Third Quarter 2014 Highlights:
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Continued profitability – annualized return on average assets of 0.97%
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Reduced NPAs – nonperforming assets were 0.37% of total assets at September 30, 2014
- Strong capital position – Tier 1 common equity to total assets of 9.25%
AUBURN, Ala., Oct. 27, 2014 (GLOBE NEWSWIRE) -- Auburn National Bancorporation, Inc. (Nasdaq:AUBN) reported net earnings of $1.9 million, or $0.51 per share, for the third quarter of 2014, compared to $1.8 million, or $0.49 per share, for the third quarter of 2013. Net earnings for the first nine months of 2014 were $5.6 million, or $1.52 per share, compared to $5.4 million, or $1.48 per share, for the first nine months of 2013.
Excluding the effects of non-operating items (specifically net securities gains (losses) and prepayment penalties on long-term debt), third quarter 2014 operating net earnings were $2.0 million, or $0.55 per share, compared to $2.1 million, or $0.59 per share, for the third quarter of 2013. Operating net earnings for the first nine months of 2014 were $5.9 million, or $1.62 per share, compared to $6.2 million, or $1.71 per share, for the first nine months of 2013.
"The Company's third 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 $5.8 million for the third quarter of 2014, compared to $5.6 million for the third quarter of 2013. Despite downward pressure on yields for earning assets, net interest income (tax-equivalent) improved due to continued improvement in the Company's cost of funds.
Nonperforming assets were $2.9 million, or 0.37% of total assets, at September 30, 2014, compared to $4.4 million, or 0.57% of total assets, at June 30, 2014. The provision for loan losses was $0.3 million in the third quarter of 2014, compared to none in the third quarter 2013. Provision for loan loss expense is impacted by the absolute level of loans, loan growth, the credit quality of the loan portfolio and the amount of net charge-offs.
Noninterest income was $1.0 million for the third quarter of 2014, compared to $1.4 million in the third quarter of 2013. The decrease was primarily due to a decrease in mortgage lending income of $0.2 million as higher interest rates for mortgage loans negatively affected refinance activity and a decrease in net securities gains (losses) of $0.2 million.
Noninterest expense was approximately $3.6 million in the third quarter of 2014, compared to $4.3 million in the third quarter of 2013. The decrease was primarily due to $0.5 million of prepayment penalties on long-term debt 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%. The Company incurred no prepayment penalties on long-term debt during the third quarter of 2014.
Income tax expense was approximately $0.7 million for the third quarter of 2014, compared to $0.6 million for the third quarter of 2013. The Company's effective tax rate for the third quarter of 2014 was 27.47%, compared to 26.19% in the third 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 third quarter of 2014. At September 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 $781 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 September 30, | Nine months ended September 30, | |||
| (Dollars in thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 |
| Results of Operations | ||||
| Net interest income (a) | $ 5,769 | $ 5,621 | $ 16,928 | $ 16,741 |
| Less: tax-equivalent adjustment | 321 | 351 | 957 | 1,098 |
| Net interest income (GAAP) | 5,448 | 5,270 | 15,971 | 15,643 |
| Noninterest income | 1,017 | 1,432 | 2,854 | 5,158 |
| Total revenue | 6,465 | 6,702 | 18,825 | 20,801 |
| Provision for loan losses | 300 | — | (100) | 400 |
| Noninterest expense | 3,584 | 4,274 | 11,324 | 13,224 |
| Income tax expense | 709 | 636 | 2,049 | 1,789 |
| Net earnings | $ 1,872 | $ 1,792 | $ 5,552 | $ 5,388 |
| Per share data: | ||||
| Basic and diluted net earnings: | ||||
| GAAP | $ 0.51 | $ 0.49 | $ 1.52 | $ 1.48 |
| Operating (b) | 0.55 | 0.59 | 1.62 | 1.71 |
| Cash dividends declared | $ 0.215 | $ 0.21 | $ 0.645 | $ 0.63 |
| Weighted average shares outstanding: | ||||
| Basic and diluted | 3,643,328 | 3,643,028 | 3,643,262 | 3,642,967 |
| Shares outstanding, at period end | 3,643,328 | 3,643,058 | 3,643,328 | 3,643,058 |
| Book value | $ 20.09 | $ 18.06 | $ 20.09 | $ 18.06 |
| Common stock price: | ||||
| High | $ 24.92 | $ 24.71 | $ 25.80 | $ 24.71 |
| Low | 23.17 | 22.00 | 22.90 | 20.80 |
| Period-end: | 24.64 | 24.40 | 24.64 | 24.40 |
| To earnings ratio | 12.38 x | 12.64 x | 12.38 x | 12.64 x |
| To book value | 123% | 135% | 123% | 135% |
| Performance ratios: | ||||
| Return on average equity: | ||||
| GAAP | 10.19% | 10.78% | 10.65% | 10.32% |
| Operating (b) | 10.99% | 12.83% | 11.29% | 11.94% |
| Return on average assets: | ||||
| GAAP | 0.97% | 0.95% | 0.96% | 0.94% |
| Operating (b) | 1.05% | 1.14% | 1.02% | 1.09% |
| Dividend payout ratio | 42.16% | 42.86% | 42.43% | 42.57% |
| Other financial data: | ||||
| Net interest margin (a) | 3.16% | 3.19% | 3.15% | 3.14% |
| Effective income tax rate | 27.47% | 26.19% | 26.96% | 24.93% |
| Efficiency ratio (c) | 51.05% | 52.93% | 55.75% | 52.84% |
| Asset Quality: | ||||
| Nonperforming assets: | ||||
| Nonperforming (nonaccrual) loans | $ 1,690 | $ 4,425 | $ 1,690 | $ 4,425 |
| Other real estate owned | 1,215 | 4,585 | 1,215 | 4,585 |
| Total nonperforming assets | $ 2,905 | $ 9,010 | $ 2,905 | $ 9,010 |
| Net charge-offs | $ 274 | $ 511 | $ 414 | $ 1,177 |
| Allowance for loan losses as a % of: | ||||
| Loans | 1.20% | 1.56% | 1.20% | 1.56% |
| Nonperforming loans | 281% | 134% | 281% | 134% |
| Nonperforming assets as a % of: | ||||
| Loans and other real estate owned | 0.73% | 2.34% | 0.73% | 2.34% |
| Total assets | 0.37% | 1.21% | 0.37% | 1.21% |
| Nonperforming loans as a % of total loans | 0.43% | 1.16% | 0.43% | 1.16% |
| Net charge-offs as % of average loans (d) | 0.28% | 0.53% | 0.14% | 0.40% |
| Selected average balances: | ||||
| Securities | $ 274,155 | $ 265,380 | $ 272,180 | $ 264,845 |
| Loans, net of unearned income | 389,392 | 383,460 | 381,947 | 389,719 |
| Total assets | 771,685 | 751,311 | 768,756 | 763,438 |
| Total deposits | 678,738 | 651,334 | 680,560 | 652,687 |
| Long-term debt | 12,217 | 26,782 | 12,217 | 34,946 |
| Total stockholders' equity | 73,499 | 66,485 | 69,503 | 69,586 |
| Selected period end balances: | ||||
| Securities | $ 264,827 | $ 259,467 | $ 264,827 | $ 259,467 |
| Loans, net of unearned income | 394,602 | 380,705 | 394,602 | 380,705 |
| Allowance for loan losses | 4,754 | 5,946 | 4,754 | 5,946 |
| Total assets | 781,136 | 744,602 | 781,136 | 744,602 |
| Total deposits | 680,763 | 650,421 | 680,763 | 650,421 |
| Long-term debt | 12,217 | 22,217 | 12,217 | 22,217 |
| Total stockholders' equity | 73,193 | 65,807 | 73,193 | 65,807 |
| (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 charge-offs are annualized. | ||||
| Reconciliation of GAAP to non-GAAP Measures (unaudited): | ||||
| Quarter ended September 30, | Nine months ended September 30, | |||
| (Dollars in thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 |
| Net earnings, as reported (GAAP) | $ 1,872 | $ 1,792 | $ 5,552 | $ 5,388 |
| Non-operating items (net of 37% statutory tax rate): | ||||
| Securities losses (gains), net | 148 | — | 333 | (428) |
| Prepayment penalties on long-term debt | — | 341 | — | 1,268 |
| Operating net earnings | $ 2,020 | $ 2,133 | $ 5,885 | $ 6,228 |
| Basic and diluted earnings per share, as reported (GAAP) | $ 0.51 | $ 0.49 | $ 1.52 | $ 1.48 |
| Non-operating items (net of 37% statutory tax rate): | ||||
| Securities losses (gains), net | 0.04 | — | 0.10 | (0.12) |
| Prepayment penalties on long-term debt | — | 0.10 | — | 0.35 |
| Operating net earnings per share | $ 0.55 | $ 0.59 | $ 1.62 | $ 1.71 |
| Net interest income, as reported (GAAP) | $ 5,448 | $ 5,270 | $ 15,971 | $ 15,643 |
| Tax-equivalent adjustment | 321 | 351 | 957 | 1,098 |
| Net interest income (tax-equivalent) | $ 5,769 | $ 5,621 | $ 16,928 | $ 16,741 |
| Noninterest income, as reported (GAAP) | $ 1,017 | $ 1,432 | $ 2,854 | $ 5,158 |
| Non-operating items: | ||||
| Securities losses (gains), net | 235 | — | 530 | (679) |
| Operating noninterest income | $ 1,252 | $ 1,432 | $ 3,384 | $ 4,479 |
| Total Revenue, as reported (GAAP) | $ 6,465 | $ 6,702 | $ 18,825 | $ 20,801 |
| Tax-equivalent adjustment | 321 | 351 | 957 | 1,098 |
| Non-operating items: | ||||
| Securities losses (gains), net | 235 | — | 530 | (679) |
| Total Operating Revenue (tax-equivalent) | $ 7,021 | $ 7,053 | $ 20,312 | $ 21,220 |
| Noninterest expense, as reported (GAAP) | $ 3,584 | $ 4,274 | $ 11,324 | $ 13,224 |
| Non-operating items: | ||||
| Prepayment penalties on long-term debt | — | (541) | — | (2,012) |
| Operating noninterest expense | $ 3,584 | $ 3,733 | $ 11,324 | $ 11,212 |
| Total stockholders' equity (GAAP) | $ 73,193 | $ 65,807 | $ 73,193 | $ 65,807 |
| Unrealized (gains) losses on available for sale securities, net of tax | (950) | 2,264 | (950) | 2,264 |
| Tier 1 Common Equity (1) | $ 72,243 | $ 68,071 | $ 72,243 | $ 68,071 |
| (1) September 30, 2014 total is preliminary. | ||||