Auburn National Bancorporation, Inc. Reports First Quarter Net Earnings

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Auburn National Bancorporation, Inc. reported strong first-quarter results with a net income of $1.4 million, or $0.39 per share, driven by a significant increase in net interest income and improved credit quality. The company's net interest income rose by 8% to $6.7 million, with an annualized loan growth of 7%. Nonperforming assets decreased to 0.09% of total assets. The company's total assets stood at $979.0 million, with deposits reaching $899.7 million.

Positive

• Net income of $1.4 million, or $0.39 per share for the first quarter of 2024
• Net interest income increased by $0.5 million to $6.7 million, a rise of 8%
• Net interest margin rose by 39 basis points to 3.04%
• Annualized loan growth of 7%
• Nonperforming assets to total assets were 0.09%
• Period-end deposits increased by $3.4 million to $899.7 million
• Total assets were $979.0 million at March 31, 2024
• Tangible common equity ratio was 7.63% at March 31, 2024
• Paid cash dividends of $0.27 per share in the first quarter of 2024
• Regulatory capital ratios were well above the minimum required levels

Negative

• None.

Financial Analyst

Analyzing Auburn National Bancorporation's first-quarter net earnings reveals a strong recovery from the previous quarter's net loss. The 8% increase in net interest income to $6.7 million is promising, especially in conjunction with the net interest margin improvement to 3.04%. The strategic balance sheet repositioning seems to have benefitted overall profitability, as evidenced by the rebound from a net loss to $1.4 million in earnings. Loan growth of 7% suggests robust business activities, although it's essential to monitor how this might impact the loan portfolio's risk profile in the future.

Credit Analyst

The exceptionally low nonperforming assets ratio at 0.09% underscores the institution's healthy credit environment and effective risk management. However, the provision for credit losses increased to $0.3 million compared to the first quarter of 2023, indicating a cautious approach amidst the backdrop of potential economic headwinds. Depositors and investors should note the increase in the allowance for credit losses to 1.27% of total loans, signifying a conservative reserve build-up to cushion future defaults.

Market Analyst

Auburn National Bancorporation's asset growth and deposit base stability are encouraging signs in a volatile rate environment. The growth in total loans across most categories, barring construction and land development, is a strategic response to current market conditions. The company's stockholders’ equity decrease is primarily due to accounting adjustments and does not impact regulatory capital, which remains well above the 'well capitalized' threshold. This reflects prudent financial management that could reassure investors of the company's stability and resilience.

First Quarter 2024 Highlights⁽¹⁾:

• Net income of $1.4 million, or $0.39 per share
  
• Net interest income (tax-equivalent) was $6.7 million, an increase of $0.5 million, or 8%
  
• Net interest margin (tax-equivalent) increased 39 basis points to 3.04%
  
• Annualized loan growth of 7%
  
• Strong credit quality – Nonperforming assets to total assets were 0.09%
  
• Period-end deposits increased by $3.4 million to $899.7 million
  

AUBURN, Ala., April 24, 2024 (GLOBE NEWSWIRE) -- Auburn National Bancorporation, Inc. (Nasdaq: AUBN) reported net earnings of $1.4 million, or $0.39 per share, for the first quarter of 2024, compared to a net loss of $(4.0) million, or $(1.14) per share, for the fourth quarter of 2023 and net earnings of $2.0 million, or $0.56 per share, for the first quarter of 2023.

The loss in the fourth quarter of 2023 reflects the Company’s decision to reposition its balance sheet, which included the sale of $117.6 million of low-yielding, available-for-sale securities for an after-tax loss of $(4.7) million or $(1.35) per share. Proceeds from the securities sale were used to repay high-cost brokered deposits and sell high-cost reciprocal deposits. Excluding the loss on sale of securities, net earnings would have been $0.7 million, or $0.21 per share for the fourth quarter of 2023.

“The Company’s first quarter results reflect meaningful improvement in our net interest income compared to the prior quarter and continued strength in our credit quality, liquidity, and capital,” said David A. Hedges, President and CEO. “While we expect the interest rate environment will remain challenging in 2024, we are pleased with the improvement in earnings following the balance sheet repositioning we executed in the fourth quarter of 2023,” continued Mr. Hedges.

Net interest income (tax-equivalent) was $6.7 million for the first quarter of 2024, an increase of 8% compared to the fourth quarter of 2023. This increase was primarily due to an increase in the Company’s net interest margin. The Company’s net interest margin (tax-equivalent) was 3.04% in the first quarter of 2024 compared to 2.65% in the fourth quarter of 2023. This increase was primarily due to decreased deposit costs, a more favorable asset mix, and higher yields on interest earning assets. Average loans for the first quarter of 2024 were $560.8 million, a 2% increase from the fourth quarter of 2023.

Nonperforming assets were $0.9 million, or 0.09% of total assets, at March 31, 2024 and December 31, 2023, compared to $2.7 million or 0.26% of total assets, at March 31, 2023. The decrease was primarily due to the resolution of one nonperforming loan, which was paid in full.

The Company recorded a provision for credit losses of $0.3 million in the first quarter of 2024 and the fourth quarter of 2023, compared to a provision for credit losses of $0.1 million in the first quarter of 2023.

At March 31, 2024, the Company’s allowance for credit losses was $7.2 million, or 1.27% of total loans, compared to $6.9 million, or 1.23% of total loans, at December 31, 2023, and $6.8 million, or 1.35% of total loans, at March 31, 2023.

Noninterest income was $0.9 million for the first quarter of 2024, compared to a loss of $(5.4) million for the fourth quarter of 2023 due to the balance sheet repositioning. Excluding the pre-tax securities loss of $(6.3) million related to the balance sheet repositioning, noninterest income would have been $0.9 million for the fourth quarter of 2023.

Noninterest expense was $5.7 million for the first quarter of 2024, a decrease of $0.1 million compared to the fourth quarter of 2023.

Income tax expense was $0.2 million for an effective tax rate of 10.68% for the first quarter of 2024. The provision for income taxes was a credit of $1.5 million due to the loss from the balance sheet repositioning for an effective tax rate of (27.53%) for the fourth quarter of 2023. This increase was primarily due to an increase in pre-tax earnings in the first quarter of 2024 compared to the fourth quarter of 2023 due to the loss from the balance sheet repositioning.

Total assets were $979.0 million at March 31, 2024, compared to $975.3 million at December 31, 2023, and $1.0 billion at March 31, 2023. Loans, net of unearned income were $567.5 million at March 31, 2024, compared to $557.3 million at December 31, 2023 and $505.0 million at March 31, 2023. This increase in loans reflects growth across all major loan categories, except construction and land development loans. Total deposits were $899.7 million at March 31, 2024, compared to $896.2 million at December 31, 2023, and $939.2 million at March 31, 2023. The decrease in deposits since March 31, 2023 was primarily related to the sale of reciprocal deposits. At March 31, 2024, the Company had $48.9 million of reciprocal deposits, compared to $59.0 million at December 31, 2023, and none at March 31, 2023. The Company had no FHLB advances or other wholesale borrowings outstanding at March 31, 2024, December 31, 2023, or March 31, 2023.

At March 31, 2024, the Company's consolidated stockholders' equity (book value) was $74.5 million or $21.32 per share, compared to $76.5 million, or $21.90 per share, at December 31, 2023 and $73.6 million, or $21.03 per share, at March 31, 2023. The decrease from December 31, 2023 was primarily driven by an other comprehensive loss of $2.2 million due to the change in unrealized losses on securities available-for-sale, net of tax, cash dividends paid of $0.9 million, and a $0.3 million one-time charge for the cumulative effect to adopt a new accounting standard on January 1, 2024, partially offset by net earnings of $1.4 million. Unrealized losses do not affect the Bank’s capital for regulatory capital purposes.

The Company’s tangible common equity ratio or total equity to total assets ratio was 7.63% at March 31, 2024, compared to 7.84% at December 31, 2023, and 7.24% at March 31, 2023. All of the Company’s securities are classified as available-for-sale and not held-to-maturity. Therefore, any changes in the fair value of the Company’s securities portfolio are fully reflected in total equity under generally accepted accounting principles.

The Company paid cash dividends of $0.27 per share in the first quarter of 2024. The Company had no share repurchases during the first quarter of 2024. At March 31, 2024, the Bank’s regulatory capital ratios were 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 $979 million. The Bank is an Alabama state-chartered bank that is a member of the Federal Reserve System, which 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 eight full-service branches in Auburn, Opelika, Valley, and Notasulga, Alabama. The Bank also operates a loan production office in 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, the continuing effects of the COVID-19 pandemic and related government, Federal Reserve monetary and regulatory actions, including the continuing effects of pandemic-related economic stimulus and economic conditions generally and in our markets, loan demand, mortgage lending activity, changes in the mix of our earning assets (including those generating tax exempt income or tax credits) and our mix and cost of deposits and wholesale liabilities, net interest margin, yields on earning assets, the market values and performance of securities held, effects of inflation, including Federal Reserve monetary policies which were tightened in response to inflation beginning in 2022 through increases in the target federal funds rate and reductions in the Federal Reserve’s Treasury and mortgage-backed securities holdings, interest rates (generally and those applicable to our assets and liabilities) and changes in our asset values, especially investment securities, as a result of interest rate changes, noninterest income, loan performance, loan deferrals and modifications, nonperforming assets, other real estate owned, provision for credit losses, including the continuing effects of the application of the new CECL accounting standard adopted on January 1, 2023 and our CECL models, including possible adjustments to the fair values of securities available for sale in lieu of other-than-temporary impairments, charge-offs, collateral values, credit quality, asset sales, insurance claims, 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, 2023 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 include certain designated net interest income amounts presented on a tax-equivalent basis, a non-GAAP financial measure, and the presentation and calculation of the efficiency ratio, a non-GAAP measure. Management uses these non-GAAP financial measures in its analysis of the Company’s performance and believes the presentation of net interest income on a tax-equivalent basis provides comparability of net interest income from both taxable and tax-exempt sources and facilitates comparability within the industry. Similarly, the efficiency ratio is a common measure that facilitates comparability with other financial institutions. Although the Company believes these non-GAAP financial measures enhance investors’ understanding of its business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. Along with the attached financial highlights, the Company provides reconciliations between the GAAP financial measures and these non-GAAP financial measures.

¹ Comparisons noted in the bullet points are for the first quarter 2024 versus the prior quarter (fourth quarter 2023), unless otherwise specified.

For additional information, contact:
David A. Hedges
President and CEO
(334) 821-9200

Financial Highlights (unaudited)											Quarter ended
				March 31,				December 31,			March 31,
(Dollars in thousands, except per share amounts)				2024				2023			2023
Results of Operations
Net interest income (a)			$	6,677				6,154			7,217
Less: tax-equivalent adjustment				20				95			108
	Net interest income (GAAP)			6,657				6,059			7,109
Noninterest income				887				(5,429	)		792
	Total revenue			7,544				630			7,901
Provision for credit losses				334				326			66	+
Noninterest expense				5,675				5,803			5,604
Income tax expense				164				(1,514	)		267
Net earnings			$	1,371				(3,985	)		1,964
Per share data:
Basic and diluted net earnings			$	0.39				(1.14	)		0.56
Cash dividends declared			$	0.27				0.27			0.27
Weighted average shares outstanding:
	Basic and diluted			3,493,663				3,493,614			3,502,143
Shares outstanding, at period end				3,493,699				3,493,614			3,500,879
Stockholders' equity (book value)			$	21.32				21.90			21.03
Common stock price:
	High		$	21.55				21.99			24.50
	Low			18.82				19.72			22.55
	Period-end			19.27				21.28			22.66
		To earnings ratio		83.78		x		53.20			7.79
		To book value		90		%		97			108
Performance ratios:
Return on average equity (annualized)				7.13		%		(26.40	)		11.44
Return on average assets (annualized)				0.56		%		(1.56	)		0.77
Dividend payout ratio				69.23		%		(23.68	)		48.21
Other financial data:
Net interest margin (a)				3.04		%		2.65			3.17
Effective income tax rate				10.68		%		(27.53	)		11.97
Efficiency ratio (b)				75.03		%		800.41			69.97
Asset Quality:
Nonperforming assets:
	Nonperforming (nonaccrual) loans		$	878				911			2,679
	Other real estate owned			—				—			—
		Total nonperforming assets	$	878				911			2,679
Net (recoveries) charge-offs			$	(66	)			173			3
Allowance for credit losses as a % of:
	Loans			1.27		%		1.23			1.35
	Nonperforming loans			822		%		753			255
Nonperforming assets as a % of:
	Loans and other real estate owned			0.15		%		0.16			0.53
	Total assets			0.09		%		0.09			0.26
Nonperforming loans as a % of total loans				0.15		%		0.16			0.53
Annualized net (recoveries) charge-offs as a % of average loans				(0.05	)	%		0.13			—
Selected average balances:
Securities			$	267,606				354,065			402,684
Loans, net of unearned income				560,757				550,938			502,158
Total assets				976,930				1,020,476			1,022,938
Total deposits				897,051				953,674			948,393
Total stockholders' equity				76,948				60,372			68,655
Selected period end balances:
Securities			$	260,770				270,910			405,692
Loans, net of unearned income				567,520				557,294			505,041
Allowance for credit losses				7,215				6,863			6,821
Total assets				979,039				975,255			1,017,746
Total deposits				899,673				896,243			939,190
Total stockholders' equity				74,489				76,507			73,640
(a) Tax equivalent. See “Explanation of Certain Unaudited Non-GAAP Financial Measures” and “Reconciliation of GAAP to non-GAAP Measures (unaudited).”
(b) Efficiency ratio is the result of noninterest expense divided by the sum of noninterest income and tax-equivalent net interest income. See “Reconciliation of GAAP to non-GAAP Measures (unaudited)” below.

Reconciliation of GAAP to non-GAAP Measures (unaudited):
							Quarter ended
		March 31,			December 31,		March 31,
(Dollars in thousands, except per share amounts)		2024			2023		2023
Net interest income, as reported (GAAP)	$	6,657			6,059		7,109
Tax-equivalent adjustment		20			95		108
Net interest income (tax-equivalent)	$	6,677			6,154		7,217

FAQ

What was Auburn National Bancorporation, Inc.'s net income for the first quarter of 2024?

Auburn National Bancorporation, Inc. reported a net income of $1.4 million, or $0.39 per share for the first quarter of 2024.

How much did the net interest income increase by in the first quarter of 2024?

The net interest income increased by $0.5 million to $6.7 million, a rise of 8% in the first quarter of 2024.

What was the tangible common equity ratio at the end of the first quarter of 2024?

The tangible common equity ratio was 7.63% at the end of the first quarter of 2024.

Did Auburn National Bancorporation, Inc. pay cash dividends in the first quarter of 2024?

Yes, the company paid cash dividends of $0.27 per share in the first quarter of 2024.

How did the company's regulatory capital ratios stand at the end of the first quarter of 2024?

At the end of the first quarter of 2024, the company's regulatory capital ratios were well above the minimum amounts required to be 'well capitalized' under current regulatory standards.