Auburn National Bancorporation, Inc. Reports Third Quarter Net Earnings - Auburn National Bancorp (NASDAQ:AUBN)

Third Quarter 2017 Highlights

Net earnings increased 9% or $0.05 per share, compared to third quarter 2016
Quarterly net interest income increased 12% compared to 0.92% in third quarter 2016
Improved profitability – Annualized return on average assets of 1.03% compared to 0.92% in third quarter 2016
Controlled expenses – Efficiency ratio was 56.09% compared to 56.96% for the third quarter 2016

AUBURN, Ala., Oct. 24, 2017 (GLOBE NEWSWIRE) -- Auburn National Bancorporation, Inc. AUBN reported net earnings of $2.1 million, or $0.59 per share, for the third quarter of 2017, compared to $2.0 million, or $0.54 per share, for the third quarter of 2016. Net earnings for the first nine months of 2017 were $6.0 million, or $1.65 per share, compared to $6.1 million, or $1.67 per share, for the first nine months of 2016.

Net interest income (tax-equivalent) was $6.6 million for the third quarter of 2017, a 10.8% increase compared to $5.9 million for the third quarter of 2016. This increase was primarily due to loan growth and management reducing its investment in federal funds sold and interest bearing bank deposits and increasing its investment in securities as market yields improved. Average loans were up 3.4% to $443.6 million in the third quarter of 2017 compared to $429.2 million in the third quarter of 2016. The Company's net interest margin (tax-equivalent) increased to 3.32% in the third quarter of 2017, compared to 2.94% for the third quarter of 2016 as earning asset yields and cost of funds both improved.

Nonperforming assets were $3.0 million, or 0.36% of total assets, at September 30, 2017, compared to $1.7 million, or 0.19% of total assets, at September 30, 2016. The Company recorded no provision for loan losses in the third quarter of 2017 or in the third quarter of 2016. The provision for loan loss is based upon various factors, including the absolute level of loans, loan growth, credit quality and the amount of net charge-offs.

Noninterest income was $1.0 million compared to $1.1 million for the third quarter of 2016. The decrease was primarily due to securities gains decreasing $0.1 million. Noninterest expense was $4.2 million compared to $4.0 million in the third quarter of 2016. The increase was primarily due to $0.2 million in gains from the sale of OREO, which reduced noninterest expense in the third quarter of 2016. The Company had an improved efficiency ratio of 56.09% for the third quarter of 2017, compared to 56.96% in the third quarter of 2016.

Income tax expense was $0.9 million compared to $0.7 million for the third quarter of 2016. The effective tax rate was 28.89% compared to 27.50% for the third quarter of 2016.

The Company paid cash dividends of $0.23 per share in the third quarter of 2017, an increase of 2.2% from the same period in 2016. At September 30, 2017, the Bank's regulatory capital was 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 $829 million. 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 8 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, 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, provision for 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, 2016 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 includes 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.

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)				2017			2016				2017			2016
Results of Operations
Net interest income (a)			$	6,565		$	5,924			$	19,156		$	17,957
Less: tax-equivalent adjustment				304			316				905			960
	Net interest income (GAAP)			6,261			5,608				18,251			16,997
Noninterest income				968			1,063				2,597			2,890
	Total revenue			7,229			6,671				20,848			19,887
Provision for loan losses				—			—				100			(600	)
Noninterest expense				4,225			3,980				12,358			12,110
Income tax expense				868			740				2,369			2,304
Net earnings			$	2,136		$	1,951			$	6,021		$	6,073

Per share data:
Basic and diluted net earnings:			$	0.59		$	0.54			$	1.65		$	1.67
Cash dividends declared			$	0.23		$	0.225			$	0.69		$	0.675
Weighted average shares outstanding:
	Basic and diluted			3,643,659			3,643,506				3,643,598			3,643,498
Shares outstanding, at period end				3,643,668			3,643,523				3,643,668			3,643,523
Book value			$	23.75		$	23.34			$	23.75		$	23.34
Common stock price:
	High		$	37.71		$	28.91			$	37.79		$	30.49
	Low			34.82			27.45				30.75			24.56
	Period-end:			35.00			27.45				35.00			27.45
		To earnings ratio		15.70	x		12.48		x		15.70	x		12.48		x
		To book value		147	%		118		%		147	%		118		%
Performance ratios:
Return on average equity (annualized)				9.87	%		9.06		%		9.47	%		9.67		%
Return on average assets (annualized)				1.03	%		0.92		%		0.96	%		0.97		%
Dividend payout ratio				38.98	%		41.67		%		41.82	%		40.42		%
Other financial data:
Net interest margin (a)				3.32	%		2.94		%		3.26	%		3.05		%
Effective income tax rate				28.89	%		27.50		%		28.24	%		27.50		%
Efficiency ratio (b)				56.09	%		56.96		%		56.81	%		58.09		%
Asset Quality:
Nonperforming assets:
	Nonperforming (nonaccrual) loans		$	2,902		$	1,614			$	2,902		$	1,614
	Other real estate owned			103			37				103			37
		Total nonperforming assets	$	3,005		$	1,651			$	3,005		$	1,651

Net charge-offs (recoveries)			$	295		$	(50	)		$	73		$	(889	)

Allowance for loan losses as a % of:
	Loans			1.04	%		1.07		%		1.04	%		1.07		%
	Nonperforming loans			161	%		284		%		161	%		284		%
Nonperforming assets as a % of:
	Loans and other real estate owned			0.67	%		0.39		%		0.67	%		0.39		%
	Total assets			0.36	%		0.19		%		0.36	%		0.19		%
Nonperforming loans as a % of total loans				0.65	%		0.38		%		0.65	%		0.38		%
Annualized net charge-offs (recoveries)
	as a % of average loans			0.27	%		(0.05	)	%		0.02	%		(0.27	)	%
Selected average balances:
Securities			$	273,280		$	227,076			$	268,612		$	229,185
Loans, net of unearned income				443,639			429,201				436,740			431,213
Total assets				831,097			851,409				832,637			834,721
Total deposits				735,372			748,229				738,255			734,241
Long-term debt				3,217			7,217				3,217			7,217
Total stockholders' equity			$	86,543			86,103				84,780		$	83,740
Selected period end balances:
Securities			$	265,171		$	249,556			$	265,171		$	249,556
Loans, net of unearned income				449,378			427,203				449,378			427,203
Allowance for loan losses				4,670			4,578				4,670			4,578
Total assets				828,546			851,672				828,546			851,672
Total deposits				732,648			751,915				732,648			751,915
Long-term debt				3,217			7,217				3,217			7,217
Total stockholders' equity			$	86,538			85,055				86,538		$	85,055

(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.

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)

2017

2016

2017

2016

Net interest income, as reported (GAAP)

6,261

5,608

18,251

16,997

Tax-equivalent adjustment

304

316

905

960

Net interest income (tax-equivalent)

6,565

5,924

19,156

17,957

For additional information, contact:
David A. Hedges
Executive Vice President and
Chief Financial Officer
(334) 821-9200

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