<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the quarterly period ended June 30, 2000
------------------
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period to
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Commission file number 0-26486
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Auburn National Bancorporation, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 63-0885779
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
165 East Magnolia Avenue, Suite 203, Auburn, Alabama 36830
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(Address of Principal Executive Offices)
(334) 821-9200
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(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after distribution of
securities under a plan confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of July 30, 2000: 3,924,573 shares of common stock, $.01 par
------------------------------------------
value per share
---------------
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE
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Item 1 Financial Information
Consolidated Balance Sheets as of
June 30, 2000 and December 31, 1999 3
Consolidated Statements of Earnings for
the Three and Six Months Ended
June 30, 2000 and 1999 4
Consolidated Statements of Changes in Stockholders'
Equity for the Six Months Ended June 30, 2000 and
the Years Ended December 31, 1999 and 1998 5
Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 2000
and 1999 6
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3 Quantitative and Qualitative Disclosures About Market Risk 13
PART II. OTHER INFORMATION
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Item 5 Other Events 14
Item 6 Exhibits 15
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. & SUBSIDIARIES
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 6/30/00 12/31/99
------------------------------------------ -------------- --------------
<S> <C> <C>
Cash and due from banks $ 12,074,386 $ 11,662,397
Federal funds sold 8,140,000 15,710,000
-------------- --------------
Cash and cash equivalents 20,214,386 27,372,397
Interest-earning deposits with other banks 1,984,604 1,269,771
Investment securities held to maturity (fair value of
$28,300,902 and $9,689,067 at June 30, 2000 and
December 31, 1999, respectively): 28,989,384 10,068,454
Investment securities available for sale 67,949,837 67,799,218
Loans:
Loans, less unearned income of $4,861 at June 30,
2000 and $7,105 at December 31, 1999,
respectively 262,687,328 260,606,260
Less allowance for loan losses (4,329,255) (3,774,523)
-------------- --------------
Loans, net 258,358,073 256,831,737
Premises and equipment, net 3,219,759 3,348,217
Rental property, net 1,632,652 1,667,604
Other assets 10,108,578 9,160,924
-------------- --------------
Total assets $392,457,273 $377,518,322
============== ==============
LIABILITIES & STOCKHOLDERS' EQUITY
------------------------------------------
Deposits:
Noninterest-bearing $ 42,830,518 $ 38,867,703
Interest-bearing 271,225,642 255,854,051
-------------- --------------
Total deposits 314,056,160 294,721,754
Securities sold under agreements to repurchase 3,292,222 5,866,385
Other borrowed funds 43,790,455 46,861,045
Accrued expenses and other liabilities 2,122,281 1,627,541
-------------- --------------
Total liabilities 363,261,118 349,076,725
Stockholders' equity:
Preferred stock of $.01 par value; authorized 200,000
shares; issued shares-none --- ---
Common stock of $.01 par value; authorized 8,500,000
shares; issued 3,957,135 shares 39,571 39,571
Additional paid-in capital 3,707,472 3,707,472
Retained earnings 27,760,966 26,743,281
Accumulated other comprehensive income (loss) (2,097,255) (1,834,128)
Less:
Treasury stock, 32,562 shares at June 30, 2000 and
December 31, 1999, at cost (214,599) (214,599)
-------------- --------------
Total stockholders' equity 29,196,155 28,441,597
-------------- --------------
Total liabilities and stockholders' equity $392,457,273 $377,518,322
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. & SUBSIDIARIES
Consolidated Statements of Earnings
For The Three Months and Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 2000 1999
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 5,599,064 $5,012,596 $11,212,327 $9,628,094
Interest and dividends on investment securities:
Taxable 1,643,651 1,062,297 3,080,057 2,199,436
Tax-exempt 14,076 19,756 28,168 40,662
----------- ---------- ----------- ----------
Total interest and dividends on
investment securities 1,657,727 1,082,053 3,108,225 2,240,098
Interest on federal funds sold 176,926 58,569 343,256 114,441
Interest on interest-bearing deposits with other banks 36,984 23,853 90,088 53,509
----------- ---------- ----------- ----------
Total interest income 7,470,701 6,177,071 14,753,896 12,036,142
Interest expense:
Interest on deposits 3,698,973 2,592,863 7,119,158 5,012,827
Interest on federal funds purchased and
securities sold under agreements to repurchase 65,956 46,428 147,176 212,527
Interest on other borrowings 608,871 501,739 1,222,341 940,405
----------- ---------- ----------- ----------
Total interest expense 4,373,800 3,141,030 8,488,675 6,165,759
----------- ---------- ----------- ----------
Net interest income 3,096,901 3,036,041 6,265,221 5,870,383
Provision for loan losses 495,000 182,017 810,000 332,017
----------- ---------- ----------- ----------
Net interest income after provisions for
loan losses 2,601,901 2,854,024 5,455,221 5,538,366
Noninterest income:
Service charges on deposit accounts 332,817 285,513 643,382 545,887
Investment securities gains/(losses), net 0 8,117 20,909 6,173
Other 561,668 434,195 1,089,320 848,206
----------- ---------- ----------- ----------
Total noninterest income 894,485 727,825 1,753,611 1,400,266
Noninterest expense:
Salaries and benefits 933,067 904,866 2,024,995 1,833,167
Net occupancy expense 252,891 290,651 553,930 552,693
Other 967,387 850,616 1,881,584 1,518,217
----------- ---------- ----------- ----------
Total noninterest expense 2,153,345 2,046,133 4,460,509 3,904,077
Earnings before income tax expense 1,343,041 1,535,716 2,748,323 3,034,555
Income tax expense 464,510 563,328 945,723 1,110,905
----------- ---------- ----------- ----------
Net earnings $ 878,531 $ 972,388 $ 1,802,600 $1,923,650
=========== ========== =========== ==========
Basic and diluted earnings per share $ 0.22 $ 0.25 $ 0.46 $ 0.49
=========== ========== =========== ==========
Weighted average shares outstanding 3,924,573 3,924,573 3,924,573 3,924,573
=========== ========== =========== ==========
Dividends per share $ 0.10 $ 0.06 $ 0.20 $ 0.12
=========== ========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
THE SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Additional Other Employee Stock
Paid-In Retained Comprehensive Ownership
Common Stock Capital Earnings Income/(Loss) Plan debt
-------------- ---------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 39,571 3,707,472 22,396,461 175,436 (56,934)
Net earnings --- --- 3,439,417 --- ---
Cash dividends paid ($0.19 per share) --- --- (758,752) --- ---
Other comprehensive income due to unrealized
gain (loss) on investment securities available
for sale, net --- --- --- 158,490 ---
Payment of Employee Stock Ownership Plan Debt --- --- --- --- 56,934
------------- ---------- ---------- ---------- ----------
Balance at December 31, 1998 $ 39,571 3,707,472 25,077,126 333,926 0
Net earnings --- --- 2,922,018 --- ---
Cash dividends paid ($0.32 per share) --- --- (1,255,863) --- ---
Other comprehensive loss due to unrealized
gain (loss) on investment securities available
for sale, net --- --- --- (2,168,054) ---
------------- ---------- ---------- ---------- ----------
Balance at December 31, 1999 $ 39,571 3,707,472 26,743,281 (1,834,128) 0
============= ========== ========== ========== ==========
Net earnings --- --- 1,802,600 --- ---
Cash dividends paid ($0.20 per share) --- --- (784,915) --- ---
Other comprehensive loss due to unrealized
gain (loss) on investment securities available
for sale, net --- --- --- (263,127) ---
------------- ---------- ---------- ---------- ----------
Balance at June 30, 2000 $ 39,571 3,707,472 27,760,966 (2,097,255) 0
============= ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Treasury
Stock Total
------------- ----------
<S> <C> <C>
Balance at December 31, 1997 (214,599) 26,047,407
Net earnings --- 3,439,417
Cash dividends paid ($0.19 per share) --- (758,752)
Other comprehensive income due to unrealized
gain (loss) on investment securities available
for sale, net --- 158,490
Payment of Employee Stock Ownership Plan Debt --- 56,934
------------- ----------
Balance at December 31, 1998 (214,599) 28,943,496
Net earnings --- 2,922,018
Cash dividends paid ($0.32 per share) --- (1,255,863)
Other comprehensive loss due to unrealized
gain (loss) on investment securities available
for sale, net --- (2,168,054)
------------- ----------
Balance at December 31, 1999 (214,599) 28,441,597
============= ==========
Net earnings --- 1,802,600
Cash dividends paid ($0.20 per share) --- (784,915)
Other comprehensive loss due to unrealized
gain (loss) on investment securities available
for sale, net --- (263,127)
------------- ----------
Balance at June 30, 2000 (214,599) 29,196,155
============= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows
For The Six Months Ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $1,802,600 $1,923,650
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and Amortization 305,686 294,971
(Accretion)/amortization of investment discounts
& loan fees (302,254) 34,061
Provision for loan losses 810,000 332,017
Loss on sale of premises & equipment 631 56,019
Gain on sale of investment securities (20,909) (6,173)
Increase in interest receivable (421,540) (560,117)
Increase in other assets (400,837) (309,421)
Increase in interest payable 189,797 162,605
Increase in other liabilities 304,943 586,266
----------- -----------
Net cash provided by operating activities 2,268,117 2,513,878
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities/calls/paydowns of
investment securities held to maturity 3,607,845 1,388,832
Purchases of investment securities held to
maturity (22,251,496) ---
Proceeds from maturities/calls/paydowns of
investment securities available for sale 5,259,402 12,851,782
Proceeds from sale of investment securities
available 2,979,308 ---
Purchases of investment securities available for
sale (8,781,989) (10,866,037)
Net increase in loans (2,336,336) (31,982,803)
Purchases of premises and equipment (79,042) (335,605)
Proceeds from sale of premises and equipment --- 5,706
Purchases of rental property (13,725) (5,070)
Net increase in interest-earning deposits with
other banks (714,833) (2,030,239)
----------- -----------
Net cash used in investing activities (22,330,866) (30,973,434)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in non-interest bearing deposits,
NOW accounts and savings accounts 15,011,688 33,366,239
Net increase in certificates of deposit 4,322,718 6,478,403
Net decrease in securities sold under agreements
to repurchase (2,574,163) (9,644,000)
Net (decrease)/increase in borrowings from FHLB (3,059,125) 4,940,876
Net decrease in other long-term debt (11,465) (10,259)
Dividends paid (784,915) (470,949)
----------- -----------
Net cash provided by financing activities 12,904,738 34,660,310
----------- -----------
Net (decrease)/increase in cash and cash equivalents (7,158,011) 6,200,754
Cash and cash equivalents at beginning of period 27,372,397 9,480,225
----------- -----------
Cash and cash equivalents at end of period $20,214,386 $15,680,979
=========== ===========
Supplemental information on cash payments:
Interest paid $8,298,878 $6,003,153
=========== ===========
Income taxes paid $770,411 $1,008,821
=========== ===========
</TABLE>
-6-
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. AND SUBISIDIARIES
Notes to the Consolidated Financial Statements
June 30, 2000
Note 1 - General
The consolidated financial statements in this report have not been audited.
In the opinion of management, all adjustments necessary to present fairly the
financial position and the results of operations for the interim periods have
been made. All such adjustments are of a normal recurring nature. The results of
operations are not necessarily indicative of the results of operations which the
Company may achieve for future interim periods or the entire year. For further
information, refer to the consolidated financial statements and footnotes
included in the Company's annual report on Form 10-K for the year ended December
31, 1999.
Note 2 - Comprehensive Income
In September 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (Statement 130). Statement 130 establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose statements. The Company adopted Statement 130 effective January 1, 1998.
The primary component of the differences between net income and comprehensive
income for the Company is unrealized gains/losses on available for sale
securities. Total comprehensive income for the three months ended June 30, 2000
was $671,000 compared to $310,000 for the three months ended June 30, 1999.
Total comprehensive income for the six months ended June 30, 2000 was $1,539,000
compared to $776,000 for the six months ended June 30, 1999.
Note 3 - Derivatives Disclosure
As part of its overall interest rate risk management activities, the
Company utilizes off-balance sheet derivatives to modify the repricing
characteristics of on-balance sheet assets and liabilities. The primary
instruments utilized by the Company are interest rate swaps and interest rate
floor and cap arrangements. The fair value of these off-balance sheet derivative
financial instruments are based on dealer quotes and third party financial
models.
Note 4 - Accounting Pronouncements
In June 1999, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133 - an amendment of FASB Statement No. 133" (Statement 137).
Statement 133 is effective for financial statements for the first fiscal
quarters of the fiscal years beginning after June 15, 2000. The Company can not
predict whether the provisions of Statement 133 as amended by Statement 137 will
have a significant impact on its financial statements upon adoption.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis is designed to provide a better
understanding of various factors related to the Company's results of operations
and financial condition. This discussion is intended to supplement and highlight
information contained in the accompanying unaudited consolidated financial
statements for the three and six months ended June 30, 2000 and 1999.
Certain of the statements discussed are forward-looking statements for
purposes of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21A of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from future results,
performance or achievements expressed or implied by such forward-looking
statements. Such forward-looking statements include statements using the words
such as "may," "will," "anticipate," "should," "would," "believe," "evaluate,"
"assessment," "contemplate," "expect," "estimate," "continue," "intend" or
similar words and expressions of the future. Our actual results may differ
significantly from the results we discuss in these forward-looking statements.
These forward-looking statements involve risks and uncertainties and may
not be realized due to a variety of factors, including, without limitation: the
effects of future economic conditions; governmental monetary and fiscal
policies, as well as legislative and regulatory changes; the risks of changes in
interest rates on the level and composition of deposits, loan demand, and the
values of loan collateral, securities, and other interest-sensitive assets and
liabilities; interest rate risks; the effects of competition from other
commercial banks, thrifts, mortgage banking firms, consumer finance companies,
credit unions, securities brokerage firms, insurance companies, money market and
other mutual funds and other financial institutions operating in the Company's
market area and elsewhere, including institutions operating, regionally,
nationally, and internationally, together with such competitors offering banking
products and services by mail, telephone, computer and Internet; and the failure
of assumptions underlying the establishment of reserves for loan losses. All
written or oral forward-looking statements attributable to the Company are
expressly qualified in their entirety by these cautionary statements.
Summary
Net income of $879,000 for the quarter ended June 30, 2000 represented a
decrease of $93,000 (9.6%) from the Company's net income of $972,000 for the
same period of 1999. Basic earnings per share was decreased $0.03 (12.0%) to
$0.22 during the second quarter of 2000 from $0.25 for the second quarter of
1999. Net income decreased $121,000 (6.3%) to $1,803,000 for the six month
period ended June 30, 2000 compared to $1,924,000 for the same period of 1999.
During the six month period ended June 30, 2000 compared to the same period of
1999, the Company experienced increases in net interest income, provision for
loan losses, noninterest income and noninterest expense due to the continued
growth of the Company. The net yield on total interest-earning assets declined
to 3.43% for the six months ended June 30, 2000 from 3.84% for the six months
ended June 30, 1999. The decrease in the net yield on interest-earning assets is
due to an overall increase in the yield on interest-earning assets offset by a
higher increase in the cost of interest-bearing liabilities. See the
"Consolidated Average Balances, Interest Income/Expense and Yields/Rates" table.
Total assets of $392,457,000 at June 30, 2000 represents an increase of
$14,939,000 (4.0%) over total assets of $377,518,000, at December 31, 1999. This
increase resulted primarily from increases in investment securities held to
maturity.
Financial Condition
Investment Securities and Federal Funds Sold
Investment securities held to maturity were $28,989,000 and $10,068,000 at
June 30, 2000 and December 31, 1999, respectively. This increase of $18,921,000
(187.93%) was primarily the result of purchases of $14,453,000 in U.S. agency
securities, $2,485,000 in mortgage backed securities and $5,314,000 in CMOs,
offset by $3,608,000 of scheduled paydowns, maturities and calls of principal
amounts.
8
<PAGE>
Investment securities available for sale increased $151,000 (0.2%) to
$67,950,000 at June 30, 2000 from $67,799,000 at December 31, 1999. This
increase is a result of purchases of $2,969,000 in U.S. agency securities,
$1,902,000 in mortgage backed securities, and $3,910,000 in CMOs. This increase
is offset by $5,259,000 of scheduled paydowns, maturities and calls of principal
amounts. In addition, $1,982,000 of U.S. agency securities and $997,000 of CMOs
were sold in the first quarter of 2000.
Federal funds sold decreased to $8,140,000 at June 30, 2000 from
$15,710,000 at December 31, 1999. This decrease is primarily due to the
reinvestment of Federal funds sold to investment securities held to maturity. In
addition, this reflects normal activity in the Bank's funds management efforts.
Loans
Total loans, net of unearned income, of $262,687,000 at June 30, 2000
reflected an increase of $2,081,000 (0.8%) compared to the total loans of
$260,606,000, net of unearned income, at December 31, 1999. The Bank primarily
experienced growth in commercial real estate loans offset by a decrease in
commercial, financial and agricultural and commercial real estate construction
categories of loans during the first six months of 2000. Commercial, financial
and agricultural, residential real estate and commercial real estate loans
represented the majority of the loan portfolio with approximately 28.14%, 25.78%
and 32.59% of the Bank's total loans, net of unearned income at June 30, 2000,
respectively. The net yield on loans was 8.52% for the six months ended June 30,
2000 compared to 8.39% for the six months ended June 30, 1999. See the
"CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND YIELDS/RATES" table.
Allowance for Loan Losses and Risk Elements
The allowance for loan losses reflects management's assessment and
estimates of the risks associated with extending credit and its evaluation of
the quality of the loan portfolio. Management takes a sample of the loan
portfolio in order to estimate the appropriate provision required to maintain
the allowance at a level believed adequate in relation to anticipated future
loan losses. In assessing the allowance, management reviews the size, quality
and risk of loans in the portfolio. Management also considers such factors as
the Bank's loan loss experience, the amount of past due and nonperforming loans,
specific known risks, the status, amounts, and values of nonperforming assets
(including loans), underlying collateral values securing loans, current and
anticipated economic conditions, and other factors, including developments
anticipated by management with respect to various credits which management
believes affects the allowance for loan losses.
The table below summarizes the changes in the allowance for loan losses for
the six months ended June 30, 2000 and the year ended December 31, 1999.
<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 2000 December 31, 1999
<S> <C> <C>
Balance at beginning of period - January 1, $ 3,775,000 $2,808,000
Charge-offs:
Loans secured by real estate - 277,000
Commercial and industrial loans 52,000 1,018,000
Loans to individuals for household, family and other personal expenditures 256,000 337,000
Loans to finance agriculture - -
All other loans - -
Recoveries:
Loans secured by real estate 1,000 1,000
Commercial and industrial loans 22,000 5,000
Loans to individuals for household, family and other personal expenditures 29,000 87,000
Loans to finance agriculture - -
All other loans - -
Net charge-offs: 256,000 1,539,000
Provision for possible loan losses 810,000 2,506,000
Ending Balance $ 4,329,000 3,775,000
</TABLE>
The allowance for loan losses was $4,329,000 at June 30, 2000 compared to
$3,775,000 at December 31, 1999. Management believes that the current level of
allowance (1.65% of total outstanding loans, net of unearned income, at June 30,
2000) was adequate at that time to absorb anticipated risks identified in the
portfolio at that time. Subsequent to June 30, 2000, management received the
draft report of its independent loan review consultant concerning the portion of
the portfolio reviewed to date as part of its continuous loan review program. As
a result, an additional provision of up to $500,000 to the Allowance for Loan
Losses will be made during the third quarter of 2000. This anticipated provision
reflects, in part, an increase in the percentage of AuburnBank's loan portfolio
scheduled to be reviewed by the independent consultant in 2000 as well as
anticipated improvements in the level of previously criticized loans.
Consistent with its methodology for calculating the adequacy of the
Allowance for Loan Losses, management believes this additional provision, in
combination with budgeted provisions throughout the remainder of 2000 will be
necessary to place the Allowance at a level sufficient to absorb identified
potential loan losses in the portfolio. No assurance can be given, however, that
adverse economic circumstances or other events, including additional loan review
or examination findings or changes in the related borrowers' financial
condition, will not result in increased losses in the Bank's loan portfolio
and/or in additional provision to the allowance for loan losses.
During the first six months of 2000, the Bank made $810,000 in provisions
to the allowance for loan losses based on management's assessment of the credit
quality of the loan portfolio, including anticipated improvements in certain
credits. The increase in the provision is due to results and estimates of
deterioration in certain loans determined by recent analyses and loan reviews
performed during a normal independent loan review and a recent regulatory
examination. The Company has recognized and has estimated what it believes to be
appropriate allowance for possible loan losses with respect to all credits
identified in the last six months. For the six months ended June 30, 2000, the
Bank had charge-offs of $308,000 and recoveries of $52,000.
Nonperforming assets, comprised of nonaccrual loans, renegotiated loans and
other real estate owned, and accruing loans 90 days or more past due were
$9,850,000 at June 30, 2000 up 44.7% from the $6,853,000 of non-performing
assets at December 31, 1999. This increase is primarily due to an increase in
nonaccrual loans due to 3 large relationships totaling approximately $3.1
million. If nonaccrual loans had performed in accordance with their original
contractual terms, interest income would have increased approximately $274,000
for the six months ended June 30, 2000.
The table below provides information concerning past due, nonaccrual loans
and certain asset quality ratios at June 30, 2000 and December 31, 1999.
<TABLE>
<CAPTION>
Past Due Past Due
30-89 Days 90 Days or More
Still Accruing Still Accruing Nonaccrual Total
<S> <C> <C> <C> <C>
December 31, 1999
Restructured Loans
Loans secured by real estate $ 1,514,000 $ 132,000 $ 4,130,000 $ 5,776,000
Commercial and industrial loans 153,000 1,663,000 1,816,000
Loans to individuals for household, 1,155,000 137,000 282,000 1,574,000
family and other personal expenditures -
Loans to finance agriculture -
All other loans -
Total $ 2,822,000 $ 269,000 $ 6,075,000 $ 9,166,000
June 30, 2000
Restructured Loans
Loans secured by real estate $ 893,000 $ 6,037,000 $ 6,930,000
Commercial and industrial loans 1,043,000 104,000 3,045,000 4,192,000
Loans to individuals for household, 423,000 13,000 138,000 574,000
family and other personal expenditures -
Loans to finance agriculture -
All other loans 19,000 3,000 22,000
Total $ 2,378,000 $ 120,000 $ 9,220,000 $ 11,718,000
</TABLE>
RATIOS
<TABLE>
<CAPTION>
December 31, 1999 June 30, 2000
<S> <C> <C>
Allowance as a percent of total loans outstanding 1.45% 1.65%
Allowance as a percent of total past due and non performing loans 41.18% 36.94%
</TABLE>
Potential problem loans consist of those loans where management has serious
doubts as to the borrower's ability to comply with the present loan repayment
terms. At June 30, 2000, 85 loans totaling $5,782,000, or 2.20% of total loans
outstanding, net of unearned income, were considered potential problem loans
compared to 92 loans totaling $10,798,000, or 4.41% of total loans outstanding,
net of unearned income, at December 31, 1999. The decrease in the amount of
potential problem loans is due to improvements in one large loan totaling
approximately $3 million. At June 30, 2000 the amount of impaired loans were
$8,254,000, which included 31 loans to 8 borrowers with a total valuation
allowance of approximately $1,438,000. In comparison, at December
9
<PAGE>
31, 1999, the Company had approximately $5,177,000 of impaired loans, which
included 7 loans to 2 borrowers with a total valuation allowance of
approximately $345,000. This increase in impaired loans is due to the same 3
relationships mentioned above.
Deposits
Total deposits increased $19,334,000 (6.6%) to $314,056,000 at June 30,
2000, as compared to $294,722,000 at December 31, 1999. Noninterest-bearing
deposits increased $3,963,000 (10.2%) during the first six months of 2000, while
total interest-bearing deposits increased $15,372,000 (6.0%) to $271,226,000 at
June 30, 2000 from $255,854,000 at December 31, 1999. The growth in
noninterest-bearing deposits is due primarily to an increase in regular demand
deposit accounts. During the first six months of 2000, the Bank also experienced
significant increases in money market accounts of $10,533,000 (17.8%), and
certificates of deposits less than $100,000 of $5,807,000 (8.0%). The
significant increase in money market accounts is due to a $7 million increase in
public funds. The Company considers the other shifts in the deposit mix to be
within the normal course of business and in line with the management of the
Bank's overall cost of funds. The average rate paid on interest-bearing deposits
was 5.27% for the six months ended June 30, 2000 compared to 4.63% for the same
period of 1999. See the "CONSOLIDATED AVERAGE BALANCES, INTEREST INCOME/EXPENSE
AND YIELDS/RATES" table.
Capital Resources and Liquidity
The Company's consolidated stockholders' equity was $29,196,000 at June 30,
2000, compared to $28,442,000 at December 31, 1999. This represents an increase
of $754,000 (2.7%) during the first six months of 2000. Net earnings for the
first six months of 2000 were $1,803,000 compared to $1,924,000 for the same
period of 1999. In addition, the Company experienced an increase in accumulated
other comprehensive loss to $2,097,000 at June 30, 2000 from $1,834,000 at
December 31, 1999 due to increased decline in market value of investment
securities available for sale. During the first six months of 2000, cash
dividends of $785,000, or $0.20 per share, were declared on Common Stock,
compared to $471,000, or $0.12 per share for the first six months of 1999.
Certain financial ratios for the company as of June 30, 2000 and December
31, 1999 are presented in the following table:
<TABLE>
<CAPTION>
December 31, 1999 June 30, 2000
<S> <C> <C>
Return on average assets - annualized 0.85% 0.93%
Return on average equity - annualized 9.86% 12.64%
</TABLE>
The Company's Tier 1 leverage ratio was 7.84%, Tier I risk-based capital
ratio was 11.40% and Total risk-based capital ratio was 12.65% at June 30, 2000.
These ratios exceed the minimum regulatory capital percentages of 4.0% for Tier
1 leverage ratio, 4.0% for Tier I risk-based capital ratio and 8.0% for Total
risk-based capital ratio. Based on current regulatory standards, the Company
believes it is a "well capitalized" bank.
The primary source of liquidity during the first six months of 2000 was
deposit growth. The Company used these funds primarily in federal funds sold and
the purchase of investment securities. In addition, an advance of $3 million
matured from the Federal Home Loan Bank of Atlanta ("FHLB-Atlanta"). Under the
advance program with FHLB-Atlanta, the Bank had outstanding advances totaling
approximately $43,581,000, leaving credit available, net of advances drawn down,
of approximately $6,419,000 at June 30, 2000.
Net cash provided by operating activities of $2,268,000 for the six months
ended June 30, 2000, consisted primarily of net earnings. Net cash used in
investing activities of $22,331,000 funded investment securities purchases and
loan growth of $31,033,000 and $2,336,000, respectively, offset by proceeds from
maturities, calls and paydowns of investment securities and proceeds from sale
of investment securities available for sale of $8,867,000 and $2,979,000,
respectively. The $12,905,000 in net cash provided by financing activities
resulted primarily from increases of $15,012,000 in non-interest bearing
deposits, NOW accounts and savings accounts, and increases in certificates of
deposit of $4,323,000 offset by a decrease in borrowings from FHLB and a
decrease in securities sold under agreements to repurchase of $3,059,000 and
$2,574,000, respectively.
Interest Rate Sensitivity Management
At June 30, 2000, interest sensitive assets that repriced or matured within
the next 12 months were $162,256,000, compared to interest sensitive liabilities
that reprice or mature within the same time frame totaling $250,067,000. The
cumulative GAP position (the difference between interest sensitive assets and
interest sensitive liabilities) of a negative $87,811,000, resulted in a GAP
ratio (calculated as interest sensitive assets divided by interest sensitive
liabilities) of 65%. This compares to a twelve month cumulative GAP position at
December 31, 1999, of a negative $2,534,000 and a GAP ratio of 99%. A negative
GAP position indicates that the Company has more
10
<PAGE>
interest-bearing liabilities than interest-earning assets that reprice within
the GAP period, and that net interest income may be adversely affected in a
rising rate environment as rates earned on interest-earning assets rise more
slowly than rates paid on interest-bearing liabilities. A positive GAP position
indicates that the Company has more interest-earning assets than
interest-bearing liabilities that reprice within the GAP period. The Bank's
Asset/Liability Management Committee ("ALCO") is charged with the responsibility
of managing, to the degree prudently possible, its exposure to "interest rate
risk," while attempting to provide earnings enhancement opportunities. Based on
ALCO's alternative interest rate scenarios used by the Company in modeling for
asset/liability planning purposes and the GAP position at June 30, 2000 and
various assumptions and estimates, the Company's asset/liability model predicts
that the Company's net interest income would not be negatively effected by more
than 5.0% over 12 months. Such estimates and predictions are forecasts which may
or may not be realized.
Results of Operations
Net Income
Net income decreased $93,000 (9.6%) to $879,000 for the three month period
ended June 30, 2000 compared to $972,000 for the same period of 1999. Basic
earnings per share was $0.22 and $0.25 for the second quarter of 2000 and 1999,
respectively. Net income decreased $121,000 (6.3%) to $1,803,000 for the six
month period ended June 30, 2000, compared to $1,924,000 for the same period of
1999. During the six month period ended June 30, 2000 compared to the same
period of 1999, the Company experienced increases in net interest income,
provision for loan losses, noninterest income, and noninterest expense due to
the continued growth of the Company.
Net Interest Income
Net interest income was $3,097,000 for the second quarter of 2000. The
increase of $61,000 (2.0%) over $3,036,000 for the same period of 1999, resulted
primarily from the increase in interest and fees on loans and interest and
dividends from investment securities offset by increases in interest on
deposits. Net interest income increased $395,000 (6.7%) to $6,265,000 for the
six months ended June 30, 2000, compared to $5,870,000 for the six months ended
June 30, 1999. Such increases resulted from overall growth in the Company's
average interest-earning assets offset by a decrease in net taxable yield on the
Company's interest-earning assets during the first six months of 2000 compared
to the same period of 1999. Through the second quarter of 2000, the Company's
GAP position remained more liability sensitive to changes in interest rates as
compared to December 31, 1999. The Company continues to regularly review and
manage its asset/liability position in an effort to manage the negative effects
of changing rates. See "Financial Condition - Interest Rate Sensitivity
Management" and the "Consolidated Average Balances, Interest Income/expense and
Yields/rates" table.
Interest Income
Interest income is a function of the volume of interest earning assets and
their related yields. Interest income was $7,471,000 and $6,177,000 for the
three months ended June 30, 2000 and 1999, respectively. This represents an
increase of $1,294,000 (21.0%) for the second quarter of 2000 compared to 1999.
For the six months ended June 30, 2000 interest income was $14,754,000, an
increase of $2,718,000 (22.6%) compared to $12,036,000 for the same period of
1999. This change for the first six months of 2000 resulted as the average
volume of interest earning assets outstanding increased $58,045,000 (18.8%) over
the same period of 1999 and the Company's yield on interest-earning assets
increased 21 basis points. See the "Consolidated Average Balances, Interest
Income/Expense and Yields/Rates" table.
Loans are the main component of the Bank's earning assets. Interest and
fees on loans were $5,599,000 and $5,013,000 for the second quarter of 2000 and
1999, respectively. This reflects an increase of $586,000 (11.7%) during the
three months ended June 30, 2000 over the same period of 1999. For the six month
period ended June 30, 2000, interest and fees on loans increased $1,584,000
(16.5%) to $11,212,000 from $9,628,000 for the same period of 1999. The average
volume of loans increased $32,597,000 (14.1%) as of June 30, 2000 compared to
the same period of 1999, while the Company's yield on loans also increased by 13
basis points comparing these same periods.
For the three month period ended June 30, 2000, interest income on
investment securities increased $576,000 (53.2%) to $1,658,000 from $1,082,000
for the same period of 1999. Interest income on investment securities for the
six month period ended June 30, 2000, increased $868,000 (38.8%) to $3,108,000
from $2,240,000 for the same period of 1999. The Company's average volume of
investment securities increased by $18,040,000 (25.2%) for the first six months
of 2000, compared to the same period of 1999, while the net yield on these
average balances also increased by 61 basis points. See the "Consolidated
Average Balances, Interest Income/Expense and Yields/Rates" table.
11
<PAGE>
Interest Expense
Total interest expense increased $1,233,000 (39.3%) to $4,374,000 for the
second quarter of 2000 compared to $3,141,000 for the same period of 1999. Total
interest expense increased $2,323,000 (37.7%) to $8,489,000 from $6,166,000 for
the six months ended June 30, 2000 and 1999, respectively. This change resulted
as the Company's average interest-bearing liabilities increased 22.4% and the
rates paid on these liabilities increased 56 basis points during the first six
months of 2000 compared to the same period of 1999. See the "Consolidated
Average Balances, Interest Income/expense and Yields/rates" table.
Interest on deposits, the primary component of total interest expense,
increased $1,106,000 (42.7%) to $3,699,000 for the second quarter of 2000
compared to $2,593,000 for the same period of 1999. Interest on deposits were
$7,119,000 and $5,013,000 for the six months ended June 30, 2000 and 1999,
respectively. The increase for the six month period ended June 30, 2000 is due
to a 24.3% increase in the average volume and a 64 basis point increase in the
rate paid on interest-bearing deposits.
Interest expense on other borrowed funds, was $609,000 and $502,000 for the
second quarters of 2000 and 1999, respectively. This represents an increase of
$107,000 or 21.3%. For the six months ended June 30, 2000, interest expense on
borrowed funds increased $282,000 (30.0%) to $1,222,000 from $940,000 for the
same period of 1999. This increase for the six month period ended June 30, 2000
is due to a 26.1% increase in the average volume and a 14 basis point increase
in the rate paid on other borrowed funds. The increase in the average volume is
primarily from the increase in FHLB-Atlanta advances.
Provision for Loan Losses
The provision for loan losses is based on management's assessments and
estimates of the risks associated with extending credit and its evaluation of
the quality of the loan portfolio. The provision for loan losses was $810,000
for the six months ended June 30, 2000 compared to $332,000 for the six months
ended June 30, 1999. The increase in the provision is due to loan growth and as
a result of a deterioration in certain loans determined by recent analyses and
loan reviews performed during a normal independent loan review and a recent
regulatory examination. See "---Allowance For Loan Loss and Risk Elements."
Noninterest Income
Noninterest income increased $166,000 (22.8%) to $894,000 for the second
quarter of 2000 from $728,000 for the same period of 1999. Noninterest income
was $1,754,000 and $1,400,000 for the six months ended June 30, 2000 and 1999,
respectively. This increase for the second quarter is mainly due to increases in
service charges on deposit accounts and other noninterest income.
Service charges on deposit accounts for the second quarter of 2000
increased $47,000 (16.4%) to $333,000 from $286,000 for the second quarter of
1999. Service charges on deposit accounts were $643,000 and $546,000 for the six
months ended June 30, 2000 and 1999, respectively. These increases are primarily
due to increases in nonsufficient funds and overdraft charges due to an increase
in nonsufficient fund items.
Other noninterest income increased $128,000 (29.5%) to $562,000 for the
second quarter of 2000 from $434,000 for the same period of 1999. Other
noninterest income was $1,089,000 and $848,000 for the six months ended June 30,
2000 and 1999, respectively. This increase primarily resulted from an increase
in Mastercard/VISA discounts and fees due to the Auburn University's acceptance
of Mastercard/VISA for tuition, an increase in checkcard income due to inception
of the checkcard in January 1999, an increase in stock dividends from stock
owned in other companies and the loss on premises and equipment in the prior
year due primarily to computer equipment that was not Year 2000 compliant.
Noninterest Expense
Total noninterest expense was $2,153,000 and $2,046,000 for the second
quarter of 2000 and 1999, respectively, representing an increase of $107,000 or
5.2%. For the six months ended June 30, 2000, total noninterest expense
increased $557,000 (14.3%) to $4,461,000 from $3,904,000 for the same period of
1999. This increase was due to increases in salaries and benefits expense and
other noninterest expense.
12
<PAGE>
Salaries and benefits expense was $933,000 and $905,000 for the three
months ended June 30, 2000 and 1999, respectively. This represents an increase
of $28,000 (3.1%) in the second quarter of 2000 compared to the second quarter
of 1999. For the six months ended June 30, 2000, total salaries and benefits
expense increased $192,000 (10.5%) to $2,025,000 from $1,833,000 for the same
period of 1999. This increase is primarily due to the increase in overall
employee levels from the same period of 1999 offset by the decrease to the
officer/employee incentive plan.
Net occupancy expense was $253,000 and $291,000 for the second quarters of
2000 and 1999, respectively, representing a decrease of $38,000 or 13.1%. For
the six month period ended June 30, 2000, net occupancy expense was comparable
to the same period of 1999. These two six month periods are comparable due to an
increase in lease payments for computer equipment offset by a decrease in
depreciation on furniture and equipment.
For the second quarter of 2000, other noninterest expense increased
$116,000 (13.6%) to $967,000 from $851,000 for the second quarter of 1999. Other
noninterest expense was $1,882,000 and $1,518,000 for the six months ended June
30, 2000 and 1999, respectively . This increase is mainly due to the expenses
associated with Auburn University's acceptance of Mastercard/VISA for tuition
mentioned above, expenses due to the increased monitoring of nonaccrual loans,
increase in computer software amortization due to additional purchases in 1999
and an increase in assessments due to an increase in FDIC Insurance Assessment
rates and state bank assessment which did not occur in the first six months of
1999.
Income taxes
Income tax expense was $465,000 and $563,000 for the second quarters of
2000 and 1999, respectively. For the six months ended June 30, 2000, income tax
expense decreased $165,000 (14.9%) to $946,000 from $1,111,000 for the six
months ended June 30, 2000. These levels represent an effective tax rate on
pre-tax earnings of 34.4% for the six months ended June 30, 2000 which is
consistent with the Company's expected annual effective rate.
Impact of Inflation and changing prices
Virtually all of the assets and liabilities of the Company are monetary in
nature. As a result, interest rates have a more significant effect on the
Company's performance than the effects of general levels of inflation. Interest
rates do not necessarily move in the same direction or with the same magnitude
as the price of goods and services because such prices are affected by
inflation. In the current interest rate environment, liquidity and the maturity
structure of the Company's assets and liabilities are critical to the
maintenance of desired performance levels. However, relatively low levels of
inflation in recent years have resulted in a rather insignificant effect on the
Company's operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk has increased somewhat during the first six
months of 2000, but still remains within policy limits. The change in interest
sensitivity is due primarilary to three factors. At year end 1999, the Company
had intentionally allowed overnight federal funds to build up to a
higher-than-normal level of $15,710,000 as a safeguard against possible
problems with date change associated with the century change (Y2K). During the
first six months of 2000, these funds have been reinvested in investment
securities with longer maturities and higher yields, primarilarly U. S. agency
securities, mortgage backed securities and CMOs. The second contributing factor
is the $9,682,000 increase in high yielding money market deposit accounts, which
allow the customer to make withdrawals by check or other transaction measures
daily. The final factor contributing to the increase in market sensitivity is
the maturing of $20,000,000 in notional value of interest rate floors, which had
protected a like amount of variable loans against a possible drop in interest
rates below the floor rate. All of these factors had the effect of increasing
the Company's balance sheet sensitivity to changes in interest rates. The
Company measures its exposure to an immediate shift in interest rates of up or
down 200 basis points. Given these conditions, the bank's modeling projects that
net interest income would decrease by less than 5% (policy limit) under either
scenario. For an immediate upward movement in interest rates of 200 basis
points, the modeling projects the Company's net interest income could drop by
4.06% over one year. For an immediate drop in interest rates of 200 basis
points, the modeling projects that the Company's net interest income could
increase by 5.96%. As the Company does not consider this change in market
sensitivity to be significant, the market rate table as shown in the Company's
1999 Annual Report filed on Form 10-K, has not been included in this filing.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held at the
AuburnBank Center in Auburn, Alabama, on Tuesday May 9, 2000, at 3:00 in the
afternoon. This meeting was held for the purpose of considering the election of
five directors to the Board of Directors to serve one year terms expiring at the
Company's 2001 Annual Meeting of Shareholders and until their successors have
been elected and qualified, and to ratify the appointment of KPMG LLP as the
independent auditors for the Company.
13
<PAGE>
As to the election of five directors, Messers E.L Spencer, Jr., Emil F.
Wright, Jr., J.E. Evans, Terry Andrus and Anne M. May were all elected to the
Board of Directors with 2,381,013 votes cast FOR and 100 votes cast WITHHOLD
AUTHORITY for all nominees.
As to the ratification of the appointment of KPMG LLP as the independent
auditors for the Company, the ratification was approved. There were 2,370,729
votes cast FOR, 957 votes cast AGAINST and 9,427 votes cast ABSTAIN.
ITEM 5. OTHER EVENTS
The proxy statement solicited by the Company's Board of Directors with
respect to the Company's 2000 Annual Meeting of Shareholders will confer
discretionary authority to vote on any proposals of shareholders intended to be
presented for consideration at such Annual Meeting that are submitted to the
Company after February 27, 2001.
14
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC.
Item 6(a)
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
------ ----------- --------------
<S> <C> <C>
3.A Certificate of Incorporation of Auburn National
Bancorporation, Inc. * ---
3.B Bylaws of Auburn National Bancorporation, Inc. * ---
10.A Auburn National Bancorporation, Inc. 1994
Long-term Incentive Plan. * ---
10.B Lease and Equipment Purchase Agreement, Dated
September 15, 1987. * ---
27 Financial Data Schedule 18
</TABLE>
* Incorporated by reference from Registrant's Registration Statement on Form
SB-2.
(b) Reports filed on Form 8-K for the quarter ended June 30, 2000:
none
15
<PAGE>
AUBURN NATIONAL BANCORPORATION, INC. & SUBSIDIARIES
Consolidated Average Balances, Interest Income/Expense and Yields/Rates
Taxable Equivalent Basis
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------------------------------
2000 1999
-----------------------------------------------------------------
Average Yield/ Average Yield/
ASSETS Balance Interest Rate Balance Interest Rate
-------------------------------------------- ------- -------- ---- ------- -------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans, net of unearned income (1) $ 263,880 11,212 8.52% 231,283 9,628 8.39%
Investment securities:
Taxable 88,392 3,080 6.99% 69,883 2,199 6.35%
Tax-exempt (2) 1,158 42 7.35% 1,627 62 7.68%
---------------------- --------------------
Total investment securities 89,550 3,122 6.99% 71,510 2,261 6.38%
Federal funds sold 11,614 343 5.92% 4,777 114 4.81%
Interest-earning deposits with other banks 2,606 90 6.93% 2,035 54 5.35%
---------------------- --------------------
Total interest-earning assets 367,650 14,767 8.06% 309,605 12,057 7.85%
Allowance for loan losses (3,976) (2,808)
Cash and due from banks 10,809 9,282
Premises and equipment 3,304 3,514
Rental property, net 1,628 1,759
Other assets 9,691 5,908
------------ ----------
Total assets $ 389,106 327,260
============ ==========
LIABILITIES & STOCKHOLDERS' EQUITY
--------------------------------------------
Interest-bearing liabilities:
Deposits:
Demand $ 34,781 552 3.18% 25,059 286 2.30%
Savings and money market 80,088 1,954 4.89% 67,517 1,381 4.12%
Certificates of deposits less than $100,000 76,026 2,389 6.30% 70,317 2,026 5.81%
Certificates of deposits and other time
deposits of $100,000 or more 80,180 2,224 5.56% 55,245 1,320 4.82%
---------------------- --------------------
Total interest-bearing deposits 271,075 7,119 5.27% 218,138 5,013 4.63%
Federal funds purchased and securities sold under
agreements to repurchase 5,239 147 5.63% 8,769 213 4.90%
Other borrowed funds 44,185 1,222 5.55% 35,029 940 5.41%
---------------------- --------------------
Total interest-bearing liabilities 320,499 8,488 5.31% 261,936 6,166 4.75%
Noninterest-bearing deposits 37,184 33,553
Accrued expenses and other liabilities 2,907 2,081
Stockholders' equity 28,516 29,690
------------ ----------
Total liabilities and stockholders'
equity $ 389,106 327,260
============ ==========
Net interest income $6,279 5,891
========= =========
Net yield on total interest-earning assets 3.43% 3.84%
========= =========
</TABLE>
----------------------
(1) Loans on nonaccrual status have been included in the computation of average
balances.
(2) Yields on tax-exempt securities have been computed on a tax-equivalent
basis using an income tax rate of 34%.
16
<PAGE>
SIGNATURES
In accordance with the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
AUBURN NATIONAL BANCORPORATION, INC.
(Registrant)
Date: August 14, 2000 By: /s/ E. L. Spencer,
---------------------------------- --------------------------------
E. L. Spencer, Jr.
President, Chief Executive
Officer and Director
Date: August 14, 2000 By: /s/ Linda D. Fucci
--------------------------------- --------------------------------
Linda D. Fucci
Chief Financial Officer and
Principal Accounting Officer
17
