Auburn National Bancorporation (Nasdaq: AUBN) reported record
quarterly net earnings of $4.5 million, or $1.27 per share, for the
fourth quarter of 2022, compared to $1.9 million, or $0.53 per
share, for the fourth quarter of 2021. For the full year 2022, the
Company reported record net earnings of $10.3 million, or $2.95 per
share, compared to $8.0 million, or $2.27 per share, for 2021.
“We had record earnings for the fourth quarter and full year
2022 partly due to a couple of notable non-routine items” said
David A. Hedges, President and CEO. “However, we saw strong revenue
growth as our net interest income and margin continued to expand.
In addition to solid loan growth, our net interest margin continued
to benefit from our low-cost core deposit base. While 2023 will
present new opportunities and challenges, 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,” said Mr. Hedges.
Total revenue increased by $4.3 million, or 62%, in the fourth
quarter of 2022, compared to the fourth quarter of 2021. This
increase was primarily related to a $3.2 million gain on the sale
of land. Excluding the impact of this gain, total revenue increased
by $1.1 million, or 15%, in the fourth quarter of 2022, compared to
the fourth quarter of 2021.
Net interest income (tax-equivalent) was $7.6 million for the
fourth quarter of 2022, an increase of 23% compared to $6.2 million
for the fourth quarter of 2021. This increase was primarily due to
improvements in the Company’s net interest margin. The Company’s
net interest margin (tax-equivalent) was 3.27% in the fourth
quarter of 2022 compared to 2.45% in the fourth quarter of 2021.
This increase was primarily due to a more favorable asset mix and
higher yields on interest earning assets, while the cost of funds
only increased 7 basis points to 0.43%.
Nonperforming assets were $2.7 million, or 0.27% of total
assets, at December 31, 2022, compared to $0.3 million, or
0.03% of total assets, at September 30, 2022 and $0.8 million, or
0.07% of total assets, at December 31, 2021. The increase in
nonperforming assets was primarily due to the downgrade of one
borrowing relationship with a recorded investment of $2.6 million
at December 31, 2022.
At December 31, 2022, the Company’s allowance for loan losses
was $5.8 million, or 1.14% of total loans, compared to $5.0
million, or 1.05% at September 30, 2022 and $4.9 million, or 1.08%
of total loans, at December 31, 2021. At December 31, 2022, the
Company’s recorded investment in loans considered impaired was $2.6
million with a corresponding valuation allowance (included in the
allowance for loan losses) of $0.5 million, compared to a recorded
investment in loans considered impaired of $0.2 million with no
corresponding valuation allowance at both September 30, 2022 and
December 31, 2021.
The Company recorded a provision for loan losses of $1.0 million
in the fourth quarter of 2022, compared to no provision for loan
losses in the fourth quarter of 2021. The increase in provision for
loan losses was primarily due to loan growth and the downgrade of
one borrowing relationship. Net charge-offs were $0.2 million, or
0.16% of average loans on an annualized basis for the fourth
quarter in both of 2022 and 2021. Net charge-offs recognized in the
fourth quarter of 2022 primarily related to the one borrowing
relationship referenced above.
Noninterest income was $3.9 million in the fourth quarter of
2022 compared to $1.0 million for the fourth quarter of 2021. This
increase was primarily related to a $3.2 million gain on the sale
of land adjacent to Company headquarters. Excluding the impact of
this gain, noninterest income was $0.7 million in the fourth
quarter of 2022, a 3% decrease compared to the fourth quarter of
2021. The decrease in noninterest income was primarily due to a
decrease in mortgage lending income of $0.2 million as refinance
activity slowed in our primary market area related to higher market
interest rates.
Noninterest expense was $4.4 million in the fourth quarter of
2022 compared to $5.1 million for the fourth quarter of 2021. This
decrease was primarily related to the $1.6 million ERC payroll tax
credit recognized in the fourth quarter of 2022. Excluding the
impact of this payroll tax credit, noninterest expense was $6.0
million in the fourth quarter of 2022, a 19% increase compared to
the fourth quarter of 2021. The increase in noninterest expense was
primarily due to increases in net occupancy and equipment expense
of $0.4 million related to the Company’s new headquarters, which
opened in June 2022 and salaries and benefits expense of $0.3
million.
Income tax expense was $1.5 million for the fourth quarter of
2022, compared to $0.1 million during fourth quarter of 2021. The
Company's effective tax rate for the fourth quarter of 2022 was
24.56%, compared to 4.74% in the fourth quarter of 2021. This
increase was primarily due to increased pre-tax earnings in the
fourth quarter of 2022, additional income tax expense of $0.2
million related to the Company’s decision to surrender certain
bank-owned life insurance contracts in the fourth quarter of 2022
and an income tax benefit of $0.4 million realized in the fourth
quarter of 2021 related to a New Markets Tax Credit investment. The
Company’s effective income tax rate is principally impacted by
tax-exempt earnings from the Company’s investments in municipal
securities, bank-owned life insurance, and New Markets Tax
Credits.
At December 31, 2022, the Company’s consolidated stockholders’
equity was $68.0 million, or $19.42 per share, compared to $103.7
million, or 29.46 per share, at December 31, 2021. The decrease
from December 31, 2021 was primarily driven by an other
comprehensive loss due to the change in unrealized gains/losses on
securities available-for-sale, net of tax, during 2022, of $41.8
million. The increase in the unrealized loss on securities was
primarily due to increases in market interest rates. These
unrealized losses do not affect the Bank’s capital for regulatory
capital purposes. At December 31, 2022, the Company’s equity to
total assets ratio was 6.65%, compared to 9.39% at December 31,
2021.
The Company paid cash dividends of $0.265 per share in the
fourth quarter of 2022, an increase of 2% from the same period in
2021. The Company repurchased 17,183 shares for $0.5 million in
2022. At December 31, 2022, 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 $1.0 billion. 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 deposit and wholesale liabilities, net interest
margin, yields on earning assets, securities valuations and
performance, effects of inflation, including Federal Reserve
tightening in 2022 of monetary policies, including reductions in
the Federal Reserve’s Treasury and mortgage-backed securities
holdings and increases in the Federal Reserve’s target federal
funds rate, interest rates (generally and those applicable to our
assets and liabilities) and changes in asset values as a result of
interest rate changes, noninterest income, 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, 2021 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:David A. HedgesPresident and
CEO(334) 821-9200
Reports Full
Year and Fourth Quarter Net Earnings |
|
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Financial Highlights (unaudited) |
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Quarter ended December 31, |
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|
|
Years ended December 31, |
|
(Dollars in thousands, except per share amounts) |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Results of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (a) |
$ |
7,588 |
|
|
|
$ |
6,152 |
|
|
|
$ |
27,622 |
|
|
|
$ |
24,460 |
|
|
Less: tax-equivalent adjustment |
|
117 |
|
|
|
|
115 |
|
|
|
|
456 |
|
|
|
|
470 |
|
|
|
Net interest income (GAAP) |
|
7,471 |
|
|
|
|
6,037 |
|
|
|
|
27,166 |
|
|
|
|
23,990 |
|
|
Noninterest income |
|
3,898 |
|
|
|
|
1,000 |
|
|
|
|
6,506 |
|
|
|
|
4,288 |
|
|
|
Total revenue |
|
11,369 |
|
|
|
|
7,037 |
|
|
|
|
33,672 |
|
|
|
|
28,278 |
|
|
Provision for loan losses |
|
1,000 |
|
|
|
|
— |
|
|
|
|
1,000 |
|
|
|
|
(600 |
) |
|
Noninterest expense |
|
4,449 |
|
|
|
|
5,073 |
|
|
|
|
19,823 |
|
|
|
|
19,433 |
|
|
Income tax expense |
|
1,454 |
|
|
|
|
93 |
|
|
|
|
2,503 |
|
|
|
|
1,406 |
|
|
Net earnings |
$ |
4,466 |
|
|
|
$ |
1,871 |
|
|
|
$ |
10,346 |
|
|
|
$ |
8,039 |
|
|
|
|
|
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|
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Per share data: |
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|
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Basic and diluted net earnings: |
$ |
1.27 |
|
|
|
$ |
0.53 |
|
|
|
$ |
2.95 |
|
|
|
$ |
2.27 |
|
|
Cash dividends declared |
$ |
0.265 |
|
|
|
$ |
0.26 |
|
|
|
$ |
1.06 |
|
|
|
$ |
1.04 |
|
|
Weighted average shares outstanding: |
|
3,504,344 |
|
|
|
|
3,524,311 |
|
|
|
|
3,510,869 |
|
|
|
|
3,545,310 |
|
|
Shares outstanding, at period end |
|
3,503,452 |
|
|
|
|
3,520,485 |
|
|
|
|
3,503,452 |
|
|
|
|
3,520,485 |
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|
Book value |
$ |
19.42 |
|
|
|
$ |
29.46 |
|
|
|
$ |
19.42 |
|
|
|
$ |
29.46 |
|
|
Common stock price: |
|
|
|
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|
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|
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|
|
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|
High |
$ |
24.71 |
|
|
|
$ |
34.79 |
|
|
|
$ |
34.49 |
|
|
|
$ |
48.00 |
|
|
|
Low |
|
22.07 |
|
|
|
|
31.32 |
|
|
|
|
22.07 |
|
|
|
|
31.32 |
|
|
|
Period-end |
$ |
23.00 |
|
|
|
$ |
32.30 |
|
|
|
$ |
23.00 |
|
|
|
$ |
32.30 |
|
|
|
To earnings ratio |
|
7.82 |
|
x |
|
|
14.23 |
|
x |
|
|
7.80 |
|
x |
|
|
14.23 |
|
x |
|
To book value |
|
118 |
|
% |
|
|
110 |
|
% |
|
|
118 |
|
% |
|
|
110 |
|
% |
Performance ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average equity (annualized): |
|
28.23 |
|
% |
|
|
7.07 |
|
% |
|
|
12.48 |
|
% |
|
|
7.54 |
|
% |
Return on average assets (annualized): |
|
1.75 |
|
% |
|
|
0.70 |
|
% |
|
|
0.96 |
|
% |
|
|
0.78 |
|
% |
Dividend payout ratio |
|
20.87 |
|
% |
|
|
49.06 |
|
% |
|
|
35.93 |
|
% |
|
|
45.81 |
|
% |
Other financial data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (a) |
|
3.27 |
|
% |
|
|
2.45 |
|
% |
|
|
2.81 |
|
% |
|
|
2.55 |
|
% |
Effective income tax rate |
|
24.56 |
|
% |
|
|
4.74 |
|
% |
|
|
19.48 |
|
% |
|
|
14.89 |
|
% |
Efficiency ratio (b) |
|
38.73 |
|
% |
|
|
70.93 |
|
% |
|
|
58.08 |
|
% |
|
|
67.60 |
|
% |
Asset Quality: |
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming (nonaccrual) loans |
$ |
2,731 |
|
|
|
$ |
444 |
|
|
|
$ |
2,731 |
|
|
|
$ |
444 |
|
|
|
Other real estate owned |
|
— |
|
|
|
|
374 |
|
|
|
|
— |
|
|
|
|
374 |
|
|
|
Total nonperforming assets |
$ |
2,731 |
|
|
|
$ |
818 |
|
|
|
$ |
2,731 |
|
|
|
$ |
818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs |
$ |
201 |
|
|
|
$ |
180 |
|
|
|
$ |
174 |
|
|
|
$ |
79 |
|
|
Allowance for loan losses as a % of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
1.14 |
|
% |
|
|
1.08 |
|
% |
|
|
1.14 |
|
% |
|
|
1.08 |
|
% |
|
Nonperforming loans |
|
211 |
|
% |
|
|
1,112 |
|
% |
|
|
211 |
|
% |
|
|
1,112 |
|
% |
Nonperforming assets as a % of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and
other real estate owned |
|
0.54 |
|
% |
|
|
0.18 |
|
% |
|
|
0.54 |
|
% |
|
|
0.18 |
|
% |
|
Total
assets |
|
0.27 |
|
% |
|
|
0.07 |
|
% |
|
|
0.27 |
|
% |
|
|
0.07 |
|
% |
Nonperforming loans as a % of total loans |
|
0.54 |
|
% |
|
|
0.10 |
|
% |
|
|
0.54 |
|
% |
|
|
0.10 |
|
% |
Net charge-offs as a % of average loans |
|
0.16 |
|
% |
|
|
0.16 |
|
% |
|
|
0.04 |
|
% |
|
|
0.02 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected average balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
$ |
407,792 |
|
|
|
$ |
414,061 |
|
|
|
$ |
425,620 |
|
|
|
$ |
383,502 |
|
|
Loans, net of unearned income |
|
490,163 |
|
|
|
|
455,726 |
|
|
|
|
454,195 |
|
|
|
|
458,087 |
|
|
Total assets |
|
1,022,863 |
|
|
|
|
1,073,564 |
|
|
|
|
1,074,735 |
|
|
|
|
1,025,348 |
|
|
Total deposits |
|
951,122 |
|
|
|
|
961,544 |
|
|
|
|
985,362 |
|
|
|
|
912,028 |
|
|
Total stockholders' equity |
|
63,283 |
|
|
|
|
105,925 |
|
|
|
|
82,925 |
|
|
|
|
106,578 |
|
|
Selected period end balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
$ |
405,304 |
|
|
|
$ |
421,891 |
|
|
|
$ |
405,304 |
|
|
|
$ |
421,891 |
|
|
Loans, net of unearned income |
|
504,458 |
|
|
|
|
458,364 |
|
|
|
|
504,458 |
|
|
|
|
458,364 |
|
|
Allowance for loan losses |
|
5,765 |
|
|
|
|
4,939 |
|
|
|
|
5,765 |
|
|
|
|
4,939 |
|
|
Total assets |
|
1,023,888 |
|
|
|
|
1,105,150 |
|
|
|
|
1,023,888 |
|
|
|
|
1,105,150 |
|
|
Total deposits |
|
950,337 |
|
|
|
|
994,243 |
|
|
|
|
950,337 |
|
|
|
|
994,243 |
|
|
Total stockholders' equity |
|
68,041 |
|
|
|
|
103,726 |
|
|
|
|
68,041 |
|
|
|
|
103,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. |
Reports Full Year and Fourth Quarter Net
Earnings |
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP to non-GAAP Measures
(unaudited): |
|
|
|
|
|
|
|
|
|
|
|
Quarter ended December 31, |
|
Years ended December 31, |
(Dollars in thousands, except per share amounts) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net interest income, as reported (GAAP) |
$ |
7.471 |
$ |
6.037 |
$ |
27.166 |
$ |
23.990 |
Tax-equivalent adjustment |
|
117 |
|
115 |
|
456 |
|
470 |
Net interest income (tax-equivalent) |
$ |
7.588 |
$ |
6.152 |
$ |
27.622 |
$ |
24.460 |
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