Auburn National Bancorp. Inc. in Alabama said it expects the failure of Silverton Bank to cut into two quarters' worth of earnings.

The $803 million-asset Auburn said late Friday that it had to lower its previously reported first-quarter earnings by 54%, to $246,000, because of charges related to the May 1 failure.

Auburn also said it would take a pretax impairment charge of $800,000 in the second quarter on its remaining investment in the common stock and trust-preferred securities of Silverton Financial Services Inc., the parent company of the Atlanta correspondent bank.

Auburn, which announced its preliminary first-quarter earnings April 30, said it revised the results before filing with the Securities and Exchange Commission on Friday. It attributed the changes mainly to a valuation allowance on its deferred tax asset related to the Silverton stock.

In addition, a loan participation that Auburn bought from the correspondent bank accounted for 91% of its $4.7 million in nonperforming assets. Excluding this loan, Auburn said, nonperforming assets would make up only 0.09% of total loans and foreclosed property, instead of 1.24%.

The company said the property securing the loan has been seized and is being held by the Federal Deposit Insurance Corp., the receiver of Silverton Bank.

"We currently cannot predict the effect of the receivership upon our interest in this foreclosed collateral and any proceeds that we may receive," it said in the filing.

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