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 September 30, 2002

o Transition report under Section 13 or 15(d) of the Exchange Act

For the transition period to

Commission file number 0-26486

Auburn National Bancorporation, Inc.
(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
63-0885779
(I.R.S.Employer
Identification No.)

165 East Magnolia Avenue, Suite 203, Auburn, Alabama 36830
(Address of Principal Executive Offices)

(334) 821-9200
(Issuer’s Telephone Number, Including Area Code)

(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 o

APPLICABLE ONLY TO CORPORATE ISSUERS

             State the number of shares outstanding of each of the issuer’s classes of common equity as of October 28, 2002: 3,894,618 shares of common stock, $.01 par value per share

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY

INDEX

			PAGE
PART I.	FINANCIAL INFORMATION
	Item 1	Financial Information
		Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001	3
		Consolidated Statements of Earnings for the Three Months and Nine Months Ended September 30, 2002 and 2001	4
		Consolidated Statement of Stockholders’ Equity and Comprehensive Income for the Nine Months Ended September 30, 2002	5
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2001	6
		Notes to Consolidated Financial Statements	7
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	17
	Item 4	Controls and Procedures	17
PART II.	OTHER INFORMATION
	Item 6	Exhibits and Reports on Form 8-K	18

2

AUBURN NATIONAL BANCORPORATION, INC.
AND SUBSIDIARY

Consolidated Balance Sheets
September 30, 2002 and December 31, 2001
(Unaudited)

	9/30/2002			12/31/2001
Assets
Cash and due from banks	$	16,408,585			17,347,717
Federal funds sold		24,724,000			13,721,000
Cash and cash equivalents		41,132,585			31,068,717
Interest-earning deposits with other banks		1,426,978			853,761
Investment securities held to maturity (fair value of $9,915,865 and $16,779,116     at September 30, 2002 and December 31, 2001, respectively)		9,649,095			16,164,448
Investment securities available for sale		174,043,149			135,309,766
Loans		260,480,645			271,833,945
Less allowance for loan losses		(4,999,020	)		(5,339,945	)
Loans, net		255,481,625			266,494,000
Premises and equipment, net		3,306,428			3,212,157
Rental property, net		1,563,922			1,564,238
Other assets		19,243,527			18,343,000
Total assets	$	505,847,309			473,010,087
Liabilities and Stockholders’ Equity
Deposits:
Noninterest-bearing	$	49,844,303			48,543,405
Interest-bearing		348,633,045			321,124,109
Total deposits		398,477,348			369,667,514
Securities sold under agreements to repurchase		10,121,483			10,135,878
Other borrowed funds		53,480,681			53,581,241
Accrued expenses and other liabilities		5,069,429			3,791,521
Total liabilities		467,148,941			437,176,154
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		33,525,085			31,202,869
Accumulated other comprehensive income		1,979,099			1,436,880
Less treasury stock, 62,517 shares at September 30, 2002 and December 31,        2001, at cost		(552,859	)		(552,859	)
Total stockholders’ equity		38,698,368			35,833,933
Total liabilities and stockholders’ equity	$	505,847,309			473,010,087

See accompanying notes to consolidated financial statements.

3

AUBURN NATIONAL BANCORPORATION, INC.
AND SUBSIDIARY

Consolidated Statements of Earnings
For the Three and Nine Months Ended September 30, 2002 and 2001
(Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2002		2001			2002		2001
Interest and dividend income:
Loans, including fees	$	4,621,008		5,284,416			14,041,212		16,614,648
Investment securities:
Taxable		2,381,467		1,912,816			6,706,158		5,630,561
Tax-exempt		43,227		30,308			127,460		57,118
Federal funds sold		71,910		190,195			161,501		393,983
Interest-earning deposits with other banks		3,567		30,390			29,669		81,272
Total interest and dividend income		7,121,179		7,448,125			21,066,000		22,777,582
Interest expense:
Deposits		2,564,383		3,231,770			7,766,244		10,198,498
Securities sold under agreements to repurchase		10,084		19,571			44,768		99,134
Other borrowings		747,134		710,556			2,218,821		2,060,441
Total interest expense		3,321,601		3,961,897			10,029,833		12,358,073
Net interest income		3,799,578		3,486,228			11,036,167		10,419,509
Provision for loan losses		350,000		425,000			1,630,000		2,035,000
Net interest income after provision for loan             losses		3,449,578		3,061,228			9,406,167		8,384,509
Noninterest income:
Service charges on deposit accounts		336,282		334,196			1,006,156		1,102,066
Investment securities gains (losses), net		82,663		(4,169	)		488,417		1,524,469
Other		982,491		724,295			2,687,873		2,236,287
Total noninterest income		1,401,436		1,054,322			4,182,446		4,862,822
Noninterest expense:
Salaries and benefits		998,274		1,080,085			3,406,160		3,166,230
Net occupancy expense		310,527		263,661			913,546		804,955
Other		1,380,653		1,230,798			4,194,969		3,566,348
Total noninterest expense		2,689,454		2,574,544			8,514,675		7,537,533
Earnings before income taxes		2,161,560		1,541,006			5,073,938		5,709,798
Income tax expense		667,309		480,504			1,466,497		1,867,952
Earnings before cumulative effect of a change in             accounting principle		1,494,251		1,060,502			3,607,441		3,841,846
Cumulative effect of a change in accounting principle,     net of tax		—		—			—		141,677
Net earnings	$	1,494,251		1,060,502			3,607,441		3,983,523
Basic and diluted earnings per share:
Earnings before cumulative effect of a change in     accounting principle	$	0.38		0.27			0.93		0.98
Cumulative effect of a change in accounting principle,     net of tax		—		—			—		0.04
Net earnings	$	0.38		0.27			0.93		1.02
Weighted-average shares outstanding, basic		3,894,618		3,904,498			3,894,618		3,911,443
Weighted-average shares outstanding, diluted		3,895,134		3,904,498			3,895,109		3,911,443

See accompanying notes to consolidated financial statements.

4

AUBURN NATIONAL BANCORPORATION, INC.
AND SUBSIDIARY

Consolidated Statement of Stockholders’ Equity and Comprehensive Income
For the Nine Months Ended September 30, 2002
(Unaudited)

			Common stock
	Comprehensive income		Shares		Amount		Additional paid-in capital		Retained earnings			Accumulated other comprehensive income		Treasury stock			Total
Balances at December 31, 2001				3,957,135	$	39,571		3,707,472		31,202,869			1,436,880		(552,859	)		35,833,933
Comprehensive income:
Net earnings	$	3,607,441		—		—		—		3,607,441			—		—			3,607,441
Other comprehensive income due to        unrealized gain on investment securities        available for sale, net		542,219		—		—		—		—			542,219		—			542,219
Total comprehensive income	$	4,149,660
Cash dividends paid ($0.33 per share)				—		—		—		(1,285,225	)		—		—			(1,285,225	)
Balances at September 30, 2002				3,957,135	$	39,571		3,707,472		33,525,085			1,979,099		(552,859	)		38,698,368

See accompanying notes to consolidated financial statements.

5

AUBURN NATIONAL BANCORPORATION, INC.
AND SUBSIDIARY

Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)

	2002			2001
Cash flows from operating activities:
Net earnings	$	3,607,441			3,983,523
Adjustments to reconcile net earnings to net cash provided by operating     activities:
Depreciation and amortization		495,278			408,068
Net amortization/(accretion) of premiums/discounts on investment          securities		316,093			(187,193	)
Provision for loan losses		1,630,000			2,035,000
Loss on disposal of premises and equipment		8,636			12,084
Loss on sale of other real estate		73,350			43,657
Investment securities gains		(488,417	)		(1,524,469	)
Decrease in interest receivable		234,293			868,051
(Increase)/decrease in other assets		(2,188,107	)		752,785
Decrease in interest payable		(465,616	)		(472,971	)
Increase in accrued expenses and other liabilities		1,107,679			296,810
Net cash provided by operating activities		4,330,630			6,215,345
Cash flows from investing activities:
Proceeds from sales of investment securities available for sale		12,250,361			42,727,538
Proceeds from maturities/calls/paydowns of investment securities held to        maturity		6,570,881			9,405,214
Proceeds from maturities/calls/paydowns of investment securities        available for sale		35,336,829			15,895,364
Purchases of investment securities available for sale		(85,300,080	)		(81,738,117	)
Investment in bank owned life insurance		—			(8,500,000	)
Net decrease in loans		9,382,375			492,510
Purchases of premises and equipment		(503,068	)		(550,207	)
Proceeds from the sale of other real estate		1,159,168			—
Proceeds from the sale of premises and equipment		335			—
Net increase in interest-earning deposits with other banks		(573,217	)		(1,375,460	)
Net cash used in investing activities		(21,676,416	)		(23,643,158	)
Cash flows from financing activities:
Net increase in noninterest-bearing deposits		1,300,898			4,052,172
Net increase in interest-bearing deposits		27,508,936			38,258,482
Net decrease in securities sold under agreements to repurchase		(14,395	)		(2,071,511	)
Borrowings from FHLB		—			10,000,000
Repayments to FHLB		(88,688	)		(5,088,687	)
Repayments of other borrowed funds		(11,872	)		(17,252	)
Purchase of treasury stock		—			(253,563	)
Dividends paid		(1,285,225	)		(1,173,357	)
Net cash provided by financing activities		27,409,654			43,706,284
Net increase in cash and cash equivalents		10,063,868			26,278,471
Cash and cash equivalents at beginning of period		31,068,717			17,919,097
Cash and cash equivalents at end of period	$	41,132,585			44,197,568
Supplemental information on cash payments:
Interest paid	$	10,495,449			12,831,043
Income taxes paid	$	701,209			882,087

See accompanying notes to consolidated financial statements.

6

AUBURN NATIONAL BANCORPORATION, INC. AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30, 2002

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 Auburn National Bancorporation, Inc. (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, 2001.

Note 2 - Comprehensive Income

         In September 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 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 September 30, 2002 was $1,465,000 compared to $1,630,000 for the three months ended September 30, 2001. Total comprehensive income for the nine months ended September 30, 2002 was $4,150,000 compared to $5,533,000 for the nine months ended September 30, 2001.

Note 3 - Derivatives

         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.

         The Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, on January 1, 2001. As of September 30, 2002, the Company had the following derivative instrument:

Interest Rate Swap
(In Thousands)

Notional Amount	Estimated fair value	Pay Rate	Receive Rate
$ 5,000	288	Variable	5.68%

         At September 30, 2002, the $5 million interest rate swap was used as a fair value hedge to convert the interest rate on a like amount of certificates of deposit with similar terms from fixed to variable.

Note 4 – Recent Accounting Pronouncements

         In July 2001, the FASB issued SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 141 also specifies criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.

7

         The Company adopted the provisions of SFAS No. 141 effective July 1, 2001, and adopted the provisions of SFAS No. 142 effective January 1, 2002.

         As the Company had no goodwill or significant identifiable intangibles as of January 1, 2002, the adoption of SFAS No. 142 did not have an impact on the consolidated financial position or results of operations of the Company and its wholly-owned subsidiary, AuburnBank (the “Bank”).

         In August 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the related asset retirement costs. SFAS No. 143 applies to all entities. SFAS No. 143 applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset, except for certain lease obligations.

         SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002. Management does not anticipate the adoption of SFAS No. 143 will have a material effect on the financial condition or results of operations of the Company or Bank.

         In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of, and the accounting and reporting provisions of Accounting Principles Board (APB) Opinion No. 30, Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business (as previously defined in that opinion). This statement also amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary.

         SFAS No. 144 requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, and broadens the presentation of discontinued operations to include more disposal transactions.

         SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The provisions are to be applied prospectively. The adoption of SFAS No. 144 has not had a material effect on the financial condition or results of operations of the Company or Bank.

         In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. Previous to the issuance of SFAS No. 145, SFAS No. 4 had required that all gains and losses from extinguishment of debt were to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. SFAS No. 145 rescinds SFAS No. 4 and the related required classification of extraordinary items. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002. The Company does not anticipate that the adoption of this SFAS No. 145 will have a material impact on the results of operations or financial position of the Company or Bank.

         In June 2002, FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. Under the new rules, a liability for a cost associated with an exit or disposal activity must only be recognized when the liability is incurred. Under the previous guidance of EITF No. 94-3, a liability for exit costs was recognized at the date of an entity’s commitment to an exit plan. SFAS No. 146 is effective for fiscal years beginning after December 15, 2002. The Company does not anticipate that the adoption of this SFAS No. 146 will have a material impact on the results of operations or financial position of the Company or Bank.

8

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 nine months ended September 30, 2002 and 2001.

         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 $1,494,000 for the quarter ended September 30, 2002 represented an increase of $433,000 (40.8%) from the Company’s net income of $1,061,000 for the same period of 2001. Basic and diluted net earnings per share increased $0.11 (40.7%) to $0.38 during the third quarter of 2002 from $0.27 for the third quarter of 2001. Net income decreased $377,000 (9.5%) to $3,607,000 for the nine month period ended September 30, 2002 compared to $3,984,000 for the same period of 2001. Basic and diluted net earnings per share decreased $0.09 (8.8%) to $0.93 during the nine months ended September 30, 2002 from $1.02 for the nine months ended September 30, 2001. During the nine month period ended September 30, 2002 compared to the same period of 2001, the Company experienced an increase in net interest income and a decrease in the provision for loan losses. This was offset by a decrease in noninterest income and an increase in noninterest expense. Net income for first quarter 2001 was significantly impacted by a $1,548,000 gain recorded upon the sale of the Star Systems, Inc. ATM network to Concord EFS, Inc. in which the Company received ownership in Concord EFS, Inc., a publicly traded entity, whose shares were issued to the Company in exchange for the Company’s ownership interest in Star Systems, Inc. network. The net yield on total interest-earning assets decreased to 3.32% for the nine months ended September 30, 2002 from 3.51% for the nine months ended September 30, 2001. The decrease in the net yield on interest-earning assets is due to the reinvestment of interest-bearing liabilities to lower yielding interest-earning assets. See the “CONSOLIDATED AVERAGE BALANCES,INTEREST INCOME/EXPENSE AND YIELDS/RATES” table.

         Total assets of $505,847,000 at September 30, 2002 represent an increase of $32,837,000 (6.9%) over total assets of $473,010,000, at December 31, 2001. This increase resulted primarily from an increase in investment securities available for sale and cash and cash equivalents offset by a decrease in investment securities held to maturity and loans.

Critical Accounting Policies

         The accounting and financial policies of the Company conform to generally accepted accounting principles and to general practices within the banking industry. The allowance for loan losses is an accounting policy applied by the Company which is deemed critical. Critical accounting policies are defined as policies which are important to the portrayal of the Company’s financial condition and results of operations, and that require management’s most difficult, subjective or

9

complex judgements. The Company’s financial results could differ significantly if different judgements or estimates are applied in the application of this policy. See “ALLOWANCE FOR LOAN LOSSES AND RISK ELEMENTS.”

Financial Condition

Investment Securities and Federal Funds Sold

         Investment securities held to maturity were $9,649,000 and $16,164,000 at September 30, 2002 and December 31, 2001, respectively. This decrease of $6,515,000 (40.3%) was primarily the result of $6,571,000 of scheduled paydowns, maturities and calls of principal amounts.

         Investment securities available for sale increased $38,733,000 (28.6%) to $174,043,000 at September 30, 2002 from $135,310,000 at December 31, 2001. This increase is a result of purchases of $27,740,000 in U.S. agency securities, $34,837,000 in mortgage backed securities, $22,312,000 in CMOs and $411,000 in state and political subdivisions. These increases are offset by $35,337,000 of scheduled paydowns, maturities and calls of principal amounts. In addition, $3,030,000 of U.S. agency securities, $6,185,000 of CMOs, $1,733,000 of mortgage backed securities and $1,302,000 of asset-backed securities were sold in the first nine months of 2002.

         Federal funds sold increased to $24,724,000 at September 30, 2002 from $13,721,000 at December 31, 2001. This reflects normal activity in the Bank’s funds management efforts.

Loans

         Total loans of $260,481,000 at September 30, 2002 reflected a decrease of $11,353,000 (4.2%) compared to the total loans of $271,834,000, at December 31, 2001. Overall, most of the loan categories decreased slightly; however, the Bank did experience growth in commercial real estate loans during the nine months ended September 30, 2002. Commercial real estate, commercial, financial and agricultural, and residential real estate represented the majority of the loan portfolio with approximately 47.32%, 24.23% and 18.42% of the Bank’s total loans at September 30, 2002, respectively. The net yield on loans was 6.91% for the nine months ended September 30, 2002 compared to 8.34% for the nine months ended September 30, 2001. 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 reviews the components 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.

10

         The table below summarizes the changes in the allowance for loan losses for the nine months ended September 30, 2002 and the year ended December 31, 2001.

	Nine months ended September 30, 2002		Year ended December 31, 2001
	(In thousands)
Balance at beginning of period, January 1,	$	5,340	$	3,634
Charge-offs		2,218		1,970
Recoveries		247		121
Net charge-offs		1,971		1,849
Provision for loan losses		1,630		3,555
Ending balance	$	4,999	$	5,340

         The allowance for loan losses was $4,999,000 at September 30, 2002 compared to $5,340,000 at December 31, 2001. Management believes that the current level of allowance (1.92% of total outstanding loans, at September 30, 2002) is adequate to absorb anticipated risks identified in the portfolio at that time.

         Consistent with its methodology for calculating the adequacy of the allowance for loan losses, management believes the provisions made during the third quarter will place the allowance at a level sufficient to absorb probable loan losses in the portfolio as of September 30, 2002. No assurance can be given, however, that adverse economic circumstances or other events, including additional loan review or examination findings or changes in borrowers’ financial conditions, will not result in increased losses in the Bank’s loan portfolio or in additional provision to the allowance for loan losses.

         During the first nine months of 2002, the Bank made $1,630,000 in provisions to the allowance for loan losses based on management’s assessment of the credit quality of the loan portfolio. For the nine months ended September 30, 2002, the Bank had charge-offs of $2,218,000 and recoveries of $247,000.

         Nonperforming assets, comprised of nonaccrual loans, renegotiated loans, other nonperforming assets, and accruing loans 90 days or more past due were $8,496,000 at September 30, 2002, a decrease of 33.1% from the $12,706,000 of non-performing assets at December 31, 2001. This decrease is due to decreases in accruing loans 90 days or more past due, other real estate owned and nonaccrual loans. If nonaccrual loans had performed in accordance with their original contractual terms, interest income would have increased approximately $407,000 for the nine months ended September 30, 2002.

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The table below provides information concerning nonperforming assets and certain asset quality ratios.

	September 30, 2002			December 31, 2001
	(In thousands)
Nonaccrual loans	$	7,429			10,211
Renegotiated loans		—			—
Other nonperforming assets (primarily other real estate)		975			1,026
Accruing loans 90 days or more past due		92			1,469
Total nonperforming assets	$	8,496			12,706
Ratio of allowance for loan losses as a percent of total loans outstanding		1.92	%		1.96	%
Ratio of allowance for loan losses as a percent of nonaccrual loans, renegotiated     loans and other nonperforming assets		59.48	%		47.52	%

         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 September 30, 2002, 105 loans totaling $7,722,000, or 3.0% of total loans outstanding, net of unearned income, were considered potential problem loans compared to 117 loans totaling $10,379,000, or 3.8% of total loans outstanding, net of unearned income, at December 31, 2001. At September 30, 2002, the amount of impaired loans were $5,658,000, which included 5 loans to 3 borrowers with a total valuation allowance of approximately $827,000. In comparison, at December 31, 2001, the Company had approximately $10,164,000 of impaired loans, which included 22 loans to 10 borrowers with a total valuation allowance of approximately $1,413,000.

Deposits

         Total deposits increased $28,809,000 (7.8%) to $398,477,000 at September 30, 2002, as compared to $369,668,000 at December 31, 2001. Noninterest-bearing deposits increased $1,301,000 (2.7%) during the first nine months of 2002, while total interest-bearing deposits increased $27,509,000 (8.6%) to $348,633,000 at September 30, 2002 from $321,124,000 at December 31, 2001. The increase in noninterest-bearing deposits is due primarily to an increase in regular demand deposit accounts. During the first nine months of 2002, the Bank primarily experienced increases in NOW accounts of $5,262,000 (8.8%) and money market accounts of $13,279,000 (18.7%). This increase is partly due to an increase of $8,158,000 in brokered deposits. In addition, the Company considers the 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 3.11% for the nine months ended September 30, 2002 compared to 4.78% for the same period of 2001. See the “CONSOLIDATED AVERAGE BALANCES,INTEREST INCOME/EXPENSE AND YIELDS/RATES” table.

Capital Resources and Liquidity

         The Company’s consolidated stockholders’ equity was $38,698,000 at September 30, 2002, compared to $35,834,000 at December 31, 2001. This represents an increase of $2,864,000 (8.0%) during the first nine months of 2002. Net earnings for the first nine months of 2002 were $3,607,000 compared to $3,984,000 for the same period of 2001. In addition, the Company’s accumulated other comprehensive income was $1,979,000 at September 30, 2002 compared to $1,437,000 at December 31, 2001. This increase was due to an increase in the fair value of investment securities available for sale. During the first nine months of 2002, cash dividends of $1,285,000 or $0.33 per share, were declared on Common Stock.

         Certain financial ratios for the Company are presented in the following table:

	September 30, 2002			December 31, 2001
Return on average assets – annualized		1.00	%		1.07	%
Return on average equity – annualized		13.25	%		13.40	%

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         The Company’s Tier I leverage ratio was 7.42%, Tier I risk-based capital ratio was 12.12% and Total risk-based capital ratio was 13.38% at September 30, 2002. These ratios exceed the minimum regulatory capital percentages of 4.0% for Tier I 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 “well capitalized.”

         The primary source of liquidity during the first nine months of 2002 was deposit growth. The Company used these funds primarily for investment securities available for sale. Under the advance program with Federal Home Loan Bank of Atlanta (“FHLB-Atlanta”), the Bank had outstanding advances totaling approximately $53,315,000 at September 30, 2002.

         Net cash provided by operating activities of $4,331,000 for the nine months ended September 30, 2002, consisted primarily of net earnings and provision for loan losses offset by investment securities gains. Net cash used in investing activities of $21,676,000 principally resulted from investment securities purchases of $85,300,000, offset by proceeds from maturities, calls and paydowns of investment securities and proceeds from sale of investment securities available for sale of $41,908,000 and $12,250,000, respectively. In addition, loans decreased by $9,382,000. The $27,410,000 in net cash provided by financing activities resulted primarily from an increase of $1,301,000 in non-interest bearing deposits and an increase in interest bearing deposits of $27,509,000. In addition, securities sold under agreements to repurchase decreased by $14,000 and the Company paid dividends of $1,285,000.

Results of Operations

Net Income

         Net income increased $433,000 (40.8%) to $1,494,000 for the three month period ended September 30, 2002 compared to $1,061,000 for the same period of 2001. Basic and diluted net earnings per share were $0.38 and $0.27 for the third quarters of 2002 and 2001, respectively. Net income decreased $377,000 (9.5%) to $3,607,000 for the nine month period ended September 30, 2002 compared to $3,984,000 for the same period of 2001. During the nine month period ended September 30, 2002 compared to the same period of 2001, the Company experienced an increase in net interest income and a decrease in the provision for loan losses. This was offset by a decrease in noninterest income and an increase in noninterest expense. Net income for first quarter 2001 was significantly impacted by a $1,548,000 gain recorded upon the sale of the Star Systems, Inc. ATM network to Concord EFS, Inc. in which the Company received ownership in Concord EFS, Inc., a publicly traded entity, whose shares were issued to the Company in exchange for the Company’s ownership interest in Star Systems, Inc. network.

Net Interest Income

         Net interest income was $3,800,000 for the third quarter of 2002, an increase of $314,000 (9.0%) from $3,486,000 for the same period of 2001. Net interest income increased $616,000 (5.9%) to $11,036,000 for the nine months ended September 30, 2002, compared to $10,420,000 for the nine months ended September 30, 2001. The increases in net interest income resulted primarily from the increase in interest and dividends from investment securities and a decrease in interest on deposits. This was offset by a decrease in interest on loans. Through the third quarter of 2002, the Company’s GAP position remained more liability sensitive to changes in interest rates. The Company continues to regularly review and manage its asset/liability position in an effort to manage the negative effects of changing rates. See the “CONSOLIDATED AVERAGE BALANCES,INTEREST INCOME/EXPENSE AND YIELDS/RATES” table.

Interest and Dividend Income

         Interest income is a function of the volume of interest earning assets and their related yields. Interest and dividend income was $7,121,000 and $7,448,000 for the three months ended September 30, 2002 and 2001, respectively. This represents a decrease of $327,000 (4.4%) for the third quarter of 2002 compared to 2001. For the nine months ended September 30, 2002 interest and dividend income was $21,066,000, a decrease of $1,712,000 (7.5%) compared to $22,778,000 for the same period of 2001. This change for the first nine months of 2002 resulted as the average volume of interest-earning assets outstanding increased $51,417,000 (13.0%) over the same period of 2001 but the Company’s yield on interest-earning assets decreased 138 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 $4,621,000 and $5,284,000 for the third quarters of 2002 and 2001, respectively. This reflects a decrease of $663,000 (12.6%) during the

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three months ended September 30, 2002 over the same period of 2001. For the nine month period ended September 30, 2002, interest and fees on loans decreased $2,574,000 (15.5%) to $14,041,000 from $16,615,000 for the same period of 2001. The average volume of loans increased $5,253,000 (2.0%) for the nine months ended September 30, 2002 compared to the same period for 2001, while the Company’s yield on loans decreased by 143 basis points comparing these same periods.

         For the three month period ended September 30, 2002, interest income on investment securities increased $482,000 (24.8%) to $2,425,000 from $1,943,000 for the same period of 2001. Interest income on investment securities for the nine month period ended September 30, 2002, increased $1,146,000 (20.2%) to $6,834,000 from $5,688,000 for the same period of 2001. The Company’s average volume of investment securities increased by $47,313,000 (41.2%) for the first nine months of 2002, compared to the same period of 2001, while the net yield on these average balances decreased by 97 basis points. See the “CONSOLIDATED AVERAGE BALANCES,INTEREST INCOME/EXPENSE AND YIELDS/RATES” table.

Interest Expense

         Total interest expense decreased $640,000 (16.2%) to $3,322,000 for the third quarter of 2002 compared to $3,962,000 for the same period of 2001. Total interest expense decreased $2,328,000 (18.8%) to $10,030,000 from $12,358,000 for the nine months ended September 30, 2002 and 2001, respectively. This change resulted as the Company’s average interest-bearing liabilities increased 15.7% but the rates paid on these liabilities decreased 146 basis points during the first nine months of 2002 compared to the same period of 2001. See the “CONSOLIDATED AVERAGE BALANCES,INTEREST INCOME/EXPENSE AND YIELDS/RATES” table.

         Interest on deposits, the primary component of total interest expense, decreased $668,000 (20.7%) to $2,564,000 for the third quarter of 2002 compared to $3,232,000 for the same period of 2001. Interest on deposits were $7,766,000 and $10,198,000 for the nine months ended September 30, 2002 and 2001, respectively. The decrease for the nine month period ended September 30, 2002 is due to a 167 basis point decrease in the rate paid on interest-bearing deposits offset by a 17.0% increase in the average volume.

         Interest expense on other borrowings, was $747,000 and $711,000 for the third quarters of 2002 and 2001, respectively. This represents an increase of $36,000 or 5.1%. For the nine months ended September 30, 2002, interest expense on borrowed funds increased $159,000 (7.7%) to $2,219,000 from $2,060,000 for the same period of 2001, This increase for the nine month period ended September 30, 2002 is due to a 8.4% increase in the average volume and a 4 basis point decrease 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 $350,000 for the three months ended September 30, 2002 compared to $425,000 for the three months ended September 30, 2001.The provision for loan losses was $1,630,000 for the nine months ended September 30, 2002 compared to $2,035,000 for the nine months ended September 30, 2001. The decrease in the provision for the nine months ended September 30, 2002 compared to 2001 is due to reduced loan growth and less deterioration in certain loans than in the nine months ended September 30, 2001. See “-ALLOWANCE FOR LOAN LOSS AND RISK ELEMENTS.”

Noninterest Income

         Noninterest income increased $347,000 (32.9%) to $1,401,000 for the third quarter of 2002 from $1,054,000 for the same period of 2001. Noninterest income was $4,182,000 and $4,863,000 for the nine months ended September 30, 2002 and 2001, respectively. This decrease for the nine months ended September 30, 2002 is due to decreases in service charges on deposit accounts and net investment securities gains. These decreases are offset by an increase in other noninterest income.

         Service charges on deposit accounts for the third quarter of 2002 increased $2,000 (0.6%) to $336,000 from $334,000 for the third quarter of 2001. Service charges on deposit accounts were $1,006,000 and $1,102,000 for the nine months ended September 30, 2002 and 2001, respectively. This decrease for the nine months ended September 20, 2002 is primarily due to decreases in nonsufficient funds and overdraft charges.

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         Net investment securities gains were $488,000 and $1,524,000 for the nine months ended September 30, 2002 and 2001, respectively. The decrease is primarily due to a gain of $1,548,000 in the first quarter 2001 resulting from the purchase of the Company’s investment in Star Systems, Inc.’s common stock by Concord EFS, Inc. In this transaction, the Company received common shares of Concord EFS, Inc., which is publicly traded, in exchange for its ownership in Star Systems, Inc.

         Other noninterest income increased $258,000 (35.6%) to $982,000 for the third quarter of 2002 from $724,000 for the same period of 2001. The increase for the third quarter 2002 is due to an increase in MasterCard/VISA discounts and fees and an increase in gains on the sale of mortgage loans. Other noninterest income was $4,195,000 and $3,566,000 for the nine months ended September 30, 2002 and 2001, respectively. This increase of $629,000 (17.6%) for the nine month period ended September 30, 2002 compared to the same period of 2001, was due to an increase in MasterCard/VISA discounts and fees due to Auburn University’s acceptance of MasterCard/VISA for tuition, an increase in gains on the sale of mortgage loans and and an increase in the cash surrender value of bank owned life insurance over amounts reported in the nine months ended September 30, 2001. During the nine months ended September 30, 2001, there was an increase in the fair value of derivatives that was not experienced in the nine months ended September 30, 2002.

Noninterest Expense

         Total noninterest expense was $2,689,000 and $2,575,000 for the third quarters of 2002 and 2001, respectively, representing an increase of $114,000 or 4.4%. For the nine months ended September 30, 2002, total noninterest expense increased $977,000 (13.0%) to $8,515,000 from $7,538,000 for the same period of 2001. This increase was mainly due to an increase in salaries and benefits expense and other noninterest expense.

         Salaries and benefits expense was $998,000 and $1,080,000 for the three months ended September 30, 2002 and 2001, respectively. This represents a decrease of $82,000 (7.6%) in the third quarter of 2002 compared to the third quarter of 2001. For the nine months ended September 30, 2002, total salaries and benefits expense increased $240,000 (7.6%) to $3,406,000 from $3,166,000 for the same period of 2001. This increase for the nine month period ending September 30, 2002 is primarily due to the increase in overall employee levels from the same period of 2001.

         For the third quarter of 2002, other noninterest expense increased $150,000 (12.2%) to $1,381,000 from $1,231,000 for the third quarter of 2001. Other noninterest expense was $4,195,000 and $3,566,000 for the nine months ended September 30, 2002 and 2001, respectively. This increase is mainly due to increases in the expenses associated with Auburn University’s acceptance of MasterCard/VISA for tuition mentioned above, expenses to maintain other real estate owned, losses on the sale of other real estate owned and increases in the FDIC assessment.

Income Taxes

         Income tax expense was $667,000 and $481,000 for the third quarters of 2002 and 2001, respectively. For the three months ended September 30, 2002, income tax expense increased $186,000 (38.7%). For the nine months ended September 30, 2002, income tax expense decreased $402,000 (21.5%) to $1,466,000 from $1,868,000 for the nine months ended September 30, 2001. These levels represent an effective tax rate on pre-tax earnings of 28.9% and 32.7% for the nine months ended September 30, 2002 and 2001, respectively. The effective tax rate has decreased due to nontaxable earnings of bank owned life insurance and benefits of tax credits related to a low income housing investment.

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.

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AUBURN NATIONAL BANCORPORATION, INC. & SUBSIDIARY
Consolidated Average Balances, Interest Income/Expense and Yields/Rates
Taxable Equivalent Basis

	Nine Months Ended September 30,
	2002								2001
	Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate
	(Dollars in thousands)
ASSETS
Interest-earning assets:
Loans, net of unearned income (1)	$	271,555			14,041		6.91	%		266,302			16,615		8.34	%
Investment securities:
Taxable		158,463			6,707		5.66	%		113,205			5,630		6.65	%
Tax-exempt (2)		3,653			192		7.03	%		1,598			86		7.20	%
Total investment securities		162,116			6,899		5.69	%		114,803			5,716		6.66	%
Federal funds sold		12,523			162		1.73	%		13,311			394		3.96	%
Interest-earning deposits with other banks		1,576			30		2.55	%		1,937			81		5.59	%
Total interest-earning assets		447,770			21,132		6.31	%		396,353			22,806		7.69	%
Allowance for loan losses		(5,481	)							(4,354	)
Cash and due from banks		14,701								11,461
Premises and equipment		3,250								3,238
Rental property, net		1,568								1,563
Other assets		18,550								9,649
Total assets	$	480,358								417,910
LIABILITIES & STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Deposits:
Demand	$	63,871			871		1.82	%		41,544			886		2.85	%
Savings and money market		89,619			1,452		2.17	%		78,308			2,231		3.81	%
Certificates of deposits less than $100,000		88,563			2,878		4.34	%		83,704			3,933		6.28	%
Certificates of deposits and other time deposits of          $100,000 or more		91,829			2,565		3.73	%		81,848			3,149		5.14	%
Total interest-bearing deposits		333,882			7,766		3.11	%		285,404			10,199		4.78	%
Federal funds purchased and securities sold under        agreements to repurchase		3,512			45		1.71	%		3,025			99		4.38	%
Other borrowed funds		53,529			2,219		5.54	%		49,361			2,060		5.58	%
Total interest-bearing liabilities		390,923			10,030		3.43	%		337,790			12,358		4.89	%
Noninterest-bearing deposits		47,832								41,233
Accrued expenses and other liabilities		4,748								5,445
Stockholders’ equity		36,855								33,442
Total liabilities and stockholders’ equity	$	480,358								417,910
Net interest income				$	11,102								10,448
Net yield on total interest-earning assets							3.32	%							3.51	%

______________

(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%.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company’s market risk has decreased during the third quarter of 2002. As of September 30, 2002, economic value of equity had become less volatile in a rising rate environment. Due to the amount of interest rate cuts, the Company is preparing for the greater risk of rising interest rates. The Company continues to become more asset-sensitive by restructuring the investment portfolio through “swap” transactions when possible. The deposit growth continues to be strong allowing the Company to invest in mortgage backed securities that repay principal on a monthly basis. The Company believes that it needs to prepare for the risk of rising interest rates. The Company has been liability-sensitive and the projected decrease of income in either a rising or falling interest rate environment can be attributed to our transition to becoming asset-sensitive. As the Company does not consider this change in market sensitivity to be significant, the market rate table, as shown in the Company’s 2001 Form 10-K, has not been updated in this filing.

ITEM 4.    CONTROLS AND PROCEDURES

         Within the 90-day period prior to the date of this quarterly report, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Director of Financial Operation (DFO), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the Company's management, including the CEO and DFO, concluded that the Company’s disclosure controls and procedures were effective. There have been no significant changes in the Company’s internal controls or in other factors subsequent to their evaluation that could significantly affect internal controls.

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PART II OTHER INFORMATION

ITEM 6.          EXHIBITS AND REPORTS ON FORM 8-K

AUBURN NATIONAL BANCORPORATION, INC.

Item 6(a)

EXHIBIT INDEX

Exhibit Number	Description
3.A	Certificate of Incorporation of Auburn National Bancorporation, Inc. and all amendments thereto. *
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. **

* Incorporated by reference from Registrant’s Form 10-Q dated June 30, 2002.

** Incorporated by reference from Registrant’s Registration Statement on Form SB-2.

(b)      Reports filed on Form 8-K for the quarter ended September 30, 2002:

         none

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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: November 14, 2002	By:	/s/ E. L. SPENCER,JR.
		E. L. Spencer, Jr. President, Chief Executive Officer and Chairman of the Board

Date: November 14, 2002	By:	/s/ C. WAYNE ALDERMAN
		C. Wayne Alderman Director of Financial Operations

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CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 REGARDING FACTS AND CIRCUMSTANCES RELATING TO QUARTERLY REPORTS

I, E.L. Spencer, Jr., certify that:

1.    I have reviewed this report on Form 10-Q of Auburn National Bancorporation, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the “Evaluation Date”); and

c)    presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize, and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.    The registrant’s other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:    November 14, 2002            

/s/    E.L. Spencer, Jr.                                 

E.L. Spencer, Jr.

Chief Executive Officer

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I, C. Wayne Alderman, certify that:

1.    I have reviewed this report on Form 10-Q of Auburn National Bancorporation, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the “Evaluation Date”); and

c)    presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize, and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.    The registrant’s other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:     November 14, 2002            

/s/ C. Wayne Alderman                            

C. Wayne Alderman

Director of Financial Operations

21