Auburn National Bancorporation, Inc. Reports Third Quarter Net Earnings

Auburn National Bancorporation, Inc. Reports Third Quarter Net Earnings

Third Quarter 2013 Highlights:

  *Improved profitability – annualized return on average assets of 0.95%
    
  *Declining credit costs – provision for loan losses down $1.6 million
    compared to Q3 2012
    
  *Controlling expenses – operating noninterest expense declined 1% compared
    to Q3 2012
    
  *Strong capital position – Tier 1 common equity to total assets of 9.14%

AUBURN, Ala., Oct. 23, 2013 (GLOBE NEWSWIRE) -- Auburn National
Bancorporation, Inc. (Nasdaq:AUBN) reported net earnings of approximately $1.8
million, or $0.49 per share, for the third quarter of 2013, an increase of 11%
compared to $1.6 million, or $0.44 per share, for the third quarter of
2012.Net earnings for the first nine months of 2013 were $5.4 million, or
$1.48 per share, an increase of 6% compared to $5.1 million, or $1.40 per
share, for the first nine months of 2012.

Excluding the effects of non-operating items (specifically net securities
gains, gain on sale of affordable housing investments, and prepayment
penalties on long-term debt), third quarter 2013 operating net earnings were
$2.1 million, or $0.58 per share, compared to $1.5 million, or $0.41 per
share, for the third quarter of 2012.Operating net earnings for the first
nine months of 2013 were $6.2 million, or $1.71 per share, compared to $5.0
million, or $1.38 per share, for the first nine months of 2012.

"Consistent with the first two quarters of 2013, the Company's third quarter
results reflect improving asset quality.While loan demand remains soft, we
are focused on improving our cost of funds and controlling our operating
expenses," said E.L. Spencer, Jr., President, CEO and Chairman of the Board.

Net interest income (tax-equivalent) was $5.6 million for the third quarter of
2013, compared to $5.7 million for the third quarter of 2012.Net interest
income (tax-equivalent) declined slightly as improvement in the Company's
funding mix and cost of funds largely offset the decline in yields on earning
assets and a decrease in average loans.Average loans were $383.5 million in
the third quarter of 2013, a decrease of $17.7 million, or 4%, from third
quarter of 2012.This decrease was primarily due to declines in the commercial
real estate loan portfolio. Average deposits were $651.3 million in the third
quarter of 2013, an increase of $26.5 million, or 4%, from the third quarter
of 2012.

The Company's annualized net charge-off ratio was 0.53% in the third quarter
of 2013, compared to 2.00% in the third quarter of 2012.The Company made no
provision for loan losses in the third quarter of 2013, compared to $1.6
million in the third 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 $1.4 million in the third quarter of 2013,
compared to $2.0 million in the third quarter of 2012.The decrease was
primarily due to declines in mortgage lending income of $0.3 million and net
securities gains of $0.2 million.

Total noninterest expense was $4.3 million in the third quarter of 2013,
compared to $3.8 million in the third quarter of 2012.The increase was
primarily due to $0.5 million of prepayment penalties incurred during the
third quarter of 2013, when the Company repaid $5.0 million of long-term debt
with an interest rate of 3.58%.

Income tax expense was approximately $0.6 million for the third quarter of
2013, compared to $0.3 million in the third quarter of 2012.The Company's
effective tax rate for the third quarter of 2013 was 26.19%, compared to
17.74% in the third quarter of 2012.The Company's effective tax rate
increased during the third quarter of 2013compared to the third 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 third quarter of
2013. At September 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, Inc.

Auburn National Bancorporation, Inc. (the "Company") is the parent company of
AuburnBank (the "Bank"), with total assets of approximately $745 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 both Auburn and Opelika. 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, 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 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 September    Nine months ended
                     30,                        September 30,
(Dollars in
thousands, except    2013          2012         2013        2012
per share amounts)
Results of                                               
Operations
Net interest income  $ 5,621      $ 5,675     $ 16,741   $ 16,818
(a)
Less: tax-equivalent 351          416         1,098      1,246
adjustment
Net interest income  5,270        5,259       15,643     15,572
(GAAP)
Noninterest income   1,432        2,017       5,158      8,695
Total revenue        6,702        7,276       20,801     24,267
Provision for loan   —            1,550       400        2,750
losses
Noninterest expense  4,274        3,770       13,224     15,360
Income tax expense   636          347         1,789      1,054
Net earnings         $ 1,792      $ 1,609     $5,388     $ 5,103
                                                        
Per share data:                                          
Basic and diluted                                        
net earnings:
GAAP                 $ 0.49       $ 0.44      $ 1.48     $ 1.40
Operating (b)        0.58         0.41        1.71       1.38
Cash dividends       $ 0.21       $ 0.205     $ 0.63     $ 0.615
declared
Weighted average                                         
shares outstanding:
Basic and diluted    3,643,028    3,642,876   3,642,967  3,642,807
Shares outstanding,  3,643,058    3,642,903   3,643,058  3,642,903
at period end
Book value           $ 18.06      $ 19.27     $ 18.06    $ 19.27
Common stock price:                                      
High                 $ 24.71      $ 23.20     $ 24.71    $ 26.65
Low                  22.00        21.00       20.80      18.23
Period-end:          24.40        22.25       24.40      22.25
To earnings ratio    12.64 x      12.94 x     12.64 x    12.94 x
To book value        135 %        115 %       135 %      115 %
Performance ratios:                                      
Return on average                                        
equity:
GAAP                 10.78 %      9.22 %      10.32 %    10.04 %
Operating (b)        12.83 %      8.58 %      11.94 %    9.85 %
Return on average                                        
assets:
GAAP                 0.95 %       0.86 %      0.94 %     0.90 %
Operating (b)        1.14 %       0.80 %      1.09 %     0.88 %
Dividend payout      42.86 %      46.59 %     42.57 %    43.93 %
ratio
Other financial                                          
data:
Net interest margin  3.19 %       3.23 %      3.14 %     3.21 %
(a)
Effective income tax 26.19 %      17.74 %     24.93 %    17.12 %
rate
Efficiency ratio (c) 52.93 %      50.17 %     52.84 %    53.80 %
Asset Quality:                                           
Nonperforming                                            
assets:
Nonperforming        $ 4,425      $ 13,635    $ 4,425    $ 13,635
(nonaccrual) loans
Other real estate    4,585        4,925       4,585      4,925
owned
Total nonperforming  $ 9,010      $ 18,560    $ 9,010    $ 18,560
assets
                                                        
Net charge-offs      $ 511        $ 2,008     $ 1,177    $ 3,624
                                                        
Allowance for loan                                       
losses as a % of:
Loans                1.56 %       1.52 %      1.56 %     1.52 %
Nonperforming loans  134 %        44 %        134 %      44 %
Nonperforming assets                                     
as a % of:
Loans and other real 2.34 %       4.61 %      2.34 %     4.61 %
estate owned
Total assets         1.21 %       2.46 %      1.21 %     2.46 %
Nonperforming loans
as a % of total      1.16 %       3.43 %      1.16 %     3.43 %
loans
Net charge-offs
(annualized) as a %  0.53 %       2.00 %      0.40 %     1.24 %
of average loans
Selected average                                         
balances:
Securities           $265,380     $ 265,670   $ 264,845  $ 285,122
Loans, net of        383,460      401,166     389,719    389,833
unearned income
Total assets         751,311      748,055     763,438    755,075
Total deposits       651,334      624,813     652,687    631,195
Long-term debt       26,782       47,217      34,946     49,752
Total stockholders'  66,485       69,826      69,586     67,754
equity
Selected period end                                      
balances:
Securities           $ 259,467    $ 254,819   $ 259,467  $ 254,819
Loans, net of        380,705      397,738     380,705    397,738
unearned income
Allowance for loan   5,946        6,045       5,946      6,045
losses
Total assets         744,602      753,467     744,602    753,467
Total deposits       650,421      629,824     650,421    629,824
Long-term debt       22,217       47,217      22,217     47,217
Total stockholders'  65,807       70,206      65,807     70,206
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 September Nine months ended
                                     30,                     September 30,
(Dollars in thousands, except per    2013         2012       2013     2012
share amounts)
Net earnings, as reported (GAAP)      $ 1,792    $ 1,609    $ 5,388  $ 5,103
Non-operating items (net of 37%                                    
statutory tax rate):
Securities gains, net               —           (112)     (428)   (383)
Gain on sale of affordable housing   —           —         —       (2,059)
investments
Prepayment penalties on long-term    341          —         1,268    2,344
debt
Operating net earnings               $ 2,133      $ 1,497    $ 6,228  $ 5,005
                                                                  
Basic and diluted earnings per       $ 0.49       $ 0.44     $ 1.48   $ 1.40
share, as reported (GAAP)
Non-operating items (net of 37%                                    
statutory tax rate):
Securities gains, net               —           (0.03)    (0.12)  (0.10)
Gain on sale of affordable housing   —           —         —       (0.56)
investments
Prepayment penalties on long-term    0.09        —         0.35    0.64
debt
Operating net earnings per share     $ 0.58       $ 0.41     $ 1.71   $ 1.38
                                                                  
Net interest income, as reported     $ 5,270      $ 5,259    $ 15,643 $ 15,572
(GAAP)
Tax-equivalent adjustment            351          416        1,098    1,246
Net interest income (tax-equivalent) $ 5,621      $ 5,675    $ 16,741 $ 16,818
                                                                  
Noninterest income, as reported      $ 1,432      $ 2,017    $ 5,158  $ 8,695
(GAAP)
Non-operating items:                                               
Securities gains, net                —           (178)     (679)   (608)
Gain on sale of affordable housing   —           —         —       (3,268)
investments
Operating noninterest income         $ 1,432      $ 1,839    $ 4,479  $ 4,819
                                                                  
Total Revenue, as reported (GAAP)    $ 6,702      $ 7,276    $ 20,801 $ 24,267
Tax-equivalent adjustment            351          416        1,098    1,246
Non-operating items:                                               
Securities gains, net                —           (178)     (679)   (608)
Gain on sale of affordable housing   —           —         —       (3,268)
investments
Total Operating Revenue              $ 7,053      $ 7,514    $ 21,220 $ 21,637
(tax-equivalent)
                                                                  
Noninterest expense, as reported     $ 4,274      $ 3,770    $ 13,224 $ 15,360
(GAAP)
Non-operating items:                                               
Prepayment penalties on long-term    (541)       —         (2,012) (3,720)
debt
Operating noninterest expense        $ 3,733      $ 3,770    $ 11,212 $ 11,640
                                                                  
Total stockholders' equity (GAAP)    $ 65,807     $ 70,206   $ 65,807 $ 70,206
Unrealized losses (gains) on
available forsale securities, net   2,264        (6,145)   2,264    (6,145)
of tax
Other deductions                    —           (91)      —       (91)
Tier 1 Common Equity (1)             $ 68,071     $ 63,970   $ 68,071 $ 63,970
                                                                  
(1) September 30, 2013 total is preliminary.

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

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