1. Executive Summary
- Company / Ticker: Auburn National Bancorporation, Inc. (AUBN)
- Sector: Community/Regional Banking (East Alabama focused)
- Investment Opinion: Hold or Light Buy — Stable earnings, improving net interest margin (NIM), strong capital and consistent dividends make this a conservative income-focused play.
2. Company Overview
- Business Model: Traditional community banking operations including deposits, loans, mortgages, and business services through 7 branches and 10 ATMs in East Alabama. Established in 1907.
- Market Position: ~$1.0B in total assets, highly localized, loyal customer base.
3. Financial Analysis
- Net Interest Income & NIM:
- Q1 2025 net interest income: ~$7.1M (+6% YoY); NIM rose to 3.20% (vs. 3.09% prior Q, 3.04% YoY)
- Credit Quality:
- Nonperforming assets: ~0.05% of loans (very strong)
- Loan loss reserves: ~1.20%, minimal charge-offs
- Liquidity & Capital:
- Cash ratio: ~11.9% of assets
- Tangible common equity ratio: 8.34%
- Profitability:
- Q1 net income: $1.5M (EPS: $0.44), improving from prior quarters
4. Stock Performance
- Current Price: $21.17
- Volatility: Low beta (~0.33), weekly price swing ~5%
- 1-Year Return: ~+16%, slightly below regional bank average (~23.5%)
5. Valuation Analysis
- P/E: ~11.3x
- P/B: ~0.9x
- Dividend Yield: $1.08 annually (quarterly $0.27), yield ≈ 5.1%, payout ratio ~58%
6. Analyst Sentiment
- No major analyst coverage due to small market cap, but income-focused investors view it favorably for its stable earnings and consistent dividends.
- Trusted regional management and conservative asset profile are viewed positively.
7. Risk Analysis
- Interest Rate Risk: Potential margin pressure if rates fall.
- Credit Risk: Economic slowdown could affect credit performance — though current nonperforming asset levels are very low.
- Regional Exposure: Sensitive to local economic and regulatory shifts (e.g., agriculture, real estate).
8. Growth Catalysts
- NIM Expansion: Ongoing asset repricing is expected to improve interest margins.
- Dividend Strength: Reliable quarterly dividend enhances investor appeal.
- Efficiency Improvement: Branch cost optimization may support ROA expansion.
9. Conclusion
AUBN is a small, well-managed community bank with stable returns and high dividend yield.
- Recommendation: Hold or Light Buy — ideal for income-seeking investors
- Rationale: Strong capital, low credit risk, and above-market dividend yield make it suitable for conservative portfolios with a long-term horizon.