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Auburn National Bancorporation, Inc. Reports Second Quarter Net Earnings

Auburn National Bancorporation, Inc. Reports Second Quarter Net Earnings

Second Quarter 2013 Highlights:

  *Continued profitability – annualized return on average assets of 1.00%
  *Declining credit costs – provision for loan losses down $0.6 million
    compared to Q2 2012
  *Improving asset quality – nonperforming assets to total assets declined to
    1.08% from 1.24% at 3/31/13
  *Strong capital position – Tier 1 common equity to total assets of 8.73%

AUBURN, Ala., July 24, 2013 (GLOBE NEWSWIRE) -- Auburn National Bancorporation
(Nasdaq:AUBN) reported net earnings of approximately $1.9 million, or $0.52
per share, for the second quarter of 2013, compared to a record $2.0 million,
or $0.56 per share, for the second quarter of 2012. Net earnings for the first
six months of 2013 were $3.6 million, or $0.99 per share, compared to $3.5
million, or $0.96 per share, for the first six months of 2012.

Excluding the effects of non-operating items (specifically securities gains,
gain on sale of affordable housing investments, and prepayment penalties on
long-term debt), second quarter 2013 operating net earnings were $2.2 million,
or $0.61 per share, for the second quarter of 2013, compared to $1.9 million,
or $0.52 per share, for the second quarter of 2012. Operating net earnings for
the first six months of 2013 were $4.1 million, or $1.12 per share, compared
to $3.5 million, or $0.96 per share, for the first six months of 2012.

"The Company's second quarter results reflect improving asset quality. While
we did not match the record earnings reported in the second quarter of 2012,
we are pleased to report that our earnings remain strong," said E.L. Spencer,
Jr., President, CEO and Chairman of the Board.

Net interest income (tax-equivalent) was $5.6 million for the second quarter
of 2013, a decrease of 2% compared to the second quarter of 2012. Although net
interest income (tax-equivalent) declined slightly, management continues to
seek to increase earnings by growing the Company's loan portfolio (in total
and as a percentage of our earning assets), focusing on deposit pricing, and
repaying higher-cost wholesale funding sources. These efforts to increase
earnings were offset by declining yields on earning assets, as well as
management's decision to reduce its securities portfolio as a percentage of
total interest earning assets and carry higher levels of short-term interest
earning assets (e.g. federal funds sold). As a result, the Company's net
interest margin (tax-equivalent) declined to 3.16% in the second quarter of
2013, compared to 3.26% for the second quarter of 2012. Average loans were
$389.4 million in the second quarter of 2013, a decrease of $5.9 million, or
2%, from second quarter of 2012. This decline in average loans primarily
reflects the resolution of nonperforming loans as average performing loans
were largely unchanged. Average deposits were $653.0 million in the second
quarter of 2013, an increase of $13.8 million, or 2%, from the second quarter
of 2012.

Nonperforming assets were $8.3 million, or 1.08% of total assets at June 30,
2013, compared to $9.6 million, or 1.24% of total assets at March 31, 2013.
The decrease was primarily due to the sale of the Company's second largest
OREO property during the second quarter of 2013, which had a carrying balance
of $1.0 million at March 31, 2013.

The Company made no provision for loan losses in the second quarter of 2013,
compared to $0.6 million in the second quarter of 2012. The decrease in the
provision for loan losses was primarily due to a decline in net charge-offs
and improvement in the overall credit quality of the loan portfolio, including
lower levels of adversely classified and nonperforming loans.

Total noninterest income was approximately $2.1 million in the second quarter
of 2013, compared to $1.8 million in the second quarter of 2012.The increase
was primarily due to gains realized on the sale of securities.Net gains on
the sale of securities were $0.5 million in the second quarter of 2013,
compared to $0.3 million in the second quarter of 2012.

Total noninterest expense was approximately $4.7 million in the second quarter
of 2013, compared to $4.0 million in the second quarter of 2012.The increase
was primarily due to an increase in prepayment penalties on long-term debt of
$1.0 million, which was partially offset by decreases in other noninterest
expense of $0.3 million.During the second quarter of 2013, the Company repaid
$10.0 million of FHLB advances with a weighted average interest rate of 3.59%
and incurred prepayment penalties of $1.0 million.

Income tax expense was approximately $0.7 million for the second quarter of
2013, compared to $0.4 million in the second quarter of 2012.The Company's
effective tax rate for the second quarter of 2013 was 26.06%, compared to
18.12% in the second quarter of 2012.The Company's effective tax rate
increased during the second quarter of 2013when compared to the second
quarter of 2012 primarily because the Company's annualized effective tax rate
for 2012 was reduced by the reversal of a deferred tax valuation allowance
related to capital loss carry-forwards.

The Company paid cash dividends of $0.21 per share in the second quarter of
2013. At June 30, 2013, the Bank's regulatory capital was well above the
minimum amounts required to be "well capitalized" under current regulatory
standards.

About Auburn National Bancorporation

Auburn National Bancorporation, Inc. (the "Company") is the parent company of
AuburnBank (the "Bank"), with total assets of approximately $767.7 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 Auburn and Opelika Kroger
stores, as well as in the Wal-Mart SuperCenter stores in Auburn and Opelika,
Alabama. The Bank also operates commercial loan production offices in
Montgomery and 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, net interest margin, yields on earning assets, securities
valuations and performance, interest rates, generally and 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 or achievements
of the Company or the Bank to be materially different from future results,
performance or achievements 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 December31, 2012 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 provide reconciliations between GAAP net earnings and
operating net earnings, which exclude gains or losses on items deemed not to
reflect core operations, as well as tax-equivalent net interest income and net
interest margin, including the presentation of total revenue and the
calculation of the efficiency ratio.Management uses these non-GAAP financial
measures in its analysis of the Company's performance and believes
presentations of "operating" and tax-equivalent financial measures provide
useful supplemental information regarding the Company's performance, and that
operating net earnings better reflect the Company's core operating
activities.Management utilizes these non-GAAP measures in the calculation of
certain of the Company's ratios, in particular, to analyze on a consistent
basis over time the performance of what it considers to be its core
operations.The Company believes the non-GAAP measures enhance investors'
understanding of the Company's business and performance.These measures are
also useful in understanding performance trends and facilitate comparisons
with the performance of other financial institutions.The limitations
associated with these measures are the risk that persons might disagree as to
the appropriateness of items comprising these measures and that different
companies might calculate these measures differently.The Company provides
reconciliations between GAAP and these non-GAAP measures.These disclosures
should not be considered an alternative to GAAP.

Financial Highlights                                          
(unaudited)
                        Quarter ended June 30,    Six months ended June 30,
(Dollars in thousands,
except per share         2013          2012        2013          2012
amounts)
Results of Operations                                         
Net interest income (a)  $5,597      $5,728    $11,120     $11,143
Less: tax-equivalent     365          416        747          830
adjustment
Net interest income      5,232        5,312      10,373       10,313
(GAAP)
Noninterest income      2,071        1,814      3,726        6,678
Total revenue            7,303        7,126      14,099       16,991
Provision for loan       —            600        400          1,200
losses
Noninterest expense      4,724        4,048      8,950        11,590
Income tax expense       672          449        1,153        707
Net earnings            $1,907      $2,029    $3,596      $3,494
                                                             
Per share data:                                               
Basic and diluted net                                         
earnings:
GAAP                    $0.52       $0.56     $0.99       $0.96
Operating (b)            0.61         0.52       1.12         0.96
Cash dividends declared  $0.21       $0.205    $0.42       $0.41
Weighted average shares                                       
outstanding:
Basic and diluted        3,642,955    3,642,826  3,642,936    3,642,782
Shares outstanding, at   3,642,993    3,642,843  3,642,993    3,642,843
period end
Book value              $17.90       $18.75     $17.90       $18.75
Common stock price:                                           
High                     $22.33      $26.65    $22.60      $26.65
Low                      21.54        21.50      20.80        18.23
Period-end:              22.00        21.50      22.00        21.50
To earnings ratio        11.70x       12.95x      11.70x       12.95x
To book value            123%         115%       123%         115%
Performance ratios:                                           
Return on average                                             
equity:
GAAP                     10.74%        12.06%      10.11%        10.48%
Operating (b)            12.62%        11.17%      11.51%        10.52%
Return on average                                             
assets:
GAAP                     1.00%         1.07%       0.93%         0.92%
Operating (b)            1.18%         0.99%       1.06%         0.92%
Dividend payout ratio    40.38%        36.61%      42.42%        42.71%
Other financial data:                                         
Net interest margin (a)  3.16%         3.26%       3.12%         3.19%
Effective income tax     26.06%        18.12%      24.28%        16.83%
rate
Efficiency ratio (c)     51.44%        55.36%      52.79%        55.72%
Asset Quality:                                                
Nonperforming assets:                                         
Nonperforming            $4,664      $8,228    $4,664      $8,228
(nonaccrual) loans
Other real estate owned  3,609         5,157       3,609         5,157
Total nonperforming      $8,273      $13,385   $8,273      $13,385
assets
                                                             
Net charge-offs          $312        $1,593    $666        $1,616
                                                             
Allowance for loan                                            
losses as a % of:
Loans                    1.65%         1.63%       1.65%         1.63%
Nonperforming loans      138%         79%        138%         79%
Nonperforming assets as                                       
a % of:
Loans and other real     2.10%        3.31%       2.10%        3.31%
estate owned
Total assets             1.08%        1.75%       1.08%        1.75%
Nonperforming loans as a 1.19%        2.06%       1.19%        2.06%
% of total loans
Net charge-offs
(annualized) as a % of   0.32%         1.61%      0.34%         0.84%
average loans
Selected average                                              
balances:
Securities               $266,056    $293,072  $264,574    $294,955
Loans, net of unearned   389,402      395,261    392,899      386,212
income
Total assets             761,534      760,413    769,602      758,623
Total deposits           652,952      639,182    653,375      634,418
Long-term debt           31,613       47,241     39,095       51,033
Total stockholders'      71,006       67,296     71,162       66,707
equity
Selected period end                                           
balances:
Securities               $270,794    $277,246  $270,794    $277,246
Loans, net of unearned   390,726      399,370    390,726      399,370
income
Allowance for loan       6,457        6,503      6,457        6,503
losses
Total assets             767,747      766,161    767,747      766,161
Total deposits           666,490      644,246    666,490      644,246
Long-term debt           27,217       47,217     27,217       47,217
Total stockholders'      65,211       68,292     65,211       68,292
equity

(a) Tax equivalent. See "Explanation of Certain Unaudited Non-GAAP Financial
Measures" and "Reconciliation of GAAP to non-GAAP Measures (unaudited)."
(b) Operating measures. See "Explanation of Certain Unaudited Non-GAAP
Financial Measures" and "Reconciliation of GAAP to non-GAAP Measures
(unaudited)."
(c) Efficiency ratio is the result of operating noninterest expense divided by
the sum of operating noninterest income and tax-equivalent net interest
income.
NM - not meaningful

                                                              
Reconciliation of GAAP to
non-GAAP Measures                                              
(unaudited):
                                                              
                                                              
                             Quarter ended June 30, Six months ended June 30,
(Dollars in thousands, except 2013        2012       2013         2012
per share amounts)
Net earnings, as reported     $1,907    $2,029   $3,596     $3,494
(GAAP)
Non-operating items (net of                                    
37% statutory tax rate):
Securities gains, net        (326)      (158)     (428)       (271)
Gain on sale of affordable    —          —         —           (2,059)
housing investments
Prepayment penalties on       659         8          927          2,344
long-term debt
Operating net earnings        $2,240    $1,879   $4,095     $3,508
                                                              
Basic and diluted earnings    $0.52     $0.56    $0.99      $0.96
per share, as reported (GAAP)
Non-operating items (net of                                    
37% statutory tax rate):
Securities gains, net        (0.09)     (0.04)    (0.12)      (0.07)
Gain on sale of affordable    —          —         —           (0.57)
housing investments
Prepayment penalties on       0.18       —         0.25        0.64
long-term debt
Operating net earnings per    $0.61     $0.52    $1.12      $0.96
share
                                                              
Net interest income, as       $5,232    $5,312   $10,373    $10,313
reported (GAAP)
Tax-equivalent adjustment     365         416        747          830
Net interest income           $5,597    $5,728   $11,120    $11,143
(tax-equivalent)
                                                              
Noninterest income, as        $2,071    $1,814   $3,726     $6,678
reported (GAAP)
Non-operating items:                                           
Securities gains, net         (518)      (251)     (679)       (430)
Gain on sale of affordable    —          —         —           (3,268)
housing investments
Operating noninterest income  $1,553    $1,563   $3,047     $2,980
                                                              
Total Revenue, as reported    $7,303    $7,126   $14,099    $16,991
(GAAP)
Tax-equivalent adjustment     365         416        747          830
Non-operating items:                                           
Securities gains, net         (518)      (251)     (679)       (430)
Gain on sale of affordable    —          —         —           (3,268)
housing investments
Total Operating Revenue       $7,150    $7,291   $14,167    $14,123
(tax-equivalent)
                                                              
Noninterest expense, as       $4,724    $4,048   $8,950     $11,590
reported (GAAP)
Non-operating items:                                           
Prepayment penalties on       (1,046)    (12)      (1,471)     (3,720)
long-term debt
Operating noninterest expense $3,678    $4,036   $7,479     $7,870
                                                              
Total stockholders' equity    $65,211   $68,292  $65,211    $68,292
(GAAP)
Unrealized losses (gains) on
available for sale            1,831       (5,096)   1,831        (5,096)
securities, net of tax
Other deductions             —          (83)      —           (83)
Tier 1 Common Equity (1)      $67,042   $63,113  $67,042    $63,113
                                                              
(1) June 30, 2013 total is preliminary.

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

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