Part I [Business](index=4&type=section&id=ITEM%201.%20BUSINESS) Auburn National Bancorporation, Inc is a bank holding company for AuburnBank, offering financial services in East Alabama while navigating competition, regulation, and pandemic-related operational changes - The Company is a bank holding company whose principal subsidiary is AuburnBank, an Alabama state member bank operating since 1907, primarily serving East Alabama[9](index=9&type=chunk)[10](index=10&type=chunk) - The Company faces **significant competition** from larger regional and national banks, credit unions, and non-bank financial institutions which have greater resources and broader service offerings[15](index=15&type=chunk)[16](index=16&type=chunk) - In response to COVID-19, the company **limited branch lobby services**, enhanced drive-thru and electronic channels, and enabled remote work for employees where possible[21](index=21&type=chunk) - The Bank offers a comprehensive suite of services including checking, savings, certificates of deposit, residential mortgages, commercial, financial, agricultural, and consumer loans[14](index=14&type=chunk) - The Bank operates **13 ATM locations** and provides online banking, bill payment, and Visa Checkcards with international access through the Plus® network[14](index=14&type=chunk) - The Bank's loan portfolio includes commercial, financial, agricultural, real estate (mortgage, acquisition, construction), and consumer loans[18](index=18&type=chunk) - The local economy is positively affected by nearby Kia and Hyundai automotive plants, but this also introduces **cyclical risk** tied to the auto industry and interest rate changes[20](index=20&type=chunk) - Management believes the diversified industrial mix within its primary service area helps mitigate the impact of adverse changes in any single industry[20](index=20&type=chunk) - The Company is a bank holding company subject to supervision by the Federal Reserve under the BHC Act, while the Bank is regulated by the Federal Reserve and the Alabama Superintendent of Banks[23](index=23&type=chunk)[24](index=24&type=chunk)[33](index=33&type=chunk) - The Company qualifies as a small bank holding company under the Small BHC Policy (for institutions up to **$3 billion in assets**), allowing its capital adequacy to be evaluated on a bank-only basis[31](index=31&type=chunk)[32](index=32&type=chunk) - The Bank is subject to Basel III Capital Rules, which require a minimum Common Equity Tier 1 (CET1) ratio of 4.5% and a capital conservation buffer of 2.5%, leading to a **total CET1 requirement of 7.0%**[70](index=70&type=chunk)[71](index=71&type=chunk)[77](index=77&type=chunk) - The CARES Act provided temporary relief allowing banks to suspend Troubled Debt Restructuring (TDR) classifications for certain loan modifications made in response to the COVID-19 pandemic[48](index=48&type=chunk) - The 2018 Growth Act provided regulatory relief for smaller banks, including exempting those with less than **$10 billion in assets** from the Volcker Rule and allowing certain residential mortgages held in portfolio to be deemed "qualified mortgages"[44](index=44&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) [Risk Factors](index=26&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces operational, financial, and regulatory risks, which are heightened by the economic impact of the COVID-19 pandemic - The COVID-19 pandemic has disrupted the economy, affecting key local sectors like hotels, restaurants, and retail, making creditworthiness and collateral value assessments less predictable[128](index=128&type=chunk)[130](index=130&type=chunk) - A significant portion of the loan portfolio is concentrated in sectors heavily impacted by COVID-19; at year-end 2020, **25% of total loans ($117.0 million)** were in hotels/motels, retail, shopping centers, and restaurants[132](index=132&type=chunk)[144](index=144&type=chunk) - The company faces risks from technological changes and competition from "fintech" businesses, and may have **fewer resources to invest in technology** compared to larger competitors[150](index=150&type=chunk)[151](index=151&type=chunk) - As a participating lender in the Paycheck Protection Program (PPP), the company is exposed to **litigation risk** regarding loan processing and credit risk if the SBA denies loan guarantees[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) [Unresolved Staff Comments](index=40&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved staff comments - None[202](index=202&type=chunk) [Properties](index=40&type=section&id=ITEM%202.%20PROPERTIES) The Bank operates from multiple branches and is currently redeveloping its main office, which was demolished in 2020 - The Bank conducts business from its main office, **seven full-service branches**, and two loan production offices in Auburn and Phenix City, Alabama[202](index=202&type=chunk) - The main office was demolished in 2020 for a redevelopment project; a **new headquarters and parking deck** are under construction, with activities starting in the second half of 2020[202](index=202&type=chunk)[203](index=203&type=chunk) - During construction, main office operations are located in the temporary main office branch in the adjacent, company-owned AuburnBank Center[202](index=202&type=chunk) [Legal Proceedings](index=41&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) Management does not expect pending legal proceedings to have a material adverse effect on the company's financial condition - Management believes there are no pending or threatened legal proceedings expected to have a **material adverse effect** on the Company's financial condition or results of operations[211](index=211&type=chunk) [Mine Safety Disclosures](index=41&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[211](index=211&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=42&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY,%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's stock trades on Nasdaq, with details on shareholder count, dividend history, and a share repurchase plan provided - The Company's Common Stock is listed on the Nasdaq Global Market under the symbol **"AUBN"**; as of March 8, 2021, there were **3,566,326 shares outstanding**[212](index=212&type=chunk) - As of December 31, 2020, the company had an approximate value of **$5,000,000 remaining** under its publicly announced share repurchase plan, though no shares were purchased in Q4 2020[218](index=218&type=chunk) Quarterly Stock Prices and Dividends (per share) | Year | Quarter | High Price ($) | Low Price ($) | Cash Dividend ($) | | :--- | :--- | :--- | :--- | :--- | | 2020 | Q1 | 59.99 | 24.11 | 0.255 | | 2020 | Q2 | 63.40 | 36.81 | 0.255 | | 2020 | Q3 | 56.80 | 26.26 | 0.255 | | 2020 | Q4 | 43.00 | 36.75 | 0.255 | | 2019 | Q1 | 39.43 | 30.61 | 0.25 | | 2019 | Q2 | 39.55 | 31.06 | 0.25 | | 2019 | Q3 | 47.38 | 32.33 | 0.25 | | 2019 | Q4 | 53.90 | 40.00 | 0.25 | [Selected Financial Data](index=44&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section refers to the detailed financial data presented in Item 7 - Selected Financial Data is presented within Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations"[219](index=219&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Net earnings declined in 2020 due to pandemic-related loan loss provisions and margin compression, though assets grew from increased deposits - The decrease in 2020 net earnings was primarily driven by an elevated **provision for loan losses ($1.1 million)** and a lower interest rate environment due to the COVID-19 pandemic[222](index=222&type=chunk) - The company extended **$36.5 million in loans to 423 small businesses** under the Paycheck Protection Program (PPP) during 2020[232](index=232&type=chunk) - The allowance for loan losses increased to **$5.6 million (1.22% of total loans)** at year-end 2020, up from $4.4 million (0.95% of total loans) at year-end 2019, reflecting the economic impact of COVID-19[224](index=224&type=chunk) - The provision for loan losses was **$1.1 million in 2020**, compared to a negative provision of $0.3 million in 2019, due to adverse economic changes from the COVID-19 pandemic[255](index=255&type=chunk) - **Mortgage lending income increased significantly to $2.3 million** in 2020 from $0.9 million in 2019, driven by higher refinance activity in the low-rate environment[257](index=257&type=chunk)[260](index=260&type=chunk) - Noninterest expense decreased slightly, with a **$0.6 million reduction in salaries and benefits** being offset by a $0.6 million increase in expenses related to the headquarters redevelopment[225](index=225&type=chunk)[263](index=263&type=chunk) - **Total deposits grew 16% to $839.8 million** at Dec 31, 2020, driven by PPP loan deposits, government stimulus, and reduced consumer spending during the pandemic[295](index=295&type=chunk) - **Securities available-for-sale increased by $99.3 million** to $335.2 million as management allocated excess liquidity from deposit growth into the investment portfolio[266](index=266&type=chunk) - Total loans were flat at $461.7 million; excluding PPP loans, the portfolio **decreased by $18.2 million (4%)**, primarily due to payoffs in commercial and residential real estate loans[269](index=269&type=chunk) - The company had granted COVID-19 related loan modifications on loans totaling **$32.3 million, or 7% of total loans**, as of December 31, 2020, down from a peak of $112.7 million[278](index=278&type=chunk) - The Company is treated as a **"small bank holding company"**, meaning its capital adequacy is evaluated at the Bank level rather than on a consolidated basis[302](index=302&type=chunk)[508](index=508&type=chunk) - At December 31, 2020, the Bank's capital conservation buffer was **10.31%**, well above the 2.5% fully phased-in requirement[300](index=300&type=chunk)[302](index=302&type=chunk) Summary of Results of Operations (in thousands) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net interest income (GAAP) | $24,338 | $26,064 | | Provision for loan losses | $1,100 | $(250) | | Noninterest income | $5,375 | $5,494 | | Noninterest expense | $19,554 | $19,697 | | Net earnings | $7,454 | $9,741 | | Basic and diluted EPS | $2.09 | $2.72 | Net Interest Income and Margin Analysis | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net Interest Income (tax-equivalent) | $24,830 thousand | $26,621 thousand | | Net Interest Margin (tax-equivalent) | 2.92% | 3.43% | | Yield on Interest-Earning Assets | 3.38% | 3.97% | | Cost of Interest-Bearing Liabilities | 0.68% | 0.80% | Bank Capital Ratios (as of Dec 31, 2020) | Ratio | Actual | Minimum to be Well Capitalized | | :--- | :--- | :--- | | Tier 1 Leverage Ratio | 10.32% | 5.00% | | CET1 Risk-Based Capital Ratio | 17.27% | 6.50% | | Tier 1 Risk-Based Capital Ratio | 17.27% | 8.00% | | Total Risk-Based Capital Ratio | 18.31% | 10.00% | [Quantitative and Qualitative Disclosures About Market Risk](index=75&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Market risk is managed through earnings simulation and EVE models, with results indicating compliance with internal policy limits - The information for this item is incorporated by reference from the "Market and Liquidity Risk Management" section within Item 7[342](index=342&type=chunk) - The company's earnings simulation model at Dec 31, 2020, showed that a gradual **100 basis point increase in rates would decrease net interest income by 0.86%**, while a 100 basis point decrease would increase it by 2.34%, both within policy limits[308](index=308&type=chunk)[309](index=309&type=chunk) - The Economic Value of Equity (EVE) model showed that an instantaneous **100 basis point rate increase would decrease EVE by 2.63%**, well within the 15% policy limit[311](index=311&type=chunk)[312](index=312&type=chunk) [Financial Statements and Supplementary Data](index=75&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section includes the audited consolidated financial statements, an unqualified auditor's opinion, and notes on critical audit matters - The independent auditor, Elliott Davis, LLC, issued an **unqualified opinion** on the consolidated financial statements[344](index=344&type=chunk) - The auditor identified the **allowance for loan losses as a critical audit matter** due to the high degree of subjective judgment involved in determining qualitative factors[348](index=348&type=chunk)[350](index=350&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total Assets | $956,597 | $827,879 | | Loans, net | $456,082 | $456,515 | | Total Deposits | $839,792 | $724,152 | | Total Stockholders' Equity | $107,690 | $98,328 | Consolidated Earnings Statement Highlights (in thousands) | Account | 2020 | 2019 | | :--- | :--- | :--- | | Net Interest Income | $24,338 | $26,064 | | Provision for loan losses | $1,100 | $(250) | | Net Earnings | $7,454 | $9,741 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=114&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) This item is not applicable to the company - Not applicable[517](index=517&type=chunk) [Controls and Procedures](index=114&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls, procedures, and internal control over financial reporting were effective as of year-end 2020 - The Chief Executive Officer and Chief Financial Officer concluded that the Company's **disclosure controls and procedures were effective** as of the end of the period[517](index=517&type=chunk) - Management concluded that the Company's **internal control over financial reporting was effective** as of December 31, 2020, based on the COSO framework[519](index=519&type=chunk) - No changes in internal control over financial reporting occurred during the period that materially affected, or are reasonably likely to materially affect, the controls[520](index=520&type=chunk) [Other Information](index=114&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company reports no other information for this item - None[520](index=520&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=115&type=section&id=ITEM%2010.%20DIRECTORS,%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information regarding directors, officers, and governance is incorporated by reference from the company's Proxy Statement - Required information is **incorporated by reference** from the Proxy Statement[521](index=521&type=chunk) - The Company has adopted a Code of Conduct and Ethics, which is available on its website, www.auburnbank.com, under the "Investor Relations" section[522](index=522&type=chunk) [Executive Compensation](index=115&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information regarding executive and director compensation is incorporated by reference from the Company's Proxy Statement - Required information is **incorporated by reference** from the Proxy Statement[523](index=523&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=115&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information regarding security ownership is incorporated by reference from the Company's Proxy Statement - Required information is **incorporated by reference** from the Proxy Statement[523](index=523&type=chunk) [Certain Relationships, Related Transactions and Director Independence](index=115&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS,%20RELATED%20TRANSACTIONS%20AND%20DIRECTOR%20INDEPENDENCE) Information regarding related party transactions and director independence is incorporated by reference from the Company's Proxy Statement - Required information is **incorporated by reference** from the Proxy Statement[524](index=524&type=chunk) [Principal Accounting Fees and Services](index=115&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Information regarding principal accounting fees and services is incorporated by reference from the Company's Proxy Statement - Required information is **incorporated by reference** from the Proxy Statement[525](index=525&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=116&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the financial statements and exhibits filed with the Form 10-K, including key corporate and certification documents - This section lists the consolidated financial statements and the report of the independent registered public accounting firm included in the Form 10-K[526](index=526&type=chunk) - A list of filed exhibits is provided, including corporate governance documents, **SOX certifications (302 and 906)**, and XBRL data files[527](index=527&type=chunk) [Form 10-K Summary](index=117&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) The company reports no summary for this item - None[528](index=528&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended September 30, 2020 ☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period __________ to __________ Commission File Number: 0-26486 Auburn National Bancorporation, Inc. (Exact Name of Registrant as Specified in Its Ch ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201%20Financial%20Statement) Total assets increased to $942.9 million, funded by deposit growth, while net earnings decreased to $3.5 million due to lower net interest income and increased loan loss provisions [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (Unaudited) | (Dollars in thousands) | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $137,835 | $92,443 | | Securities available-for-sale | $302,193 | $235,902 | | Loans, net | $458,966 | $456,515 | | **Total assets** | **$942,887** | **$827,879** | | **Liabilities & Equity** | | | | Total deposits | $829,810 | $724,152 | | Total liabilities | $837,588 | $729,551 | | Total stockholders' equity | $105,299 | $98,328 | | **Total liabilities and stockholders' equity** | **$942,887** | **$827,879** | [Consolidated Statements of Earnings](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings) Consolidated Earnings Summary (Unaudited) | (In thousands, except per share data) | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :--- | :--- | :--- | | Net interest income | $12,282 | $13,217 | | Provision for loan losses | $850 | $0 | | Noninterest income | $2,598 | $2,045 | | Noninterest expense | $9,815 | $9,240 | | **Net earnings** | **$3,462** | **$4,850** | | **Basic and diluted EPS** | **$0.97** | **$1.35** | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Comprehensive Income (Unaudited) | (Dollars in thousands) | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :--- | :--- | :--- | | Net earnings | $3,462 | $4,850 | | Other comprehensive income, net of tax | $5,327 | $4,443 | | **Comprehensive income** | **$8,789** | **$9,293** | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) - Total stockholders' equity increased from **$98.3 million** at December 31, 2019, to **$105.3 million** at June 30, 2020, driven by net earnings of **$3.5 million** and other comprehensive income of **$5.3 million**, partially offset by cash dividends paid of **$1.8 million**[9](index=9&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Cash Flows Summary (Unaudited) | (In thousands) | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,768 | $4,323 | | Net cash used in investing activities | ($63,142) | ($4,556) | | Net cash provided by financing activities | $104,766 | $10,825 | | **Net change in cash and cash equivalents** | **$45,392** | **$10,592** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, a **$302.2 million** securities portfolio, **$464.3 million** loan portfolio, and **$5.3 million** allowance for loan losses - All securities held by the company, totaling **$302.2 million** at fair value as of June 30, 2020, were classified as available-for-sale, primarily composed of Agency residential mortgage-backed securities (RMBS) and Agency obligations[28](index=28&type=chunk)[29](index=29&type=chunk) Loan Portfolio Composition (June 30, 2020) | Loan Type | Amount (In thousands) | | :--- | :--- | | Commercial and industrial | $87,754 | | Construction and land development | $32,967 | | Commercial real estate | $250,588 | | Residential real estate | $85,825 | | Consumer installment | $8,631 | | **Total loans, net of unearned income** | **$464,274** | Changes in Allowance for Loan Losses (Six months ended June 30, 2020) | (In thousands) | Amount | | :--- | :--- | | Beginning balance (Dec 31, 2019) | $4,386 | | Net recoveries (charge-offs) | $72 | | Provision for loan losses | $850 | | **Ending balance (June 30, 2020)** | **$5,308** | - The company's fair value hierarchy for recurring measurements as of June 30, 2020, shows that all **$302.2 million** of securities available-for-sale are valued using significant other observable inputs (Level 2), with no assets valued using Level 1 or Level 3 inputs on a recurring basis[102](index=102&type=chunk)[103](index=103&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net earnings declined **28%** due to lower net interest margin and **$0.9 million** loan loss provision, with **$105.6 million** deposit growth and **$36.5 million** in PPP loans [Financial Summary](index=29&type=section&id=Financial%20Summary) Financial Performance Summary | Metric | Six Months 2020 | Six Months 2019 | | :--- | :--- | :--- | | Net Earnings | $3.5 million | $4.9 million | | Basic and Diluted EPS | $0.97 | $1.35 | | Net Interest Income (tax-equivalent) | $12.5 million | $13.5 million | | Provision for Loan Losses | $0.9 million | $0 | | Noninterest Income | $2.6 million | $2.0 million | - The decrease in net interest income was primarily due to a lower rate environment, with the net interest margin (tax-equivalent) falling to **3.09%** from **3.52%** in the prior year period[131](index=131&type=chunk) - The increase in the provision for loan losses was directly related to changes in economic conditions driven by the impact of the COVID-19 pandemic, including higher unemployment in the company's primary market area[132](index=132&type=chunk) [COVID-19 Impact Assessment](index=30&type=section&id=COVID-19%20Impact%20Assessment) - In response to the COVID-19 pandemic, the company implemented business continuity plans, including limiting branch lobby service, enabling remote work, and offering loan extensions and deferrals to affected customers[141](index=141&type=chunk)[142](index=142&type=chunk) Paycheck Protection Program (PPP) Loan Summary (as of June 30, 2020) | SBA Tier | of Loans | $ of Loans (in thousands) | | :--- | :--- | :--- | | $350k to < $2M | 22 | $14,687 | | Up to $350k | 400 | $21,784 | | **Total** | **422** | **$36,471** | - The company collected approximately **$1.5 million** in fees related to its PPP loans, which will be recognized as a yield adjustment over the life of the loans[144](index=144&type=chunk) [Critical Accounting Policies](index=31&type=section&id=Critical%20Accounting%20Policies) - Management identifies several critical accounting policies that require significant judgments and estimates, including the determination of the allowance for loan losses, assessment of other-than-temporary impairment on securities, fair value measurements, and the valuation of OREO and deferred tax assets[147](index=147&type=chunk) - To determine the allowance for loan losses, the company has extended its look-back period to **45 quarters** (since Q1 2009) to incorporate the effects of at least one economic downturn, with certain qualitative factors adjusted for COVID-19's adverse economic conditions in H1 2020[155](index=155&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) - Net interest income (tax-equivalent) decreased to **$12.5 million** in the first six months of 2020 from **$13.5 million** in the prior year, as the tax-equivalent yield on interest-earning assets fell **47 basis points** to **3.58%**[166](index=166&type=chunk)[167](index=167&type=chunk) - The provision for loan losses was **$0.9 million** for the first six months of 2020, compared to no provision in the same period of 2019, reflecting adverse economic changes from the COVID-19 pandemic[169](index=169&type=chunk) - Noninterest income increased, primarily due to a significant rise in mortgage lending income from **$376 thousand** to **$913 thousand**, driven by increased mortgage refinance activity[171](index=171&type=chunk)[175](index=175&type=chunk) - Noninterest expense increased, mainly due to higher net occupancy and equipment costs related to the redevelopment of the company's headquarters[178](index=178&type=chunk)[179](index=179&type=chunk) [Balance Sheet Analysis](index=36&type=section&id=Balance%20Sheet%20Analysis) - Total loans, net of unearned income, increased by **$3.4 million** since year-end 2019 to **$464.3 million**, but excluding the **$36.5 million** in PPP loans, total loans decreased by **$32.0 million**, or **7%**, primarily due to payoffs in commercial and residential real estate loans[182](index=182&type=chunk) COVID-19 High-Risk Industry Exposure (June 30, 2020) | Industry | Loan Balance (in thousands) | % of Total Loans | | :--- | :--- | :--- | | Hotel/motel | $52,472 | 11% | | Shopping centers | $33,891 | 7% | | Retail, excluding shopping centers | $18,314 | 4% | | Restaurants | $15,167 | 4% | | **Total** | **$119,844** | **26%** | - As of June 30, 2020, the company had granted loan payment deferrals or interest-only payments on loans totaling **$112.7 million**, representing **24%** of the total loan portfolio, to assist borrowers impacted by COVID-19[191](index=191&type=chunk)[193](index=193&type=chunk) - The allowance for loan losses as a percentage of total loans increased to **1.14%** at June 30, 2020, from **0.95%** at December 31, 2019, with the ratio at **1.24%** excluding PPP loans[198](index=198&type=chunk) - Total deposits grew by **$105.6 million** to **$829.8 million** at June 30, 2020, from year-end 2019, attributed to deposits from PPP loan recipients, government stimulus, and reduced customer spending[209](index=209&type=chunk) [Capital Adequacy](index=42&type=section&id=Capital%20Adequacy) - Stockholders' equity increased to **$105.3 million** at June 30, 2020, from **$98.3 million** at year-end 2019, driven by net earnings and a **$5.3 million** increase in unrealized gains on securities[214](index=214&type=chunk) Bank Regulatory Capital Ratios (June 30, 2020) | Ratio | Bank's Ratio | "Well Capitalized" Minimum | | :--- | :--- | :--- | | Tier 1 leverage ratio | 10.62% | 5.0% | | CET1 risk-based capital ratio | 18.00% | 6.5% | | Tier 1 risk-based capital ratio | 18.00% | 8.0% | | Total risk-based capital ratio | 19.04% | 10.0% | [Market and Liquidity Risk Management](index=42&type=section&id=Market%20and%20Liquidity%20Risk%20Management) - The company manages interest rate risk using an earnings simulation model and an Economic Value of Equity (EVE) model, both indicating compliance with internal policy guidelines as of June 30, 2020[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) - The Bank maintains strong liquidity sources, including customer deposits, access to the Federal Reserve discount window, and an available line of credit with the FHLB of **$256.5 million** as of June 30, 2020[228](index=228&type=chunk) - As of June 30, 2020, the company had outstanding standby letters of credit of **$1.6 million** and unfunded loan commitments of **$70.5 million**[230](index=230&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section incorporates by reference the market and liquidity risk management details from Item 2 of this report [Item 4. Controls and Procedures](index=56&type=section&id=Item%204%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=56&type=section&id=Item%201%20Legal%20Proceedings) The company is involved in routine legal proceedings, with no expected material adverse effect on financial condition or operations [Item 1A. Risk Factors](index=56&type=section&id=Item%201A%2E%20Risk%20Factors) Primary risks include the ongoing COVID-19 pandemic's impact on loan demand, credit quality, net interest income, and operational risks, alongside PPP-related litigation [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=60&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company made no common stock repurchases in Q2 2020, with a **$5 million** repurchase program remaining fully available [Item 6. Exhibits](index=60&type=section&id=Item%206%20Exhibits) This section lists filed exhibits, including corporate documents, CEO/CFO certifications, and XBRL interactive data files

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended March 31, 2020 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period to Commission File Number: 0-26486 Auburn National Bancorporation, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 63-088 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number: 0-26486 Auburn National Bancorporation, Inc. (Exact name of registrant as specified in charter) Delaware 63-08 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended September 30, 2019 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period to Commission File Number: 0-26486 Auburn National Bancorporation, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 63 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended June 30, 2019 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period to Commission File Number: 0-26486 Auburn National Bancorporation, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 63-0885 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended March 31, 2019 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period to Commission File Number: 0-26486 Auburn National Bancorporation, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 63-088 ...