SOURCE: Empire Bancorp, Inc.

Empire Bancorp, Inc.

July 27, 2015 12:11 ET

Empire Bancorp Announces 18.0% Increase in Earnings for the Six Months Ended June 30, 2015

ISLANDIA, NY--(Marketwired - Jul 27, 2015) - Empire Bancorp, Inc. (OTCQB: EMPK) today announced its operating results for the second quarter of 2015. Highlights for the three and six months ended June 30, 2015 include:

  • Net income of $1.3 million, a $191 thousand, or 18.0%, increase from the six months ended June 30, 2014, and an $80 thousand, or 13.6%, increase from the three months ended March 31, 2015
  • Total loans of $401.6 million, a $77 million, or 23.5%, increase from June 30, 2014
  • Total assets of $517 million, a $26.3 million, or 5.4%, increase from June 30, 2014
  • Total deposits of $426.5 million, a $5.3 million, or 1.3%, increase from June 30, 2014, and a $31.4 million, or 7.9%, increase from December 31, 2014
  • Solid asset quality with an allowance for loan and lease losses of 1.19% of total loans and a ratio of non-performing loans to total loans of 0.16%
  • "Well capitalized" regulatory capital levels, as of June 30, 2015:
    • Tier 1 leverage capital ratio of 12.63%
    • Common equity tier 1 risk based capital ratio of 15.97%
    • Tier 1 risk based capital ratio of 15.97 %
    • Total risk based capital ratio of 17.17%

Douglas C. Manditch, Chairman and Chief Executive Officer stated, "Our profitability continued to trend upward this quarter. Our year to date net interest margin of 3.99%, as compared to 3.52% for the first six months of 2014, reflected the historically high revenues we recognized from prepayment fees on loans during 2015. Loan prepayment penalties, written into our loan agreements as protection against early loan payoffs, increased $737 thousand or 453.4% when compared to prepayment revenue earned over the first six months of 2014. Although accretive to current earnings, these payoffs offset much of the new loan growth we generated this year. The majority of our loan portfolio is collateralized by multi-family properties in Brooklyn, Queens and Manhattan, boroughs experiencing rapidly rising real estate values. As many property owners look to refinance, we are sometimes uncomfortable with the requested high cash out amounts while on other deals we are unwilling to match the low fixed rates of our competitors. As an organization, we are watchful of the current elevated real estate values in many sections of New York City. We are also mindful of developments in the domestic and global markets foreshadowing possible changes in the interest rate environment.

Entering the second half of the year, we are positioned for continued growth of the balance sheet. In recent months, we have apportioned resources to better serve the commercial and industrial businesses of the city, opening a loan and deposit production office in Manhattan. Moreover, consolidation in the regional banking market provided the opportunity to add several seasoned commercial lenders and deposit relationship managers to our team. We remain loyal to our core business model focusing on traditional, relationship-based community banking targeting small to mid-sized businesses and professional practices. Our intention is to continue leveraging our capital to enhance earnings while maintaining our disciplined underwriting standards, as evidenced by our ratio of non-performing loans to total loans, which further improved to 0.16% at quarter end. 

Earnings for the Three Months Ended June 30, 2015

Net income was $667 thousand, or $0.10 per diluted share, for the second quarter of 2015, compared to $614 thousand, or $0.14 per share, for the second quarter of 2014, representing an increase of $53 thousand, or 8.6%.

Net interest income increased $726 thousand, or 16.9%, over the same period last year as average interest earning assets increased to $488.8 million as of June 30, 2015, an increase of $10.6 million or 2.2% over June 30, 2014. Net interest margin was 4.11% for the three months ended June 30, 2015, an increase from 3.59% for the three months ended June 30, 2014 and from 3.87% for the three months ended March 31, 2015. The yield on interest earning assets for the second quarter of 2015 averaged 4.43%, as compared to 3.97% for the second quarter of 2014 and 4.18% for the first quarter of 2015. The increase in yield on earning assets was primarily attributable to prepayment fees on loan payoffs as well as a shift in asset mix from investment securities to loans, which was partially offset by a lower average yield on loans. The cost of interest bearing liabilities remained the same as for the first quarter of 2015 averaging 0.62% for the second quarter of 2015, a decrease from 0.69% over the second quarter of 2014. Provisions for loan losses of $230 thousand and $120 thousand were made in the second quarters of 2015 and 2014, respectively. 

Total other income increased $8 thousand, or 3.0%, largely from increased professional practice revenue. Total other expenses increased approximately $632 thousand, or 18.6%, as compared to the same period in 2014. The increase was primarily attributable to an increase in salaries and employee benefits expense of $287 thousand, or 17.1%, over the second quarter of 2014, due to base salary increases and the hiring of new employees to support growth and strategic plans. Net occupancy and equipment costs increased $50.0 thousand, or 8.7%, as the Company increased the space covered by our main office lease during the first quarter of 2015 and opened a loan and deposit production office in Manhattan during the second quarter of 2015. Software services decreased $32 thousand, or 8.1%, largely from reduction in negotiated contract services. Increases in other operating expenses also reflected the New York State capital based tax that replaced the state income tax in 2015. Also in the second quarter of 2015, the Company began accruing for estimated New York City capital based taxes. The elimination of the state income tax reduced the Company's combined effective income tax rate from 41.4% to 35.8% for the second quarter of 2015.

Earnings for the Six Months Ended June 30, 2015

Net income was $1.3 million, or $0.18 per diluted share, for the six months of 2015, compared to $1.1 million, or $0.24 per share, for the six months of 2014, representing an increase of $191 thousand or 18.0%. Diluted earnings per share reflect the issuance of convertible preferred stock and additional shares of our common stock as part of a private placement completed in the fourth quarter of 2014.

Net interest income increased $1.5 million, or 17.8%, over the same period in 2014 as average interest earning assets increased to $487.5 million as of June 30, 2015, an increase of $18.7 million or 4.0%. Net interest margin was 3.99% for the six months ended June 30, 2015, an increase from 3.52% for the six months ended June 30, 2014. The yield on interest earning assets in the first half of 2015 averaged 4.31%, as compared to an average of 3.92% for the first half of 2014. The increase in yield on earning assets was primarily attributable to a shift in asset mix from investment securities to loans, which was partially offset by a lower average yield on loans. The impact of the prepayment fees on loan payoffs, which increased by $737 thousand or 453.4% over the first six months of 2014, offset the lower loan yields. The cost of interest bearing liabilities averaged 0.62% for the first half of 2015, a decrease from an average of 0.71% over the first half of 2014. A provision of $357 thousand was recorded for the first six months of 2015 as compared to $120 thousand for the first six months of 2014.

Other income was relatively flat with an increase of $3 thousand, or 0.55%. The Company recognized net loss of $71 thousand during the six months of 2015 on sale of investment securities as compared to a gain of $4K for the six months ended June 30, 2014. Total other expenses increased approximately $1.0 million, or 15.0%, as compared to the first six months of in 2014. The increase was primarily attributable to an increase in salaries and employee benefits expense of $481.0 thousand, or 14.1%, over the first six months of 2014, which was largely due to base salary increases and the hiring of new employees to support planned growth. Net occupancy and equipment costs increased $90.0 thousand, or 7.9%, increased the space covered by our main office lease during the first quarter of 2015 and opened a loan and deposit production office in Manhattan during the second quarter of 2015. Increases in other operating expenses reflect the New York State capital based tax that replaced the state income tax in 2015. Also in the second quarter of 2015 the Company began accruing for estimated New York City capital based taxes. The combined effective income tax rate for the first six months of 2015 decreased to 35.8% from 41.7% for the first six months of 2014.

Balance Sheet and Asset Quality

Total assets were $517.0 million at June 30, 2015 an increase of $26.3 million over June 30, 2014, or 5.4%, which was primarily attributable to an increase in outstanding loan balances of $76.5 million, or 23.5% to $401.6 million, which was partially offset by a decrease of $52.5 million, or 35.9%, in securities available for sale. The ratio of non-performing loans to total loans improved to 0.16% as of June 30, 2015, as compared to 0.27% as of June 30, 2014 and 0.19% as of March 31, 2015. The allowance for loan losses totaled 1.19% of total loans as of June 30, 2015. 

Total deposits were $426.5 million at June 30, 2015, an increase of $5.3 million over June 30, 2014, or 1.3%. Demand deposits decreased $21.7 million, or 10.7%, over June 30, 2014. Savings, NOW and money market deposits increased $36.4 million or 23.6% from June 30, 2014 to a total of $190.5 million at quarter end. A significant portion of the money market growth was from new municipal banking relationships. Certificates of deposit of $100,000 or more and other time deposits in decreased by $9.4 million or 14.4% over June 30, 2014. Short-term borrowings, representing Federal Home Loan Bank borrowings, decreased $570 thousand, or 2.46%, from June 30, 2014.

Stockholders' equity increased to $63.2 million at June 30, 2015 from $42.2 million at June 30, 2014, primarily as a result of net proceeds of $18.7 million from the Company's private placement completed in the fourth quarter of 2014. Operating earnings, as well as reductions in the net unrealized loss on available for sale securities, net of taxes, also contributed to the increase in stockholders' equity. At June 30, 2015, the bank was "well capitalized" as defined by OCC regulation, with Tier I leverage, Common equity tier 1 risk-based, Tier 1 risk-based and total risk-based capital ratios of 12.63 %, 15.97%, 15.97% and 17.17%, respectively.

Opportunities and Challenges

"We see tremendous opportunity within our niche of offering customers the individualized attention ascribed mainly to community banks. Our infrastructure has been developed to support continued growth in our loan portfolio, given the prudent underwriting standards upon which the bank was founded. Our focus on customer service is reflective not only in the manner in which we interact with our customers, but with the banking technology we provide to our customers. Our entry into the New York City market with our deposit and loan production office is expected to present strong opportunities for new banking relationships," commented Thomas M. Buonaiuto, President and Chief Operating Officer.

   
   
Balance Sheet (unaudited)  
(dollars in thousands)  
   
    June 30,     March 31,     December 31,     June 30,  
    2015     2015     2014     2014  
ASSETS                                
Total cash and cash equivalents   $ 11,596     $ 16,930     $ 17,985     $ 8,347  
Securities available for sale, at fair value     93,906       99,414       100,617       146,388  
Securities, restricted     3,543       4,019       3,962       3,048  
Loans, net     396,811       380,586       375,199       320,811  
Premises and equipment, net     6,290       5,969       5,989       6,479  
Other assets and accrued interest receivable     4,812       4,728       4,317       5,662  
  Total Assets   $ 516,958     $ 511,646     $ 508,069     $ 490,735  
                                 
LIABILITIES AND STOCKHOLDERS' EQUITY                                
Demand Deposits   $ 180,398     $ 183,734     $ 189,204     $ 202,087  
Savings, N.O.W. and money market deposits     190,492       158,539       142,286       154,110  
Certificates of deposit of $100,000 or more and other time deposits     55,625       66,768       63,635       64,980  
  Total Deposits   $ 426,515     $ 409,041     $ 395,125     $ 421,177  
Short-term borrowings     22,593       34,406       46,105       23,163  
Other liabilities and accrued expenses     4,641       4,854       4,418       4,229  
Total Liabilities   $ 453,749     $ 448,301     $ 445,648     $ 448,569  
Total Stockholders' Equity     63,209       63,345       62,421       42,166  
Total Liabilities and Stockholders' Equity   $ 516,958     $ 511,646     $ 508,069     $ 490,735  
                                 
Selected Financial Data (unaudited)                                
Allowance for Loan Losses to Total Loans     1.19 %     1.18 %     1.17 %     1.33 %
Non-performing Loans to Total Loans     0.16 %     0.19 %     0.31 %     0.27 %
Non-performing Assets to Total Assets     0.13 %     0.14 %     0.23 %     0.18 %
                                 
Capital Ratios (unaudited)(1)(2)                                
Tier 1 Leverage Ratio     12.63 %     12.55 %     12.65 %     8.72 %
Common Equity Tier 1 Risk-Based Capital Ratio     15.97 %     16.33 %     N/A       N/A  
Tier 1 Risk-Based Capital Ratio     15.97 %     16.33 %     16.02 %     12.37 %
Total Risk-Based Capital Ratio     17.17 %     17.52 %     17.17 %     13.61 %
Book Value per Share, as converted (3)   $ 9.19     $ 9.21     $ 9.07     $ 9.63  
                                 
(1) Regulatory capital ratios presented on bank-only basis
(2) Capital ratios at June 30 and March 31, 2015 are calculated under Basel III guidelines.
(3) Book value, as converted, treats the Series A preferred stock as having been converted into common stock because it has been structured as a nonvoting common stock equivalent.
 
   
   
Statement of Operations (unaudited)  
(dollars in thousands, except per share data)  
   
    For the three months ended     For the six months ended  
    June 30,     March 31,     June 30,     June 30,     June 30,  
    2015     2015     2014     2015     2014  
Interest income   $ 5,394     $ 5,015     $ 4,739     $ 10,409     $ 9,113  
Interest expense     382       377       453       759       920  
Net interest income   $ 5,012     $ 4,638     $ 4,286     $ 9,650     $ 8,193  
Provision for loan losses     230       127       120       357       120  
Net interest income after provision for loan losses     4,782       4,511       4,166       9,293       8,073  
Net securities (losses) gains     -       (71 )     4       (71 )     4  
Other income     279       269       267       548       545  
Other expense     4,022       3,795       3,390       7,817       6,799  
Income before income taxes     1,039       914       1,047       1,953       1,823  
Income tax     372       327       433       699       760  
Net income   $ 667     $ 587     $ 614     $ 1,254     $ 1,063  
                                         
Basic earnings per share   $ 0.12     $ 0.10     $ 0.14     $ 0.22     $ 0.24  
Diluted earnings per share   $ 0.10     $ 0.09     $ 0.14     $ 0.18     $ 0.24  
                                         
Selected Financial Data (unaudited)                                        
Return on Average Assets     0.53 %     0.48 %     0.50 %     0.51 %     0.45 %
Return on Average Equity     4.21 %     3.79 %     5.99 %     4.00 %     5.32 %
Net Interest Margin     4.11 %     3.87 %     3.59 %     3.99 %     3.52 %
Efficiency Ratio     76.02 %     77.36 %     74.46 %     76.66 %     77.81 %
                                         

About Empire Bancorp, Inc.

Empire Bancorp, Inc. is a bank holding company for Empire National Bank, a Long Island-based independent community bank that specializes in serving the financial needs of small and mid-sized businesses, professionals, nonprofit organizations, real estate investors, and consumers. The bank operates from full service banking offices located in Islandia, Shirley, Port Jefferson Station and Mineola, New York, and a loan and deposit production office in New York City. Our bankers take pride in understanding the needs of each customer so the bank can deliver the highest quality service with a sense of urgency.

This release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "estimate" or "continue," or comparable terminology, are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within the control of the Company. The forward-looking statements included in this press release are made only as of the date of this press release. The Company has no intention, and does not assume any obligation, to update these forward- looking statements.

Contact Information

  • Contact:
    William Franz
    VP, Director of Marketing & Investor Relations
    (631) 348-4444