Auburn National Bancorporation, Inc. Reports Third Quarter Net Earnings
10/30/2020 - 08:15 AM
Third Quarter 2020 Results:
Net earnings of $1.9 million , or $0.54 per share, compared to $2.2 million , or $0.62 per share for the third quarter of 2019 Provision for loan losses of $250 thousand , compared to none for the third quarter of 2019 Allowance for loan losses to total loans of 1.18% or 1.28% excluding Paycheck Protection Plan (“PPP”) loans, compared to 0.95% at year-end 2019 Net interest margin decreased to 2.72% , compared to 3.41% in the third quarter of 2019 Mortgage lending income of $0.7 million more than doubled, compared to $0.3 million in the third quarter of 2019 AUBURN, Ala., Oct. 30, 2020 (GLOBE NEWSWIRE) -- Auburn National Bancorporation, Inc. (Nasdaq: AUBN) reported net earnings of $1.9 million , or $0.54 per share, for the third quarter of 2020, compared to $2.2 million , or $0.62 per share, for the third quarter of 2019. Net earnings for the nine months of 2020 were $5.4 million , or $1.51 per share, compared to $7.1 million , or $1.97 per share, for the first nine months of 2019.
“We are open and continue to serve our customers’ banking needs despite a challenging operating environment due to COVID-19. I am very proud of the response from our team,” said Robert W. Dumas, Chairman, President, and CEO.
“The economic effects of the pandemic have resulted in an additional provision for loan losses in the third quarter of 2020. In addition, we are experiencing net interest margin compression as a result of the historic low interest rate environment. Despite these challenges, we are very pleased with the increase in noninterest income as mortgage lending income more than doubled for both the quarter and first nine months of 2020.
“We are proactively working with our customers as payment deferrals have declined from nearly $113 million at June 30, 2020 to roughly $87 million at September 30, 2020. We expect this number to continue to decline in the fourth quarter of 2020 when most of the remaining initial deferral periods expire. While a great deal of uncertainty remains regarding the duration of the pandemic and its effects on our customers, we believe the Company is well positioned to continue supporting our customers and communities through this crisis,” said Mr. Dumas.
Net interest income (tax-equivalent) was $6.0 million for the third quarter of 2020, a decrease of 11% compared to $6.7 million for the third quarter of 2019. This decrease was primarily due to net interest margin compression resulting from the Federal Reserve’s efforts to keep market interest rates low.
Net interest margin (tax-equivalent) decreased to 2.72% in the third quarter of 2020, compared to 3.41% for the third quarter of 2019 primarily due to the lower interest rate environment and changes in our asset mix resulting from the significant short-term liquidity increase in customer deposits.
At September 30, 2020, the Company’s allowance for loan losses was $5.6 million , or 1.18% of total loans, compared to $4.4 million , or 0.95% of total loans, at December 31, 2019 and $4.8 million , or 1.03% of total loans, at September 30, 2019. Excluding PPP loans, the Company’s allowance for loan losses was 1.28% of total loans at September 30, 2020.$250 thousand for the third quarter of 2020, compared to no provision for loan losses during the third quarter of 2019. The increase in the provision for loan losses was related to adverse changes in economic conditions and portfolio trends driven by the COVID-19 pandemic, including higher unemployment in our primary market area. The provision for loan losses is based upon various estimates and judgments, including the absolute level of loans, economic conditions, loan growth, credit quality and the amount of net charge-offs.
We have identified certain commercial sectors with enhanced risk resulting from the impact of COVID-19. Loans within these sectors represent 49% of the Company’s total COVID-19 related modifications at September 30, 2020. The table below summarizes the loans outstanding for these sectors at September 30, 2020.
Portfolio Segment ( Dollars i n thousands) Commercial Construction Commercial Total % of Total September 30, 2020: Hotel/motel $ 753 9,890 43,111 $ 53,754 11 % Shopping centers 13 — 33,630 33,643 7 Retail, excluding shopping centers 283 161 18,149 18,593 4 Restaurants 1,516 — 13,306 14,822 4 Total $ 2,565 10,051 108,196 $ 120,812 26 %
At September 30, 2020, we have granted loan payment deferrals or other loan modifications totaling $87.1 million , or 18% of total loans, compared to $112.7 million , or 24% of total loans at June 30, 2020. The tables below provide information concerning the composition of these COVID-19 modifications as of September 30, 2020.
COVID-19 Modifications Modification Types (Dollars in thou sands) Balance % of Portfolio Interest Only P&I Payments Commercial and industrial $ 1,541 2 % 37 % 63 % Construction and land development 45 — — 100 Commercial real estate 82,491 33 32 68 Residential real estate 2,874 3 5 95 Consumer installment 117 2 — 100 Total $ 87,068 24 % 24 % 76 %
COVID-19 Modifications within High Exposure Commercial Real Estate Segments (Dollars in tho usands) Balance of Loans % of Total Hotel/motel $ 42,018 78 % Shopping centers 6,938 21 Retail, excluding shopping centers 3,033 16 Restaurants 7,523 51
Noninterest income was $1.4 million in the third quarter of 2020, compared to $1.0 million in the third quarter of 2019. The increase was primarily due to an increase in mortgage lending income as lower interest rates for mortgage loans increased refinancing activity and pricing margins improved.
Noninterest expense was $4.7 million in the third quarter of 2020 compared to $4.8 million during the third quarter of 2019. The decrease was primarily due to a decrease in other noninterest expense, including marketing and various other expenses.$0.4 million for the third quarter of 2020 compared to $0.5 million during third quarter of 2019. The Company's effective tax rate for the third quarter of 2020 was 17.23% , compared to 19.28% in the third quarter of 2019.
The Company paid cash dividends of $0.25 5 per share in the third quarter of 2020, an increase of 2% from the same period in 2019. At September 30, 2020, 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 $938 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 loan production offices in Auburn 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, the effects of the COVID-19 pandemic and related government, Federal Reserve and regulatory actions, including 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) and our deposit and wholesale liabilities, net interest margin, yields on earning assets, securities valuations and performance, interest rates (generally and those applicable to our assets and liabilities), loan performance, loan deferrals and modifications, nonperforming assets, other real estate owned, provision for loan losses, charge-offs, other-than-temporary impairments, 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, 2019, our interim reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 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.
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Financial Highlights (unaudited) Quarter ended September 30, Nine months ended September 30, (Dollars in thousands, except per share amounts) 2020 2019 2020 2019 Results of Operations Net interest income (a) $ 5,990 $ 6,707 $ 18,519 $ 20,215 Less: tax-equivalent adjustment 122 140 369 431 Net interest income (GAAP) 5,868 6,567 18,150 19,784 Noninterest income 1,374 991 3,972 3,036 Total revenue 7,242 7,558 22,122 22,820 Provision for loan losses 250 — 1,100 — Noninterest expense 4,653 4,824 14,468 14,064 Income tax expense 403 527 1,156 1,699 Net earnings $ 1,936 $ 2,207 $ 5,398 $ 7,057 Per share data: Basic and diluted net earnings: $ 0.54 $ 0.62 $ 1.51 $ 1.97 Cash dividends declared $ 0.255 $ 0.25 $ 0.765 $ 0.75 Weighted average shares outstanding: Basic and diluted 3,566,239 3,568,287 3,566,184 3,586,642 Shares outstanding, at period end 3,566,276 3,566,146 3,566,276 3,566,146 Book value $ 29.81 $ 27.12 $ 29.81 $ 27.12 Common stock price: High $ 56.80 $ 47.38 $ 63.40 $ 47.38 Low 26.26 32.33 24.11 30.61 Period-end: 36.26 47.38 36.26 47.38 To earnings ratio 15.97 x 18.08 x 15.97 x 18.08 x To book value 122 % 175 % 122 % 175 % Performance ratios: Return on average equity (annualized) 7.26 % 9.25 % 6.94 % 10.17 % Return on average assets (annualized) 0.84 % 1.06 % 0.81 % 1.14 % Dividend payout ratio 47.22 % 40.32 % 50.66 % 38.07 % Other financial data: Net interest margin (a) 2.72 % 3.41 % 2.96 % 3.48 % Effective income tax rate 17.23 % 19.28 % 17.64 % 19.40 % Efficiency ratio (b) 63.19 % 62.67 % 64.33 % 60.49 % Asset Quality: Nonperforming assets: Nonperforming (nonaccrual) loans $ 549 $ 174 $ 549 $ 174 Total nonperforming assets $ 549 $ 174 $ 549 $ 174 Net (recoveries) charge-offs $ (17 ) $ 44
Auburn National Bancorp Inc.
AUBN Rankings
#2694 Ranked by Stock Gains
AUBN Stock Data
Industry
Commercial Banking
Sector
Finance and Insurance
Tags
Finance, Regional Banks, Finance and Insurance, Commercial Banking
About AUBN
auburn national bancorporation, inc. (nasdaq: aubn) is a bank holding company headquartered in auburn, alabama, with total assets of $790 million as of march 31, 2015. through our wholly-owned subsidiary, auburnbank, we offer a full range of banking services to commercial and retail customers. founded in 1907, the bank has operated continuously since it was established as the first financial institution in auburn, alabama. auburnbank is community oriented and focuses primarily on offering commercial and consumer loan and deposit services to individuals, and small and middle market businesses in east alabama, including lee county and surrounding areas. the bank has 10 offices and 14 atm locations throughout the communities we serve. for nine of the last ten years, american banker magazine (may 2015 issue) featured auburn national bancorporation, inc. as one of the "top 200 community banks" in the nation, based on average return on equity (“roe”) for a three-year period. equal housing l
