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 ...

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, 2018 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 63-0885779 Common Stock ...