AUBN Auburn National Bancorporation Inc

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report: October 27, 2014

 

 

AUBURN NATIONAL BANCORPORATION, INC.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware		0-26486		63-0885779
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

100 North Gay Street, P.O. Drawer 3110, Auburn, Alabama 36831-3110

(Addresses of Principal Executive Offices, including Zip Code)

(334) 821-9200

(Registrant’s Telephone Number, including Area Code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

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Item 2.02.     Results of Operations and Financial Condition

The information, including the exhibits attached hereto, in this Current Report on Form 8-K is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document filed by the Company pursuant to the Securities Act of 1933, as amended, or into any other filing or document made by the Company pursuant to the Securities Exchange Act of 1934, as amended, except as otherwise expressly stated in any such filing.

Attached and incorporated herein by reference as Exhibit 99.1 is a copy of the press release of Auburn National Bancorporation, Inc., dated October 27, 2014, reporting the Company’s financial results for the quarter and nine months ended September 30, 2014.

 

Item 9.01.

Financial Statements, Pro Forma Financial Information and Exhibits.

 

(c)

Exhibits.  The following exhibit is furnished herewith:

 

Exhibit No.		Exhibit Description
99.1		Press Release, dated October 27, 2014

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

		AUBURN NATIONAL BANCORPORATION, INC.
		(Registrant)
		/s/ E.L. Spencer, Jr.
		E.L. Spencer, Jr.
		Chairman, President and Chief Executive Officer

Date: October 27, 2014

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EXHIBIT INDEX

 

Exhibit No.		Exhibit Description
99.1		Press Release, dated October 27, 2014

Exhibit 99.1

 

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

Press Release – October 27, 2014

Auburn National Bancorporation, Inc. Reports Third Quarter Net Earnings

Third Quarter 2014 Highlights:

 

—

Continued profitability – annualized return on average assets of 0.97%

 

—

Reduced NPAs – nonperforming assets were 0.37% of total assets at September 30, 2014

 

—

Strong capital position – Tier 1 common equity to total assets of 9.25%

AUBURN, Alabama – Auburn National Bancorporation, Inc. (Nasdaq: AUBN) reported net earnings of $1.9 million, or $0.51 per share, for the third quarter of 2014, compared to $1.8 million, or $0.49 per share, for the third quarter of 2013. Net earnings for the first nine months of 2014 were $5.6 million, or $1.52 per share, compared to $5.4 million, or $1.48 per share, for the first nine months of 2013.

Excluding the effects of non-operating items (specifically net securities gains (losses) and prepayment penalties on long-term debt), third quarter 2014 operating net earnings were $2.0 million, or $0.55 per share, compared to $2.1 million, or $0.59 per share, for the third quarter of 2013. Operating net earnings for the first nine months of 2014 were $5.9 million, or $1.62 per share, compared to $6.2 million, or $1.71 per share, for the first nine months of 2013.

“The Company’s third quarter results reflect strong profitability and continued improvement in our asset quality,” said E.L. Spencer, Jr., President, CEO and Chairman of the Board.

Net interest income (tax-equivalent) was $5.8 million for the third quarter of 2014, compared to $5.6 million for the third quarter of 2013. Despite downward pressure on yields for earning assets, net interest income (tax-equivalent) improved due to continued improvement in the Company’s cost of funds.

Nonperforming assets were $2.9 million, or 0.37% of total assets, at September 30, 2014, compared to $4.4 million, or 0.57% of total assets, at June 30, 2014. The provision for loan losses was $0.3 million in the third quarter of 2014, compared to none in the third quarter 2013. Provision for loan loss expense is impacted by the absolute level of loans, loan growth, the credit quality of the loan portfolio and the amount of net charge-offs.

Noninterest income was $1.0 million for the third quarter of 2014, compared to $1.4 million in the third quarter of 2013. The decrease was primarily due to a decrease in mortgage lending income of $0.2 million as higher interest rates for mortgage loans negatively affected refinance activity and a decrease in net securities gains (losses) of $0.2 million.

Noninterest expense was approximately $3.6 million in the third quarter of 2014, compared to $4.3 million in the third quarter of 2013. The decrease was primarily due to $0.5 million of prepayment penalties on long-term debt incurred during the third quarter of 2013, when the Company repaid $5.0 million of long-term debt with an interest rate of 3.58%. The Company incurred no prepayment penalties on long-term debt during the third quarter of 2014.

Income tax expense was approximately $0.7 million for the third quarter of 2014, compared to $0.6 million for the third quarter of 2013. The Company’s effective tax rate for the third quarter of 2014 was 27.47%, compared to 26.19% in the third quarter of 2013. The increase in the Company’s effective tax rate was primarily due to decreases in tax exempt interest income as our holdings of municipal securities have declined.

The Company paid cash dividends of $0.215 per share in the third quarter of 2014. At September 30, 2014, the Bank’s regulatory capital was well above the minimum amounts required to be “well capitalized” under current regulatory standards.

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About Auburn National Bancorporation, Inc.

Auburn National Bancorporation, Inc. (the “Company”) is the parent company of AuburnBank (the “Bank”), with total assets of approximately $781 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, Hurtsboro and Notasulga, Alabama. In-store branches are located in the Kroger and Wal-Mart SuperCenter stores in both Auburn and Opelika. The Bank also operates commercial loan production offices in Montgomery 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, economic conditions in our markets, loan demand, mortgage lending activity, 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, 2013 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 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, including the presentation of total revenue and the calculation of the efficiency ratio. 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 regarding the Company’s performance, and that operating net earnings better reflect the Company’s core operating activities. Management utilizes these 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 these 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 3

 

Financial Highlights (unaudited)

		Quarter ended September 30,								Nine months ended September 30,
(Dollars in thousands, except per share amounts)		2014				2013				2014				2013
Results of Operations
Net interest income (a)		$	5,769			$	5,621			$	16,928			$	16,741
Less: tax-equivalent adjustment			321				351				957				1,098
Net interest income (GAAP)			5,448				5,270				15,971				15,643
Noninterest income			1,017				1,432				2,854				5,158
Total revenue			6,465				6,702				18,825				20,801
Provision for loan losses			300				—				(100)				400
Noninterest expense			3,584				4,274				11,324				13,224
Income tax expense			709				636				2,049				1,789
Net earnings		$	1,872			$	1,792			$	5,552			$	5,388
Per share data:
Basic and diluted net earnings:
GAAP		$	0.51			$	0.49			$	1.52			$	1.48
Operating (b)			0.55				0.59				1.62				1.71
Cash dividends declared		$	0.215			$	0.21			$	0.645			$	0.63
Weighted average shares outstanding:
Basic and diluted			3,643,328				3,643,028				3,643,262				3,642,967
Shares outstanding, at period end			3,643,328				3,643,058				3,643,328				3,643,058
Book value		$	20.09			$	18.06			$	20.09			$	18.06
Common stock price:
High		$	24.92			$	24.71			$	25.80			$	24.71
Low			23.17				22.00				22.90				20.80
Period-end:			24.64				24.40				24.64				24.40
To earnings ratio			12.38	x			12.64	x			12.38	x			12.64	x
To book value			123	%			135	%			123	%			135	%
Performance ratios:
Return on average equity:
GAAP			10.19	%			10.78	%			10.65	%			10.32	%
Operating (b)			10.99	%			12.83	%			11.29	%			11.94	%
Return on average assets:
GAAP			0.97	%			0.95	%			0.96	%			0.94	%
Operating (b)			1.05	%			1.14	%			1.02	%			1.09	%
Dividend payout ratio			42.16	%			42.86	%			42.43	%			42.57	%
Other financial data:
Net interest margin (a)			3.16	%			3.19	%			3.15	%			3.14	%
Effective income tax rate			27.47	%			26.19	%			26.96	%			24.93	%
Efficiency ratio (c)			51.05	%			52.93	%			55.75	%			52.84	%
Asset Quality:
Nonperforming assets:
Nonperforming (nonaccrual) loans		$	1,690			$	4,425			$	1,690			$	4,425
Other real estate owned			1,215				4,585				1,215				4,585
Total nonperforming assets		$	2,905			$	9,010			$	2,905			$	9,010
Net charge-offs		$	274			$	511			$	414			$	1,177

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Allowance for loan losses as a % of:
Loans			1.20	%			1.56	%			1.20	%			1.56	%
Nonperforming loans			281	%			134	%			281	%			134	%
Nonperforming assets as a % of:
Loans and other real estate owned			0.73	%			2.34	%			0.73	%			2.34	%
Total assets			0.37	%			1.21	%			0.37	%			1.21	%
Nonperforming loans as a % of total loans			0.43	%			1.16	%			0.43	%			1.16	%
Net charge-offs as % of average loans (d)			0.28	%			0.53	%			0.14	%			0.40	%
Selected average balances:
Securities		$	274,155			$	265,380			$	272,180			$	264,845
Loans, net of unearned income			389,392				383,460				381,947				389,719
Total assets			771,685				751,311				768,756				763,438
Total deposits			678,738				651,334				680,560				652,687
Long-term debt			12,217				26,782				12,217				34,946
Total stockholders’ equity			73,499				66,485				69,503				69,586
Selected period end balances:
Securities		$	264,827			$	259,467			$	264,827			$	259,467
Loans, net of unearned income			394,602				380,705				394,602				380,705
Allowance for loan losses			4,754				5,946				4,754				5,946
Total assets			781,136				744,602				781,136				744,602
Total deposits			680,763				650,421				680,763				650,421
Long-term debt			12,217				22,217				12,217				22,217
Total stockholders’ equity			73,193				65,807				73,193				65,807

(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.

(d) Net charge-offs are annualized.

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Reports Third Quarter Net Earnings/page 4

Reconciliation of GAAP to non-GAAP Measures (unaudited):

 

		Quarter ended September 30,								Nine months ended September 30,
(Dollars in thousands, except per share amounts)		2014				2013				2014				2013
Net earnings, as reported (GAAP)		$	1,872			$	1,792			$	5,552			$	5,388
Non-operating items (net of 37% statutory tax rate):
Securities losses (gains), net			148				—				333				(428)
Prepayment penalties on long-term debt			—				341				—				1,268
Operating net earnings		$	2,020			$	2,133			$	5,885			$	6,228
Basic and diluted earnings per share, as reported (GAAP)		$	0.51			$	0.49			$	1.52			$	1.48
Non-operating items (net of 37% statutory tax rate):
Securities losses (gains), net			0.04				—				0.10				(0.12)
Prepayment penalties on long-term debt			—				0.10				—				0.35
Operating net earnings per share		$	0.55			$	0.59			$	1.62			$	1.71
Net interest income, as reported (GAAP)		$	5,448			$	5,270			$	15,971			$	15,643
Tax-equivalent adjustment			321				351				957				1,098
Net interest income (tax-equivalent)		$	5,769			$	5,621			$	16,928			$	16,741
Noninterest income, as reported (GAAP)		$	1,017			$	1,432			$	2,854			$	5,158
Non-operating items:
Securities losses (gains), net			235				—				530				(679)
Operating noninterest income		$	1,252			$	1,432			$	3,384			$	4,479
Total Revenue, as reported (GAAP)		$	6,465			$	6,702			$	18,825			$	20,801
Tax-equivalent adjustment			321				351				957				1,098
Non-operating items:
Securities losses (gains), net			235				—				530				(679)
Total Operating Revenue (tax-equivalent)		$	7,021			$	7,053			$	20,312			$	21,220
Noninterest expense, as reported (GAAP)		$	3,584			$	4,274			$	11,324			$	13,224
Non-operating items:
Prepayment penalties on long-term debt			—				(541)				—				(2,012)
Operating noninterest expense		$	3,584			$	3,733			$	11,324			$	11,212
Total stockholders’ equity (GAAP)		$	73,193			$	65,807			$	73,193			$	65,807
Unrealized (gains) losses on available for sale securities, net of tax			(950)				2,264				(950)				2,264
Tier 1 Common Equity (1)		$	72,243			$	68,071			$	72,243			$	68,071

(1) September 30, 2014 total is preliminary.