AUBURN NATIONAL BANCORPORATION INC

Table 1

– Explanation of Non-GAAP Financial Measures

In addition to results presented in accordance with U.S. generally accepted accounting principles

(GAAP), this quarterly

report on Form 10-Q includes certain designated net interest income amounts

presented on a tax-equivalent basis, a non-

GAAP financial measure, including the presentation and calculation of the efficiency

ratio.

The Company believes the presentation of net interest income on a tax-equivalent

basis provides comparability of net

interest income from both taxable and tax-exempt sources and facilitates comparability

within the industry. Although the

Company believes these non-GAAP financial measures enhance investors’

understanding of its business and performance,

these non-GAAP financial measures should not be considered an alternative to

GAAP.

The reconciliations

of these non-

GAAP financial measures to their most directly comparable GAAP financial

measures are presented below.

Second

First

Fourth

Third

Second

Quarter

Quarter

Quarter

Quarter

Quarter

$

6,709

6,657

6,059

6,272

6,888

Tax-equivalent adjustment

Net interest income (Tax

-equivalent)

$

6,728

6,677

6,154

6,380

6,994

$

13,366

13,997

Tax-equivalent adjustment

Net interest income (Tax

-equivalent)

$

13,405

14,211