A WINNING STRATEGY 2010 ANNUAL REPORT AUBURN NaTIONAL BANCORPORATION, INC. For almost 60 years, AuburnBank and Toomers Corner grew side by side, sharing the roots of our community. A winning strategy undergirded the success of the bank while a community celebrated victories among the oaks across the street. The bank remains in sight of the famous street corner, which bears the name of a founding member of AuburnBank, and both continue to serve the community on which they were built. AUBURN NaTIONAL BANCORPORATION, INC. 2010 ANNUAL REPORT A W INNING S TR ATEGY CORPORATE PROFILE Auburn National Bancorporation, Inc., is a one-bank holding company established in 1984, and incorporated under the laws of the State of Delaware. Its total assets were $764 million as of December 31, 2010. Since its inception, Auburn National Bancorporation has wholly owned AuburnBank. As the effects of a national recession continued to batter East Alabama in 2010, AuburnBank focused on a winning strategy of sound banking practices to mark a year of strong financial performance. In spite of an unrelenting weak housing market and less than optimal credit conditions, AuburnBank significantly exceeded last year’s bottom line and continued to strengthen its reserves. For the fifth consecutive year, AuburnBank was named one of the top 200 community banks in America by U.S. Banker magazine, one of many external measures of the bank’s strength. AuburnBank’s mortgage lending area continued its strong contributions to 2010 earnings, a bright spot in what is a troubled market in many parts of the country. Although refinancing of existing home loans led the way in mortgage earnings, a steady stream of conventional loans for single-family homes added to our bottom line. AuburnBank’s profitability showed a marked improvement over the previous year, with $5.3 million in net earnings compared to $2.4 million in 2009. In addition, we reported $27.7 million growth in deposits and provided increased dividend payments to shareholders for the tenth consecutive year. By any measure, AuburnBank is a well-capitalized bank with sound reserves and significant liquidity to meet both short and long-term cash needs. We continue to observe the highest standards in our underwriting process and we will continue our efforts to reduce our nonperforming assets in 2011. Beyond the improvements of the bank’s performance, we also took steps in 2010 to evaluate expansion opportunities that will likely manifest themselves in 2011. Community plays a vital role in AuburnBank’s winning strategy. We are proud of our involvement in many local charities, special events, education, and opportunities for service, both at a corporate level and among individual employees. For decades the bank has enjoyed a synergistic relationship among its customers, the University, and the communities we serve. In spite of continued economic uncertainties in 2011, one thing remains quite certain: We will provide for your financial needs and are delighted to be able to serve our customers and shareholders from a position of financial strength. AuburnBank provides a wide range of services, including traditional checking and savings accounts, loans, and internet banking. These services are available to individuals, families, and businesses, and are offered at our many convenient locations. In addition to its principal office, AuburnBank operates full-service branches in Opelika, Hurtsboro, and Notasulga, Alabama, as well as the new Bent Creek branch in Auburn. In-store branches are located in Auburn and Tiger Town Kroger supermarkets as well as Wal-Mart SuperCenter stores in Auburn, Opelika, and Phenix City, Alabama. Mortgage loan offices are also located in Phenix City, Valley, and Mountain Brook, Alabama. An extensive network of automated teller machines is operated throughout East Alabama. In addition, AuburnBank offers full financial consulting through a partnership with Bert Harris and Investment Professionals, Inc. (IPI), specializing in retirement planning, college saving, and estate planning. AuburnBank has been operating continuously since 1907 when it was established as the first financial institution in Auburn, Alabama. Auburn National Bancorporation’s initial public offering was held in 1995. The common stock is traded on the NASDAQ Global Market under the symbol “AUBN.” Robert W. Dumas President and CEO AuburnBank TO OUR SHAREHOLDERS AND FRIENDS In spite of a third year of less than favorable economic conditions, AuburnBank continued to produce positive results in 2010. Thanks to our management team, dedicated employees, and a great deal of hard work, AuburnBank has found a winning approach to combat one of the worst economic downturns in years. In the face of a weak economy, AuburnBank has performed well. In 2010, our net earnings were $5.3 million, or $1.47 per share, compared to $2.4 million, or $0.66 per share in 2009. Highlights of 2010 included a stable loan portfolio, paying a dividend of $0.78 per share, and producing net interest income (tax-equivalent) of $20.6 million, an increase of one percent. Moreover, we strengthened our loan loss reserve to 2.05 percent of total loans in 2010, compared to 1.73 percent in 2009. The relationship between our bank and our communities sets AuburnBank apart from the competition. I am always proud to report that our employees continue to participate in a wide range of charitable and civic activities, each one contributing to the quality of life in East Alabama. In addition, I cannot overstate how much we appreciate the relationships we have with both commercial and consumer customers, relationships that play a major role in our good financial results. This year, the continued uncertainty in financial markets will present further challenges. We have quickly and decisively addressed unfavorable credit issues and made further provision for loan loss that will enable us to continue our plans to expand our branch network and grow our service area. The winning strategies that have been our guide since 1907 still serve us well. Your confidence in us as a shareholder continues to inspire our team to live up to the highest standards as the stewards of your ownership in the bank. We deeply appreciate your support and encouragement. E.L. Spencer, Jr. Chairman, Board of Directors AuburnBank and ANBC A W INNING S TR A TEGY Shel Toomer 1912-1957 Emil Wright 1957-1969 Bobby Blake 1969-1981 A W INNING S TR A TEGY Clark Hudson 1981-1983 William Walker 1984-1990 STEADFasT LEADERSHIP. n the shadows of Toomer’s Corner, former presidents of AuburnBank shared roots Iwith tradition, developing a common vision which has led the Auburn community and financial services industry for more than 100 years. Shel Toomer guided the bank, community and Auburn University through two world wars and the Great Depression. Bobby Blake embraced the emerging ATM era and led the community through the historic Kopper Kettle explosion. Clark Hudson ushered in unprecedented growth to East Alabama while William Walker, a third-generation banker, embraced technology and promoted extensive customer service by actively serving the Auburn Chamber of Commerce, The Industrial Development Board, United Way, etc. When farmers had nothing in the 1920s, when the community and university shuddered through the Great Depression, when GIs returned home from World War II, Auburn Bank remained steadfast by honoring the slogan, “Since 1907, your partner, your neighbor, your friend.” FISCAL RESPONSIBILITY. COMMUNITY INVOLVEMENT. HIGHEST LEVEL OF CUSTOMER SERVICE. e understand excellence through perseverance. WWe’ve been there and have celebrated the thrill of victory, like a championship season, with our community. The hallmarks of Auburn Bank are these components of a winning strategy. A way of doing business that elevates us to a peer group of one — the best. We’ve established business practices with a vision for the economic needs of East Alabama, both personally and commercially, with fiscal responsibility to shareholders. Our approach to doing business allows us to participate and support a wide array of charities, civic groups, educational organizations, etc. as a means of transcending the basic role of a community bank. We also place customers at the highest priority, taking extraordinary measures to exceed expectations. Above, from top: Mortgage loan originator John Reese offers the bank’s most prized product to a customer—excellent service. On behalf of the United Way, bank officer Christy Fogle reads to a class at the Auburn Daycare Center. Volunteers for the East Alabama Chapter of the National Alliance for the Mentally Ill use the downtown bank parking lot as a fundraiser during Auburn University football Saturdays. AuburnBank president and CEO, Robert W. Dumas, accepts the gavel as president of the Alabama Bankers Association. NATIONAL RANKING. LOCAL RECOGNITION. hese fundamental strategies result in national Tchampionships…national recognition. For example, AuburnBank was honored to have been named as one of U.S. Banker’s Top 200 Community Banks for the fifth consecutive year. Seeking Alpha, a financial news Web site that provides information and analysis on investing, recognized AuburnBank stock’s consistent performance over the past decade. And, locally, the readers of the Opelika-Auburn News once again voted AuburnBank recipient of the Readers' Choice Award, recognizing it as the best bank among 16 local competitors. AUBURN NATIONAL BANCORPORATION, INC. AND AUBURNBANK BOARD OF DIRECTORS Terry W. Andrus President, East Alabama AUBURNBANK BOARD OF DIRECTORS Medical Center C. Wayne Alderman Secretary to ANBC Dean of Enrollment Services and former Dean, College of Business, Auburn University J. Tutt Barrett Attorney, Dean and Barrett Robert W. Dumas President & CEO, AuburnBank J.E. Evans Owner, Evans Realty William F. Ham, Jr. Mayor, City of Auburn & Owner, Varsity Enterprises David E. Housel Director of Athletics Emeritus, Auburn University 2010 Board of Directors Left to Right: David E. Housel, Robert W. Dumas, Edward Lee Spencer, III, Anne M.