Empire Bancorp Announces First Quarter Operating Results

ISLANDIA, NY--(Marketwired - Apr 29, 2015) - Empire Bancorp, Inc. (OTCQB: EMPK), today announced its operating results for the first quarter of 2015. Highlights for the quarter ended March 31, 2015 include:

• Net income of $587 thousand, a $138 thousand, or 30.7%, increase from the quarter ended March 31, 2014;
• Total loans of $385.1 million, a $70.8 million, or 22.5%, increase from March 31, 2014;
• Total assets of $511.6 million, a $22.4 million, or 4.6%, increase from March 31, 2014;
• Demand deposits of $183.7 million, a $10.6 million, or 6.1%, increase from March 31, 2014;
• Solid asset quality with an allowance for loan and lease losses of 1.18% of total loans and a ratio of non-performing loans to total loans of 0.19%;
• Book value per share, as converted at $9.21 as of March 31, 2015;
• "Well capitalized" regulatory capital levels, as of March 31, 2015:
  • Common equity tier 1 risk based capital ratio of 16.33%
  • Tier 1 leverage capital ratio of 12.55%
  • Tier 1 risk based capital ratio of 16.33%
  • Total risk based capital ratio of 17.52%
    
    

Douglas C. Manditch, Chairman and Chief Executive Officer stated, "We are pleased with the continued growth of our profitability and asset base. Over the past year, we have succeeded in managing our balance sheet toward a greater composition of loans while maintaining asset quality, which has enhanced net interest income and net earnings. Our ratio of non-performing loans to total loans further improved to 0.19% at quarter end as we steadfastly remain selective in our underwriting. 

In addition to our performance, we made a number of strategic moves during the first quarter to position the bank for continued growth. First, we hired Robert Schepis as our new Chief Lending Officer. Robert brings more than twenty five years of lending experience in our core markets with a focus on the commercial and industrial customer as well as commercial real estate lending. His lending philosophy fits well into our design, one of advising clients and building long term relationships through a network of real estate and business professionals. In January, we also expanded our Board of Directors adding Robert Falese, Jr., a forty year veteran of the banking profession. Bob served in senior executive roles in commercial banking and lending throughout his career, and that experience provides us with a valuable and respected resource as we continue to grow and leverage the additional capital raised in late 2014. I am excited about the future of our organization."

Earnings

Net income was $587 thousand or $0.09 per diluted share for the first quarter of 2015, compared to $449 thousand or $0.10 per share for the first quarter of 2014, representing an increase of $138 thousand or 30.7%. 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 $730 thousand, or 18.7%, year-over-year as average earning assets increased to $486.3 million as of March 31, 2015, an increase of $26.9 million or 5.9%. The bank's net interest margin was 3.87% for the quarter ended March 31, 2015, an increase from 3.45% for the quarter ended March 31, 2014. The bank's yield on interest earning assets in the first quarter of 2015 averaged 4.18%, as compared to an average of 3.86% for the first quarter 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 bank's cost of interest bearing liabilities averaged 0.62% for the first quarter of 2015, a decrease from an average of 0.74% over the first quarter of 2014. Based upon growth of the loan portfolio, a provision for loan losses of $127 thousand was recorded for the quarter ended March 31, 2015. No provision for loan losses was recorded for the quarter ended March 31, 2014.

As compared to the first quarter of 2014, other income decreased approximately $10 thousand or 3.6%, and total other expenses increased by approximately $384 thousand, or 11.3%. The Company recognized net loss of $71 thousand during the first quarter of 2015 on sale of investment securities; there were no gains or losses on sales of investment securities in the first quarter of 2014. Increases in other expenses were primarily attributable to an increase in salaries and employee benefits expense of $194 thousand, or 11.1%. Net occupancy and equipment expense increased $40 thousand or 7.1% as we signed a new lease expanding our corporate headquarters in Islandia during the first quarter of 2015. Advertising and business development increased $25 thousand, or 14.4%, largely due to additional costs for social media and our website. Increases in other operating expenses also reflect the New York State capital based tax that replaced the state income tax in 2015. The elimination of the state income tax reduced our combined effective tax rate to 35.8% from 42.1% for the first quarter of 2015.

Balance Sheet and Asset Quality

Total assets were $511.6 million at March 31, 2015, an increase of $22.4 million year-over-year, or 4.6%, which was primarily attributable to an increase in net loan balances of $70.8 million, or 22.5%. The bank's ratio of non-performing loans to total loans improved to 0.19% as of March 31, 2015 with the allowance for loan losses at 1.18% of total loans. Securities available for sale decreased $52.8 million, or 34.7%, to a total of $99.4 million at March 31, 2015.

Total deposits were $409.0 million at March 31, 2015, a year-over-year increase of $18.0 million, or 4.6%. Demand deposits increased $10.6 million, or 6.1%, year-over-year. Savings, NOW and money market deposits increased $2.8 million or 1.8 % from March 31, 2014 to a total of $158.5 million at quarter end. Certificate of deposits of $100,000 or more, increased $5.2 million or 12.1%, year-over-year.

Stockholders' equity increased $23 million, or 57.1%, from $40.3 million to $63.3 million at March 31, 2015 as compared to March 31, 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 March 31, 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 12.55%, 16.33%, 16.33% and 17.52%, respectively.

Opportunities and Challenges

"For 2015, we are excited to announce the roll out of our redesigned website, the gatekeeper to our many electronic services," commented Thomas M. Buonaiuto, President and Chief Operating Officer. "Our customers quickly embraced mobile banking which now allows for the depositing of checks from anywhere, at any time, into a personal account. As businesses and consumers seek greater convenience, protecting the privacy, personal assets and information of our account holders remains a priority. We recently renewed our core processing contract allowing for unbroken outstanding service to our customers through all delivery channels, including our branch offices in Islandia, Shirley, Port Jefferson Station and Mineola, New York."

Balance Sheet (unaudited)
(dollars in thousands)
			March 31,				December 31,				March 31,
			2015				2014				2014
ASSETS
Total cash and cash equivalents			$	16,930			$	17,985			$	9,420
Securities available for sale, at fair value				99,414				100,617				152,150
Securities held to maturity				-				-				-
Securities, restricted				4,019				3,962				4,331
Loans, net				380,586				375,199				310,077
Premises and equipment, net				5,969				5,989				6,651
Other assets and accrued interest receivable				4,728				4,317				6,608
	Total Assets		$	511,646			$	508,069			$	489,237
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand Deposits			$	183,734			$	189,204			$	173,052
Savings, N.O.W. and money market deposits				158,539				142,286				155,657
Certificates of deposit of $100,000 or more and other time deposits				66,768				63,635				62,258
	Total Deposits		$	409,041			$	395,125			$	390,967
Short-term borrowings				34,406				46,105				54,629
Other liabilities and accrued expenses				4,854				4,418				3,310
Total Liabilities			$	448,301			$	445,648			$	448,906
Total Stockholders' Equity				63,345				62,421				40,331
Total Liabilities and Stockholders' Equity			$	511,646			$	508,069			$	489,237
Selected Financial Data (unaudited)
Allowance for Loan Losses to Total Loans				1.18	%			1.17	%			1.35	%
Non-performing Loans to Total Loans				0.19	%			0.31	%			0.74	%
Non-performing Assets to Total Assets				0.14	%			0.23	%			0.47	%
Capital Ratios (unaudited)(1)(2)
Tier 1 Leverage Ratio				12.55	%			12.65	%			8.91	%
Common Equity Tier 1 Risk Based Capital Ratio				16.33	%			N/A				N/A
Tier 1 Risk-Based Capital Ratio				16.33	%			16.02	%			12.26	%
Total Risk-Based Capital Ratio				17.52	%			17.17	%			13.49	%
Book Value per Share(3)			$	9.21			$	9.07			$	9.21
(1) Regulatory capital ratios presented on bank-only basis
(2) Capital ratios at 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
		March 31,				December 31,				March 31,
		2015				2014				2014
Interest income		$	5,015			$	4,752			$	4,374
Interest expense			377				377				466
Net interest income		$	4,638			$	4,375			$	3,908
Provision for loan losses			127				48				-
Net interest income after
provision for loan losses			4,511				4,327				3,908
Net securities (losses) gains			(71	)			23				-
Other income			269				204				279
Other expense			3,795				3,663				3,411
Income before income taxes			914				891				776
Income tax			327				772				327
Net income		$	587			$	119			$	449
Basic earnings per share		$	0.10			$	0.03			$	0.10
Diluted earnings per share		$	0.09			$	0.02			$	0.10
Selected Financial Data (unaudited)
Return on Average Assets			0.48	%			0.10	%			0.39	%
Return on Average Equity			3.79	%			1.08	%			4.61	%
Net Interest Margin			3.87	%			3.64	%			3.45	%
Efficiency Ratio			77.36	%			80.02	%			81.45	%

About Empire Bancorp, Inc.

Empire Bancorp, Inc. is a bank holding company for Empire National Bank, a Long Island-based independent bank that specializes in serving the financial needs of small and medium sized businesses, professionals, nonprofit organizations, real estate investors, and consumers. The bank has four banking offices located in Islandia, Shirley, Port Jefferson Station and Mineola, New York. 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.