000 at the end of Q2 2025 and $990,143,000 at the end of Q3 2024[25] - Total deposits were $917.3 million at September 30, 2025, compared to $939.9 million at June 30, 2025, and $901.7 million at September 30, 2024[15] - Total deposits at the end of Q3 2025 were $917,266,000, an increase from $939,851,000 in Q2 2025 and $901,724,000 in Q3 2024[25] Dividends and Equity - The Company paid cash dividends of $0.27 per share in Q3 2025, with stockholders' equity increasing to $89.6 million, or $25.65 per share, at September 30, 2025[18] - Noninterest expense for Q3 2025 was $5,806,000, slightly up from $5,702,000 in Q2 2025 and $5,500,000 in Q3 2024[24]

Core Insights - Auburn National Bancorporation, Inc. reported net earnings of $2.2 million, or $0.64 per share, for Q3 2025, showing an increase from $1.8 million, or $0.52 per share, in Q2 2025 and $1.7 million, or $0.50 per share, in Q3 2024 [2][4][11] - The company achieved a net interest income of $7.6 million in Q3 2025, up from $7.4 million in Q2 2025 and $6.8 million in Q3 2024, attributed to growth in average interest-earning assets and improved net interest margin [4][11] - Nonperforming assets decreased to $0.1 million, or 0.01% of total assets, at September 30, 2025, compared to $0.3 million, or 0.03%, at June 30, 2025, and $0.8 million, or 0.08%, at September 30, 2024, indicating strong credit quality [6][11] Financial Performance - Net interest margin (tax-equivalent) improved to 3.30% in Q3 2025 from 3.27% in Q2 2025 and 3.05% in Q3 2024, primarily due to better yields on interest-earning assets and a decrease in the cost of interest-bearing deposits [5][11] - The company recorded a negative provision for credit losses of $255 thousand in Q3 2025, compared to a charge of $113 thousand in Q2 2025 and a negative provision of $127 thousand in Q3 2024 [7][11] - Noninterest income remained stable at $0.8 million for Q3 2025, unchanged from both Q2 2025 and Q3 2024 [8][11] Expense and Taxation - Noninterest expense increased to $5.8 million in Q3 2025 from $5.7 million in Q2 2025 and $5.5 million in Q3 2024, primarily due to higher salaries and benefits [9][11] - The provision for income tax expense was $0.6 million for Q3 2025, compared to $0.5 million for both Q2 2025 and Q3 2024 [10][11] - The effective tax rate for Q3 2025 was 21.86%, slightly higher than 20.92% in Q2 2025 and lower than 23.46% in Q3 2024 [12][11] Asset and Equity Position - Total assets were reported at $1.0 billion as of September 30, 2025, consistent with June 30, 2025, and an increase from $990.1 million at September 30, 2024 [13][11] - The company's allowance for credit losses was $6.7 million, or 1.20% of total loans, at September 30, 2025, down from $7.0 million, or 1.24%, at June 30, 2025 [8][11] - Stockholders' equity increased to $89.6 million, or $25.65 per share, at September 30, 2025, compared to $86.1 million, or $24.64 per share, at June 30, 2025 [14][11]

Core Points - Auburn National Bancorporation, Inc. announced the election of Walt Conn to its Board of Directors for both the Company and AuburnBank [1] - The Chairman, Robert W. Dumas, expressed that Conn's extensive experience in public accounting and risk management will provide valuable insights to the board [2] Company Overview - Auburn National Bancorporation, Inc. is the parent company of AuburnBank, with total assets of approximately $1.0 billion [5] - AuburnBank is an Alabama state-chartered bank that has been operating since 1907, with seven full-service branches in East Alabama [5] Leadership Background - Walt Conn, aged 63, served as Global Chief Operating Officer – Quality, Risk & Regulatory for KPMG International from 2015 until his retirement in 2023 [3] - Conn has a bachelor's degree in accounting from Auburn University and has held various leadership roles within KPMG for 38 years [3][4]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part covers the company's unaudited consolidated financial statements and management's discussion and analysis [Item 1 Financial Statements](index=3&type=section&id=Item%201%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including balance sheets, earnings, comprehensive income, equity, and cash flows, with explanatory notes [Consolidated Balance Sheets (Unaudited)](index=3&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity Consolidated Balance Sheet Highlights (Dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total assets** | $1,029,224 | $977,324 | | **Total liabilities** | $943,153 | $899,032 | | **Total stockholders' equity** | $86,071 | $78,292 | [Consolidated Statements of Earnings (Unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings%20(Unaudited)) This section details the company's financial performance over specific periods, reporting revenues, expenses, and net earnings Consolidated Statements of Earnings Highlights (Six months ended June 30, Dollars in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | **Net interest income** | $14,389 | $13,366 | | **Net earnings** | $3,363 | $3,105 | | **Basic and diluted net earnings per share** | $0.96 | $0.89 | [Consolidated Statements of Comprehensive Income (Unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) This section presents net earnings and other comprehensive income items, reflecting changes in equity from non-owner sources Consolidated Statements of Comprehensive Income Highlights (Six months ended June 30, Dollars in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | **Net earnings** | $3,363 | $3,105 | | **Change in fair value on available-for-sale securities, net of tax** | $6,302 | $(2,255) | | **Comprehensive income** | $9,665 | $850 | [Consolidated Statements of Stockholders' Equity (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) This section outlines changes in stockholders' equity, including net earnings, other comprehensive income, and dividends Consolidated Statements of Stockholders' Equity Highlights (Six months ended June 30, Dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Balance, beginning of period** | $78,292 | $76,507 (Dec 31, 2023) | | **Net earnings** | $3,363 | $3,105 | | **Other comprehensive income (loss)** | $6,302 | $(2,255) | | **Cash dividends paid** | $(1,886) | $(1,887) | | **Balance, end of period** | **$86,071** | **$75,209** | [Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This section reports cash inflows and outflows from operating, investing, and financing activities over specific periods Consolidated Statements of Cash Flows Highlights (Six months ended June 30, Dollars in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $4,764 | $6,136 | | **Net cash provided by (used in) investing activities** | $11,900 | $(9,795) | | **Net cash provided by financing activities** | $42,141 | $46,789 | | **Net change in cash and cash equivalents** | $58,805 | $43,130 | | **Cash and cash equivalents at end of period** | **$152,159** | **$114,499** | [Notes to Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed explanations and disclosures supporting the consolidated financial statements [NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%201%3A%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the key accounting principles and methods used in preparing the financial statements - **Auburn National Bancorporation, Inc.** provides banking services through its wholly-owned subsidiary, **AuburnBank**, primarily in **Lee County, Alabama**, and surrounding areas[13](index=13&type=chunk) - The unaudited consolidated financial statements are prepared in accordance with **U.S. GAAP** for **interim financial information** and include management's estimates and assumptions, which could differ from actual results[14](index=14&type=chunk)[16](index=16&type=chunk) - No **new accounting guidance** was adopted in the first six months of 2025[19](index=19&type=chunk) [NOTE 2: SECURITIES](index=9&type=section&id=NOTE%202%3A%20SECURITIES) This note details the company's investment securities, including available-for-sale portfolios and unrealized gains/losses Securities Available-for-Sale (Fair Value, Dollars in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Agency obligations** | $53,546 | $52,411 | | **Agency MBS** | $169,119 | $173,676 | | **State and political subdivisions** | $17,016 | $16,925 | | **Total available-for-sale** | **$239,681** | **$243,012** | - **Gross unrealized losses** on securities totaled **$31.1 million** at June 30, 2025, primarily due to changes in interest rates, not credit quality, and no write-down or **allowance for credit losses** was deemed necessary[25](index=25&type=chunk)[26](index=26&type=chunk) - No realized gains or losses on the sale of securities occurred during the quarters and six months ended June 30, 2025 and 2024[27](index=27&type=chunk) [NOTE 3: LOANS AND ALLOWANCE FOR CREDIT LOSSES](index=10&type=section&id=NOTE%203%3A%20LOANS%20AND%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) This note provides information on the loan portfolio, its composition, and the allowance for credit losses Total Loans by Category (Dollars in thousands) | Loan Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Commercial and industrial** | $59,773 | $63,274 | | **Construction and land development** | $93,820 | $82,493 | | **Commercial real estate** | $282,868 | $289,992 | | **Residential real estate** | $117,159 | $118,627 | | **Consumer installment** | $9,094 | $9,631 | | **Total Loans** | **$562,714** | **$564,017** | - **Loans secured by real estate** constituted approximately **87.8%** of the **total loan portfolio** at June 30, 2025, with geographic concentration primarily in **Lee County, Alabama**[28](index=28&type=chunk) Nonaccrual Loans (Dollars in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Commercial real estate** | $119 | $0 | | **Residential real estate** | $183 | $0 | | **Commercial and industrial** | $0 | $99 | | **Construction and land development** | $0 | $404 | | **Total Nonaccrual Loans** | **$302** | **$503** | Allowance for Credit Losses (ACL) (Dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | **ACL Ending Balance** | $6,965 | $6,871 | $7,142 | | **Provision for credit losses** (Six months) | $110 | N/A | $221 | [NOTE 4: MORTGAGE SERVICING RIGHTS, NET](index=20&type=section&id=NOTE%204%3A%20MORTGAGE%20SERVICING%20RIGHTS%2C%20NET) This note describes the company's mortgage servicing rights, their valuation, and related amortization - **Mortgage servicing rights (MSRs)** are recognized at **fair value** upon loan sale and amortized over the period of estimated net servicing income. The Company generally sells conforming, fixed-rate residential mortgages to **Fannie Mae**, retaining servicing rights[50](index=50&type=chunk)[51](index=51&type=chunk) Mortgage Servicing Rights (MSRs), Net (Dollars in thousands) | Metric | Quarter ended June 30, 2025 | Quarter ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **MSRs, net: Beginning balance** | $857 | $965 | $892 | $992 | | **Additions, net** | $11 | $15 | $17 | $27 | | **Amortization expense** | $(41) | $(38) | $(82) | $(77) | | **Ending balance** | **$827** | **$942** | **$827** | **$942** | [NOTE 5: FAIR VALUE](index=20&type=section&id=NOTE%205%3A%20FAIR%20VALUE) This note explains the fair value measurements of financial instruments, categorized by input hierarchy - **Fair value** measurements are categorized into a three-level hierarchy (**Level 1**: quoted prices in active markets, **Level 2**: observable inputs other than **Level 1**, **Level 3**: unobservable inputs)[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) Assets Measured at Fair Value on a Recurring Basis (Level 2, Dollars in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Agency obligations** | $53,546 | $52,411 | | **Agency MBS** | $169,119 | $173,676 | | **State and political subdivisions** | $17,016 | $16,925 | | **Total securities available-for-sale** | **$239,681** | **$243,012** | Assets Measured at Fair Value on a Nonrecurring Basis (Level 2 & 3, Dollars in thousands) | Category | Fair Value Hierarchy | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | :--- | | **Loans held for sale** | Level 2 | $186 | $0 | | **Mortgage servicing rights, net** | Level 3 | $827 | $892 | | **Collateral dependent loans** | Level 3 | $0 | $503 | [Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, balance sheet trends, capital adequacy, and risk management strategies [General](index=25&type=section&id=General) This section provides an overview of the company's business and operational focus - **Auburn National Bancorporation, Inc.** is a **bank holding company** controlling **AuburnBank**, an **Alabama state member bank**, operating primarily in East Alabama[75](index=75&type=chunk)[76](index=76&type=chunk) [Special Cautionary Notice Regarding Forward-Looking Statements](index=25&type=section&id=Special%20Cautionary%20Notice%20Regarding%20Forward-Looking%20Statements) This notice advises readers about the inherent uncertainties and risks associated with forward-looking statements in the report - The report contains forward-looking statements subject to various risks and uncertainties, including economic conditions, governmental policies, regulatory changes, interest rate fluctuations, and competition[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) - The Company does not undertake to update, revise, or correct any forward-looking statements after the report date[83](index=83&type=chunk) [Summary of Results of Operations](index=27&type=section&id=Summary%20of%20Results%20of%20Operations) This section summarizes key financial performance metrics, including net earnings, net interest income, and noninterest items Key Financial Highlights (Six Months Ended June 30, Dollars in thousands) | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Net earnings** | $3,363 | $3,105 | 8.3% | | **Basic and diluted EPS** | $0.96 | $0.89 | 7.9% | | **Net interest income (tax-equivalent)** | $14,425 | $13,405 | 7.6% | | **Net interest margin (tax-equivalent)** | 3.24% | 3.05% | +0.19 pp | | **Noninterest income** | $1,536 | $1,783 | -13.8% | | **Noninterest expense** | $11,582 | $11,194 | 3.5% | | **Income tax expense** | $877 | $639 | 37.2% | | **Effective tax rate** | 20.68% | 17.07% | +3.61 pp | - The increase in **net interest income** was driven by an improved **net interest margin** and growth in **average interest-earning assets**, with yields on assets outpacing deposit cost increases[88](index=88&type=chunk) - **Noninterest income** decreased primarily due to lower **mortgage lending income** and **other noninterest income**, while **noninterest expense** rose due to increased **salaries and benefits**[91](index=91&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=28&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) This section highlights the accounting policies that require significant judgment and estimation by management - No significant changes to critical accounting policies were reported compared to the Annual Report on Form 10-K for the year ended December 31, 2024[95](index=95&type=chunk) [RESULTS OF OPERATIONS](index=29&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's financial performance, including income and expense components [Average Balance Sheet and Interest Rates](index=29&type=section&id=Average%20Balance%20Sheet%20and%20Interest%20Rates) This section presents average balances of assets and liabilities, along with their corresponding yields and rates Average Balances and Yields/Rates (Six Months Ended June 30, Dollars in thousands) | Category | 2025 Average Balance | 2025 Yield/Rate | 2024 Average Balance | 2024 Yield/Rate | | :--- | :--- | :--- | :--- | :--- | | **Loans and loans held for sale** | $563,086 | 5.45% | $567,434 | 5.12% | | **Total interest-earning assets** | $898,526 | 4.49% | $884,191 | 4.29% | | **Total interest-bearing deposits** | $640,065 | 1.76% | $637,845 | 1.72% | | **Total interest-bearing liabilities** | **$640,120** | **1.76%** | **$639,107** | **1.71%** | [Net Interest Income and Margin](index=29&type=section&id=Net%20Interest%20Income%20and%20Margin) This section analyzes the components of net interest income and the factors influencing the net interest margin - **Net interest income (tax-equivalent)** increased by **8%** to **$14.4 million** for the first six months of 2025, driven by a **19 basis point** increase in **net interest margin** to **3.24%**[97](index=97&type=chunk) - The **tax-equivalent yield** on **total interest-earning assets** rose by **20 basis points** to **4.49%**, while the **cost of interest-bearing liabilities** increased by **5 basis points** to **1.76%**[98](index=98&type=chunk)[99](index=99&type=chunk) - The **Federal Reserve** reduced the target **federal funds rate** by **100 basis points** in late 2024, with the rate at **4.25%-4.50%** at June 30, 2025[97](index=97&type=chunk) [Provision for Credit Losses](index=30&type=section&id=Provision%20for%20Credit%20Losses) This section discusses the provision for credit losses and its impact on the allowance for credit losses Provision for Credit Losses (Six months ended June 30, Dollars in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | **Provision for credit losses** | $103 | $211 | - The **allowance for credit losses** was **$7.0 million**, or **1.24%** of **total loans**, at June 30, 2025, compared to **$6.9 million** (**1.22%**) at December 31, 2024, and **$7.1 million** (**1.24%**) at June 30, 2024[102](index=102&type=chunk) - The **CECL model** is influenced by economic factors such as the anticipated **Alabama unemployment rate**[101](index=101&type=chunk) [Noninterest Income](index=30&type=section&id=Noninterest%20Income) This section details the various sources of income generated from non-lending activities Noninterest Income (Six Months Ended June 30, Dollars in thousands) | Category | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Service charges on deposit accounts** | $307 | $309 | -0.6% | | **Mortgage lending income** | $224 | $330 | -32.1% | | **Bank-owned life insurance** | $206 | $201 | 2.5% | | Other | $799 | $943 | -15.3% | | **Total noninterest income** | **$1,536** | **$1,783** | **-13.8%** | - The decrease in **mortgage lending income** was due to reduced demand in the primary market area, while **other noninterest income** declined due to decreased fee income on **reciprocal deposits**[107](index=107&type=chunk)[108](index=108&type=chunk) [Noninterest Expense](index=31&type=section&id=Noninterest%20Expense) This section outlines the operating expenses incurred by the company, excluding interest expenses Noninterest Expense (Six Months Ended June 30, Dollars in thousands) | Category | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Salaries and benefits** | $6,568 | $6,211 | 5.7% | | **Net occupancy and equipment** | $1,318 | $1,366 | -3.4% | | **Professional fees** | $672 | $640 | 5.0% | | Other | $3,024 | $2,977 | 1.6% | | **Total noninterest expense** | **$11,582** | **$11,194** | **3.5%** | - The increase in **total noninterest expense** was primarily driven by routine annual increases in **salaries and wages**[109](index=109&type=chunk) [Income Tax Expense](index=31&type=section&id=Income%20Tax%20Expense) This section reports the income tax expense and the effective tax rate for the reporting periods Income Tax Expense and Effective Tax Rate (Six Months Ended June 30, Dollars in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | **Income tax expense** | $877 | $639 | | **Effective tax rate** | 20.68% | 17.07% | - The **effective income tax rate** is influenced by **tax-exempt earnings** from municipal securities, **bank-owned life insurance (BOLI)**, and **New Markets Tax Credits (NMTCs)**[110](index=110&type=chunk) [BALANCE SHEET ANALYSIS](index=31&type=section&id=BALANCE%20SHEET%20ANALYSIS) This section provides a detailed analysis of the company's assets, liabilities, and equity components [Securities](index=31&type=section&id=Securities) This section analyzes the company's investment securities portfolio, including available-for-sale holdings Securities Available-for-Sale (Dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Securities available-for-sale** | $239,681 | $243,012 | - The decrease in **securities available-for-sale** was due to an **$11.7 million** decrease in **amortized cost basis**, partially offset by an **$8.4 million** increase in **fair value**[111](index=111&type=chunk) - The **average annualized tax-equivalent yield** on **total securities** remained stable at **2.27%** for the first six months of both 2025 and 2024[111](index=111&type=chunk) [Loans](index=31&type=section&id=Loans) This section details the composition and trends of the company's loan portfolio Total Loans by Category (Dollars in thousands) | Loan Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Commercial real estate** | $282,868 | $289,992 | | **Residential real estate** | $117,159 | $118,627 | | **Construction and land development** | $93,820 | $82,493 | | **Commercial and industrial** | $59,773 | $63,274 | | **Total loans** | **$562,714** | **$564,017** | - **Total loans** slightly decreased to **$562.7 million** at June 30, 2025, from **$564.0 million** at December 31, 2024. **Commercial real estate**, **residential real estate**, **construction and land development**, and **commercial and industrial loans** constitute the majority of the portfolio[112](index=112&type=chunk) - The **average yield on loans and loans held for sale** increased to **5.45%** in the first six months of 2025 from **5.12%** in the same period of 2024[114](index=114&type=chunk) [Allowance for Credit Losses](index=32&type=section&id=Allowance%20for%20Credit%20Losses) This section discusses the allowance for credit losses, its calculation, and adequacy relative to the loan portfolio Allowance for Credit Losses (ACL) (Dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **ACL** | $7,000 | $6,900 | | **ACL as % of total loans** | 1.24% | 1.22% | - The **CECL models** use macroeconomic factors like the **Alabama unemployment rate**, **home price index**, **national commercial real estate price index**, and **Alabama gross state product** to estimate future credit losses[120](index=120&type=chunk) Net (Charge-offs) Recoveries as % of Average Loans (Annualized) | Period | 2025 Q2 | 2025 Q1 | 2024 Q4 | 2024 Q3 | 2024 Q2 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Net (charge-offs) recoveries as % of average loans** | (0.03)% | 0.05% | (0.01)% | 0.04% | 0.01% | [Nonperforming Assets](index=34&type=section&id=Nonperforming%20Assets) This section reports on assets that are not generating income or are experiencing payment defaults Nonperforming Assets (Dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total nonperforming assets** | $302 | $503 | | **Nonperforming assets as % of total assets** | 0.03% | 0.05% | | **Nonperforming loans as % of total loans** | 0.05% | 0.09% | - The Company had no **loans 90 days or more past due** and still accruing, and no **OREO** at June 30, 2025, or December 31, 2024[129](index=129&type=chunk)[130](index=130&type=chunk) [Deposits](index=35&type=section&id=Deposits) This section analyzes the company's deposit base, including types of deposits and their cost Total Deposits (Dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Total deposits** | $939,851 | $895,824 | 4.9% | | **Noninterest-bearing deposits** | $268,468 | $260,874 | 2.9% | | **Noninterest-bearing deposits as % of total deposits** | 30% | 29% | +1 pp | - The **5%** increase in **total deposits** was primarily due to a decrease in **reciprocal customer deposits** sold through the **Intrafi network**, with no **reciprocal deposits** sold at June 30, 2025, compared to **$74.1 million** at December 31, 2024[131](index=131&type=chunk) - The **average rate paid on total interest-bearing deposits** increased to **1.76%** in the first six months of 2025 from **1.72%** in the same period of 2024[132](index=132&type=chunk) [Other Borrowings and Available Credit](index=35&type=section&id=Other%20Borrowings%20and%20Available%20Credit) This section details the company's other funding sources and available lines of credit - The Company had no **long-term debt**, **federal funds borrowings**, or **FHLB advances** outstanding at June 30, 2025, and December 31, 2024[136](index=136&type=chunk)[137](index=137&type=chunk) Available Lines of Credit (Dollars in millions) | Source | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **FHLB of Atlanta** | $298.9 | $296.9 | | **Federal funds lines** | $65.2 | $65.2 | [CAPITAL ADEQUACY](index=36&type=section&id=CAPITAL%20ADEQUACY) This section assesses the company's capital position and compliance with regulatory capital requirements Regulatory Capital Ratios (AuburnBank) | Ratio | June 30, 2025 | Minimum for "Well Capitalized" | | :--- | :--- | :--- | | **Total risk-based capital ratio** | 16.35% | 10.0% | | **Tier 1 leverage ratio** | 10.64% | 5.0% | | **Common equity tier 1 (CET1) ratio** | 15.32% | 6.5% | - **Consolidated stockholders' equity** increased to **$86.1 million** at June 30, 2025, from **$78.3 million** at December 31, 2024, primarily due to **net earnings** and **other comprehensive income** from securities[138](index=138&type=chunk) - The Bank's **capital conservation buffer** was **8.35%** at June 30, 2025, well above the **2.5%** requirement, indicating no limitations on distributions[140](index=140&type=chunk)[141](index=141&type=chunk) [MARKET AND LIQUIDITY RISK MANAGEMENT](index=36&type=section&id=MARKET%20AND%20LIQUIDITY%20RISK%20MANAGEMENT) This section describes the strategies and models used to manage interest rate and liquidity risks [Interest Rate Risk Management](index=36&type=section&id=Interest%20Rate%20Risk%20Management) This section details how the company manages exposure to changes in interest rates through various models - The **Asset Liability Management Committee (ALCO)** manages **interest rate risk** using **earnings simulation** and **economic value of equity (EVE)** models[143](index=143&type=chunk) - **Earnings simulation** modeling indicates compliance with policy guidelines, limiting **net interest income variance** for gradual interest rate changes (e.g., **+/- 5%** for **100 basis points**, **+/- 20%** for **400 basis points**)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) - **EVE modeling**, which measures changes in economic values of assets and liabilities due to instantaneous interest rate changes, also showed compliance with policy guidelines (e.g., **EVE** should not decrease by more than **15%** for **+/- 100 basis points**)[147](index=147&type=chunk)[152](index=152&type=chunk) [Liquidity Risk Management](index=37&type=section&id=Liquidity%20Risk%20Management) This section outlines the company's approach to ensuring sufficient cash and funding to meet obligations - Liquidity is managed at both the Company and Bank levels, with primary funding for the Company from Bank dividends and for the Bank from customer deposits and other borrowings[151](index=151&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) - Management believes both the Company and the Bank have adequate liquidity to meet all known contractual obligations and unfunded commitments over the next twelve months[155](index=155&type=chunk) - The Bank has access to **$298.9 million** in **FHLB lines of credit** and **$65.2 million** in **federal funds lines**, with no outstanding borrowings at June 30, 2025[154](index=154&type=chunk) [Off-Balance Sheet Arrangements, Commitments, Contingencies and Contractual Obligations](index=38&type=section&id=Off-Balance%20Sheet%20Arrangements%2C%20Commitments%2C%20Contingencies%20and%20Contractual%20Obligations) This section discloses financial commitments and potential liabilities not recorded on the balance sheet - At June 30, 2025, the Bank had **$0.8 million** in outstanding **standby letters of credit** and **$64.5 million** in **unfunded loan commitments**[156](index=156&type=chunk) - The Company sells residential mortgage loans to **Fannie Mae**, retaining servicing rights, and may be obligated to repurchase loans for breaches of representations and warranties, though no repurchases were required in the first six months of 2025[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) - The aggregate **unpaid principal balance** of residential mortgage loans serviced for **Fannie Mae** was **$196.3 million** at June 30, 2025, with **99%** being current[158](index=158&type=chunk)[162](index=162&type=chunk) [Effects of Inflation and Changing Prices](index=39&type=section&id=Effects%20of%20Inflation%20and%20Changing%20Prices) This section discusses the impact of inflation and interest rate changes on the company's financial performance - **Interest rates** significantly impact financial institutions more than general inflation, affecting **noninterest expenses**, deposit mix, and interest income/expense spreads[164](index=164&type=chunk)[165](index=165&type=chunk) - The **yield curve** was inverted for most of 2024, leading to lower spreads between funding costs and interest income[165](index=165&type=chunk) - The **FOMC** reduced the target **federal funds rate** by **100 basis points** in late 2024, to **4.25%-4.50%** at June 30, 2025, in response to moderating inflation and unemployment risks[166](index=166&type=chunk) [CURRENT ACCOUNTING DEVELOPMENTS](index=40&type=section&id=CURRENT%20ACCOUNTING%20DEVELOPMENTS) This section provides updates on new accounting standards and their potential impact on the company - **ASU 2023-09**, "**Income Taxes (Topic 740)**: Improvements to Income Tax disclosures," is effective for annual periods beginning after December 15, 2024, and is not expected to materially impact the Company's financial statements[167](index=167&type=chunk) [Table 1 – Explanation of Non-GAAP Financial Measures](index=41&type=section&id=Table%201%20%E2%80%93%20Explanation%20of%20Non-GAAP%20Financial%20Measures) This table reconciles non-GAAP financial measures to their most directly comparable GAAP counterparts - This table provides reconciliations of non-GAAP financial measures, specifically **net interest income on a tax-equivalent basis**, to their most directly comparable GAAP financial measures[168](index=168&type=chunk)[169](index=169&type=chunk) Net Interest Income Reconciliation (Six Months Ended June 30, Dollars in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | **Net interest income (GAAP)** | $14,389 | $13,366 | | **Tax-equivalent adjustment** | $36 | $39 | | **Net interest income (Tax-equivalent)** | **$14,425** | **$13,405** | [Table 2 – Selected Quarterly Financial Data](index=42&type=section&id=Table%202%20%E2%80%93%20Selected%20Quarterly%20Financial%20Data) This table presents key financial performance indicators on a quarterly basis Selected Quarterly Financial Data (Q2 2025 vs Q2 2024, Dollars in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Net earnings** | $1,833 | $1,734 | | **Basic and diluted net earnings per share** | $0.52 | $0.50 | | **Net interest income (tax-equivalent)** | $7,363 | $6,728 | | **Noninterest income** | $789 | $896 | | **Noninterest expense** | $5,702 | $5,519 | | **Return on average equity** | 9.00% | 9.63% | | **Return on average assets** | 0.74% | 0.71% | | **Efficiency ratio** | 69.95% | 72.39% | [Table 3 – Selected Financial Data](index=43&type=section&id=Table%203%20%E2%80%93%20Selected%20Financial%20Data) This table provides a summary of key financial data for the reported periods Selected Financial Data (Six Months Ended June 30, Dollars in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | **Net earnings** | $3,363 | $3,105 | | **Basic and diluted net earnings per share** | $0.96 | $0.89 | | **Net interest income (tax-equivalent)** | $14,425 | $13,405 | | **Noninterest income** | $1,536 | $1,783 | | **Noninterest expense** | $11,582 | $11,194 | | **Annualized return on average equity** | 8.26% | 8.34% | | **Annualized return on average assets** | 0.68% | 0.64% | | **Efficiency ratio** | 72.56% | 73.70% | [Table 4 – Average Balances and Net Interest Income Analysis – for the quarter ended June 30, 2025 and 2024](index=44&type=section&id=Table%204%20%E2%80%93%20Average%20Balances%20and%20Net%20Interest%20Income%20Analysis%20%E2%80%93%20for%20the%20quarter%20ended%20June%2030%2C%202025%20and%202024) This table analyzes average balances and net interest income for the specified quarters Average Balances and Net Interest Income Analysis (Quarter Ended June 30, Dollars in thousands) | Category | Q2 2025 Average Balance | Q2 2025 Yield/Rate | Q2 2024 Average Balance | Q2 2024 Yield/Rate | | :--- | :--- | :--- | :--- | :--- | | **Loans and loans held for sale** | $559,939 | 5.50% | $573,926 | 5.22% | | **Total interest-earning assets** | $902,057 | 4.50% | $884,064 | 4.37% | | **Total interest-bearing deposits** | $637,343 | 1.74% | $637,688 | 1.81% | | **Net interest income (tax-equivalent)** | N/A | 3.27% | N/A | 3.06% | [Table 5 – Average Balances and Net Interest Income Analysis – for the six months ended June 30, 2025 and 2024](index=45&type=section&id=Table%205%20%E2%80%93%20Average%20Balances%20and%20Net%20Interest%20Income%20Analysis%20%E2%80%93%20for%20the%20six%20months%20ended%20June%2030%2C%202025%20and%202024) This table analyzes average balances and net interest income for the specified six-month periods Average Balances and Net Interest Income Analysis (Six Months Ended June 30, Dollars in thousands) | Category | 2025 Average Balance | 2025 Yield/Rate | 2024 Average Balance | 2024 Yield/Rate | | :--- | :--- | :--- | :--- | :--- | | **Loans and loans held for sale** | $563,086 | 5.45% | $567,434 | 5.12% | | **Total interest-earning assets** | $898,526 | 4.49% | $884,191 | 4.29% | | **Total interest-bearing deposits** | $640,065 | 1.76% | $637,845 | 1.72% | | **Net interest income (tax-equivalent)** | N/A | 3.24% | N/A | 3.05% | [Table 6 – Volume and Rate Variance Analysis for the quarter and six months ended June 30, 2025](index=46&type=section&id=Table%206%20%E2%80%93%20Volume%20and%20Rate%20Variance%20Analysis%20for%20the%20quarter%20and%20six%20months%20ended%20June%2030%2C%202025) This table breaks down changes in net interest income due to volume and rate fluctuations Net Interest Income Volume and Rate Variance (Six Months Ended June 30, 2025 vs. 2024, Dollars in thousands) | Category | Net Change | Due to change in Rate | Due to change in Volume | | :--- | :--- | :--- | :--- | | **Total interest income** | $1,155 | $672 | $483 | | **Total interest expense** | $134 | $231 | $(97) | | **Net interest income** | **$1,021** | **$441** | **$580** | - For the six months ended June 30, 2025, the increase in **net interest income** was primarily driven by both rate and volume changes, with volume contributing more to the increase than rate[179](index=179&type=chunk) [Item 3 Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the market and liquidity risk management discussion within Item 2, which details the Company's strategies for managing interest rate risk through earnings simulation and economic value of equity models, and liquidity risk by ensuring adequate funding sources for both the Company and its Bank subsidiary - The disclosures about market risk are incorporated by reference from the "**MARKET AND LIQUIDITY RISK MANAGEMENT**" section in Item 2[180](index=180&type=chunk) [Item 4 Controls and Procedures](index=47&type=section&id=Item%204%20Controls%20and%20Procedures) The Company's management, including the CEO and CFO, evaluated the effectiveness of its disclosure controls and procedures as of June 30, 2025, concluding they were effective. No material changes in internal control over financial reporting occurred during the period - The Company's **disclosure controls and procedures** were evaluated and deemed effective as of June 30, 2025[181](index=181&type=chunk) - No material changes in **internal control over financial reporting** occurred during the period covered by the report[181](index=181&type=chunk) [PART II. OTHER INFORMATION](index=47&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes legal proceedings, risk factors, equity sales, defaults, and other required disclosures [Item 1 Legal Proceedings](index=47&type=section&id=Item%201%20Legal%20Proceedings) The Company and Bank are involved in routine legal proceedings, but management believes no pending or threatened proceedings are expected to have a material adverse effect on their financial condition or results of operations - Management believes there are no legal, governmental, or regulatory proceedings that are expected to have a material adverse effect on the Company's or Bank's financial condition or results of operations[182](index=182&type=chunk) [Item 1A Risk Factors](index=47&type=page&id=Item%201A%20Risk%20Factors) This section highlights that readers should consider the risk factors detailed in the Company's Annual Report on Form 10-K for 2024. It specifically notes that persistent inflation, tightened Federal Reserve monetary policy, and increased interest rates continue to affect market values of securities and loans, deposit costs, and borrower cash flows, leading to unrealized losses in stockholders' equity - Readers should carefully consider **risk factors** discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[183](index=183&type=chunk) - Persistent inflation and tightened **Federal Reserve monetary policy** have adversely affected **stockholders' equity** due to **unrealized losses** on securities and loans, and continue to impact deposit costs and borrower cash flows[183](index=183&type=chunk) [Item 2 Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company did not engage in any unregistered sales of common stock or other equity securities during the second quarter of 2025 - The Company did not sell any common stock or other equity securities during the second quarter of 2025[184](index=184&type=chunk) [Item 3 Defaults Upon Senior Securities](index=48&type=section&id=Item%203%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the Company for the reporting period - Not applicable[185](index=185&type=chunk) [Item 4 Mine Safety Disclosures](index=48&type=section&id=Item%204%20Mine%20Safety%20Disclosures) This item is not applicable to the Company for the reporting period - Not applicable[186](index=186&type=chunk) [Item 5 Other Information](index=48&type=section&id=Item%205%20Other%20Information) This item is not applicable to the Company for the reporting period - Not applicable[187](index=187&type=chunk) [Item 6 Exhibits](index=49&type=section&id=Item%206%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications from the CEO and CFO under the Sarbanes-Oxley Act, and XBRL interactive data files, with references to previous filings where applicable - Includes certifications (**31.1**, **31.2**, **32.1**, **32.2**) from the **CEO** and **CFO**, and **XBRL interactive data files** (**101.INS**, **101.SCH**, **101.CAL**, **101.LAB**, **101.PRE**, **101.DEF**, **104**)[188](index=188&type=chunk) - Certifications under Section 906 of the **Sarbanes-Oxley Act** are "furnished" and not "filed" for purposes of Section 18 of the **Securities Exchange Act of 1934**[189](index=189&type=chunk) [SIGNATURES](index=50&type=section&id=SIGNATURES) This section contains the official signatures of the company's authorized officers, certifying the report's accuracy - The report is signed by **David A. Hedges**, **President and CEO**, and **W. James Walker, IV**, **Senior Vice President and Chief Financial Officer**, on August 12, 2025[191](index=191&type=chunk)

Core Viewpoint - Auburn National Bancorporation reported improved profitability and revenue growth in Q2 2025, with earnings per share of $0.52 and revenue of $8.1 million, both higher than previous quarters and the same quarter last year [1][5]. Financial Performance - Earnings per share (GAAP) increased to $0.52, up 4.0% from Q2 2024 and 18.2% from Q1 2025 [2]. - Revenue (GAAP) rose to $8.1 million, reflecting a 6.6% increase year-over-year and a 3.8% increase from Q1 2025 [2]. - Net interest income (Non-GAAP) was $7.36 million, a 9.9% increase from Q2 2024 and a 4.2% increase from Q1 2025 [2]. - The net interest margin (Non-GAAP) improved to 3.27%, up 0.21 percentage points from Q2 2024 [2][5]. - Noninterest expense increased to $5.7 million from $5.5 million in Q2 2024, but decreased from $5.9 million in Q1 2025 [2][7]. Asset Quality and Balance Sheet - Total assets were reported at $1.0 billion, with loans at $562.7 million, remaining stable compared to the previous quarter [6]. - Deposit balances increased to $939.9 million, up from $910.5 million in Q1 2025, primarily due to fluctuations in reciprocal customer deposits [6]. - Nonperforming assets fell to 0.03% of total assets, indicating strong asset quality [8]. Dividend and Capital Management - The bank maintained a quarterly dividend of $0.27, representing a 51.9% payout of earnings, down from 61.36% in Q1 2025 [9]. - Tangible common equity rose to 8.36% of assets, up from 7.34% in Q2 2024, reflecting improved capital ratios [6]. Future Outlook - Management expects continued improvement in net interest margin as loans and securities re-price in the current rate cycle, although loan demand has slowed [10][11]. - There is no specific financial guidance for future earnings or revenue, but management acknowledged potential changes in noninterest income due to mortgage lending trends [10][11].

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) Auburn National Bancorporation reported strong Q2 2025 results with **$1.8 million** net earnings and **$0.52 EPS**, driven by increased net interest income, expanded net interest margin, and excellent credit quality Quarterly Earnings Performance | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Earnings (million USD) | $1.8 | $1.5 | $1.7 | | EPS (diluted, USD) | $0.52 | $0.44 | $0.50 | Six-Month Earnings Performance | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Earnings (million USD) | $3.4 | $3.1 | | EPS (diluted, USD) | $0.96 | $0.89 | - Key drivers for the quarter included an **18%** QoQ increase in EPS, a **4%** QoQ rise in net interest income, a **7 basis point** QoQ expansion in net interest margin, and a **3%** QoQ decrease in noninterest expense, all supported by strong credit quality with nonperforming assets at only **0.03%** of total assets[7](index=7&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management attributes strong quarterly results to excellent credit quality and improving net interest margin, anticipating further expansion despite slower loan demand, while maintaining strong capital and liquidity - The CEO emphasized that strong credit quality and continued improvement in the net interest margin were key drivers of the second quarter's performance[3](index=3&type=chunk) - Management remains optimistic about further net interest margin improvement from the re-pricing of loans and securities, even with slower loan demand[3](index=3&type=chunk) - The company's capital and liquidity are described as strong and well-positioned to serve its customers[3](index=3&type=chunk) [Detailed Financial Performance](index=1&type=section&id=Detailed%20Financial%20Performance) This section provides an in-depth analysis of the company's net interest income, credit quality, noninterest income, and expenses, highlighting key trends and performance drivers [Net Interest Income and Net Interest Margin](index=1&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income (tax-equivalent) increased to **$7.4 million** in Q2 2025, with net interest margin expanding to **3.27%** due to lower deposit costs and improved asset yields Net Interest Income (Tax-Equivalent) | Period | Net Interest Income (Tax-Equivalent, million USD) | | :--- | :--- | | Q2 2025 | $7.4 | | Q1 2025 | $7.1 | | Q2 2024 | $6.7 | Net Interest Margin (Tax-Equivalent) | Period | Net Interest Margin (Tax-Equivalent, %) | | :--- | :--- | | Q2 2025 | 3.27% | | Q1 2025 | 3.20% | | Q2 2024 | 3.06% | - The increase in net interest margin was primarily due to a lower cost of interest-bearing deposits compared to Q1 2025, and improved yields on interest-earning assets compared to Q2 2024[5](index=5&type=chunk) [Credit Quality and Provision for Credit Losses](index=1&type=section&id=Credit%20Quality%20and%20Provision%20for%20Credit%20Losses) Credit quality remained exceptionally strong with nonperforming assets at **0.03%** of total assets, while a **$113 thousand** provision for credit losses was recorded, maintaining the allowance for credit losses at **1.24%** of total loans Nonperforming Assets (NPA) | Date | NPA (million USD) | NPA as % of Total Assets (%) | | :--- | :--- | :--- | | June 30, 2025 | $0.3 | 0.03% | | March 31, 2025 | $0.5 | 0.05% | | June 30, 2024 | $0.8 | 0.08% | - The company recorded a provision for credit losses of **$113 thousand** in Q2 2025, compared to a negative provision of **$10 thousand** in Q1 2025 and a negative provision of **$123 thousand** in Q2 2024[6](index=6&type=chunk) Allowance for Credit Losses (ACL) | Date | ACL (million USD) | ACL as % of Total Loans (%) | | :--- | :--- | :--- | | June 30, 2025 | $7.0 | 1.24% | | March 31, 2025 | $6.8 | 1.20% | | June 30, 2024 | $7.1 | 1.24% | [Noninterest Income and Expense](index=2&type=section&id=Noninterest%20Income%20and%20Expense) Noninterest income was **$0.8 million** in Q2 2025, while noninterest expense decreased **3%** sequentially to **$5.7 million** due to lower occupancy costs, despite a year-over-year increase from higher salaries and professional fees Noninterest Income and Expense | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Noninterest Income (million USD) | $0.8 | $0.7 | $0.9 | | Noninterest Expense (million USD) | $5.7 | $5.9 | $5.5 | - The decrease in noninterest expense from Q1 2025 was mainly due to lower net occupancy and other noninterest expenses[9](index=9&type=chunk) - The increase in noninterest expense from Q2 2024 was primarily due to routine increases in salaries and benefits, along with higher professional fees[9](index=9&type=chunk) [Balance Sheet and Capital](index=2&type=section&id=Balance%20Sheet%20and%20Capital) This section provides an overview of the company's balance sheet composition, including assets, loans, deposits, and stockholders' equity, along with capital adequacy and dividend information [Balance Sheet Analysis](index=2&type=section&id=Balance%20Sheet%20Analysis) Total assets were **$1.0 billion** as of June 30, 2025, with net loans at **$562.7 million** and total deposits at **$939.9 million**, maintaining a clean funding profile with no wholesale funding Selected Period-End Balances | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Assets (USD) | $1.0 billion | $996.8 million | $1.0 billion | | Loans, net (million USD) | $562.7 | $560.7 | $578.1 | | Total Deposits (million USD) | $939.9 | $910.5 | $946.4 | - The year-over-year decrease in loans was primarily due to the payoff of a single **$14.9 million** loan, the proceeds of which were used to repay **$15.0 million** of high-cost non-core funding[12](index=12&type=chunk) - The company had no FHLB advances or other wholesale funding outstanding at the end of Q2 2025, Q1 2025, or Q2 2024[12](index=12&type=chunk) [Stockholders' Equity and Dividends](index=2&type=section&id=Stockholders%27%20Equity%20and%20Dividends) Stockholders' equity grew to **$86.1 million** or **$24.64 per share**, driven by net earnings and reduced unrealized securities losses, while the company paid a **$0.27 per share** cash dividend and maintained strong regulatory capital ratios Stockholders' Equity | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Equity (million USD) | $86.1 | $83.1 | $75.2 | | Book Value/Share (USD) | $24.64 | $23.79 | $21.53 | - The company paid cash dividends of **$0.27 per share** in the second quarter of 2025[15](index=15&type=chunk) - The Tangible Common Equity (TCE) ratio was **8.36%** at June 30, 2025, and the Bank's regulatory capital ratios were well above the minimums required to be 'well capitalized'[14](index=14&type=chunk)[15](index=15&type=chunk) [Corporate Information and Disclosures](index=3&type=section&id=Corporate%20Information%20and%20Disclosures) This section provides an overview of Auburn National Bancorporation, parent of AuburnBank, including cautionary notices on forward-looking statements and explanations of non-GAAP financial measures used for enhanced comparability - The company is the parent of AuburnBank, which has approximately **$1.0 billion** in total assets and has operated continuously since 1907, serving East Alabama through seven branches and a loan production office[16](index=16&type=chunk) - The press release contains forward-looking statements that are subject to risks and uncertainties, as detailed in the company's SEC filings[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) - The report utilizes non-GAAP financial measures, such as net interest income on a tax-equivalent basis and the efficiency ratio, to provide better comparability Reconciliations to GAAP are provided[20](index=20&type=chunk) [Financial Tables](index=4&type=section&id=Financial%20Tables) This section provides detailed unaudited financial tables, including results of operations, per-share data, performance ratios, asset quality metrics, balance sheet figures, and GAAP to non-GAAP reconciliations for relevant periods - The Financial Highlights table provides a comprehensive summary of the income statement, per-share data, performance ratios, and asset quality metrics for the quarters and six months ended June 30, 2025 and 2024[21](index=21&type=chunk) - A table of selected average and period-end balances for key assets, liabilities, and equity is provided for comparative analysis[22](index=22&type=chunk) - A reconciliation of GAAP net interest income to the non-GAAP tax-equivalent net interest income measure is included to clarify the impact of tax-exempt income[24](index=24&type=chunk)

Financial Performance - Auburn National Bancorporation reported net earnings of $1.8 million, or $0.52 per share, for Q2 2025, an increase from $1.5 million, or $0.44 per share, in Q1 2025, and $1.7 million, or $0.50 per share, in Q2 2024 [1][10] - Net interest income (tax-equivalent) was $7.4 million in Q2 2025, up from $7.1 million in Q1 2025 and $6.7 million in Q2 2024, driven by growth in average interest-earning assets and improvements in net interest margin [3][10] - Noninterest income for Q2 2025 was $0.8 million, compared to $0.7 million in Q1 2025 and $0.9 million in Q2 2024, reflecting fluctuations in mortgage lending income and other noninterest income [6] Asset Quality - Nonperforming assets were $0.3 million, or 0.03% of total assets, at June 30, 2025, down from $0.5 million, or 0.05% at March 31, 2025, and $0.8 million, or 0.08% at June 30, 2024 [5][10] - The allowance for credit losses was $7.0 million, or 1.24% of total loans, at June 30, 2025, compared to $6.8 million, or 1.20% at March 31, 2025, and $7.1 million, or 1.24% at June 30, 2024 [6][10] Capital and Liquidity - The Company's consolidated stockholders' equity was $86.1 million, or $24.64 per share, at June 30, 2025, an increase from $83.1 million, or $23.79 per share, at March 31, 2025, and $75.2 million, or $21.53 per share, at June 30, 2024 [12][10] - The tangible common equity ratio was 8.36% at June 30, 2025, compared to 8.34% at March 31, 2025, and 7.34% at June 30, 2024 [13] Operational Efficiency - Noninterest expense decreased to $5.7 million in Q2 2025 from $5.9 million in Q1 2025, while it was $5.5 million in Q2 2024, primarily due to decreases in net occupancy expense and other noninterest expenses [7][10] - The efficiency ratio improved to 69.95% in Q2 2025 from 75.30% in Q1 2025 and 72.39% in Q2 2024, indicating better operational efficiency [22] Market Position - Total assets were approximately $1.0 billion at June 30, 2025, compared to $996.8 million at March 31, 2025, and $1.0 billion at June 30, 2024 [11][10] - Total deposits increased to $939.9 million at June 30, 2025, from $910.5 million at March 31, 2025, and decreased from $946.4 million at June 30, 2024 [11][10]

PART I. FINANCIAL INFORMATION This part details the company's unaudited financial statements, management's discussion, market risks, and internal controls [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=Item%201%20Financial%20Statements) This section presents the Company's unaudited consolidated financial statements and notes on accounting policies, securities, loans, and fair value measurements [Consolidated Balance Sheets (Unaudited)](index=3&type=section&id=Consolidated%20Balance%20Sheets%20%28Unaudited%29%20as%20of%20March%2031%2C%202025%20and%20December%2031%2C%202024) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Total assets | $996,786 | $977,324 | | Cash and cash equivalents | $118,656 | $93,354 | | Securities available-for-sale | $242,468 | $243,012 | | Loans, net | $553,900 | $557,146 | | Total deposits | $910,503 | $895,824 | | Total liabilities | $913,671 | $899,032 | | Total stockholders' equity | $83,115 | $78,292 | [Consolidated Statements of Earnings (Unaudited)](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings%20%28Unaudited%29%20for%20the%20quarters%20ended%20March%2031%2C%202025%20and%202024) | Metric | Quarter ended March 31, 2025 (in thousands) | Quarter ended March 31, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | | Total interest income | $9,861 | $9,229 | | Total interest expense | $2,816 | $2,572 | | Net interest income | $7,045 | $6,657 | | Provision for credit losses | $(10) | $334 | | Noninterest income | $747 | $887 | | Noninterest expense | $5,880 | $5,675 | | Net earnings | $1,530 | $1,371 | | Basic and diluted net earnings per share | $0.44 | $0.39 | [Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29%20%28Unaudited%29%20for%20the%20quarters%20ended%20March%2031%2C%202025%20and%202024) | Metric | Quarter ended March 31, 2025 (in thousands) | Quarter ended March 31, 2024 (in thousands) | | :------------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net earnings | $1,530 | $1,371 | | Unrealized net holding gain (loss) on securities | $4,236 | $(2,184) | | Comprehensive income (loss) | $5,766 | $(813) | [Consolidated Statements of Stockholders' Equity (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity%20%28Unaudited%29%20for%20the%20quarters%20ended%20March%2031%2C%202025%20and%202024) | Metric | Balance, December 31, 2024 (in thousands) | Balance, March 31, 2025 (in thousands) | Balance, December 31, 2023 (in thousands) | Balance, March 31, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------- | :------------------------------------- | :---------------------------------------- | :------------------------------------- | | Total stockholders' equity | $78,292 | $83,115 | $76,507 | $74,489 | | Net earnings | N/A | $1,530 | N/A | $1,371 | | Other comprehensive income (loss) | N/A | $4,236 | N/A | $(2,184) | | Cash dividends paid | N/A | $(943) | N/A | $(943) | [Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%28Unaudited%29%20for%20the%20quarters%20ended%20March%2031%2C%202025%20and%202024) | Metric | Quarter ended March 31, 2025 (in thousands) | Quarter ended March 31, 2024 (in thousands) | | :-------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net cash provided by operating activities | $2,627 | $3,081 | | Net cash provided by (used in) investing activities | $8,939 | $(4,383) | | Net cash provided by financing activities | $13,736 | $2,514 | | Net change in cash and cash equivalents | $25,302 | $1,212 | | Cash and cash equivalents at end of period | $118,656 | $72,581 | [Notes to Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28Unaudited%29) [NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%201%3A%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The Company provides a full range of banking services through its wholly-owned subsidiary, AuburnBank, primarily in Lee County, Alabama, and surrounding areas[15](index=15&type=chunk) - Financial statements are prepared in accordance with U.S. GAAP for interim information, requiring management estimates for items such as allowance for credit losses, fair value of financial instruments, and deferred tax assets[16](index=16&type=chunk)[18](index=18&type=chunk) - Revenue recognition for service charges on deposits, ATM and interchange fees, and gains on sales of OREO is based on transaction processing, service period, or transfer of asset control[19](index=19&type=chunk)[20](index=20&type=chunk) [NOTE 2: BASIC AND DILUTED NET EARNINGS PER SHARE](index=9&type=section&id=NOTE%202%3A%20BASIC%20AND%20DILUTED%20NET%20EARNINGS%20PER%20SHARE) | Metric | Quarter ended March 31, 2025 | Quarter ended March 31, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net earnings | $1,530 | $1,371 | | Weighted average common shares outstanding | 3,493,699 | 3,493,663 | | Net earnings per share | $0.44 | $0.39 | - There were no dilutive securities or rights outstanding at March 31, 2025, or 2024, resulting in no difference between basic and diluted net earnings per share[22](index=22&type=chunk) [NOTE 3: SECURITIES](index=9&type=section&id=NOTE%203%3A%20SECURITIES) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :---------------------------- | :----------------------------- | | Total available-for-sale (Fair Value) | $242,468 | $243,012 | | Total available-for-sale (Amortized Cost) | $276,347 | $282,548 | | Gross Unrealized Losses | $33,879 | $39,536 | - Unrealized losses on securities are primarily due to changes in interest rates, not credit quality, and no write-down was deemed necessary as the Company does not intend to sell these securities before recovery of their amortized cost basis[29](index=29&type=chunk) - The Company had no realized gains or losses on the sale of securities during the quarters ended March 31, 2025, and 2024[30](index=30&type=chunk) [NOTE 4: LOANS AND ALLOWANCE FOR CREDIT LOSSES](index=11&type=section&id=NOTE%204%3A%20LOANS%20AND%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) | Loan Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :---------------------------- | :-----------------------------

Financial Performance - Net earnings for Q1 2025 were $1.5 million, or $0.44 per share, compared to $1.4 million, or $0.39 per share in Q1 2024, reflecting a 7.7% year-over-year increase in earnings per share [3][8]. - Net earnings for Q1 2025 were $1,530,000, compared to $1,371,000 in Q1 2024, representing an increase of 11.6% [23]. - Basic and diluted net earnings per share for Q1 2025 were $0.44, up from $0.39 in Q1 2024, marking a growth of 12.8% [23]. - Total revenue for Q1 2025 was $7,792,000, slightly up from $7,544,000 in Q1 2024, reflecting a growth of 3.3% [23]. Interest Income and Margin - Net interest income (tax-equivalent) increased to $7.1 million in Q1 2025, a 6% increase compared to $6.7 million in Q1 2024 [5][8]. - Net interest income for Q1 2025 was $7,045,000, an increase of 5.8% compared to $6,657,000 in Q1 2024 [23]. - Net interest margin (tax-equivalent) improved to 3.20% in Q1 2025, up from 3.04% in Q1 2024, driven by a favorable asset mix and improved yields [6][8]. Asset Quality - Nonperforming assets were $0.5 million, or 0.05% of total assets, at March 31, 2025, down from $0.9 million, or 0.09% of total assets, at March 31, 2024 [7][8]. - Nonperforming loans decreased to $520,000 in Q1 2025 from $878,000 in Q1 2024, showing improved asset quality [23]. - The allowance for credit losses was $6.8 million, or 1.20% of total loans, at March 31, 2025, down from 1.27% at March 31, 2024 [9][8]. - The allowance for credit losses as a percentage of loans was 1.20% in Q1 2025, slightly down from 1.27% in Q1 2024 [23]. Deposits and Assets - Total assets increased to $996.8 million at March 31, 2025, compared to $979.0 million at March 31, 2024, reflecting growth in the bank's balance sheet [14][8]. - Total deposits rose to $910.5 million at March 31, 2025, compared to $899.7 million at March 31, 2024, indicating strong deposit growth [14][8]. - Total assets at the end of Q1 2025 were $996,786,000, up from $979,039,000 at the end of Q1 2024 [24]. - Total deposits increased to $910,503,000 in Q1 2025 from $899,673,000 in Q1 2024, reflecting a growth of 1.8% [24]. Expenses and Efficiency - Noninterest income remained stable at $0.8 million for Q1 2025, consistent with Q4 2024, but down from $0.9 million in Q1 2024 [10][8]. - Noninterest expense increased to $5.9 million in Q1 2025, up from $5.7 million in Q1 2024, primarily due to routine salary and benefit increases [11][8]. - The efficiency ratio for Q1 2025 was 75.30%, compared to 75.03% in Q1 2024, indicating a slight decline in operational efficiency [23]. Shareholder Returns - The Company paid cash dividends of $0.27 per share in Q1 2025, maintaining a consistent return to shareholders [17][8]. Return on Equity - The return on average equity (annualized) improved to 7.83% in Q1 2025 from 7.13% in Q1 2024 [23].

Deposits and Loans - The Bank had the largest share of deposits in Lee County, Alabama, with 21.3% as of June 30, 2024[22]. - As of December 31, 2024, the Bank's commercial real estate loans totaled $290.2 million, representing 51% of total loans[28]. - At December 31, 2024, the Bank had $82.8 million in construction and land development loans, representing approximately 73% of the Bank's total risk-based capital[6]. - The Bank had $324.0 million in total CRE loans, which is approximately 286% of the Bank's total risk-based capital at December 31, 2024[7]. - The company had 42% of its loan portfolio in commercial real estate (CRE) loans at year-end 2024, up from 40% at year-end 2023, which raises concerns about potential loan losses due to market volatility[213]. Economic Conditions - The unemployment rate in Lee County was 2.8% as of year-end 2024, compared to 3.3% for the State of Alabama[25]. - The Auburn-Opelika MSA population is estimated to grow by 6.6% from 2023 to 2028, with household income projected to increase by 14.25% to $69,213 during the same period[26]. - Higher interest rates and increased housing costs since 2020 have slowed housing sales, adversely affecting mortgage loan production and residential mortgage collateral values[198]. - The Tax Cuts and Jobs Act's limitations on the deductibility of residential mortgage interest could negatively impact consumer behavior and housing market activity[200]. - The concentration of commercial real estate loans poses risks of possible loss due to market conditions and regulatory scrutiny, necessitating improved underwriting and risk management policies[212]. Regulatory Environment - The Company has a "satisfactory" CRA rating as of February 28, 2022, with satisfactory ratings on both its lending and community development tests[60]. - The New CRA Regulations classify banks into categories based on asset size, with the Bank transitioning from "intermediate small bank" to "intermediate bank" due to assets of $600 million to $2.0 billion[64]. - The New CRA Regulations will become effective on January 1, 2026, with data reporting requirements starting on January 1, 2027[63]. - The Federal Reserve requires bank holding companies to act as a source of financial and managerial strength to their FDIC-insured subsidiaries[44]. - The Federal Reserve and the Alabama Superintendent must approve mergers and acquisitions by the Bank, with the FDIC and OCC also having a role in commenting on such transactions[49]. Management and Employees - The Company had 145 full-time equivalent employees as of December 31, 2024, with an average tenure of approximately 11 years[30]. - The Company successfully transitioned management in 2022, with a new President and CFO who have extensive experience in financial services[32]. - The Company offers a variety of equity and equity-based awards under its 2024 Equity and Incentive Compensation Plan to attract and retain talent[33]. Financial Performance - The Bank paid total cash dividends of approximately $3.8 million during 2024, with net profits for the year and retained net profits for the preceding two years totaling $9.7 million[118]. - As of December 31, 2024, the Bank is categorized as "well capitalized" under regulatory standards, maintaining a total risk-based capital ratio of 10% or greater[117]. - The capital conservation buffer for the Bank exceeded 2.5% at December 31, 2024, allowing for distributions from eligible retained income[116]. Competition - The East Alabama banking markets are highly competitive, served by 19 banks, including 10 headquartered outside Alabama[214]. - Competitors include national and regional banks such as J.P. Morgan Chase, Wells Fargo, and PNC, which have greater resources and broader geographic reach[214]. - The presence of fintech and non-bank competitors is increasing, posing additional challenges to customer retention[214]. - The rapid growth of nationwide lenders operating online is a significant threat to market position[214]. Risk Management - The risks associated with operational, financial, and legal factors are intertwined and could significantly affect the company's performance[189]. - Future acquisitions may disrupt business operations and dilute shareholder value, posing additional risks to financial condition[194]. - The allowance for loan losses may prove inadequate due to unanticipated adverse changes in the economy, including inflation and higher interest rates, which could materially affect the company's financial condition and results of operations[196]. - Nonperforming loans were 0.09% of total loans as of December 31, 2024, with no other real estate owned due to foreclosures, indicating a stable credit quality[197]. Compliance and Legal - The Company expects to continue spending significant amounts on compliance with SEC and FDIC rules regarding internal controls[95]. - The Company adopted the CECL accounting standard effective January 1, 2023, recognizing all effects on its regulatory capital in the year of adoption[111]. - The Company has not elected to become a financial holding company but may consider this option in the future[40]. - The Anti-Money Laundering Act of 2020 and the Corporate Transparency Act require entities to report beneficial ownership information, effective January 1, 2024[88].