AUBN Auburn National Bancorporation Inc

Full Year 2015 Results – Compared to Full Year 2014:

Auburn National Bancorporation (Nasdaq:AUBN) reported record net earnings of $7.9 million, or $2.16 per share for the full year 2015, compared to $7.4 million, or $2.04 per share, for the full year 2014.  For the fourth quarter of 2015, the Company reported net earnings of $1.9 million, or $0.53 per share, compared to $1.9 million, or $0.52 per share, for the fourth quarter of 2014. 

E.L. Spencer, Jr., President, CEO and Chairman of the Board, commented: “We are pleased to report record earnings for the full year 2015. Our full year and fourth quarter results reflect an increase in net interest income driven by loan growth and continued improvements in our cost of funds.”

Net interest income (tax-equivalent) was $6.1 million for the fourth quarter of 2015, an increase of 4% compared to the fourth quarter of 2014.  This increase reflects management’s continued efforts to increase earnings by shifting the Company’s asset mix through loan growth, focusing on deposit pricing, and repaying higher-cost wholesale funding. Average loans were $426.2 million in the fourth quarter of 2015, an increase of $28.3 million, or 7%, from the fourth quarter of 2014. Average deposits were $720.9 million in the fourth quarter of 2015, an increase of $38.0 million, or 6%, from the fourth quarter of 2014.

Nonperforming assets were $3.0 million, or 0.36% of total assets, at December 31, 2015, compared to $1.7 million, or 0.21% of total assets, at December 31, 2014. The increase in nonperforming assets was primarily due to one nonperforming commercial real estate loan with a recorded investment of $1.5 million at December 31, 2015. Approximately $0.6 million, or 68%, of net charge-offs recognized in the fourth quarter of 2015 related to this nonperforming commercial real estate loan.

Net charge-offs were $0.8 million, or 0.79% of average loans on an annualized basis for the fourth quarter of 2015, compared to $0.1 million, or 0.07% of average loans on an annualized basis for the fourth quarter of 2014.  Net charge-offs recognized in the fourth quarter of 2015 primarily related to two impaired loans with corresponding valuation allowances that were established in prior periods, including the above nonperforming commercial real estate loan.  The Company recorded no provision for loan losses in the fourth quarter of 2015, compared to $0.2 million in the fourth quarter 2014.  

Noninterest income was $1.0 million in the fourth quarter of 2015, compared to $1.1 million in the fourth quarter of 2014, primarily due to a decrease in mortgage lending income of $0.1 million as mortgage refinance activity declined.

Noninterest expense was $4.1 million in the fourth quarter of 2015 compared to $3.8 million in fourth quarter of 2014, as gains realized on the sale of OREO properties decreased by $0.3 million. Any gains or losses on disposal of OREO are reflected in noninterest expense.

Income tax expense was approximately $0.7 million for both the fourth quarter of 2015 and the fourth quarter of 2014. The Company’s income tax expense for the fourth quarter of 2015 reflects an effective tax rate of 25.19%, compared to 27.94% in the fourth quarter of 2014. The decrease in the effective tax rate was primarily attributable to an increase in tax exempt earnings from the Company’s investments in municipal securities and bank-owned life insurance.

The Company paid cash dividends of $0.22 per share in the fourth quarter of 2015. At December 31, 2015, 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 $817 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, Valley and Notasulga, Alabama.  In-store branches are located in the Kroger and Wal-Mart SuperCenter stores in Opelika. The Bank also operates a commercial 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, economic conditions 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, nonperforming assets, other real estate owned, loan losses, charge-offs, other-than-temporary impairments, collateral values, credit quality, asset sales, 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, 2014 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, including the presentation and calculation of the efficiency ratio. 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. 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.

	Financial Highlights (unaudited)
					Quarter ended December 31,								Years ended December 31,
	(Dollars in thousands, except per share amounts)					2015				2014				2015				2014
	Results of Operations
	Net interest income (a)				$	6,065			$	5,813			$	24,060			$	22,741
	Less: tax-equivalent adjustment					328				331				1,342				1,288
		Net interest income (GAAP)				5,737				5,482				22,718				21,453
	Noninterest income					988				1,079				4,532				3,933
		Total revenue				6,725				6,561				27,250				25,386
	Provision for loan losses					—				150				200				50
	Noninterest expense					4,137				3,780				16,372				15,104
	Income tax expense					652				735				2,820				2,784
	Net earnings				$	1,936			$	1,896			$	7,858			$	7,448
	Per share data:
	Basic and diluted net earnings:				$	0.53			$	0.52			$	2.16			$	2.04
	Cash dividends declared				$	0.22			$	0.215			$	0.88			$	0.86
	Weighted average shares outstanding:					3,643,478				3,643,328				3,643,428				3,643,278
	Shares outstanding, at period end					3,643,478				3,643,328				3,643,478				3,643,328
	Book value				$	21.94			$	20.80			$	21.94			$	20.80
	Common stock price:
		High			$	30.39			$	24.64			$	30.39			$	25.80
		Low				26.14				22.10				23.15				22.10
		Period-end			$	29.62			$	23.64			$	29.62			$	23.64
			To earnings ratio			13.78	x			11.59	x			13.78	x			11.59	x
			To book value			135	%			114	%			135	%			114	%
	Performance ratios:
	Return on average equity (annualized):					9.59	%			10.21	%			9.98	%			10.53	%
	Return on average assets (annualized):					0.95	%			0.98	%			0.98	%			0.97	%
	Dividend payout ratio					41.51	%			41.35	%			40.74	%			42.16	%
	Other financial data:
	Net interest margin (a)					3.12	%			3.14	%			3.17	%			3.15	%
	Effective income tax rate					25.19	%			27.94	%			26.41	%			27.21	%
	Efficiency ratio (b)					58.66	%			54.85	%			57.26	%			56.62	%
	Asset Quality:
	Nonperforming assets:
		Nonperforming (nonaccrual) loans			$	2,714			$	1,117			$	2,714			$	1,117
		Other real estate owned				252				534				252				534
			Total nonperforming assets		$	2,966			$	1,651			$	2,966			$	1,651
	Net charge-offs				$	838			$	68			$	747			$	482
	Allowance for loan losses as a % of:
		Loans				1.01	%			1.20	%			1.01	%			1.20	%
		Nonperforming loans				158	%			433	%			158	%			433	%
	Nonperforming assets as a % of:
		Loans and other real estate owned				0.70	%			0.41	%			0.70	%			0.41	%
		Total assets				0.36	%			0.21	%			0.36	%			0.21	%
	Nonperforming loans as a % of total loans					0.64	%			0.28	%			0.64	%			0.28	%
	Net charge-offs as a % of average loans (c)					0.79	%			0.07	%			0.18	%			0.12	%
	Selected average balances:
	Securities				$	246,130			$	265,616			$	255,231			$	270,526
	Loans, net of unearned income					426,192				397,875				411,346				385,962
	Total assets					815,616				777,548				804,127				770,972
	Total deposits					720,854				682,812				710,308				681,127
	Long-term debt					7,217				12,217				8,285				12,217
	Total stockholders' equity					80,764				74,307				78,724				70,714
	Selected period end balances:
	Securities				$	241,687			$	267,603			$	241,687			$	267,603
	Loans, net of unearned income					426,410				402,954				426,410				402,954
	Allowance for loan losses					4,289				4,836				4,289				4,836
	Total assets					817,189				789,231				817,189				789,231
	Total deposits					723,627				693,390				723,627				693,390
	Long-term debt					7,217				12,217				7,217				12,217
	Total stockholders' equity					79,949				75,799				79,949				75,799
	(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 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)			2015		2014		2015		2014
	Net interest income, as reported (GAAP)		$	5,737	$	5,482	$	22,718	$	21,453
	Tax-equivalent adjustment			328		331		1,342		1,288
	Net interest income (tax-equivalent)		$	6,065	$	5,813	$	24,060	$	22,741

For additional information, contact: 
E.L. Spencer, Jr. 
President, CEO and 
Chairman of the Board 
(334) 821-9200