Second Quarter 2014 Highlights:
- Continued profitability – annualized return on average assets of 0.96%
- Deposit growth – average deposits increased 5% compared to Q2 2013
- Reduced NPAs – nonperforming assets were 0.57% of total assets at June 30, 2014
- Strong capital position – Tier 1 common equity to total assets of 9.18%
AUBURN, Ala., July 24, 2014 (GLOBE NEWSWIRE) -- Auburn National Bancorporation, Inc. (Nasdaq:AUBN) reported net earnings of $1.9 million, or $0.51 per share, for the second quarter of 2014, compared to $1.9 million, or $0.52 per share, for the second quarter of 2013. Net earnings for the first six months of 2014 were $3.7 million, or $1.01 per share, compared to $3.6 million, or $0.99 per share, for the first six months of 2013.
Excluding the effects of non-operating items (specifically net securities gains (losses) and prepayment penalties on long-term debt), second quarter 2014 operating net earnings were $1.9 million, or $0.51 per share, compared to $2.2 million, or $0.61 per share, for the second quarter of 2013. Operating net earnings for the first six months of 2014 were $3.9 million, or $1.06 per share, compared to $4.1 million, or $1.12 per share, for the first six months of 2013.
"Despite a challenging environment for loan growth, the Company's second quarter results reflect strong profitability and continued improvement in our asset quality," 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 2014 and 2013. Despite downward pressure on yields for earning assets, net interest income (tax-equivalent) was unchanged due to continued improvement in the Company's cost of funds.
Nonperforming assets were $4.4 million, or 0.57% of total assets, at June 30, 2014, compared to $6.3 million, or 0.81% of total assets, at March 31, 2014. The Company recorded no provision for loan losses in the second quarter of 2014and 2013, primarily due to improved credit quality in the loan portfolio, including declining net charge-offs and lower levels of adversely classified and nonperforming loans.
Noninterest income was $1.1 million for the second quarter of 2014, compared to $2.1 million in the second quarter of 2013. The decrease was primarily due to a decrease in mortgage lending income of $0.5 million as higher interest rates for mortgage loans negatively impacted refinance activity and a decrease in net securities gains of $0.5 million.
Noninterest expense was approximately $3.8 million in the second quarter of 2014, compared to $4.7 million in the second quarter of 2013. The decrease was primarily due to $1.0 million of prepayment penalties on long-term debt incurred during the second quarter of 2013, when the Company repaid $10.0 million of long-term debt with a weighted average interest rate of 3.59%. The Company incurred no prepayment penalties during the second quarter of 2014.
Income tax expense was approximately $0.7 million for the second quarter of 2014 and 2013. The Company's effective tax rate for the second quarter of 2014 was 26.87%, compared to 26.05% in the second 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.
The Company paid cash dividends of $0.215 per share in the second quarter of 2014. At June 30, 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 $775 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 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, 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 June 30, | Six Months Ended June 30, | |||
| (Dollars in thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 |
| Results of Operations | ||||
| Net interest income (a) | $ 5,565 | $ 5,597 | $ 11,159 | $ 11,120 |
| Less: tax-equivalent adjustment | 312 | 365 | 636 | 747 |
| Net interest income (GAAP) | 5,253 | 5,232 | 10,523 | 10,373 |
| Noninterest income | 1,081 | 2,071 | 1,837 | 3,726 |
| Total revenue | 6,334 | 7,303 | 12,360 | 14,099 |
| Provision for loan losses | — | — | (400) | 400 |
| Noninterest expense | 3,792 | 4,724 | 7,740 | 8,950 |
| Income tax expense | 683 | 672 | 1,340 | 1,153 |
| Net earnings | $ 1,859 | $ 1,907 | $ 3,680 | $ 3,596 |
| Per share data: | ||||
| Basic and diluted net earnings: | ||||
| GAAP | $ 0.51 | $ 0.52 | $ 1.01 | $ 0.99 |
| Operating (b) | 0.51 | 0.61 | 1.06 | 1.12 |
| Cash dividends declared | $ 0.215 | $ 0.21 | $ 0.43 | $ 0.42 |
| Weighted average shares outstanding: | ||||
| Basic and diluted | 3,643,295 | 3,642,955 | 3,643,228 | 3,642,936 |
| Shares outstanding, at period end | 3,643,328 | 3,642,993 | 3,643,328 | 3,642,993 |
| Book value | $ 19.84 | $ 17.90 | $ 19.84 | $ 17.90 |
| Common stock price: | ||||
| High | $ 25.00 | $ 22.33 | $ 25.80 | $ 22.60 |
| Low | 22.90 | 21.54 | 22.90 | 20.80 |
| Period-end: | 24.02 | 22.00 | 24.02 | 22.00 |
| To earnings ratio | 12.19x | 11.70x | 12.19x | 11.70x |
| To book value | 121% | 123% | 121% | 123% |
| Performance ratios: | ||||
| Return on average equity: | ||||
| GAAP | 10.72% | 10.74% | 10.91% | 10.11% |
| Operating (b) | 10.67% | 12.62% | 11.46% | 11.51% |
| Return on average assets: | ||||
| GAAP | 0.96% | 1.00% | 0.96% | 0.93% |
| Operating (b) | 0.96% | 1.18% | 1.01% | 1.06% |
| Dividend payout ratio | 42.16% | 40.38% | 42.57% | 42.42% |
| Other financial data: | ||||
| Net interest margin (a) | 3.09% | 3.16% | 3.14% | 3.12% |
| Effective income tax rate | 26.87% | 26.06% | 26.69% | 24.28% |
| Efficiency ratio (c) | 57.16% | 51.44% | 58.23% | 52.79% |
| Asset Quality: | ||||
| Nonperforming assets: | ||||
| Nonperforming (nonaccrual) loans | $ 2,804 | $ 4,664 | $ 2,804 | $ 4,664 |
| Other real estate owned | 1,584 | 3,609 | 1,584 | 3,609 |
| Total nonperforming assets | $ 4,388 | $ 8,273 | $ 4,388 | $ 8,273 |
| Net (recoveries) charge-offs | $ (17) | $ 312 | $ 140 | $ 666 |
| Allowance for loan losses as a % of: | ||||
| Loans | 1.23% | 1.65% | 1.23% | 1.65% |
| Nonperforming loans | 169% | 138% | 169% | 138% |
| Nonperforming assets as a % of: | ||||
| Loans and other real estate owned | 1.13% | 2.10% | 1.13% | 2.10% |
| Total assets | 0.57% | 1.08% | 0.57% | 1.08% |
| Nonperforming loans as a % of total loans | 0.73% | 1.19% | 0.73% | 1.19% |
| Net (recoveries) charge-offs as % of average loans (d) | (0.02)% | 0.32% | 0.07% | 0.34% |
| Selected average balances: | ||||
| Securities | $ 274,305 | $ 266,056 | $ 271,177 | $ 264,574 |
| Loans, net of unearned income | 378,994 | 389,402 | 378,163 | 392,899 |
| Total assets | 772,326 | 761,534 | 767,268 | 769,602 |
| Total deposits | 684,613 | 652,952 | 681,487 | 653,375 |
| Long-term debt | 12,217 | 31,613 | 12,217 | 39,095 |
| Total stockholders' equity | 69,367 | 71,006 | 67,472 | 71,162 |
| Selected period end balances: | ||||
| Securities | $ 276,953 | $ 270,794 | $ 276,953 | $ 270,794 |
| Loans, net of unearned income | 385,826 | 390,726 | 385,826 | 390,726 |
| Allowance for loan losses | 4,728 | 6,457 | 4,728 | 6,457 |
| Total assets | 775,128 | 767,747 | 775,128 | 767,747 |
| Total deposits | 684,181 | 666,490 | 684,181 | 666,490 |
| Long-term debt | 12,217 | 27,217 | 12,217 | 27,217 |
| Total stockholders' equity | 72,291 | 65,211 | 72,291 | 65,211 |
| (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. | ||||
| (d) Net (recoveries) charge-offs are annualized. | ||||
| Reconciliation of GAAP to non-GAAP Measures (unaudited): | ||||
| Quarter ended June 30, | Six Months Ended June 30, | |||
| (Dollars in thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 |
| Net earnings, as reported (GAAP) | $ 1,859 | $ 1,907 | $ 3,680 | $ 3,596 |
| Non-operating items (net of 37% statutory tax rate): | ||||
| Securities (gains) losses, net | (8) | (326) | 186 | (428) |
| Gain on sale of affordable housing investments | — | — | — | — |
| Prepayment penalties on long-term debt | — | 659 | — | 927 |
| Operating net earnings | $ 1,851 | $ 2,240 | $ 3,866 | $ 4,095 |
| Basic and diluted earnings per share, as reported (GAAP) | $ 0.51 | $ 0.52 | $ 1.01 | $ 0.99 |
| Non-operating items (net of 37% statutory tax rate): | ||||
| Securities (gains) losses, net | — | (0.09) | 0.05 | (0.12) |
| Gain on sale of affordable housing investments | — | — | — | — |
| Prepayment penalties on long-term debt | — | 0.18 | — | 0.25 |
| Operating net earnings per share | $ 0.51 | $ 0.61 | $ 1.06 | $ 1.12 |
| Net interest income, as reported (GAAP) | $ 5,253 | $ 5,232 | $ 10,523 | $ 10,373 |
| Tax-equivalent adjustment | 312 | 365 | 636 | 747 |
| Net interest income (tax-equivalent) | $ 5,565 | $ 5,597 | $ 11,159 | $ 11,120 |
| Noninterest income, as reported (GAAP) | $ 1,081 | $ 2,071 | $ 1,837 | $ 3,726 |
| Non-operating items: | ||||
| Securities (gains) losses, net | (12) | (518) | 295 | (679) |
| Gain on sale of affordable housing investments | — | — | — | — |
| Operating noninterest income | $ 1,069 | $ 1,553 | $ 2,132 | $ 3,047 |
| Total Revenue, as reported (GAAP) | $ 6,334 | $ 7,303 | $ 12,360 | $ 14,099 |
| Tax-equivalent adjustment | 312 | 365 | 636 | 747 |
| Non-operating items: | ||||
| Securities (gains) losses, net | (12) | (518) | 295 | (679) |
| Gain on sale of affordable housing investments | — | — | — | — |
| Total Operating Revenue (tax-equivalent) | $ 6,634 | $ 7,150 | $ 13,291 | $ 14,167 |
| Noninterest expense, as reported (GAAP) | $ 3,792 | $ 4,724 | $ 7,740 | $ 8,950 |
| Non-operating items: | ||||
| Prepayment penalties on long-term debt | — | (1,046) | — | (1,471) |
| Operating noninterest expense | $ 3,792 | $ 3,678 | $ 7,740 | $ 7,479 |
| Total stockholders' equity (GAAP) | $ 72,291 | $ 65,211 | $ 72,291 | $ 65,211 |
| Unrealized (gains) losses on available for sale securities, net of tax | (1,136) | 1,831 | (1,136) | 1,831 |
| Tier 1 Common Equity (1) | $ 71,155 | $ 67,042 | $ 71,155 | $ 67,042 |
| (1) June 30, 2014 total is preliminary. | ||||