Auburn National Bancorporation, Inc. Reports Fourth Quarter and Full Year Results
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Insights
The reported net loss of Auburn National Bancorporation is a significant event, reflecting a strategic shift in the company's financial management. The sale of available-for-sale securities to repay high-cost funding and the subsequent impact on the tangible common equity ratio are critical factors that investors should consider. The expected improvement in the interest rate risk profile and future earnings, alongside the estimated 2.3-year earn-back period for the balance sheet repositioning, suggest a strategic move that could potentially enhance shareholder value in the long term.
However, this strategy also comes with immediate drawbacks, such as the reported loss and the impact on short-term earnings per share. Investors may also be concerned about the decline in net interest income and the net interest margin, which are key indicators of a bank's profitability. These figures reflect the challenging interest rate environment and the bank's response to it. The reduction in nonperforming assets and the increase in the allowance for credit losses indicate a conservative approach to risk management, which is a positive sign for the bank's credit quality.
The reported financials of Auburn National Bancorporation provide insights into the bank's operational efficiency and market positioning. The decrease in noninterest income, excluding the securities loss and the decrease in noninterest expense, excluding the one-time payroll tax credit, suggest a mixed performance in terms of revenue generation and cost management. The increase in loans across all segments indicates growth potential and a focus on expanding the bank's lending activities.
The strategic disposal of high-cost deposits and the absence of brokered deposits or wholesale borrowings at the end of the period demonstrate a shift towards a more stable and lower-cost funding base. The bank's capital and liquidity position, as indicated by the regulatory capital ratios, suggest a strong foundation that may reassure investors about the bank's resilience and regulatory compliance.
The actions taken by Auburn National Bancorporation must be evaluated within the broader economic context, particularly the interest rate environment. The bank's balance sheet repositioning in response to higher market interest rates reflects a proactive approach to managing interest rate risk. This suggests an anticipation of future economic conditions and an attempt to optimize the bank's interest income in a rising rate environment.
The bank's strategic decision to hold proceeds from the securities sale in cash for funding future loan growth and the purchase of higher-yielding securities also indicates a response to economic signals and a potential shift in asset allocation to capitalize on market opportunities. The reported increase in the company's book value per share over the year, despite the net loss, suggests that the bank is still generating value for shareholders, which may be a positive indicator for long-term investment prospects.
AUBURN, Ala., Jan. 29, 2024 (GLOBE NEWSWIRE) -- Auburn National Bancorporation (Nasdaq: AUBN) reported a net loss of
“By taking proactive measures to reposition our balance sheet, the Company will benefit from improved earnings in 2024 and should recover the loss on sale of securities over a reasonable time period” said David A. Hedges, President and CEO. “While the interest rate environment remains challenging for the banking industry, our capital and liquidity remains strong and we have reduced our risks to changes in market interest rates, and are well positioned to meet the needs of our customers” said Mr. Hedges.
Net earnings for the fourth quarter of 2022 were
Excluding the loss on sale of securities related to the balance sheet repositioning strategy and the non-routine items described above, net earnings would have been
For the full year 2023, the Company reported net earnings of
Net interest income (tax-equivalent) was
Nonperforming assets were
At December 31, 2023, the Company’s allowance for credit losses was
The Company recorded a provision for credit losses of
Noninterest income was a loss of
Noninterest expense was
The provision for income taxes was a credit of
Total assets were
At December 31, 2023, the Company’s consolidated stockholders’ equity (book value) was
The Company’s total equity to total assets ratio was
The Company paid cash dividends of
About Auburn National Bancorporation, Inc.
Auburn National Bancorporation, Inc. (the “Company”) is the parent company of AuburnBank (the “Bank”), with total assets of approximately
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, securities valuations and performance, effects of inflation, including Federal Reserve monetary policy tightening beginning 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, resulting increases in 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, 2022 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. Hedges
President and CEO
(334) 821-9200
| Reports Fourth Quarter and Full Year Results/page 4 | ||||||||||||||||||||
| Financial Highlights (unaudited) | ||||||||||||||||||||
| Quarter ended December 31, | Years ended December 31, | |||||||||||||||||||
| (Dollars in thousands, except per share amounts) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||
| Results of Operations | ||||||||||||||||||||
| Net interest income (a) | $ | 6,154 | $ | 7,588 | $ | 26,745 | $ | 27,622 | ||||||||||||
| Less: tax-equivalent adjustment | 95 | 117 | 417 | 456 | ||||||||||||||||
| Net interest income (GAAP) | 6,059 | 7,471 | 26,328 | 27,166 | ||||||||||||||||
| Noninterest income | (5,429 | ) | 3,898 | (2,981 | ) | 6,506 | ||||||||||||||
| Total revenue | 630 | 11,369 | 23,347 | 33,672 | ||||||||||||||||
| Provision for credit losses | 326 | 1,000 | 135 | 1,000 | ||||||||||||||||
| Noninterest expense | 5,803 | 4,449 | 22,594 | 19,823 | ||||||||||||||||
| Income tax (benefit) expense | (1,514 | ) | 1,454 | (777 | ) | 2,503 | ||||||||||||||
| Net (loss) earnings | $ | (3,985 | ) | $ | 4,466 | $ | 1,395 | $ | 10,346 | |||||||||||
| Per share data: | ||||||||||||||||||||
| Basic and diluted net (loss) earnings: | $ | (1.14 | ) | $ | 1.27 | $ | 0.40 | $ | 2.95 | |||||||||||
| Cash dividends declared | $ | 0.27 | $ | 0.265 | $ | 1.08 | $ | 1.06 | ||||||||||||
| Weighted average shares outstanding: | 3,493,614 | 3,504,344 | 3,498,030 | 3,510,869 | ||||||||||||||||
| Shares outstanding, at period end | 3,493,614 | 3,503,452 | 3,493,614 | 3,503,452 | ||||||||||||||||
| Book value | $ | 21.90 | $ | 19.42 | $ | 21.90 | $ | 19.42 | ||||||||||||
| Common stock price: | ||||||||||||||||||||
| High | $ | 21.99 | $ | 24.71 | $ | 24.50 | $ | 34.49 | ||||||||||||
| Low | 19.72 | 22.07 | 18.80 | 22.07 | ||||||||||||||||
| Period-end | $ | 21.28 | $ | 23.00 | $ | 21.28 | $ | 23.00 | ||||||||||||
| To earnings ratio | 53.20 | x | 7.82 | x | 53.20 | x | 7.80 | x | ||||||||||||
| To book value | 97 | % | 118 | % | 97 | % | 118 | % | ||||||||||||
| Performance ratios: | ||||||||||||||||||||
| Return on average equity (annualized): | (26.40 | ) | % | 28.23 | % | 2.05 | % | 12.48 | % | |||||||||||
| Return on average assets (annualized): | (1.56 | ) | % | 1.75 | % | 0.14 | % | 0.96 | % | |||||||||||
| Dividend payout ratio | (23.68 | ) | % | 20.87 | % | 270.00 | % | 35.93 | % | |||||||||||
| Other financial data: | ||||||||||||||||||||
| Net interest margin (a) | 2.65 | % | 3.27 | % | 2.89 | % | 2.81 | % | ||||||||||||
| Effective income tax rate | (27.53 | ) | % | 24.56 | % | (125.73 | ) | % | 19.48 | % | ||||||||||
| Efficiency ratio (b) | 800.41 | % | 38.73 | % | 95.08 | % | 58.08 | % | ||||||||||||
| Asset Quality: | ||||||||||||||||||||
| Nonperforming assets: | ||||||||||||||||||||
| Nonperforming (nonaccrual) loans | $ | 911 | $ | 2,731 | $ | 911 | $ | 2,731 | ||||||||||||
| Total nonperforming assets | $ | 911 | $ | 2,731 | $ | 911 | $ | 2,731 | ||||||||||||
| Net charge-offs | $ | 173 | $ | 201 | $ | 46 | $ | 174 | ||||||||||||
| Allowance for credit losses as a % of: | ||||||||||||||||||||
| Loans | 1.23 | % | 1.14 | % | 1.23 | % | 1.14 | % | ||||||||||||
| Nonperforming loans | 753 | % | 211 | % | 753 | % | 211 | % | ||||||||||||
| Nonperforming assets as a % of: | ||||||||||||||||||||
| Loans and other real estate owned | 0.16 | % | 0.54 | % | 0.16 | % | 0.54 | % | ||||||||||||
| Total assets | 0.09 | % | 0.27 | % | 0.09 | % | 0.27 | % | ||||||||||||
| Nonperforming loans as a % of total loans | 0.16 | % | 0.54 | % | 0.16 | % | 0.54 | % | ||||||||||||
| Net charge-offs as a % of average loans | 0.13 | % | 0.16 | % | 0.01 | % | 0.04 | % | ||||||||||||
| Selected average balances: | ||||||||||||||||||||
| Securities | $ | 354,065 | $ | 407,792 | $ | 387,488 | $ | 425,620 | ||||||||||||
| Loans, net of unearned income | 550,938 | 490,163 | 523,838 | 454,195 | ||||||||||||||||
| Total assets | 1,020,476 | 1,022,863 | 1,021,808 | 1,074,735 | ||||||||||||||||
| Total deposits | 953,674 | 951,122 | 946,791 | 985,362 | ||||||||||||||||
| Total stockholders' equity | 60,372 | 63,283 | 68,066 | 82,925 | ||||||||||||||||
| Selected period end balances: | ||||||||||||||||||||
| Securities | $ | 270,910 | $ | 405,304 | $ | 270,910 | $ | 405,304 | ||||||||||||
| Loans, net of unearned income | 557,294 | 504,458 | 557,294 | 504,458 | ||||||||||||||||
| Allowance for credit losses | 6,863 | 5,765 | 6,863 | 5,765 | ||||||||||||||||
| Total assets | 975,255 | 1,023,888 | 975,255 | 1,023,888 | ||||||||||||||||
| Total deposits | 896,243 | 950,337 | 896,243 | 950,337 | ||||||||||||||||
| Total stockholders' equity | 76,507 | 68,041 | 76,507 | 68,041 | ||||||||||||||||
| (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. | ||||||||||||||||||||
| Reports Fourth Quarter and Full Year Results/page 5 | ||||||||||
| Reconciliation of GAAP to non-GAAP Measures (unaudited): | ||||||||||
| Quarter ended December 31, | Years ended December 31, | |||||||||
| (Dollars in thousands, except per share amounts) | 2023 | 2022 | 2023 | 2022 | ||||||
| Net interest income, as reported (GAAP) | $ | 6,059 | $ | 7,471 | $ | 26,328 | $ | 27,166 | ||
| Tax-equivalent adjustment | 95 | 117 | 417 | 456 | ||||||
| Net interest income (tax-equivalent) | $ | 6,154 | $ | 7,588 | $ | 26,745 | $ | 27,622 | ||
FAQ
What was Auburn National Bancorporation's net loss for the fourth quarter of 2023?
What was the reason for the net loss in the fourth quarter of 2023?
What was the impact of the securities sale on the company's balance sheet?
What was the net interest income for the fourth quarter of 2023?
What were the total assets at December 31, 2023?
