Auburn National Bancorporation, Inc. Reports Third Quarter Net Earnings

Third Quarter 2020 Results:

• Net earnings of $1.9 million, or $0.54 per share, compared to $2.2 million, or $0.62 per share for the third quarter of 2019
• Provision for loan losses of $250 thousand, compared to none for the third quarter of 2019
• Allowance for loan losses to total loans of 1.18% or 1.28% excluding Paycheck Protection Plan (“PPP”) loans, compared to 0.95% at year-end 2019
• Net interest margin decreased to 2.72%, compared to 3.41% in the third quarter of 2019
• Mortgage lending income of $0.7 million more than doubled, compared to $0.3 million in the third quarter of 2019

AUBURN, Ala., Oct. 30, 2020 (GLOBE NEWSWIRE) — Auburn National Bancorporation, Inc. (Nasdaq: AUBN) reported net earnings of $1.9 million, or $0.54 per share, for the third quarter of 2020, compared to $2.2 million, or $0.62 per share, for the third quarter of 2019. Net earnings for the nine months of 2020 were $5.4 million, or $1.51 per share, compared to $7.1 million, or $1.97 per share, for the first nine months of 2019.

“We are open and continue to serve our customers’ banking needs despite a challenging operating environment due to COVID-19. I am very proud of the response from our team,” said Robert W. Dumas, Chairman, President, and CEO.

“The economic effects of the pandemic have resulted in an additional provision for loan losses in the third quarter of 2020. In addition, we are experiencing net interest margin compression as a result of the historic low interest rate environment. Despite these challenges, we are very pleased with the increase in noninterest income as mortgage lending income more than doubled for both the quarter and first nine months of 2020.

“We are proactively working with our customers as payment deferrals have declined from nearly $113 million at June 30, 2020 to roughly $87 million at September 30, 2020. We expect this number to continue to decline in the fourth quarter of 2020 when most of the remaining initial deferral periods expire. While a great deal of uncertainty remains regarding the duration of the pandemic and its effects on our customers, we believe the Company is well positioned to continue supporting our customers and communities through this crisis,” said Mr. Dumas.

Net interest income (tax-equivalent) was $6.0 million for the third quarter of 2020, a decrease of 11% compared to $6.7 million for the third quarter of 2019. This decrease was primarily due to net interest margin compression resulting from the Federal Reserve’s efforts to keep market interest rates low.

Net interest margin (tax-equivalent) decreased to 2.72% in the third quarter of 2020, compared to 3.41% for the third quarter of 2019 primarily due to the lower interest rate environment and changes in our asset mix resulting from the significant short-term liquidity increase in customer deposits.

At September 30, 2020, the Company’s allowance for loan losses was $5.6 million, or 1.18% of total loans, compared to $4.4 million, or 0.95% of total loans, at December 31, 2019 and $4.8 million, or 1.03% of total loans, at September 30, 2019. Excluding PPP loans, the Company’s allowance for loan losses was 1.28% of total loans at September 30, 2020.
The provision for loan losses was $250 thousand for the third quarter of 2020, compared to no provision for loan losses during the third quarter of 2019. The increase in the provision for loan losses was related to adverse changes in economic conditions and portfolio trends driven by the COVID-19 pandemic, including higher unemployment in our primary market area. The provision for loan losses is based upon various estimates and judgments, including the absolute level of loans, economic conditions, loan growth, credit quality and the amount of net charge-offs.

We have identified certain commercial sectors with enhanced risk resulting from the impact of COVID-19. Loans within these sectors represent 49% of the Company’s total COVID-19 related modifications at…