GlobeNewswire Inc | Jan 29, 2021 08:30AM EST

January 29, 2021

Full Year 2020 Results:

-- Net interest margin decreased to 2.92% in 2020, compared to 3.43% in 2019 -- Mortgage lending income increased by $1.5 million in 2020, or 168%, compared to 2019 -- Funded 423 loans in 2020 for $36.5 million under the Paycheck Protection Program (PPP), supporting an estimated 5,500 jobs -- Provision for loan losses increased to $1.1 million in 2020, compared to a negative provision of $0.3 million in 2019 primarily due to risks resulting from the Coronavirus (COVID-19) pandemic -- The allowance for loan losses to total loans increased to 1.22% in 2020, compared to 0.95% at year-end 2019 -- Named a Banking Performance Powerhouse by Bank Director in their 2021 RankingBanking study

AUBURN, Ala., Jan. 29, 2021 (GLOBE NEWSWIRE) -- Auburn National Bancorporation (Nasdaq: AUBN) reported quarterly net earnings of $2.1 million, or $0.58 per share, for the fourth quarter of 2020, compared to $2.7 million, or $0.75 per share, for the fourth quarter of 2019. For the full year 2020, the Company reported net earnings of $7.5 million, or $2.09 per share for 2020, compared to $9.7 million, or $2.72 per share, for 2019. The decrease in full year 2020 net earnings was primarily driven by the negative impact of the COVID-19 pandemic, which resulted in elevated provision for loan losses, compared to 2019, in addition to a lower interest rate environment.

I am very proud of our organizations response to the challenges presented by the COVID-19 pandemic and I would like to extend my sincere thanks to our entire team for the results we achieved in 2020 and the efforts of our staff to stay safe while being accessible to customers, said Robert W. Dumas, Chairman, President, and CEO. We believe the Companys strong balance sheet is well positioned to continue to support our customers and communities through the pandemic, said Mr. Dumas.

I am also pleased to report the Company was recently named a Banking Performance Powerhouse by Bank Director in their 2021 RankingBanking study. The ranking included the 20 highest performing banks in the United States based on total shareholder return over a 20 year period-ended June 30, 2020. Once again, 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 in the future, said Mr. Dumas.

Net interest income (tax-equivalent) was $6.3 million for the fourth quarter of 2020, a decrease of 1% compared to $6.4 million for the fourth quarter of 2019. This decrease was primarily due to net interest margin compression resulting from the Federal Reserves interest rate reductions in response to COVID-19. Net interest margin (tax-equivalent) decreased to 2.81% in the fourth quarter of 2020, compared to 3.27% for the fourth quarter of 2019 primarily due to the lower interest rate environment and changes in our asset mix resulting from the significant increase in customer deposits.

The Company recorded no provision for loan losses for the fourth quarter of 2020, compared to a negative provision of $0.3 million for the fourth quarter of 2020. At December 31, 2020, the Companys allowance for loan losses was $5.6 million, or 1.22% of total loans, compared to $4.4 million, or 0.95% of total loans, at December 31, 2019. Excluding PPP loans, the Companys allowance for loan losses was 1.27% of total loans at December 31, 2020.

We have identified certain commercial sectors with enhanced risk resulting from the impact of COVID-19. Loans within these sectors represent 86% of the Companys total COVID-19 related modifications at December 31, 2020. The table below summarizes the loans outstanding for these sectors at December 31, 2020.

Portfolio Segment Commercial Construction Commercial % of(Dollars in thousands) and and land real Total Total industrial development estate LoansDecember 31, 2020: Hotel/motel $ 866 10,549 42,900 $ 54,315 12 %Shopping centers 8 ? 30,000 30,008 6 Retail, excluding 327 ? 18,053 18,380 4 shopping centersRestaurants 1,407 ? 12,865 14,272 3 Total $ 2,608 10,549 103,818 $ 116,975 25 %

At December 31, 2020, our loan payment deferrals or other loan modifications totaled $32.3 million, or 7% of total loans. This was a decline from $87.1 million, or 18% of total loans at September 30, 2020 and $112.7 million, or 24% of total loans at June 30, 2020. The tables below provide information concerning the composition of these COVID-19 modifications as of December 31, 2020.

COVID-19 Modifications Modification Types % of Interest P&I Payments(Dollars in thousands) Balance Portfolio Only Deferred Modified PaymentCommercial and $ 741 ? % 100 % ? %industrialCommercial real estate 31,399 7 100 ? Residential real estate 133 ? ? 100 Total $ 32,273 7 % 99 % 1 %

COVID-19 Modifications within High Exposure Commercial Real Estate Segments

(Dollars in thousands) Balance of Loans % of Total Modified Segment LoansHotel/motel $ 26,427 49 %Restaurants 1,442 10

During 2020, we participated in the PPP, where the federal government provided loan guarantees and forgiveness for qualifying loans, and generated 423 PPP loans with an aggregate outstanding principal balance of $36.5 million. We collected approximately $1.5 million in fees payable by the federal government on our PPP loans. These fees are recognized, net of related costs, as a yield adjustment over the life of the underlying PPP loans. During 2020, we received payments and forgiveness on 158 loans totaling $17.5 million. The outstanding balance for the remaining 265 loans as of December 31, 2020 was approximately $19.0 million.

Noninterest income was $1.4 million in the fourth quarter of 2020, compared to $2.5 million in the fourth quarter of 2019. The decrease was primarily due to a $1.7 million payment received by the Company during the fourth quarter of 2019 that resulted from the termination of a loan guarantee program operated by the State of Alabama. This decrease was partially offset by an increase in mortgage lending income of $0.5 million during the fourth quarter of 2020 compared to the fourth quarter of 2019, as lower interest rates for mortgage loans increased refinancing activity and pricing margins improved.

Noninterest expense was $5.1 million in the fourth quarter of 2020 compared to $5.6 million during the fourth quarter of 2019. The decrease was primarily due to a reduction of $0.2 million in salaries and benefits expense and $0.3 million of various expenses related to the planned redevelopment of the Companys headquarters in downtown Auburn.

Income tax expense was $0.4 million for the fourth quarter of 2020, compared to $0.7 million during fourth quarter of 2019. The Company's effective tax rate for the fourth quarter of 2020 was 17.92%, compared to 20.00% in the fourth quarter of 2019. This change was primarily due to a decrease in the level of earnings before taxes relative totax-exemptsources of income. The Companys effective income tax rate is principally impacted bytax-exemptearnings from the Companys investments in municipal securities and bank-owned life insurance.

The Company paid cash dividends of $0.255 per share in the fourth quarter of 2020, an increase of 2% from the same period in 2019. At December 31, 2020, the Banks 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 $957 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 eight full-service branches in Auburn, Opelika, Valley, and Notasulga, Alabama. The Bank also operates loan production offices in Auburn 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, the effects of the COVID-19 pandemic and related government, Federal Reserve and regulatory response, including 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) 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, 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, our interim reports on Form 10-Q 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 Companys 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:Robert W. DumasChairman, President and CEO(334) 821-9200

FinancialHighlights (unaudited) Quarter ended December 31, Years ended December 31, (Dollars inthousands, except 2020 2019 2020 2019 per shareamounts)Results of OperationsNet interest $ 6,311 $ 6,406 $ 24,830 $ 26,621 income (a)Less:tax-equivalent 123 126 492 557 adjustment Net interest 6,188 6,280 24,338 26,064 income (GAAP)Noninterest 1,403 2,458 5,375 5,494 income Total revenue 7,591 8,738 29,713 31,558 Provision for ? (250 ) 1,100 (250 ) loan lossesNoninterest 5,086 5,633 19,554 19,697 expenseIncome tax 449 671 1,605 2,370 expenseNet earnings $ 2,056 $ 2,684 $ 7,454 $ 9,741 Per share data: Basic and diluted $ 0.58 $ 0.75 $ 2.09 $ 2.72 net earnings:Cash dividends $ 0.255 $ 0.25 $ 1.02 $ 1.00 declaredWeighted averageshares 3,566,276 3,566,146 3,566,207 3,581,476 outstanding:Sharesoutstanding, at 3,566,276 3,566,146 3,566,276 3,566,146 period endBook value $ 30.20 $ 27.57 $ 30.20 $ 27.57 Common stock price: High $ 43.00 $ 53.90 $ 63.40 $ 53.90 Low 36.75 40.00 24.11 30.61 Period-end $ 42.29 $ 53.00 $ 42.29 $ 53.00 To earnings 20.23 x 19.49 x 20.23 x 19.49 x ratio To book value 140 % 192 % 140 % 192 %Performance ratios:Return on averageequity 7.63 % 10.86 % 7.12 % 10.35 %(annualized):Return on averageassets 0.87 % 1.30 % 0.83 % 1.18 %(annualized):Dividend payout 43.97 % 33.33 % 48.80 % 36.76 %ratioOther financial data:Net interest 2.81 % 3.27 % 2.92 % 3.43 %margin (a)Effective income 17.92 % 20.00 % 17.72 % 19.57 %tax rateEfficiency ratio 65.93 % 63.55 % 64.74 % 61.33 %(b)Asset Quality: Nonperforming assets: Nonperforming (nonaccrual) $ 534 $ 187 $ 534 $ 187 loans Total nonperforming $ 534 $ 187 $ 534 $ 187 assets Net (recoveries) $ (43 ) $ 171 $ (132 ) $ 154 charge-offs Allowance forloan losses as a % of: Loans 1.22 % 0.95 % 1.22 % 0.95 % Nonperforming 1,052 % 2,345 % 1,052 % 2,345 % loansNonperforming assets as a % of: Loans and other real estate 0.12 % 0.04 % 0.12 % 0.04 % owned Total assets 0.06 % 0.02 % 0.06 % 0.02 %Nonperformingloans as a % of 0.12 % 0.04 % 0.12 % 0.04 %total loansNet (recoveries)charge-offs as a (0.04 ) % 0.15 % (0.03 ) % 0.03 %% of averageloans (c)Selected average balances:Securities $ 325,102 $ 249,106 $ 297,449 $ 245,038 Loans, net of 466,704 469,579 462,561 473,213 unearned incomeTotal assets 944,439 827,684 900,645 826,545 Total deposits 828,801 723,557 789,163 727,723 Totalstockholders' 107,791 98,887 104,734 94,151 equitySelected period end balances:Securities $ 335,177 $ 235,902 $ 335,177 $ 235,902 Loans, net of 461,700 460,901 461,700 460,901 unearned incomeAllowance for 5,618 4,386 5,618 4,386 loan lossesTotal assets 956,597 828,570 956,597 828,570 Total deposits 839,792 724,152 839,792 724,152 Totalstockholders' 107,689 98,328 107,689 98,328 equity (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 (recoveries) charge-offs are annualized.

Reconciliation of GAAP to non-GAAP Measures (unaudited): Quarter ended Years ended December 31, December 31,(Dollars in thousands, except per 2020 2019 2020 2019 share amounts)Net interest income, as reported $ 6,188 $ 6,280 $ 24,338 $ 26,064 (GAAP)Tax-equivalent adjustment 123 126 492 557 Net interest income $ 6,311 $ 6,406 $ 24,830 $ 26,621 (tax-equivalent)