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AUBURN NATIONAL BANCORPORATION, INC

AUBN
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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% compared to 2.7% 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 of loans on owner occupied property, as of December 31, 2025 totaled $325.5 million (58% of total loans). Excluding owner-occupied loans, CRE loans were $290.2 million (51% of total loans) at year end 2024. The Bank had outstanding $56.6 million in construction and land development loans and $325.8 million in total CRE loans (excluding owner occupied properties), which represent approximately 48% and 277% , 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 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% , a tier 1 leverage ratio of 10.71% and common equity tier 1 (CET1) of 16.06% 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 at December 31, 2025 and 2024 with no federal funds borrowed. The Bank had $304.9 million and $296.9 million , respectively, of available lines of credit at the FHLB-Atlanta at those dates.

The Company's net earnings were $7.3 million for the full year 2025, compared to $6.4 million for the full year 2024. Basic and diluted net earnings per share were $2.08 per share for the full year 2025, compared to $1.83 per share for the full year 2024. Net interest income (tax-equivalent) was $29.7 million in 2025, a 9% increase compared to $27.2 million in 2024. The Company's net interest margin (tax-equivalent) was 3.27% in 2025, compared to 3.06% in 2024. Noninterest income was $3.1 million in 2025 compared to $3.5 million in 2024. Noninterest expense was $23.0 million in 2025 compared to $22.2 million in 2024. The provision for income tax expense was $2.0 million for an effective tax rate of 21.24% for 2025, compared to $2.0 million for an effective tax rate of 23.82% for 2024.

Business Outlook

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% in 2025, compared to 72.25% 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 in 2025 compared to $1.0 million 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 full-time equivalent employees, including 37 officers. Employees have been with the Company an average of approximately 12 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 restricted stock units. The Company paid cash dividends of $1.08 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 in 2025 compared to $36 thousand during 2024.

Risk Factors

The Company faces material risks from its concentration of commercial real estate loans, which represented approximately 68% of the loan portfolio at year-end 2025, with CRE loans (excluding owner-occupied) of $290.2 million (51% of total loans) at year end 2024, and construction and land development loans of $56.6 million representing approximately 48% 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% variance in net interest income, while a 400 basis point decrease would result in a negative 5.16% variance. The economic value of equity model showed that an instantaneous 400 basis point increase would result in a 3.76% variance in EVE, while a 400 basis point decrease would result in a negative 27.26% variance. The Company's securities portfolio had $233.259 million in fair value with $25.893 million 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.

Management Priorities

Management's message emphasizes the Company's improved financial performance in 2025, with net earnings of $7.3 million compared to $6.4 million in 2024, and basic and diluted net earnings per share of $2.08 compared to $1.83 in the prior year. Key themes include the 9% increase in net interest income (tax-equivalent) to $29.7 million driven by improved net interest margin and a 2% increase in interest-earning assets, and the net interest margin (tax-equivalent) improvement to 3.27% from 3.06% 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% , a tier 1 leverage ratio of 10.71% and common equity tier 1 of 16.06% . 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.

View Source Annual Report on SEC.gov ↗

References

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

Analysis on 6/21/2026