Business Information page 2 The Bank has loans outstanding to borrowers in all industries within its PSA. Any adverse economic or other  conditions affecting these industries would also likely have an adverse effect on the local workforce, other local businesses,  and individuals in the community that have entered into loans with the Bank. However, management believes that due to the  diversified mix of industries located within the Bank’s PSA, adverse changes in one industry may not necessarily affect other  area industries to the same degree or within the same time frame. The Bank’s PSA is also subject to both local and national  economic conditions and fluctuations. While most loans are made within the PSA, residential mortgage loans are originated  outside the PSA, and the Bank has from time to time purchased loans and loan participations from outside its PSA. 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. While there are certain risks unique to each type of  lending, management believes that there is more risk associated with commercial, real estate acquisition, construction and  development, agricultural and consumer lending than with residential real estate mortgage loans. To help manage these risks,  the Bank has established underwriting standards used in evaluating each extension of credit on an individual basis, which are  substantially similar for each type of loan. These standards include a review of the economic conditions affecting the  borrower, the borrower’s financial strength and capacity to repay the debt, the underlying collateral and the borrower’s past  credit performance. These standards are used to determine the creditworthiness of the borrower at the time a loan is made and are monitored periodically throughout the life of the loan. See “Legislative and Regulatory Changes” for a discussion of  regulatory guidance on commercial real estate lending.  Loans and Loan Concentrations  Services  The Bank offers checking, savings, transaction deposit accounts and certificates of deposit, and is an active residential  mortgage lender in its primary service area (“PSA”). The Bank’s PSA includes the cities of Auburn and Opelika, Alabama  and nearby surrounding areas in East Alabama, primarily in Lee County. The Bank also offers commercial, financial,  agricultural, real estate construction and consumer loan products and other financial services. The Bank is one of the largest providers of automated teller services in East Alabama and operates ATM machines in 13 locations in its PSA. The Bank  offers Visa ® Checkcards, which are debit cards with the Visa logo that work like checks but can be used anywhere Visa is  accepted, including ATMs. The Bank’s Visa Checkcards can be used internationally through the Cirrus ® network. The Bank  offers online banking and bill payment services through its Internet website,  www.auburnbank.com . The Company’s principal executive offices are located at 100 N. Gay Street, Auburn, Alabama 36830, and its  telephone number at such address is (334) 821-9200. The Company maintains an Internet website at  www.auburnbank.com . The Company is not incorporating the information on that website into this report, and the website and the information  appearing on the website are not included in, and are not part of, this report. The Company files annual, quarterly and current  reports, proxy statements, and other information with the SEC. You may read and copy any document we file with the SEC at  the SEC’s public reference room at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for  more information on the operation of the public reference rooms. The SEC maintains an Internet site that contains reports,  proxy, and other information Our SEC filings are also available to the public free of charge from the SEC’s web site at  www.sec.gov . Auburn National Bancorporation, Inc. (the “Company”) is a bank holding company registered with the Board of  Governors of the Federal Reserve System (the “Federal Reserve”) under the Bank Holding Company Act of 1956, as  amended (the “BHC Act”). The Company was incorporated in Delaware in 1990, and in 1994 it succeeded its Alabama  predecessor as the bank holding company controlling AuburnBank, an Alabama state member bank with its principal office  in Auburn, Alabama (the “Bank”). The Company and its predecessor have controlled the Bank since 1984. As a bank holding  company, the Company may diversify into a broader range of financial services and other business activities than currently  are permitted to the Bank under applicable laws, regulations and rules. The holding company structure also provides greater  financial and operating flexibility than is presently permitted to the Bank.  BUSINESS INFORMATION