Auburn National Bancorporation, Inc. Reports Third Quarter Net Earnings

Third Quarter 2015 Highlights:

  • Earnings per share increased 2% compared to third quarter 2014
  • Net interest income (tax-equivalent) increased 4% compared to third quarter 2014
  • Average loans increased $26.8 million or 7% compared to third quarter 2014
  • Nonperforming assets were 0.48% of total assets at September 30, 2015 compared to 0.37% a year earlier

AUBURN, Ala., Oct. 26, 2015 (GLOBE NEWSWIRE) — Auburn National Bancorporation, Inc. (Nasdaq:AUBN) reported net earnings of $1.9 million, or $0.52 per share, for the third quarter of 2015, compared to $1.9 million, or $0.51 per share, for the third quarter of 2014.  Net earnings for the first nine months of 2015 were $5.9 million, or $1.63 per share, compared to $5.6 million, or $1.52 per share, for the first nine months of 2014.

“The Company’s third quarter results reflect solid loan growth and continued improvements in our cost of funds,” said E.L. Spencer, Jr., President, CEO and Chairman of the Board.

Net interest income (tax-equivalent) was $6.0 million for the third quarter of 2015, an increase of 4% compared to the third quarter of 2014.  This increase reflects management’s efforts to increase earnings by shifting the Company’s asset mix through loan growth, focusing on deposit pricing, and reducing higher-cost wholesale funding.   Average loans were $416.2 million in the third quarter of 2015, an increase of $26.8 million or 7%, from the third quarter of 2014.  Average deposits were $715.0 million in the third quarter of 2015, an increase of $36.2 million or 5%, from the first nine months of 2014.

Nonperforming assets were $3.9 million, or 0.48% of total assets, at September 30, 2015, compared to $2.9 million, or 0.37% of total assets, at September 30, 2014.  Annualized net recoveries were 0.04% of average loans for the third quarter of 2015, compared to annualized net charge-offs of 0.28% of average loans for the third quarter of 2014. The Company recorded $0.2 million in provision for loan losses in the third quarter of 2015, compared to $0.3 million in the third quarter of 2014.  Provision expense reflects the absolute level of loans, loan growth, the credit quality of the loan portfolio, and the amount of net charge-offs.  Our allowance for loan losses was 1.21% of total loans at September 30, 2015, compared to 1.20% of total loans at September 30, 2014.
                                                                                                                                                     
Noninterest income was $1.1 million for the third quarter of 2015, compared to $1.0 million in the third quarter of 2014.  Mortgage lending income decreased by $0.2 million due to a decrease in origination income of $0.1 million and a decrease of $0.1 million in servicing fees, net of related amortization expense.  Although servicing fees were unchanged, amortization expense increased due to faster prepayment speeds.  The decrease in mortgage lending income was largely offset by an increase in securities gains and (losses), net of $0.2 million.  The Company had no realized losses on the sale of securities in the third quarter of 2015, compared to $0.2 million in the third quarter of 2014. Losses realized on the sale of securities in the third quarter of 2014 were solely due to changes in interest rates and not the credit quality of the securities.

Noninterest expense was $3.9 million in the third quarter of 2015, compared to $3.6 million in the third quarter of 2014.  The increase was primarily due to an increase in net expenses related to OREO of $0.2 million.  Net expenses related to OREO increased compared to the third quarter of 2014 primarily due to gains realized on the sale of certain OREO properties in the third quarter of 2014.

Income tax expense was $0.7 million for the third quarter of 2015 and 2014. The Company’s income tax expense for the third quarter of 2015 reflects an effective income tax rate of 27.49%, compared to 27.47% for the third quarter of 2014. The Company’s income tax expense is principally affected by tax-exempt earnings on municipal securities investments and bank-owned life insurance. 

The Company paid cash dividends of $0.22 per share in the third quarter of 2015, an increase of 2.3% from the same period in 2014. At September 30, 2015, the Bank’s regulatory capital was well above the minimum amounts required to be “well capitalized” under current regulatory standards.

About Auburn National Bancorporation, Inc.

Auburn National Bancorporation, Inc. (the “Company”) is the parent company of AuburnBank (the “Bank”), with total assets of approximately $818 million. The Bank is an Alabama state-chartered bank that is a member of the Federal Reserve System and has operated continuously since 1907. Both the Company and the Bank are headquartered in Auburn, Alabama. The Bank conducts its business in East Alabama, including Lee County and surrounding areas. The Bank operates full-service branches in Auburn, Opelika, Valley, Hurtsboro and Notasulga, Alabama.  In-store branches are located in the Kroger and Wal-Mart SuperCenter stores in Opelika. The Bank also operates a commercial loan production office in Phenix City, Alabama. Additional information about the Company and the Bank may be found by visiting www.auburnbank.com

Cautionary Notice Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, including, without limitation, statements about future financial and operating results, costs and revenues, economic conditions in our markets, loan demand, mortgage lending activity, changes in the mix of our earning assets (including those generating tax exempt income) and our deposit  and wholesale liabilities, net interest margin, yields on earning assets, securities valuations and performance, interest rates (generally and those applicable to our assets and liabilities), loan performance, nonperforming assets, other real estate owned, loan losses, charge-offs, other-than-temporary impairments, collateral values, credit quality, asset sales, and market trends, as well as statements with respect to our objectives, expectations and intentions and other statements that are not historical facts. Actual results may differ from those set forth in the forward-looking statements.

Forward-looking statements, with respect to our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance, achievements, or financial condition of the Company or the Bank to be materially different from future results, performance, achievements, or financial condition expressed or implied by such forward-looking statements. You should not expect us to update any forward-looking statements.

All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, together with those risks and uncertainties described in our annual report on Form 10-K for the year ended December 31, 2014 and otherwise in our other SEC reports and filings.

Explanation of Certain Unaudited Non-GAAP Financial Measures

This press release contains financial information determined by methods other than U.S. generally accepted accounting principles (“GAAP”). The attached financial highlights include 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. Management uses these non-GAAP financial measures in its analysis of the Company’s performance and 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. Along with the attached financial highlights, the Company provides reconciliations between the GAAP financial measures and these non-GAAP financial measures.

 

                           
Reports Third Quarter Net Earnings                          
                           
                           
Financial Highlights (unaudited)                          
    Quarter ended September 30, Nine Months Ended September 30,    
(Dollars in thousands, except per share amounts)     2015       2014       2015         2014      
Results of Operations                          
Net interest income (a) $   6,011     $ 5,769   $   17,995     $   16,928      
Less: tax-equivalent adjustment     341       321       1,014         957      
Net interest income (GAAP)     5,670       5,448       16,981         15,971      
Noninterest income     1,056       1,017       3,544         2,854      
Total revenue     6,726       6,465       20,525         18,825      
Provision for loan losses     200       300       200         (100 )    
Noninterest expense     3,892       3,584       12,235         11,324      
Income tax expense     724       709       2,168         2,049      
Net earnings $   1,910     $ 1,872   $   5,922     $   5,552      
                           
Per share data:                          
Basic and diluted net earnings: $   0.52     $ 0.51   $   1.63     $   1.52      
Cash dividends declared $   0.22     $ 0.215   $   0.66     $   0.645      
Weighted average shares outstanding:                          
Basic and diluted     3,643,416       3,643,328       3,643,392         3,643,262      
Shares outstanding, at period end     3,643,465       3,643,328       3,643,465         3,643,328      
Book value $   21.85     $ 20.09   $   21.85     $   20.09      
Common stock price:                          
High $   27.80     $ 24.92   $   27.80     $   25.80      
Low     25.78       23.17       23.15         22.90      
Period-end:     26.47       24.64       26.47         24.64      
To earnings ratio     12.37   x   12.38 x     12.37   x     12.38   x  
To book value     121   %   123 %     121   %     123   %  
Performance ratios:                          
Return on average equity (annualized)     9.75   %   10.19 %     10.12   %     10.65   %  
Return on average assets (annualized)     0.95   %   0.97 %     0.99   %     0.96   %  
Dividend payout ratio     42.31   %   42.16 %     40.49   %     42.43   %  
Other financial data:                          
Net interest margin (a)     3.13   %   3.16 %     3.19   %     3.15   %  
Effective income tax rate     27.49   %   27.47 %     26.80   %     26.96   %  
Efficiency ratio (b)     55.07   %   52.81 %     56.80   %     57.24   %  
Asset Quality:                          
Nonperforming assets:                          
Nonperforming (nonaccrual) loans $   3,650     $ 1,690   $   3,650     $   1,690      
Other real estate owned     278       1,215       278         1,215      
Total nonperforming assets $   3,928     $ 2,905   $   3,928     $   2,905      
                           
Net (recoveries) charge-offs $   (41 )   $ 274   $   (91 )   $   414      
                           
Allowance for loan losses as a % of:                          
Loans     1.21   %   1.20 %     1.21   %     1.20   %  
Nonperforming loans     140   %   281 %     140   %     281   %  
Nonperforming assets as a % of:                          
Loans and other real estate owned     0.93   %   0.73 %     0.93   %     0.73   %  
Total assets     0.48   %   0.37 %     0.48   %     0.37   %  
Nonperforming loans as a % of total loans     0.86   %   0.43 %     0.86   %     0.43   %  
Net (recoveries) charge-offs as % of avg. loans (c)     (0.04 ) %   0.28 %     (0.03 ) %     0.14   %  
Selected average balances:                          
Securities $   251,393     $ 274,155   $   258,299     $   272,180      
Loans, net of unearned income     416,210       389,392       406,343         381,947      
Total assets     806,764       771,685       800,255         768,756      
Total deposits     714,960       678,738       706,754         680,560      
Long-term debt     7,217       12,217       8,646         12,217      
Total stockholders’ equity     78,387       73,499       78,037         69,503      
Selected period end balances:                          
Securities $   250,142     $ 264,827   $   250,142     $   264,827      
Loans, net of unearned income     422,572       394,602       422,572         394,602      
Allowance for loan losses     5,127       4,754       5,127         4,754      
Total assets     817,994       781,136       817,994         781,136      
Total deposits     724,311       680,763       724,311         680,763      
Long-term debt     7,217       12,217       7,217         12,217      
Total stockholders’ equity     79,599       73,193       79,599         73,193      
                           
(a) Tax equivalent. See “Explanation of Certain Unaudited Non-GAAP Financial Measures” and “Reconciliation of GAAP to non-GAAP Measures (unaudited).”              
                           
(b) Efficiency ratio is the result of noninterest expense divided by the sum of noninterest income and tax-equivalent net interest income.                
                           
(c) Net (recoveries) charge-offs are annualized.                          
                           

                         
Reports Third Quarter Net Earnings                        
                         
Reconciliation of GAAP to non-GAAP Measures (unaudited):                        
                         
  Quarter ended September 30,   Nine Months Ended September 30,  
(Dollars in thousands, except per share amounts)   2015     2014     2015     2014  
Net interest income, as reported (GAAP) $ 5,670   $ 5,448   $ 16,981   $ 15,971  
Tax-equivalent adjustment   341     321     1,014     957  
Net interest income (tax-equivalent) $ 6,011   $ 5,769   $ 17,995   $ 16,928  
                         

 

CONTACT: For additional information, contact:
E.L. Spencer, Jr.
President, CEO and 
Chairman of the Board
(334) 821-9200