Auburn National Bancorporation Announces Sale of Limited Partnership Investments and Balance Sheet Restructuring

On January 13, 2012, AuburnBank, a wholly-owned subsidiary of Auburn National Bancorporation, Inc.

, sold its interests in three affordable housing limited partnerships with a carrying value of $5.2 million. Net proceeds from the sale of these investments were approximately $8.5 million. As a result, the Company will recognize a pre-tax gain on sale of $3.3 million during the first quarter of 2012. Because the gain on sale of the limited partnership interests is considered a capital gain for tax purposes, management believes it is more-likely-than-not that approximately $0.5 million in deferred tax assets related to capital loss carryforwards will be realized. As a result, the Company will reverse a previously established deferred tax valuation allowance during the first quarter of 2012, which is expected to reduce the Company's projected annual income tax expense for 2012. In addition, on January 19, 2012, the Bank restructured its balance sheet by paying off $38.0 million of Federal Home Loan Bank of Atlanta ("FHLB") advances outstanding with a weighted average rate of 4.26% and a weighted average duration of 2.6 years. In connection with paying off the FHLB advances, the Bank will incur prepayment penalties of approximately $3.7 million during the first quarter of 2012. Sources available to repay the FHLB advances included net proceeds from the sale of the limited partnership interests and excess liquidity previously invested in federal funds.