Exhibit 99.1
 | For additional information, contact: E.L. Spencer, Jr. President, CEO and Chairman of the Board (334) 821-9200 |
Press Release – October 22, 2010
Auburn National Bancorporation, Inc. Reports Third Quarter Net Earnings
Third Quarter 2010 Results – Compared to Third Quarter 2009:
| • | Continued profitability with net earnings of $1.2 million or $0.35 per share |
| • | Net interest margin increased by 11 basis points |
| • | Mortgage lending drives 28% increase in operating noninterest income |
| • | Credit quality continues to compare favorably to industry peers; nonperforming assets to total assets of 2.18% |
| • | Strengthened loan loss reserve to 1.91% of total loans at September 30, 2010, compared to 1.42% at September 30, 2009 |
| • | Maintained strong balance sheet with tangible common equity to total assets of 7.51% |
AUBURN, Alabama – Auburn National Bancorporation (Nasdaq: AUBN) reported net earnings of approximately $1.2 million, or $0.35 per share, for the third quarter of 2010, compared to $1.0 million, or $0.28 per share, for the third quarter of 2009. Net earnings for the first nine months of 2010 were $4.5 million, or $1.23 per share, compared to $2.2 million, or $0.60 per share, for the same period in 2009.
Third quarter 2010 operating net earnings, which excludes the effects of non-operating items such as securities gains or losses, expenses related to other real estate owned and prepayment penalties on long-term debt, were approximately $1.6 million, or $0.44 per share, compared to third quarter 2009 operating net earnings of approximately $1.2 million, or $0.32 per share.
E.L. Spencer, Jr., President, CEO and Chairman of the Board, commented: “The Company’s third quarter 2010 results were profitable, reflecting improved net interest margin and mortgage lending income when compared to the third quarter of 2009. Despite a challenging environment for revenue growth, the Company’s operating revenues increased by seven percent during the third quarter of 2010 when compared to the third quarter of 2009.”
Net interest income (tax-equivalent) was $5.2 million for the third quarter of 2010, compared to $5.1 million for the third quarter of 2009. Net interest income (tax-equivalent) increased primarily due to net interest margin expansion. Average loans were $374.2 million in the third quarter of 2010, compared to $377.2 in the third quarter of 2009. Average total deposits were $599.7 million in the third quarter of 2010, compared to $604.0 million in the third quarter of 2009.
Nonperforming assets increased slightly on a linked-quarter basis to 2.18% of total assets at September 30, 2010, compared to 1.98% of total assets at June 30, 2010. However, the Company’s annualized net charge-off ratio declined to 0.14% in the third quarter of 2010, compared to 0.31% in the third quarter of 2009. As a result, the provision for loan losses decreased to $0.7 million during the third quarter of 2010, compared to $1.1 million in the third quarter of 2009.
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Reports Third Quarter Net Earnings/page 2
Mr. Spencer continued, “The Company continued to build its allowance for loan losses during the third quarter of 2010 to 1.91% of total loans. Although reported decreases in net charge-offs and the provision for loan losses during the third quarter of 2010 are positive trends, we foresee ongoing challenges related to asset quality given the high rate of unemployment and slow economic growth nationally.”
Operating noninterest income (which excludes non-operating items mentioned below) was approximately $1.7 million in the third quarter of 2010, compared to $1.3 million in the third quarter of 2009. This change is primarily due to an increase in mortgage lending income, reflecting an increase in the level of mortgage refinance activity during the third quarter of 2010 compared to the levels reported during the third quarter of 2009.
Total noninterest income, including non-operating items, was approximately $1.9 million in the third quarter of 2010, compared to $1.2 million in the third quarter of 2009. The increase in total noninterest income is primarily due to an increase in mortgage lending income and a decrease in other-than-temporary impairment charges reflected within net securities gains (losses). The Company recorded $0.3 million in other-than-temporary impairment charges in the third quarter of 2010, compared to approximately $0.8 million of other-than-temporary impairment charges in the third quarter of 2009. Other-than-temporary impairment charges relate to the Company’s investments in trust preferred securities.
Operating noninterest expense (which excludes non-operating items mentioned below) was approximately $3.7 million in the third quarter of 2010, compared to $3.4 million in the third quarter of 2009. The increase in operating noninterest expense is primarily due to an increase in salaries and benefits expense, which include commissions paid to our mortgage originators.
Total noninterest expense, including non-operating items, was approximately $4.4 million during the third quarter of 2010, compared to $3.4 million in the third quarter of 2009. The increase in total noninterest expense is primarily due to an increase in other real estate owned expense of $0.3 million, prepayment penalties on long-term debt of $0.4 million, and an increase in salaries and benefits expense of $0.2 million. The increase in other real estate owned expense primarily related to write-downs of the carrying value of certain foreclosed (OREO) properties.
In the third quarter of 2010, the Company paid cash dividends of $0.195 per share. At September 30, 2010, the Bank’s regulatory capital was well above the minimum amounts required to be “well capitalized” under current regulatory standards.
About Auburn National Bancorporation
Auburn National Bancorporation, Inc. (the “Company”) is the parent company of AuburnBank (the “Bank”), with total assets of approximately $778 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, Hurtsboro and Notasulga, Alabama. In-store branches are located in the Auburn and Opelika Kroger stores, as well as in the Wal-Mart SuperCenter stores in Auburn, Opelika, and Phenix City, Alabama. Mortgage loan offices are located in Phenix City, Valley and Mountain Brook, Alabama. Additional information about the Company and the Bank may be found by visitingwww.auburnbank.com.
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, net interest margin, securities valuations and performance, loan performance, nonperforming assets, charge-offs, collateral values, and credit quality conditions, 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,
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and which may cause the actual results, performance or achievements of the Company or the Bank to be materially different from future results, performance or achievements 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, including, without limitation, those risks and uncertainties described in our annual report on Form 10-K for the year ended December 31, 2009, and otherwise in our SEC reports and filings.
Explanation of Certain Unaudited Non-GAAP Financial Measures
This press release contains financial information determined by methods other than 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. 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, a clearer understanding of the Company’s performance, and that operating net earnings better reflect the Company’s core operating activities. Management utilizes 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 operating 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.
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Reports Third Quarter Net Earnings/page 4
Financial Highlights (unaudited)*
| Quarter ended September 30 | Nine months ended September 30 | |||||||||||||||
| (Dollars in thousands, except per share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Results of Operations | ||||||||||||||||
Net interest income (a) | $ | 5,187 | $ | 5,094 | $ | 15,581 | $ | 14,901 | ||||||||
Less: tax-equivalent adjustment | 449 | 432 | 1,324 | 1,195 | ||||||||||||
Net interest income (GAAP) | 4,738 | 4,662 | 14,257 | 13,706 | ||||||||||||
Noninterest income | 1,857 | 1,159 | 6,945 | 2,333 | ||||||||||||
Total revenue | 6,595 | 5,821 | 21,202 | 16,039 | ||||||||||||
Provision for loan losses | 730 | 1,100 | 2,930 | 2,350 | ||||||||||||
Noninterest expense | 4,366 | 3,421 | 12,811 | 10,898 | ||||||||||||
Income tax expense | 255 | 277 | 993 | 590 | ||||||||||||
Net earnings | $ | 1,244 | $ | 1,023 | $ | 4,468 | $ | 2,201 | ||||||||
Per share data: | ||||||||||||||||
Basic and diluted net earnings: | ||||||||||||||||
GAAP | $ | 0.35 | $ | 0.28 | $ | 1.23 | $ | 0.60 | ||||||||
Operating (b) | 0.44 | 0.32 | 1.11 | 1.28 | ||||||||||||
Cash dividends declared | $ | 0.195 | $ | 0.190 | $ | 0.585 | $ | 0.570 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic and diluted | 3,642,701 | 3,644,097 | 3,642,896 | 3,645,128 | ||||||||||||
Shares outstanding, at period end | 3,642,718 | 3,644,097 | 3,642,718 | 3,644,097 | ||||||||||||
Book value | $ | 16.73 | $ | 16.03 | $ | 16.73 | $ | 16.03 | ||||||||
Common stock price: | ||||||||||||||||
High | $ | 22.00 | $ | 29.99 | $ | 22.00 | $ | 30.00 | ||||||||
Low | 18.08 | 22.50 | 16.86 | 18.07 | ||||||||||||
Period-end: | $ | 20.35 | $ | 24.40 | $ | 20.35 | $ | 24.40 | ||||||||
To earnings ratio | 15.78 | x | 28.05 | x | 15.78 | x | 28.05x | |||||||||
To book value | 122 | % | 152 | % | 122 | % | 152% | |||||||||
Performance ratios: | ||||||||||||||||
Return on average equity: | ||||||||||||||||
GAAP | 8.31 | % | 7.64 | % | 10.17 | % | 5.25% | |||||||||
Operating (b) | 10.50 | % | 8.60 | % | 9.18 | % | 11.10% | |||||||||
Return on average assets: | ||||||||||||||||
GAAP | 0.64 | % | 0.52 | % | 0.76 | % | 0.37% | |||||||||
Operating (b) | 0.81 | % | 0.58 | % | 0.69 | % | 0.78% | |||||||||
Dividend payout ratio | 55.71 | % | 67.86 | % | 47.56 | % | 95.00% | |||||||||
Other financial data: | ||||||||||||||||
Net interest margin (a) | 2.85 | % | 2.74 | % | 2.87 | % | 2.70% | |||||||||
Effective income tax rate | 17.01 | % | 21.31 | % | 18.18 | % | 21.14% | |||||||||
Efficiency ratio (c) | 53.75 | % | 52.86 | % | 54.69 | % | 53.56% | |||||||||
Asset Quality: | ||||||||||||||||
Nonperforming assets: | ||||||||||||||||
Nonperforming (nonaccrual) loans | $ | 8,776 | $ | 8,490 | $ | 8,776 | $ | 8,490 | ||||||||
Other real estate owned | 8,163 | 5,279 | 8,163 | 5,279 | ||||||||||||
Total nonperforming assets | $ | 16,939 | $ | 13,769 | $ | 16,939 | $ | 13,769 | ||||||||
Net charge-offs | $ | 129 | $ | 288 | $ | 2,244 | $ | 1,290 | ||||||||
Allowance for loan losses as a % of: | ||||||||||||||||
Loans | 1.91 | % | 1.42 | % | 1.91 | % | 1.42% | |||||||||
Nonperforming loans | 82 | % | 64 | % | 82 | % | 64% | |||||||||
Nonperforming assets as a % of: | ||||||||||||||||
Loans and foreclosed properties | 4.42 | % | 3.52 | % | 4.42 | % | 3.52% | |||||||||
Total assets | 2.18 | % | 1.75 | % | 2.18 | % | 1.75% | |||||||||
Nonperforming loans as a % of total loans | 2.34 | % | 2.20 | % | 2.34 | % | 2.20% | |||||||||
Net charge-offs (annualized) as a % of average loans | 0.14 | % | 0.31 | % | 0.79 | % | 0.46% | |||||||||
Selected average balances: | ||||||||||||||||
Securities | $ | 331,913 | $ | 346,353 | $ | 329,858 | $ | 346,014 | ||||||||
Loans, net of unearned income | 374,224 | 377,170 | 377,251 | 374,795 | ||||||||||||
Total assets | 778,979 | 790,885 | 783,100 | 791,403 | ||||||||||||
Total deposits | 599,708 | 604,005 | 601,593 | 598,802 | ||||||||||||
Long-term debt | 113,120 | 118,355 | 115,430 | 120,887 | ||||||||||||
Total stockholders’ equity | 59,900 | 53,584 | 58,595 | 55,949 | ||||||||||||
Selected period end balances: | ||||||||||||||||
Securities | $ | 322,118 | $ | 338,924 | $ | 322,118 | $ | 338,924 | ||||||||
Loans, net of unearned income | 375,098 | 385,448 | 375,098 | 385,448 | ||||||||||||
Allowance for loan losses | 7,181 | 5,458 | 7,181 | 5,458 | ||||||||||||
Total assets | 777,846 | 786,042 | 777,846 | 786,042 | ||||||||||||
Total deposits | 602,508 | 597,591 | 602,508 | 597,591 | ||||||||||||
Long-term debt | 108,335 | 118,355 | 108,335 | 118,355 | ||||||||||||
Total stockholders’ equity | 60,937 | 58,405 | 60,937 | 58,405 |
*Certain amounts reported in prior periods have been reclassified to conform to the current-period presentation.
(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.
Reports Third Quarter Net Earnings/page 5
Reconciliation of GAAP to non-GAAP Measures (unaudited):
| Quarter ended September 30 | Nine months ended September 30 | |||||||||||||||
| (Dollars in thousands, except per share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Net earnings, as reported (GAAP) | $ | 1,244 | $ | 1,023 | $ | 4,468 | $ | 2,201 | ||||||||
Non-operating items (net of 37% tax): | ||||||||||||||||
Securities (gains) losses, net (a) | (81 | ) | 119 | (1,644 | ) | 2,440 | ||||||||||
Other real estate owned, net | 169 | 10 | 781 | 15 | ||||||||||||
Prepayment penalty on long-term debt | 240 | — | 428 | — | ||||||||||||
Operating net earnings | $ | 1,572 | $ | 1,152 | $ | 4,033 | $ | 4,656 | ||||||||
Net interest income, as reported (GAAP) | $ | 4,738 | $ | 4,662 | $ | 14,257 | $ | 13,706 | ||||||||
Tax-equivalent adjustment | 449 | 432 | 1,324 | 1,195 | ||||||||||||
Net interest income (tax-equivalent) | $ | 5,187 | $ | 5,094 | $ | 15,581 | $ | 14,901 | ||||||||
Noninterest income, as reported (GAAP) | $ | 1,857 | $ | 1,159 | $ | 6,945 | $ | 2,333 | ||||||||
Non-operating items: | ||||||||||||||||
Securities (gains) losses, net | (129 | ) | 189 | (2,610 | ) | 3,070 | ||||||||||
Operating noninterest income | $ | 1,728 | $ | 1,348 | $ | 4,335 | $ | 5,403 | ||||||||
Total Revenue, as reported (GAAP) | $ | 6,595 | $ | 5,821 | $ | 21,202 | $ | 16,039 | ||||||||
Tax-equivalent adjustment | 449 | 432 | 1,324 | 1,195 | ||||||||||||
Non-operating items: | ||||||||||||||||
Securities (gains) losses, net | (129 | ) | 189 | (2,610 | ) | 3,070 | ||||||||||
Total Operating Revenue (tax-equivalent) | $ | 6,915 | $ | 6,442 | $ | 19,916 | $ | 20,304 | ||||||||
Noninterest expense, as reported (GAAP) | $ | 4,366 | $ | 3,421 | $ | 12,811 | $ | 10,898 | ||||||||
Non-operating items: | ||||||||||||||||
Other real estate owned, net | (268 | ) | (16 | ) | (1,240 | ) | (24) | |||||||||
Prepayment penalty on long-term debt | (381 | ) | — | (679 | ) | — | ||||||||||
Operating noninterest expense | $ | 3,717 | $ | 3,405 | $ | 10,892 | $ | 10,874 | ||||||||
Total stockholders’ equity (GAAP) | $ | 60,937 | $ | 58,405 | $ | 60,937 | $ | 58,405 | ||||||||
Unrealized (gains) losses on available for sale securities, net of tax | (2,536 | ) | (1,821 | ) | (2,536 | ) | (1,821 | ) | ||||||||
Tangible Common Equity | $ | 58,401 | $ | 56,584 | $ | 58,401 | $ | 56,584 | ||||||||
(a) Any securities losses for which no tax benefit is recorded are included at the gross amount.