AUBURN NATIONAL BANCORPORATION, INC (AUBN) Business Analysis — Annual Report Summary, Outlook & Risks

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AUBURN NATIONAL BANCORPORATION, INC (AUBN)

Business Summary

Auburn National Bancorporation, Inc. operates as a bank holding company whose primary business is conducted through its wholly-owned subsidiary, AuburnBank, an Alabama state-chartered bank that is a member of the Federal Reserve System and has operated continuously since 1907. The Bank conducts its business primarily in East Alabama, including Lee County and surrounding areas, and operates full-service branches in Auburn, Opelika, Notasulga and Valley, Alabama, as well as a loan production office in Phenix City, Alabama. The local economy is influenced by higher education, healthcare services, public education, distribution and logistics operations, retail and service businesses, and automobile manufacturing and related suppliers located in the region. As of year-end 2025, Lee County's unemployment rate was 2.1% ¹ compared to 2.7% ² for the State of Alabama.

The Bank operates in a highly competitive market for loans, deposits and other financial services in East Alabama, including Lee County. Based on FDIC deposit market share data as of June 30, 2025, the Bank held the largest share of deposits in Lee County. The Bank competes with 20 national, regional and community banks with offices in Lee County, which operate offices in the local market and many have substantially greater financial, technological and marketing resources. The Bank also competes with credit unions, mortgage lenders, insurance companies, investment firms and other financial service providers. The Bank seeks to compete by emphasizing customer relationships, community presence, local decision-making and responsive service.

The Company's business is conducted primarily through the Bank and its subsidiaries. The Bank offers checking, savings, transaction deposit accounts and certificates of deposit, and is an active residential mortgage lender in its primary service area. The Bank also offers commercial, financial, agricultural, real estate construction and consumer loan products, and other financial services. The Bank operates ATM machines in 8 locations in its primary service area. The Bank offers Visa Checkcards, online banking, bill payment, online consumer account opening, and other electronic banking services through its Internet website. The Bank has not offered any services related to any Bitcoin or other digital or crypto instruments, stablecoins or businesses.

The Bank makes loans for commercial, financial and agricultural purposes, as well as for real estate mortgages, real estate acquisition, construction and development and consumer purposes. The Company's commercial real estate loans, including $59.6 million ³ of loans on owner occupied property, as of December 31, 2025 totaled $325.5 million ⁴ (58% ⁵ of total loans). Excluding owner-occupied loans, CRE loans were $290.2 million ⁶ (51% ⁷ of total loans) at year end 2024. The Bank had outstanding $56.6 million ⁸ in construction and land development loans and $325.8 million ⁹ in total CRE loans (excluding owner occupied properties), which represent approximately 48% ¹⁰ and 277% ¹¹, respectively, of the Bank's total risk-based capital at December 31, 2025. The Bank had no leveraged loans at year-end 2025, 2024 or 2023 subject to the Interagency Guidance on Leveraged Lending or that were shared national credits.

The Bank operates its main office and 7 branches in Auburn, Opelika, Notasulga, and Valley, Alabama and a loan production office in Phenix City, Alabama. The Bank closed one branch office in Auburn at the end of 2024. The Bank's main office campus in downtown Auburn comprises over 4 acres and includes the AuburnBank Center, which was constructed in May 2022 and has approximately 90,000 square feet of space. The AuburnBank Center has approximately 46,000 square feet of Class A office space and approximately 5,000 square feet of retail space available for lease to third party tenants, of which approximately 32,000 square feet is currently leased and occupied. The Bank's drive-through facility has five drive-through lanes, including an ATM, and a walk-up teller window. The parking deck has approximately 500 parking spaces, of which approximately 100 to 150 parking spaces have been made available to a third-party under a long-term lease.

The Company paid cash dividends of $1.08 ¹² per share in 2025 and 2024. At December 31, 2025, the Bank's regulatory capital ratios were well above the minimum amounts required to be 'well capitalized' under current regulatory standards with a total risk-based capital ratio of 17.14% ¹³, a tier 1 leverage ratio of 10.71% ¹⁴ and common equity tier 1 (CET1) of 16.06% ¹⁵ at December 31, 2025. The Company had no long-term debt at December 31, 2025 and 2024. The Bank had no FHLB-Atlanta advances or other wholesale borrowings outstanding at December 31, 2025 and 2024. The Bank had available federal funds lines totaling $65.2 million ¹⁶ at December 31, 2025 and 2024 with no federal funds borrowed. The Bank had $304.9 million ¹⁷ and $296.9 million ¹⁸, respectively, of available lines of credit at the FHLB-Atlanta at those dates.

The Company's net earnings were $7.3 million ¹⁹ for the full year 2025, compared to $6.4 million ²⁰ for the full year 2024. Basic and diluted net earnings per share were $2.08 ²¹ per share for the full year 2025, compared to $1.83 ²² per share for the full year 2024. Net interest income (tax-equivalent) was $29.7 million ²³ in 2025, a 9% ²⁴ increase compared to $27.2 million ²⁵ in 2024. The Company's net interest margin (tax-equivalent) was 3.27% ²⁶ in 2025, compared to 3.06% ²⁷ in 2024. Noninterest income was $3.1 million ²⁸ in 2025 compared to $3.5 million ²⁹ in 2024. Noninterest expense was $23.0 million ³⁰ in 2025 compared to $22.2 million ³¹ in 2024. The provision for income tax expense was $2.0 million ³² for an effective tax rate of 21.24% ³³ for 2025, compared to $2.0 million ³⁴ for an effective tax rate of 23.82% ³⁵ for 2024.

Business Outlook & Financial Sufficiency

The Company seeks continued organic growth, including loan growth, and also may consider the acquisition of banks, branches, deposits, or other parts of financial services businesses. The Company expects that other financial services companies, including credit unions and nonbanking institutions, some of which have significantly greater resources, will compete with it to acquire financial services businesses. The Company evaluates potential acquisitions and expansion opportunities, including new branches and other offices. The Bank had a successful management transition in 2022 where its CEO became Chairman, and was succeeded by its CFO, whose role was then filled by its Chief Accounting Officer. At the time of transition, the Chairman had served the Bank 39 years, the President and CEO had been with the Company 16 years and the Chief Accounting Officer had been with the Company for 7 years.

The Company believes that interest rates, inflation and monetary policy may continue to fluctuate in 2026 and may be challenging as a result. The Company's ability to compete and manage its deposits costs until its interest-earning assets reprice and it generates new loans with current market interest rates will be important to its net interest margin during 2026. The Company continues to deploy various asset liability management strategies to manage its risk from interest rate fluctuations. The Company may also use derivative financial instruments to improve the balance between interest-sensitive assets and interest-sensitive liabilities and as one tool to manage interest rate sensitivity while continuing to meet the credit and deposit needs of customers. At December 31, 2025, the Company had one derivative contract to assist in managing interest rate sensitivity.

The Company's efficiency ratio was 69.83% ³⁶ in 2025, compared to 72.25% ³⁷ in 2024. The decrease in net occupancy and equipment expense was primarily due to increased leasing income associated with the Company's headquarters, which totaled $1.4 million ³⁸ in 2025 compared to $1.0 million ³⁹ in 2024. The increase in other noninterest expense was due to a variety of miscellaneous items including increased information technology and systems expenses and loan-related expenses.

At December 31, 2025, the Company and its subsidiaries had 145 ⁴⁰ full-time equivalent employees, including 37 ⁴¹ officers. Employees have been with the Company an average of approximately 12 ⁴² years. The Company developed its remote and electronic banking services, and established remote work access to help employees stay at home where their job duties permitted. The Company encourages and supports the growth and development of its employees and, wherever possible, seeks to fill positions by promotion and transfer from within the organization.

The Company's 2024 Equity and Incentive Compensation Plan provides for a variety of equity and equity-based awards, including stock options, performance shares, performance units, stock appreciation rights, restricted stock and restricted stock units and cash incentive awards. During 2025, the Company granted 3,030 ⁴³ restricted stock units. The Company paid cash dividends of $1.08 ⁴⁴ per share in 2025 and 2024. The Company had no long-term debt at December 31, 2025 and 2024. The Company had no securities sold under agreements to repurchase at December 31, 2025 and 2024.

The Company's primary market area is Lee County, Alabama, including the cities of Auburn and Opelika and surrounding communities in East Alabama. The local economy is influenced by higher education, healthcare services, public education, distribution and logistics operations, retail and service businesses, and automobile manufacturing and related suppliers located in the region. The auto manufacturing business and its suppliers have positively affected the local economy, but automobile sales manufacturing is cyclical and adversely affected by increases in interest rates. Decreases in automobile sales, including adverse changes due to interest rate increases and inflation, tariffs, supply chain disruptions and a tight labor market, could adversely affect nearby Kia and Hyundai automotive plants and their suppliers' local spending and employment.

The Company's allowance for credit losses is estimated under the CECL methodology. The CECL model is largely influenced by economic factors including, most notably, the anticipated unemployment rate. Macroeconomic factors used in the CECL model include the Alabama unemployment rate, the Alabama home price index, the national commercial real estate price index and the Alabama gross state product. At December 31, 2025 and 2024, reasonable and supportable periods of 4 quarters were utilized followed by an 8-quarter straight line reversion period to long term averages. The Company recorded a provision for credit losses of $631 thousand ⁴⁵ in 2025 compared to $36 thousand ⁴⁶ during 2024.

Management Sentiments & Priorities

Management's message emphasizes the Company's improved financial performance in 2025, with net earnings of $7.3 million ⁵⁸ compared to $6.4 million ⁵⁹ in 2024, and basic and diluted net earnings per share of $2.08 ⁶⁰ compared to $1.83 ⁶¹ in the prior year. Key themes include the 9% ⁶² increase in net interest income (tax-equivalent) to $29.7 million ⁶³ driven by improved net interest margin and a 2% ⁶⁴ increase in interest-earning assets, and the net interest margin (tax-equivalent) improvement to 3.27% ⁶⁵ from 3.06% ⁶⁶ primarily due to improved yields on interest-earning assets and a decrease in the cost of interest-bearing deposits. Management highlights that the Bank's regulatory capital ratios were well above 'well capitalized' minimums at December 31, 2025, with a total risk-based capital ratio of 17.14% ⁶⁷, a tier 1 leverage ratio of 10.71% ⁶⁸ and common equity tier 1 of 16.06% ⁶⁹. Strategic priorities emphasized include managing interest rate risk through asset liability management strategies, maintaining strong capital and liquidity positions, and continuing to focus on customer relationships, community presence, local decision-making and responsive service to compete effectively in the highly competitive East Alabama market.

Financial Details

Total revenue (net interest income GAAP plus noninterest income) was $32.793 million ⁷⁰ in 2025 compared to $30.599 million ⁷¹ in 2024. Net interest income (GAAP) was $29.674 million ⁷² in 2025 versus $27.125 million ⁷³ in 2024. Net earnings were $7.255 million ⁷⁴ in 2025 compared to $6.397 million ⁷⁵ in 2024. Diluted net earnings per share were $2.08 ⁷⁶ in 2025 versus $1.83 ⁷⁷ in 2024. The provision for credit losses was $631 thousand ⁷⁸ in 2025 compared to $36 thousand ⁷⁹ in 2024. Noninterest income was $3.119 million ⁸⁰ in 2025 versus $3.474 million ⁸¹ in 2024. Noninterest expense was $22.951 million ⁸² in 2025 compared to $22.166 million ⁸³ in 2024. Income tax expense was $1.956 million ⁸⁴ in 2025 versus $2.000 million ⁸⁵ in 2024. The effective income tax rate was 21.24% ⁸⁶ in 2025 compared to 23.82% ⁸⁷ in 2024. The Company's net interest margin (tax-equivalent) was 3.27% ⁸⁸ in 2025 versus 3.06% ⁸⁹ in 2024. The efficiency ratio was 69.83% ⁹⁰ in 2025 compared to 72.25% ⁹¹ in 2024. At December 31, 2025, total assets were $1.018797 billion ⁹² compared to $977.324 million ⁹³ at December 31, 2024. Total deposits were $922.926 million ⁹⁴ at December 31, 2025 versus $895.824 million ⁹⁵ at December 31, 2024. Total stockholders' equity was $92.053 million ⁹⁶ at December 31, 2025 compared to $78.292 million ⁹⁷ at December 31, 2024. The allowance for credit losses was $7.176 million ⁹⁸ at December 31, 2025, or 1.27% ⁹⁹ of total loans, compared to $6.871 million ¹⁰⁰, or 1.22% ¹⁰¹ of total loans, at December 31, 2024. Net charge-offs were $398 thousand ¹⁰² in 2025, or 0.07% ¹⁰³ of average loans, compared to net recoveries of $14 thousand ¹⁰⁴ in 2024. Nonperforming assets were $482 thousand ¹⁰⁵ at December 31, 2025, or 0.09% ¹⁰⁶ of loans and other real estate owned, compared to $503 thousand ¹⁰⁷, or 0.09% ¹⁰⁸, at December 31, 2024. Cash and cash equivalents were $147.832 million ¹⁰⁹ at December 31, 2025 versus $93.354 million ¹¹⁰ at December 31, 2024.

Risk Factors

The Company faces material risks from its concentration of commercial real estate loans, which represented approximately 68% ⁴⁷ of the loan portfolio at year-end 2025, with CRE loans (excluding owner-occupied) of $290.2 million ⁴⁸ (51% ⁴⁹ of total loans) at year end 2024, and construction and land development loans of $56.6 million ⁵⁰ representing approximately 48% ⁵¹ of the Bank's total risk-based capital. The CRE Guidance requires banks with high levels of CRE to implement improved underwriting, internal controls, risk management policies and portfolio stress testing, as well as higher levels of allowances for possible losses and capital levels. The Company also faces significant interest rate risk, as its earnings simulation model at December 31, 2025 indicated that a gradual 400 basis point increase in interest rates would result in a 4.67% ⁵² variance in net interest income, while a 400 basis point decrease would result in a negative 5.16% ⁵³ variance. The economic value of equity model showed that an instantaneous 400 basis point increase would result in a 3.76% ⁵⁴ variance in EVE, while a 400 basis point decrease would result in a negative 27.26% ⁵⁵ variance. The Company's securities portfolio had $233.259 million ⁵⁶ in fair value with $25.893 million ⁵⁷ in gross unrealized losses at December 31, 2025, which reduce reported stockholders' equity and could become realized losses upon sale. The Company's CECL model relies on projections of macroeconomic factors including the Alabama unemployment rate, and unanticipated adverse changes in the economy could increase the variability of provisions for loan losses and earnings.

View Source Annual Report on SEC.gov ↗

References

[1] Item 1, Business — Selected Economic Data
[2] Item 1, Business — Selected Economic Data
[3] Item 1, Business — Loans and Loan Concentrations
[4] Item 1, Business — Loans and Loan Concentrations
[5] Item 1, Business — Loans and Loan Concentrations
[6] Item 1, Business — Loans and Loan Concentrations
[7] Item 1, Business — Loans and Loan Concentrations
[8] Item 1, Business — Supervision and Regulation, CRE
[9] Item 1, Business — Supervision and Regulation, CRE
[10] Item 1, Business — Supervision and Regulation, CRE
[11] Item 1, Business — Supervision and Regulation, CRE
[12] Item 7, MD&A — Summary of Results of Operations
[13] Item 7, MD&A — Capital Adequacy
[14] Item 7, MD&A — Capital Adequacy
[15] Item 7, MD&A — Capital Adequacy
[16] Item 7, MD&A — Other Borrowings
[17] Item 7, MD&A — Other Borrowings
[18] Item 7, MD&A — Other Borrowings
[19] Item 7, MD&A — Financial Summary
[20] Item 7, MD&A — Financial Summary
[21] Item 7, MD&A — Financial Summary
[22] Item 7, MD&A — Financial Summary
[23] Item 7, MD&A — Summary of Results of Operations
[24] Item 7, MD&A — Summary of Results of Operations
[25] Item 7, MD&A — Summary of Results of Operations
[26] Item 7, MD&A — Summary of Results of Operations
[27] Item 7, MD&A — Summary of Results of Operations
[28] Item 7, MD&A — Summary of Results of Operations
[29] Item 7, MD&A — Summary of Results of Operations
[30] Item 7, MD&A — Summary of Results of Operations
[31] Item 7, MD&A — Summary of Results of Operations
[32] Item 7, MD&A — Summary of Results of Operations
[33] Item 7, MD&A — Summary of Results of Operations
[34] Item 7, MD&A — Summary of Results of Operations
[35] Item 7, MD&A — Summary of Results of Operations
[36] Item 7, MD&A — Table 2, Selected Financial Data
[37] Item 7, MD&A — Table 2, Selected Financial Data
[38] Item 7, MD&A — Noninterest Expense
[39] Item 7, MD&A — Noninterest Expense
[40] Item 1, Business — Human Capital
[41] Item 1, Business — Human Capital
[42] Item 1, Business — Human Capital
[43] Item 8, Note 2 — Basic and Diluted Net Earnings Per Share
[44] Item 7, MD&A — Summary of Results of Operations
[45] Item 7, MD&A — Provision for Credit Losses
[46] Item 7, MD&A — Provision for Credit Losses
[47] Item 1A, Risk Factors — Concentration of commercial real estate loans
[48] Item 1, Business — Loans and Loan Concentrations
[49] Item 1, Business — Loans and Loan Concentrations
[50] Item 1, Business — Supervision and Regulation, CRE
[51] Item 1, Business — Supervision and Regulation, CRE
[52] Item 7, MD&A — Market and Liquidity Risk Management, Earnings simulation
[53] Item 7, MD&A — Market and Liquidity Risk Management, Earnings simulation
[54] Item 7, MD&A — Market and Liquidity Risk Management, Economic Value of Equity
[55] Item 7, MD&A — Market and Liquidity Risk Management, Economic Value of Equity
[56] Item 8, Note 3 — Securities
[57] Item 8, Note 3 — Securities
[58] Item 7, MD&A — Financial Summary
[59] Item 7, MD&A — Financial Summary
[60] Item 7, MD&A — Financial Summary
[61] Item 7, MD&A — Financial Summary
[62] Item 7, MD&A — Net Interest Income and Margin
[63] Item 7, MD&A — Net Interest Income and Margin
[64] Item 7, MD&A — Net Interest Income and Margin
[65] Item 7, MD&A — Net Interest Income and Margin
[66] Item 7, MD&A — Net Interest Income and Margin
[67] Item 7, MD&A — Capital Adequacy
[68] Item 7, MD&A — Capital Adequacy
[69] Item 7, MD&A — Capital Adequacy
[70] Item 7, MD&A — Summary of Results of Operations
[71] Item 7, MD&A — Summary of Results of Operations
[72] Item 8, Consolidated Statements of Earnings
[73] Item 8, Consolidated Statements of Earnings
[74] Item 8, Consolidated Statements of Earnings
[75] Item 8, Consolidated Statements of Earnings
[76] Item 8, Consolidated Statements of Earnings
[77] Item 8, Consolidated Statements of Earnings
[78] Item 8, Consolidated Statements of Earnings
[79] Item 8, Consolidated Statements of Earnings
[80] Item 8, Consolidated Statements of Earnings
[81] Item 8, Consolidated Statements of Earnings
[82] Item 8, Consolidated Statements of Earnings
[83] Item 8, Consolidated Statements of Earnings
[84] Item 8, Consolidated Statements of Earnings
[85] Item 8, Consolidated Statements of Earnings
[86] Item 7, MD&A — Income Tax Expense
[87] Item 7, MD&A — Income Tax Expense
[88] Item 7, MD&A — Net Interest Income and Margin
[89] Item 7, MD&A — Net Interest Income and Margin
[90] Item 7, MD&A — Table 2, Selected Financial Data
[91] Item 7, MD&A — Table 2, Selected Financial Data
[92] Item 8, Consolidated Balance Sheets
[93] Item 8, Consolidated Balance Sheets
[94] Item 8, Consolidated Balance Sheets
[95] Item 8, Consolidated Balance Sheets
[96] Item 8, Consolidated Balance Sheets
[97] Item 8, Consolidated Balance Sheets
[98] Item 8, Consolidated Balance Sheets
[99] Item 7, MD&A — Allowance for Credit Losses
[100] Item 8, Consolidated Balance Sheets
[101] Item 7, MD&A — Allowance for Credit Losses
[102] Item 7, MD&A — Table 5, Net Charge-Offs
[103] Item 7, MD&A — Table 5, Net Charge-Offs
[104] Item 7, MD&A — Table 5, Net Charge-Offs
[105] Item 7, MD&A — Nonperforming Assets
[106] Item 7, MD&A — Nonperforming Assets
[107] Item 7, MD&A — Nonperforming Assets
[108] Item 7, MD&A — Nonperforming Assets
[109] Item 8, Consolidated Balance Sheets
[110] Item 8, Consolidated Balance Sheets

Analysis on 6/21/2026

Recent Material Events

Jul 28, 2026Material Event

Auburn National Bancorporation, Inc. reported second quarter 2026 net earnings of $2.3 million, or $0.66 per share, representing a 27% increase from $1.8 million, or $0.52 per share, in the prior year period. Net interest income (tax-equivalent) rose 8% to $8.0 million, driven by growth in average interest-earning assets and a 15 basis point expansion in net interest margin to 3.33%. The company recorded a negative provision for credit losses of $248 thousand, compared to a $113 thousand charge in the second quarter of 2025. Nonperforming assets decreased to 0.01% of total assets, and return on assets improved to 0.90%. Auburn National Bancorporation, Inc. operates as a bank holding company in the financial services industry, providing commercial and consumer banking services through its subsidiary, AuburnBank.