Full Year 2020 Results:

  • Net interest margin decreased to 2.92% in 2020, compared to 3.43% in 2019

  • Mortgage lending income increased by $1.5 million in 2020, or 168%, compared to 2019

  • Funded 423 loans in 2020 for $36.5 million under the Paycheck Protection Program (“PPP”), supporting an estimated 5,500 jobs

  • Provision for loan losses increased to $1.1 million in 2020, compared to a negative provision of $0.3 million in 2019 primarily due to risks resulting from the Coronavirus (“COVID-19”) pandemic

  • The allowance for loan losses to total loans increased to 1.22% in 2020, compared to 0.95% at year-end 2019

  • Named a “Banking Performance Powerhouse” by Bank Director in their 2021 ‘RankingBanking’ study

AUBURN, Ala., Jan. 29, 2021 (GLOBE NEWSWIRE) -- Auburn National Bancorporation (Nasdaq: AUBN) reported quarterly net earnings of $2.1 million, or $0.58 per share, for the fourth quarter of 2020, compared to $2.7 million, or $0.75 per share, for the fourth quarter of 2019. For the full year 2020, the Company reported net earnings of $7.5 million, or $2.09 per share for 2020, compared to $9.7 million, or $2.72 per share, for 2019. The decrease in full year 2020 net earnings was primarily driven by the negative impact of the COVID-19 pandemic, which resulted in elevated provision for loan losses, compared to 2019, in addition to a lower interest rate environment.

“I am very proud of our organization’s response to the challenges presented by the COVID-19 pandemic and I would like to extend my sincere thanks to our entire team for the results we achieved in 2020 and the efforts of our staff to stay safe while being accessible to customers,” said Robert W. Dumas, Chairman, President, and CEO. “We believe the Company’s strong balance sheet is well positioned to continue to support our customers and communities through the pandemic,” said Mr. Dumas.

“I am also pleased to report the Company was recently named a Banking Performance Powerhouse by Bank Director in their 2021 ‘RankingBanking’ study. The ranking included the 20 highest performing banks in the United States based on total shareholder return over a 20 year period-ended June 30, 2020. Once again, we remain confident that our long-term approach and philosophy of knowing and caring for our customers, maintaining exceptional asset quality, and supporting our communities will enable us to continue to generate value for our shareholders in the future,” said Mr. Dumas.

Net interest income (tax-equivalent) was $6.3 million for the fourth quarter of 2020, a decrease of 1% compared to $6.4 million for the fourth quarter of 2019. This decrease was primarily due to net interest margin compression resulting from the Federal Reserve’s interest rate reductions in response to COVID-19. Net interest margin (tax-equivalent) decreased to 2.81% in the fourth quarter of 2020, compared to 3.27% for the fourth quarter of 2019 primarily due to the lower interest rate environment and changes in our asset mix resulting from the significant increase in customer deposits.

The Company recorded no provision for loan losses for the fourth quarter of 2020, compared to a negative provision of $0.3 million for the fourth quarter of 2020. At December 31, 2020, the Company’s allowance for loan losses was $5.6 million, or 1.22% of total loans, compared to $4.4 million, or 0.95% of total loans, at December 31, 2019. Excluding PPP loans, the Company’s allowance for loan losses was 1.27% of total loans at December 31, 2020.

We have identified certain commercial sectors with enhanced risk resulting from the impact of COVID-19. Loans within these sectors represent 86% of the Company’s total COVID-19 related modifications at December 31, 2020. The table below summarizes the loans outstanding for these sectors at December 31, 2020.

  Portfolio Segment    
(Dollars in thousands) Commercial
and industrial		Construction
and land
development		Commercial
real estate		 Total% of Total
Loans
December 31, 2020:        
Hotel/motel$86610,54942,900$54,31512%
Shopping centers 8—30,000 30,0086 
Retail, excluding shopping centers 327—18,053 18,3804 
Restaurants 1,407—12,865 14,2723 
Total$2,60810,549103,818$116,97525%


At December 31, 2020, our loan payment deferrals or other loan modifications totaled $32.3 million, or 7% of total loans. This was a decline from $87.1 million, or 18% of total loans at September 30, 2020 and $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 December 31, 2020.

COVID-19 Modifications    Modification Types 
      
(Dollars in thousands) Balance% of Portfolio
Modified		 Interest Only
Payment		 P&I Payments
Deferred		 
Commercial and industrial$741—%100%—%
Commercial real estate 31,3997 100 — 
Residential real estate 133— — 100 
Total$32,2737%99%1%


COVID-19 Modifications within High Exposure Commercial Real Estate Segments
 
(Dollars in thousands) Balance of Loans
Modified		% of Total
Segment Loans		 
Hotel/motel$26,42749%
Restaurants 1,44210 


During 2020, we participated in the PPP, where the federal government provided loan guarantees and forgiveness for qualifying loans, and generated 423 PPP loans with an aggregate outstanding principal balance of $36.5 million. We collected approximately $1.5 million in fees payable by the federal government on our PPP loans. These fees are recognized, net of related costs, as a yield adjustment over the life of the underlying PPP loans. During 2020, we received payments and forgiveness on 158 loans totaling $17.5 million. The outstanding balance for the remaining 265 loans as of December 31, 2020 was approximately $19.0 million.

Noninterest income was $1.4 million in the fourth quarter of 2020, compared to $2.5 million in the fourth quarter of 2019. The decrease was primarily due to a $1.7 million payment received by the Company during the fourth quarter of 2019 that resulted from the termination of a loan guarantee program operated by the State of Alabama. This decrease was partially offset by an increase in mortgage lending income of $0.5 million during the fourth quarter of 2020 compared to the fourth quarter of 2019, as lower interest rates for mortgage loans increased refinancing activity and pricing margins improved.

Noninterest expense was $5.1 million in the fourth quarter of 2020 compared to $5.6 million during the fourth quarter of 2019. The decrease was primarily due to a reduction of $0.2 million in salaries and benefits expense and $0.3 million of various expenses related to the planned redevelopment of the Company’s headquarters in downtown Auburn.

Income tax expense was $0.4 million for the fourth quarter of 2020, compared to $0.7 million during fourth quarter of 2019. The Company's effective tax rate for the fourth quarter of 2020 was 17.92%, compared to 20.00% in the fourth quarter of 2019. This change was primarily due to a decrease in the level of earnings before taxes relative to tax-exempt sources of income. The Company’s effective income tax rate is principally impacted by tax-exempt earnings from the Company’s investments in municipal securities and bank-owned life insurance.

The Company paid cash dividends of $0.255 per share in the fourth quarter of 2020, an increase of 2% from the same period in 2019. At December 31, 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 $957 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 response, 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, our interim reports on Form 10-Q 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.

For additional information, contact:
Robert W. Dumas
Chairman, President and CEO
(334) 821-9200


Financial Highlights (unaudited)               
    Quarter ended December 31,  Years ended December 31, 
(Dollars in thousands, except per share amounts) 2020    2019    2020    2019  
Results of Operations               
Net interest income (a)$6,311   $6,406   $24,830   $26,621  
Less: tax-equivalent adjustment 123    126    492    557  
 Net interest income (GAAP) 6,188    6,280    24,338    26,064  
Noninterest income 1,403    2,458    5,375    5,494  
 Total revenue 7,591    8,738    29,713    31,558  
Provision for loan losses —    (250)   1,100    (250) 
Noninterest expense 5,086    5,633    19,554    19,697  
Income tax expense 449    671    1,605    2,370  
Net earnings$2,056   $2,684   $7,454   $9,741  
                       
Per share data:                   
Basic and diluted net earnings:$0.58   $0.75   $2.09   $2.72  
Cash dividends declared$0.255   $0.25   $1.02   $1.00  
Weighted average shares outstanding: 3,566,276    3,566,146    3,566,207    3,581,476  
Shares outstanding, at period end 3,566,276    3,566,146    3,566,276    3,566,146  
Book value$30.20   $27.57   $30.20   $27.57  
Common stock price:                   
 High$43.00   $53.90   $63.40   $53.90  
 Low 36.75    40.00    24.11    30.61  
 Period-end$42.29   $53.00   $42.29   $53.00  
  To earnings ratio 20.23 x  19.49 x  20.23 x  19.49 x
  To book value 140 %  192 %  140 %  192 %
Performance ratios:                   
Return on average equity (annualized): 7.63 %  10.86 %  7.12 %  10.35 %
Return on average assets (annualized): 0.87 %  1.30 %  0.83 %  1.18 %
Dividend payout ratio 43.97 %  33.33 %  48.80 %  36.76 %
Other financial data:                   
Net interest margin (a) 2.81 %  3.27 %  2.92 %  3.43 %
Effective income tax rate 17.92 %  20.00 %  17.72 %  19.57 %
Efficiency ratio (b) 65.93 %  63.55 %  64.74 %  61.33 %
Asset Quality:                   
Nonperforming assets:                   
 Nonperforming (nonaccrual) loans$534   $187   $534   $187  
  Total nonperforming assets$534   $187   $534   $187  
                       
Net (recoveries) charge-offs$(43)  $171   $(132)  $154  
                       
Allowance for loan losses as a % of:                   
 Loans 1.22 %  0.95 %  1.22 %  0.95 %
 Nonperforming loans 1,052 %  2,345 %  1,052 %  2,345 %
Nonperforming assets as a % of:                   
 Loans and other real estate owned 0.12 %  0.04 %  0.12 %  0.04 %
 Total assets 0.06 %  0.02 %  0.06 %  0.02 %
Nonperforming loans as a % of total loans 0.12 %  0.04 %  0.12 %  0.04 %
Net (recoveries) charge-offs as a % of average loans (c) (0.04)%  0.15 %  (0.03)%  0.03 %
Selected average balances:                   
Securities$325,102   $249,106   $297,449   $245,038  
Loans, net of unearned income 466,704    469,579    462,561    473,213  
Total assets 944,439    827,684    900,645    826,545  
Total deposits 828,801    723,557    789,163    727,723  
Total stockholders' equity 107,791    98,887    104,734    94,151  
Selected period end balances:                   
Securities$335,177   $235,902   $335,177   $235,902  
Loans, net of unearned income 461,700    460,901    461,700    460,901  
Allowance for loan losses 5,618    4,386    5,618    4,386  
Total assets 956,597    828,570    956,597    828,570  
Total deposits 839,792    724,152    839,792    724,152  
Total stockholders' equity 107,689    98,328    107,689    98,328  
                   
(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. 
(c) Net (recoveries) charge-offs are annualized. 


Reconciliation of GAAP to non-GAAP Measures (unaudited):         
          
  Quarter ended December 31,
 Years ended December 31,
 
(Dollars in thousands, except per share amounts) 2020 2019 2020 2019 
Net interest income, as reported (GAAP)$6,188$6,280$24,338$26,064 
Tax-equivalent adjustment 123 126 492 557 
Net interest income (tax-equivalent)$6,311$6,406$24,830$26,621 

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