Auburn National Bancorporation (Nasdaq: AUBN) reported a net loss
of $4.0 million, or $1.14 per share, for the fourth quarter of
2023. The quarterly loss reflects the sale of $117.6 million of
available-for-sale securities for an after-tax loss of $4.7 million
or $1.36 per share. Proceeds of $111.3 million from the securities
sale were used to repay high-cost wholesale funding and sell
high-cost reciprocal deposits, with the remaining amounts held in
cash to fund future loan growth, the purchase of higher-yielding
securities, and other banking operations. Although this balance
sheet repositioning strategy resulted in a loss for the fourth
quarter of 2023, it immediately improved the Company’s tangible
common equity ratio or total equity to total asset ratio due to a
smaller balance sheet and is expected to improve the Company’s
interest rate risk profile and future earnings. The Company
estimates the earn-back period for the balance sheet repositioning
to be approximately 2.3 years.
“By taking proactive measures to reposition our balance sheet,
the Company will benefit from improved earnings in 2024 and should
recover the loss on sale of securities over a reasonable time
period” said David A. Hedges, President and CEO. “While the
interest rate environment remains challenging for the banking
industry, our capital and liquidity remains strong and we have
reduced our risks to changes in market interest rates, and are well
positioned to meet the needs of our customers” said
Mr. Hedges.
Net earnings for the fourth quarter of 2022 were
$4.5 million or $1.27 per share. Non-routine items affecting the
fourth quarter of 2022 included a gain on sale of land and a
one-time payroll tax credit provided by the CARES Act. The
after-tax impact of these non-routine items improved net earnings
by $3.6 million, or $1.02 per share.
Excluding the loss on sale of securities related
to the balance sheet repositioning strategy and the non-routine
items described above, net earnings would have been $0.7 million,
or $0.21 per share for the fourth quarter of 2023, compared to net
earnings of $0.9 million, or $0.25 per share, for the fourth
quarter of 2022.
For the full year 2023, the Company reported net
earnings of $1.4 million, or $0.40 per share, compared to $10.3
million, or $2.95 per share, for 2022. Excluding the loss on sale
of securities related to the balance sheet repositioning strategy
and the non-routine items described above, net earnings for the
full year 2023 would have been $6.1 million, or $1.75 per share,
compared to $6.7 million, or $1.92 per share for the full year
2022.
Net interest income (tax-equivalent) was $6.2 million for the
fourth quarter of 2023, a decrease of 19% compared to $7.6 million
for the fourth quarter of 2022. This decrease was primarily due to
a decline in the Company’s net interest margin. The Company’s net
interest margin (tax-equivalent) was 2.65% in the fourth quarter of
2023 compared to 3.27% in the fourth quarter of 2022. This decrease
was primarily due to higher market interest rates, which increased
our cost of funds, generally, and changes in our deposit mix to
higher-cost interest bearing deposits, which was partially offset
by a more favorable asset mix and higher yields on interest earning
assets. Average loans for the fourth quarter of 2023 were $550.9
million, a 12% increase from the fourth quarter of 2022.
Nonperforming assets were $0.9 million, or 0.09% of total
assets, at December 31, 2023, compared to $1.2 million, or
0.12% of total assets, at September 30, 2023 and $2.7 million, or
0.27% of total assets, at December 31, 2022. The decrease is
primarily due to the resolution of one nonperforming loan during
2023, which was paid in full.
At December 31, 2023, the Company’s allowance for credit losses
was $6.9 million, or 1.23% of total loans, compared to $6.8
million, or 1.24% at September 30, 2023 and $5.8 million, or 1.14%
of total loans, at December 31, 2022. The implementation of the
accounting standard for current expected credit losses (“CECL”),
increased our allowance for credit losses by $1.0 million on
January 1, 2023, or 0.20% of total loans, as a day one transition
adjustment to the new accounting standard. For the full year 2023,
increases in the allowance for credit losses due to changes in the
composition and balance of loans during 2023 were largely offset by
reductions in the allowance for credit losses due to the resolution
of collateral dependent nonperforming loans.
The Company recorded a provision for credit losses of $0.3
million in the fourth quarter of 2023, compared to $1.0 million in
the fourth quarter of 2022. The decrease in provision for credit
losses was primarily related to the downgrade of one borrowing
relationship in the fourth quarter of 2022, where one of these
loans was repaid in full during the second quarter of 2023.
Noninterest income was a loss of $5.4 million in the fourth
quarter of 2023, compared to noninterest income of $3.9 million for
the fourth quarter of 2022. Excluding the pre-tax securities loss
of $6.3 million related to the balance sheet repositioning strategy
in 2023, noninterest income would have been $0.9 million for the
fourth quarter of 2023, compared to noninterest income of $0.7
million in the fourth quarter of 2022 after excluding the pre-tax
gain of $3.2 million on the sale of land. This increase in
noninterest income was primarily related to increased income from
bank-owned life insurance and other noninterest income.
Noninterest expense was $5.8 million in the fourth quarter of
2023 compared to $4.4 million for the fourth quarter of 2022.
Excluding the impact of the one-time payroll tax credit of $1.6
million, noninterest expense would have been $6.0 million for the
fourth quarter of 2022. This decrease in noninterest expense was
primarily related to decreases in salaries and benefits expense,
net occupancy and equipment expense, and other noninterest
expenses, which were partially offset by an increase in
professional fees expense.
The provision for income taxes was a credit of $1.5 million for
an effective tax rate of (27.53)% for the fourth quarter of 2023,
compared to tax expense of $1.5 million and an effective tax rate
of 24.56% for the fourth quarter of 2022. This decrease was
primarily due to a decrease in pre-tax earnings in the fourth
quarter of 2023 resulting from the balance sheet repositioning. The
Company’s effective income tax rate otherwise is principally
affected by tax-exempt earnings from the Company’s investments in
municipal securities, bank-owned life insurance, and New Markets
Tax Credits.
Total assets were $975.3 million at December 31, 2023, compared
to $1.031 billion at September 30, 2023 and $1.024 billion at
December 31, 2022. Loans, net of unearned income were $557.3
million at December 31, 2023, compared to $545.6 million at
September 30, 2023, and $504.5 million at December 31, 2022. This
increase in loans reflects growth across all loan segments. Total
deposits were $896.2 million at December 31, 2023, compared to
$964.6 million at September 30, 2023 and $950.3 million at December
31, 2022. During the fourth quarter of 2023, deposit outflows due
to maturing brokered deposits of $46.1 million and the sale of
$59.0 million of reciprocal deposits were partially offset by net
deposit inflows of $36.7 million. For the full year 2023, deposit
outflows due to the sale of $59.0 million of reciprocal deposits
were partially offset by net deposit inflows of $4.9 million. The
Company had no brokered deposits at December 31, 2023, compared to
$46.1 million at September 30, 2023, and none at December 31, 2022.
The Company had no FHLB advances or other wholesale borrowings
outstanding at December 31, 2023, September 30, 2023, or December
31, 2022.
At December 31, 2023, the Company’s consolidated stockholders’
equity (book value) was $76.5 million, or $21.90 per share,
compared to $68.0 million, or $19.42 per share, at December 31,
2022. The increase from December 31, 2022 was primarily driven by
net earnings of $1.4 million and other comprehensive income of
$11.9 million related to unrealized gains/losses on securities
available-for-sale, net of tax. These increases were partially
offset by cash dividends paid of $3.8 million, a one-time charge of
$0.8 million, net of tax, for the cumulative effect to adopt the
CECL accounting standard on January 1, 2023, and $0.2 million in
repurchases of the Company’s common stock. Unrealized securities
losses do not affect the Bank’s capital for regulatory capital
purposes.
The Company’s total equity to total assets ratio was 7.84% at
December 31, 2023, compared to 5.96% at September 30, 2023, and
6.65% at December 31, 2022. All of the Company’s securities are
classified as available-for-sale and not held-to-maturity.
Therefore, any changes in the fair value of the Company’s
securities portfolio are fully reflected in total equity under
generally accepted accounting principles.
The Company paid cash dividends of $0.27 per share in the fourth
quarter of 2023, an increase of 2% from the same period in 2022.
The Company’s share repurchases of $0.2 million since December 31,
2022 resulted in 10,108 fewer outstanding common shares at December
31, 2023. At December 31, 2023, the Bank’s 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 $975 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 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,
the continuing effects of the COVID-19 pandemic and
related government, Federal Reserve monetary and regulatory
actions, including the continuing effects of pandemic-related
economic stimulus and 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
or tax credits) and our mix and cost of deposits and wholesale
liabilities, net interest margin, yields on earning assets,
securities valuations and performance, effects of inflation,
including Federal Reserve monetary policy tightening beginning in
2022 of monetary policies, including reductions in the Federal
Reserve’s Treasury and mortgage-backed securities holdings and
increases in the Federal Reserve’s target federal funds rate,
resulting increases in interest rates (generally and those
applicable to our assets and liabilities) and changes in our asset
values, especially investment securities, as a result of interest
rate changes, noninterest income, loan performance, loan deferrals
and modifications, nonperforming assets, other real estate owned,
provision for credit losses, including the continuing effects of
the application of the new CECL accounting standard adopted on
January 1, 2023 and our CECL models, including possible
adjustments to the fair values of securities available for sale in
lieu of other-than-temporary impairments, charge-offs, 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 for the year ended December 31,
2022 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 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.
For additional information, contact:David A. HedgesPresident and
CEO(334) 821-9200
Reports Fourth
Quarter and Full Year Results/page 4 |
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Financial Highlights (unaudited) |
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Quarter ended December 31, |
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Years ended December 31, |
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(Dollars in thousands, except per share amounts) |
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2023 |
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2022 |
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2023 |
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2022 |
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Results of Operations |
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Net interest income (a) |
$ |
6,154 |
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$ |
7,588 |
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$ |
26,745 |
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$ |
27,622 |
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Less: tax-equivalent adjustment |
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95 |
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117 |
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417 |
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|
456 |
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Net interest income (GAAP) |
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6,059 |
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7,471 |
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26,328 |
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27,166 |
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Noninterest income |
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(5,429 |
) |
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3,898 |
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(2,981 |
) |
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6,506 |
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Total revenue |
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630 |
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11,369 |
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23,347 |
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33,672 |
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Provision for credit losses |
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326 |
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1,000 |
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135 |
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1,000 |
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Noninterest expense |
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5,803 |
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4,449 |
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22,594 |
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19,823 |
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Income tax (benefit) expense |
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(1,514 |
) |
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1,454 |
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(777 |
) |
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2,503 |
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Net (loss) earnings |
$ |
(3,985 |
) |
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$ |
4,466 |
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$ |
1,395 |
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$ |
10,346 |
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Per share data: |
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Basic and diluted net (loss) earnings: |
$ |
(1.14 |
) |
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$ |
1.27 |
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$ |
0.40 |
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$ |
2.95 |
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Cash dividends declared |
$ |
0.27 |
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$ |
0.265 |
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$ |
1.08 |
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$ |
1.06 |
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Weighted average shares outstanding: |
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3,493,614 |
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3,504,344 |
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3,498,030 |
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3,510,869 |
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Shares outstanding, at period end |
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3,493,614 |
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3,503,452 |
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3,493,614 |
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3,503,452 |
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Book value |
$ |
21.90 |
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$ |
19.42 |
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$ |
21.90 |
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$ |
19.42 |
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Common stock price: |
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High |
$ |
21.99 |
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$ |
24.71 |
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$ |
24.50 |
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$ |
34.49 |
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Low |
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19.72 |
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22.07 |
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18.80 |
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22.07 |
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Period-end |
$ |
21.28 |
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$ |
23.00 |
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$ |
21.28 |
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$ |
23.00 |
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To earnings ratio |
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53.20 |
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x |
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7.82 |
x |
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53.20 |
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x |
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7.80 |
x |
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To book value |
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97 |
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% |
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118 |
% |
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97 |
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% |
|
118 |
% |
Performance ratios: |
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Return on average equity (annualized): |
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(26.40 |
) |
% |
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28.23 |
% |
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2.05 |
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% |
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12.48 |
% |
Return on average assets (annualized): |
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(1.56 |
) |
% |
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1.75 |
% |
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0.14 |
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% |
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0.96 |
% |
Dividend payout ratio |
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(23.68 |
) |
% |
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20.87 |
% |
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270.00 |
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% |
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35.93 |
% |
Other financial data: |
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Net interest margin (a) |
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2.65 |
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% |
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3.27 |
% |
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2.89 |
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% |
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2.81 |
% |
Effective income tax rate |
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(27.53 |
) |
% |
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24.56 |
% |
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(125.73 |
) |
% |
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19.48 |
% |
Efficiency ratio (b) |
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800.41 |
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% |
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38.73 |
% |
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95.08 |
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% |
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58.08 |
% |
Asset Quality: |
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Nonperforming assets: |
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Nonperforming (nonaccrual) loans |
$ |
911 |
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$ |
2,731 |
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$ |
911 |
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$ |
2,731 |
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Total nonperforming assets |
$ |
911 |
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$ |
2,731 |
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$ |
911 |
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$ |
2,731 |
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Net charge-offs |
$ |
173 |
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$ |
201 |
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$ |
46 |
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$ |
174 |
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Allowance for credit losses as a % of: |
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Loans |
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1.23 |
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% |
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1.14 |
% |
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1.23 |
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% |
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1.14 |
% |
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Nonperforming loans |
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753 |
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% |
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211 |
% |
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753 |
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% |
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211 |
% |
Nonperforming assets as a % of: |
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Loans and other real estate owned |
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0.16 |
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% |
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0.54 |
% |
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0.16 |
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% |
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0.54 |
% |
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Total assets |
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0.09 |
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% |
|
0.27 |
% |
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0.09 |
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% |
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0.27 |
% |
Nonperforming loans as a % of total loans |
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0.16 |
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% |
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0.54 |
% |
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0.16 |
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% |
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0.54 |
% |
Net charge-offs as a % of average loans |
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0.13 |
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% |
|
0.16 |
% |
|
0.01 |
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% |
|
0.04 |
% |
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Selected average balances: |
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Securities |
$ |
354,065 |
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$ |
407,792 |
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$ |
387,488 |
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$ |
425,620 |
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Loans, net of unearned income |
|
550,938 |
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|
490,163 |
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|
523,838 |
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|
454,195 |
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Total assets |
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1,020,476 |
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1,022,863 |
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1,021,808 |
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1,074,735 |
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Total deposits |
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953,674 |
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|
951,122 |
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|
946,791 |
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985,362 |
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Total stockholders' equity |
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60,372 |
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|
63,283 |
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|
68,066 |
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|
82,925 |
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Selected period end balances: |
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Securities |
$ |
270,910 |
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$ |
405,304 |
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|
$ |
270,910 |
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$ |
405,304 |
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Loans, net of unearned income |
|
557,294 |
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|
|
|
504,458 |
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|
557,294 |
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|
504,458 |
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Allowance for credit losses |
|
6,863 |
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|
5,765 |
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|
6,863 |
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|
5,765 |
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Total assets |
|
975,255 |
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|
1,023,888 |
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|
975,255 |
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|
1,023,888 |
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Total deposits |
|
896,243 |
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|
|
|
950,337 |
|
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|
896,243 |
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|
|
|
950,337 |
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Total stockholders' equity |
|
76,507 |
|
|
|
|
68,041 |
|
|
|
76,507 |
|
|
|
|
68,041 |
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(a) Tax equivalent. See “Explanation of Certain Unaudited Non-GAAP
Financial Measures” and “Reconciliation of GAAP to non-GAAP
Measures (unaudited).” |
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(b) Efficiency ratio
is the result of noninterest expense divided by the sum of
noninterest income and tax-equivalent net interest income. See
"Reconciliation of GAAP to non-GAAP Measures (unaudited)"
below. |
|
Reports Fourth
Quarter and Full Year Results/page 5 |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of GAAP to non-GAAP Measures (unaudited): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended December 31, |
|
Years ended December 31, |
|
(Dollars in thousands, except per share amounts) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Net interest income, as reported (GAAP) |
$ |
6,059 |
$ |
7,471 |
$ |
26,328 |
$ |
27,166 |
|
Tax-equivalent adjustment |
|
95 |
|
117 |
|
417 |
|
456 |
|
Net interest income (tax-equivalent) |
$ |
6,154 |
$ |
7,588 |
$ |
26,745 |
$ |
27,622 |
|
|
|
|
|
|
|
|
|
|
|
|
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