Auburn National Bancorporation, Inc. Reports First Quarter Net Earnings

Auburn National Bancorporation, Inc. Reports First Quarter Net Earnings

First Quarter 2014 Highlights:

  *Improved profitability – annualized return on average assets of 0.96%
  *Declining credit costs – recorded negative provision for loan losses of
    $0.4 million
  *Net interest margin expansion – increased 11 basis points compared to Q1
    2013
  *Reduced NPAs – nonperforming assets less than 1% of total assets at March
    31, 2014
  *Strong capital position – Tier 1 common equity to total assets of 9.06%

AUBURN, Ala., April 24, 2014 (GLOBE NEWSWIRE) -- Auburn National
Bancorporation, Inc. (Nasdaq:AUBN) reported net earnings of approximately $1.8
million, or $0.50 per share, for the first quarter of 2014, an increase of 8%,
compared to $1.7 million, or $0.46 per share, for the first quarter of 2013.

Excluding the effects of non-operating items (specifically net securities
gains (losses) and prepayment penalties on long-term debt), first quarter 2014
operating net earnings were $2.0 million, or $0.55 per share, compared to $1.9
million, or $0.51 per share, for the first quarter of 2013.

"The Company's strong first quarter results reflect improvements in our asset
quality and net interest margin," said E.L. Spencer, Jr., President, CEO and
Chairman of the Board.

Net interest income (tax-equivalent) was $5.6 million for the first quarter of
2014, compared to $5.5 million for the first quarter of 2013. Net interest
income (tax-equivalent) increased as net interest margin improvement offset a
decline in average interest-earning assets of 2%. The Company's improved net
interest margin reflects management's efforts to increase earnings by focusing
on deposit pricing and repaying higher-cost wholesale borrowings.

Mr. Spencer continued, "We are pleased with our progress in reducing
nonperforming assets and are optimistic about further improvement in 2014."

Nonperforming assets were $6.3 million, or 0.81% of total assets at March 31,
2014, compared to $8.2 million, or 1.08% of total assets at December 31, 2013.
The Company's annualized net charge-off ratio was 0.17% in the first quarter
of 2014, compared to 0.36% in the first quarter of 2013. The Company recorded
a negative provision for loan losses of $0.4 million in the first quarter of
2014, compared to a charge of $0.4 million for the provision for loan losses
in the first quarter of 2013. The decrease in the provision for loan losses
was primarily due to improvement in the overall credit quality of the loan
portfolio, including declining net charge-offs and lower levels of adversely
classified and nonperforming loans.

Noninterest income was $0.8 million for the first quarter of 2014, compared to
$1.7 million in the first quarter of 2013. The decrease was primarily due to a
decrease in mortgage lending income of $0.4 million as higher interest rates
for mortgage loans negatively impacted refinance activity and a decrease in
net securities gains (losses) of $0.5 million that was primarily due to an
other-than-temporary impairment charge on securities management intended to
sell at March 31, 2014. Subsequent to March 31, 2014, the Company sold
available-for-sale agency RMBS securities with a fair value of approximately
$18.9 million and realized a loss of $0.3 million.

Noninterest expense was approximately $4.0 million in the first quarter of
2014, compared to $4.2 million in the first quarter of 2013.The decrease was
primarily due to a decrease in prepayment penalties on long-term debt.The
Company incurred no prepayment penalties during the first quarter of 2014,
compared to $0.4 million during the first quarter of 2013 when the Company
repaid a $10.0 million FHLB advance with an interest rate of 3.17%.This
decrease was partially offset by increases in certain other noninterest
expenses, including an increase in net OREO expenses of $0.1 million due to
realized holding losses or write-downs on the valuations of certain OREO
properties.

Income tax expense was approximately $0.7 million for the first quarter of
2014, compared to $0.5 million in the first quarter of 2013. The Company's
effective tax rate for the first quarter of 2014 was 26.51%, compared to
22.17% in the first quarter of 2013. The increase in the Company's effective
tax rate was primarily due to decreases in tax exempt interest income as our
holdings of municipal securities have declined.In addition, as earnings
before income taxes increases, the impact of tax preference items, such as tax
exempt interest income, on the Company's effective tax rate is reduced.

The Company paid cash dividends of $0.215 per share in the first quarter of
2014. At March 31, 2014, 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 $773 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, 2013 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 March 31,
(Dollars in thousands, except per share   2014               2013
amounts)
Results of Operations                                       
Net interest income (a)                   $5,594           $5,523
Less: tax-equivalent adjustment           324               382
Net interest income (GAAP)                5,270             5,141
Noninterest income                        756               1,655
Total revenue                             6,026             6,796
Provision for loan losses                 (400)             400
Noninterest expense                       3,948             4,226
Income tax expense                        657               481
Net earnings                              $1,821           $1,689
                                                           
Per share data:                                             
Basic and diluted net earnings:                             
GAAP                                      $0.50            $0.46
Operating (b)                             0.55              0.51
Cash dividends declared                   $0.215           $0.21
Weighted average shares outstanding:                        
Basic and diluted                         3,643,161         3,642,918
Shares outstanding, at period end         3,643,173         3,642,928
Book value                                $18.74           $19.27
Common stock price:                                         
High                                      $25.80           $22.60
Low                                       23.20             20.80
Period-end                                23.20             22.00
To earnings ratio                         11.72 x           11.46
To book value                             124 %             114
Performance ratios:                                         
Return on average equity (annualized):                      
GAAP                                      11.11 %           9.47
Operating (b)                             12.29 %           10.41
Return on average assets (annualized):                      
GAAP                                      0.96 %            0.87
Operating (b)                             1.06 %            0.95
Dividend payout ratio                     43.00 %           45.65
Other financial data:                                       
Net interest margin (a)                   3.20 %            3.09
Effective income tax rate                 26.51 %           22.17
Efficiency ratio (c)                      59.31 %           54.17
Asset Quality:                                              
Nonperforming assets:                                       
Nonperforming (nonaccrual) loans          $3,188           $4,748
Other real estate owned                   3,111             4,810
Total nonperforming assets                $6,299           $9,558
                                                           
Net charge-offs                           $157             $354
                                                           
Allowance for loan losses as a % of:                        
Loans                                     1.26 %            1.73
Nonperforming loans                       148 %             143
Nonperforming assets as a % of:                             
Loans and other real estate owned         1.68 %            2.42
Total assets                              0.81 %            1.24
Nonperforming loans as a % of total loans 0.86 %            1.22
Net charge-offs (annualized) as a % of    0.17 %            0.36
average loans
Selected average balances:                                  
Securities                                $268,013         $263,074
Loans, net of unearned income             377,322           396,436
Total assets                              762,153           777,756
Total deposits                            678,324           653,802
Long-term debt                            12,217            46,661
Total stockholders' equity                65,556            71,317
Selected period end balances:                               
Securities                                $279,989         $270,219
Loans, net of unearned income             372,639           390,570
Allowance for loan losses                 4,711             6,769
Total assets                              773,333           772,155
Total deposits                            687,088           659,056
Long-term debt                            12,217            37,217
Total stockholders' equity                68,283            70,217

(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.

                                                                 
Reconciliation of GAAP to non-GAAP Measures                       
(unaudited):
                                                                 
                                                      Quarter ended March 31,
(Dollars in thousands, except per share amounts)       2014        2013
Net earnings, as reported (GAAP)                       $1,821    $1,689
Non-operating items (net of 37% statutory tax rate):              
Securities losses (gains), net                        193        (101)
Prepayment penalty on long-term debt                   —          268
Operating net earnings                                 $2,014    $1,856
                                                                 
Basic and diluted earnings per share, as reported      $0.50     $0.46
(GAAP)
Non-operating items (net of 37% statutory tax rate):              
Securities losses (gains), net                        0.05       (0.03)
Prepayment penalty on long-term debt                   —          0.08
Operating net earnings per share                       $0.55     $0.51
                                                                 
Net interest income, as reported (GAAP)                $5,270    $5,141
Tax-equivalent adjustment                              324         382
Net interest income (tax-equivalent)                   $5,594    $5,523
                                                                 
Noninterest income, as reported (GAAP)                 $756      $1,655
Non-operating items:                                              
Securities losses (gains), net                        307         (161)
Operating noninterest income                           $1,063    $1,494
                                                                 
Total Revenue, as reported (GAAP)                      $6,026    $6,796
Tax-equivalent adjustment                              324         382
Non-operating items:                                              
Securities losses (gains), net                        307         (161)
Total Operating Revenue (tax-equivalent)               $6,657    $7,017
                                                                 
Noninterest expense, as reported (GAAP)                $3,948    $4,226
Non-operating items:                                              
Prepayment penalty on long-term debt                   —          (425)
Operating noninterest expense                          $3,948    $3,801
                                                                 
Total stockholders' equity (GAAP)                      $68,284   $70,217
Unrealized losses (gains) on available forsale        1,793       (4,317)
securities, net of tax
Other deductions                                      —          —
Tier 1 Common Equity (1)                               $70,077   $65,900
                                                                 
(1) March 31, 2014 total is preliminary.

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

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