ISLANDIA, N.Y., July 24, 2017 (GLOBE NEWSWIRE) — Empire Bancorp, Inc. (OTCQB:EMPK), today announced its financial results for the quarter ended June 30, 2017.
“We continued to experience a number of positive trends in our operating performance through the second quarter. Net income year over year increased 48.7% or $636 thousand to $1.9 million. Earnings per share rose to 27 cents per share as compared to 19 cents per share for the first six months of 2016. Our efficiency ratio trended downward over the past year from 81.49% to 75.29% reflecting our improved ability to manage our spending while generating revenue,” stated Douglas C. Manditch, Chairman and Chief Executive Officer. “The pace of our growth remains steady with total assets of $836.9 million, up 8.3% or $64.1 million over June 30, 2016. Although loan prepayments have continued to offset much of the new loan growth generated this year, our loan pipeline remains strong.”
Mid-Year Highlights
Financial Results
• Net income, measured on a consolidated basis, for the first six months of 2017 increased $636 thousand, or 48.7%, to $1.9 million, as compared to the same period in 2016.
• Net income at Empire National Bank for the first six months of 2017, without the impact of the subordinated debt interest expense and other holding company operating expenses, increased $642 thousand, or 37.8%, to $2.3 million, as compared to the same period in 2016.
• Diluted earnings per common share for the first six months of 2017 were $0.27, compared with $0.19 for the first six months of 2016.
• Return on average assets and average common stockholders’ equity for the first six months of 2017 were 0.48% and 6.02%, respectively, compared with 0.38% and 4.00%, for the same period in 2016.
Quarterly Highlights
Financial Results
• Net income, measured on a consolidated basis, for the second quarter of 2017 was $1.1 million, compared with $868 thousand for the first quarter of 2017 and $820 thousand for the second quarter of 2016. The provision for loan losses was $140 thousand in the second quarter of 2017, as compared to $130 thousand in the first quarter of 2017 and $17 thousand for the second quarter of 2016.
• Diluted earnings per common share for the second quarter of 2017 were $0.15, compared with $0.12 for the first quarter of 2017 and for the second quarter of 2016.
• Return on average assets and average common stockholders’ equity for the second quarter of 2017 were 0.52% and 6.50%, respectively, compared with 0.44% and 5.51%, respectively, for the first quarter of 2017, and 0.46% and 4.98%, respectively, for the second quarter of 2016.
• Net income at Empire National Bank for the second quarter of 2017, which excludes the impact of subordinated debt interest expense and other holding company operating expenses, was $1.3 million, compared with $1.1 million for the first quarter of 2017 and $1.0 million for the second quarter of 2016.
Franchise Development
• Total assets were $836.9 million at June 30, 2017, up from $772.8 million or 8.3% at June 30, 2016.
• Loans outstanding totaled $495.0 million at June 30, 2017, up from $463.0 million or 6.9% at June 30, 2016.
• Deposits totaled $748.8 million at June 30, 2017, up from $644.4 million or 16.2% at June 30, 2016.
Continued Financial and Credit Strength
• Strong 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 0.40%.
• “Well capitalized” regulatory capital levels at Empire National Bank, as of June 30, 2017:
- Tier 1 leverage capital ratio of 9.71%
- Common equity tier 1 risk-based capital ratio of 16.27%
- Tier 1 risk-based capital ratio of 16.27%
- Total risk-based capital ratio of 17.45%
“As a community bank we are dedicated to time-honored person to person service to meet client needs and quickly resolve problems. Yet we recognize customer satisfaction increasingly correlates with convenience and speed so we remain focused on improving our digital functionality. This quarter we rolled out Popmoney®, a person-to-person payments service (P2P) allowing enrolled customers to send money as easily as sending an email or text,” commented Thomas M. Buonaiuto, President and Chief Operating Officer.
Balance Sheet
Assets totaled $836.9 million at June 30, 2017, up $39.9 million, or 5.0%, from March 31, 2017 and up $64.1 million, or 8.3%, from June 30, 2016. Investment securities available for sale were $304.9 million at the most recent quarter-end, up $32.2 million, or 11.8%, from March 31, 2017 and up $22.4 million or 7.9% from June 30, 2016. The significant increase in investment securities was primarily attributable to the increase in deposits from March 31, 2017 and June 30, 2016, as discussed below. Gross loans were $495.0 million at June 30, 2017, down 1.3% from $501.3 million at March 31, 2017 and up 6.9% from $463.0 million from June 30, 2016.
Total deposits were $748.8 million at June 30, 2017, up $42.8 million, or 6.1%, from March 31, 2017 and up $104.3 million, or 16.2%, from June 30, 2016. Demand deposits were $172.4 million, a decrease of $4.7 million, or 2.6% from March 31, 2017, and down $12.9 million, or 7.0%, from June 30, 2016. Savings, N.O.W. and money market deposits totaled $557.4 million at June 30, 2017, an increase of $50.0 million, or 9.9%, over March 31, 2017, and $138.6 million, or 33.1%, from June 30, 2016. The growth in these deposits was driven in large part by new and existing municipal banking relationships. Higher cost certificates of deposit of $100,000 or more and other time deposits continued to trend downward as a percentage of total deposits at June 30, 2017, representing 2.5% of total deposits, compared to 6.3% at June 30, 2016.
Stockholders’ equity rose to $67.9 million at June 30, 2017 from $64.7 million at March 31, 2017 while remaining relatively flat from $67.8 million at June 30, 2016. The linked quarter increase was primarily attributable to net income of $1.1 million as well as the reduced net unrealized loss on securities available for sale, net of taxes, of $1.9 million. The slight increase in stockholders’ equity from June 30, 2016 resulted from net income of $3.4 million and $560 thousand associated with stock compensation plans and the exercise of both warrants and stock options, offset by net increase in the net unrealized loss on securities available for sale, net of taxes of $3.9 million. At June 30, 2017, the bank was “well capitalized” as defined by OCC regulation, with tier 1 leverage, common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratios of 9.71%, 16.27%, 16.27% and 17.45%, respectively.
Net Interest Margin/Net Interest Income
Net interest income for the second quarter of 2017 increased $372 thousand, or 6.2%, over the first quarter of 2017, and $1.1 million, or 20.6%, over the second quarter of 2016. Net interest margin was 3.14% for the three months ended June 30, 2017, an increase from 3.13% for the three months ended March 31, 2017, and an increase from 3.04% for the three months ended June 30, 2016.
Interest income increased $596 thousand, or 8.6% for the second quarter of 2017, from the first quarter of 2017, and $1.4 million, or 22.5%, from the second quarter of 2016. The linked quarter increase was attributable to an increase in income from loans and securities available for sale by $383 thousand and $219 thousand, respectively. The yield on interest earning assets increased to 3.68% for the second quarter of 2017 compared to 3.59% for the first quarter of 2017 and increased from 3.51% for the second quarter of 2016. The increase quarter over quarter was attributed to an increase in the average balance of interest earning assets coupled with an increase in the average rate of return on interest earning assets. Additionally, prepayment fees were higher in the second quarter of 2017, as compared to both first quarter of 2017 and second quarter of 2016.
Interest expense was $1.1 million in the most recent quarter and $881 thousand for the first quarter of 2017, as compared to $818 thousand for the second quarter of 2016. The cost of interest bearing liabilities was 0.76% for the three months ended June 30, 2017, an increase from 0.66% from the three months ended March 31, 2017, and an increase from 0.72% for the three months ended June 30, 2016.
Net interest income increased $2.1 million, or 20.3%, for the first six months of 2017 over the same period in 2016. Net interest margin was 3.13% for the first six months of 2017, an increase from 3.11% for the same period in 2016.
Interest income increased $2.5 million, or 21.1% for the first six months of 2017 over the same period in 2016. The increase was attributed to an increase from securities available for sale and loan income by $1.5 million and $896 thousand, respectively. Average interest earning assets increased $131.7 million for the first six months of 2017 over the first half of 2016. In addition, the yield on interest earning assets increased five basis points to 3.63% for the first six months of 2017 as compared to the same period in 2016. The increase in yield was driven largely by two factors. The average yield on loans increased to 4.42% for the first six months of 2017 from 4.30% for the first six months of 2016, primarily due to loan prepayment fees being higher in the first six months of 2017, as compared to the first six months of 2016. Additionally, investment securities available for sale represented a greater percentage of the earning asset mix over the first six months of 2017 as compared to the same period of the prior year and the average rate of return for investment securities available for sale increased by forty four basis points over 2016.
The increase in net interest margin was also impacted by a decrease of three basis points in the cost of average interest-bearing liabilities to 0.71% for the first half of 2017 from 0.74% for the same period in 2016. The decreases were largely driven by increased municipal deposits, which carry a lower cost of funds as compared to maturing time deposits.
Noninterest Income and Expense
Other income of $344 thousand for the second quarter of 2017 represented an increase of $36 thousand over the linked quarter and an increase of $52 thousand over the same period in 2016. The linked quarter increase resulted primarily from increased collection of miscellaneous loan charges. The increase in the second quarter of 2017 over the second quarter of 2016 resulted from both increased collection of miscellaneous loan charges and increased customer related fees and service charges offset by the decrease in professional practice revenue.
Other income of $652 thousand for the first six months of 2017 represented an increase of $59 thousand, or 9.9%, as compared to the same period in 2016. The net increase resulted from both increased collection of miscellaneous loan charges and increased customer related fees and service charges offset by the decrease in professional practice revenue.
Other expense in the second quarter of 2017 totaled $5.0 million, compared with $4.9 million in the first quarter of 2017 and $4.5 million in the second quarter of 2016. The increase in linked quarter for other expense was primarily attributable to an increase in advertising and business development expense of $38 thousand, or 13.1%, and fees associated with recruiting services. The increase in the second quarter of 2017 over the second quarter of 2016 was attributable to an increase in salaries and employee benefits expense of $217 thousand, or 8.9%, an increase in advertising and business development expense of $98 thousand, or 42.4%, and an increase in net occupancy and equipment costs of $43 thousand or 6.5% primarily as a result of additional rental expense associated with operating the private banking branch office in Manhattan, which opened in September 2016.
Other expense in the first half of 2017 totaled $9.9 million, compared with $8.9 million in the first half of 2016. The increase in other expense was primarily attributable to an increase in salaries and employee benefits expense of $550 thousand, or 11.6%, over the previous year, largely due to base salary increases and benefit plans to support strategic plans and employee recognition and retention. Advertising and business development expense increased $158 thousand, or 34.2%, as compared to the same period in 2016. Net occupancy and equipment costs increased $85 thousand, or 6.4%, over the same period last year, primarily as a result of additional rental expense associated with operating the private banking branch office in Manhattan, which opened in September 2016. Costs associated with the collateralization of municipal deposits increased $31 thousand over the same period last year. FDIC insurance decreased $27 thousand, or 13.4%, during the first six months of 2017 as compared to the same period in 2016, as a direct result of the reduction of rates offset by an increase in average assets.
Strong Asset Quality/Provision for Loan Losses
Credit quality remained strong with loans classified as nonaccrual at $2.0 million, or 0.40% of total loans outstanding at June 30, 2017, compared with $2.3 million, or 0.46%, at March 31, 2017 and $525 thousand, or 0.11%, at June 30, 2016.
Based on management’s assessment of the adequacy of the allowance for loan and lease losses, a provision of $140 thousand was recorded for the second quarter of 2017, as compared with $130 thousand for the first quarter of 2017 and $17 thousand for the second quarter of 2016. Expressed as a percentage of outstanding loans, the allowance for loan and lease losses was 1.19% at June 30, 2017, compared with 1.18% at March 31, 2017 and at June 30, 2016.
In the second quarter of 2017 there were net charge-offs of $199 thousand as compared to no recorded charge-offs or recoveries in the first quarter of 2017 or the second quarter of 2016.
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, municipalities, real estate investors, and consumers. The bank has four full-service banking offices located in Islandia, Shirley, Port Jefferson Station, Mineola and a private banking branch office in Manhattan. 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.
| Consolidated Statements of Condition (unaudited) | ||||||||||||||||||||
| (dollars in thousands, except per share data) | ||||||||||||||||||||
| June 30, | March 31, | December 31, | June 30, | |||||||||||||||||
| 2017 | 2017 | 2016 | 2016 | |||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Total cash and cash equivalents | $ | 21,957 | $ | 8,122 | $ | 6,354 | $ | 18,066 | ||||||||||||
| Securities available for sale, at fair value | 304,948 | 272,788 | 264,734 | 282,577 | ||||||||||||||||
| Securities held to maturity | 4,000 | 3,000 | 3,000 | – | ||||||||||||||||
| Securities, restricted | 3,071 | 2,960 | 4,131 | 2,935 | ||||||||||||||||
| Loans | 495,010 | 501,309 | 494,274 | 463,001 | ||||||||||||||||
| Allowance for loan losses | (5,870 | ) | (5,929 | ) | (5,799 | ) | (5,460 | ) | ||||||||||||
| Loans, net | 489,140 | 495,380 | 488,475 | 457,541 | ||||||||||||||||
| Premises and equipment, net | 5,798 | 6,006 | 6,052 | 6,408 | ||||||||||||||||
| Other assets and accrued interest receivable | 7,941 | 8,766 | 8,689 | 5,240 | ||||||||||||||||
| Total Assets | $ | 836,855 | $ | 797,022 | $ | 781,435 | $ | 772,767 | ||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
| Demand Deposits | $ | 172,378 | $ | 177,044 | $ | 177,299 | $ | 185,307 | ||||||||||||
| Savings, N.O.W. and money market deposits | 557,353 | 507,314 | 465,890 | 418,801 | ||||||||||||||||
| Certificates of deposit of $100,000 or more | ||||||||||||||||||||
| and other time deposits | 19,020 | 21,564 | 27,494 | 40,329 | ||||||||||||||||
| Total Deposits | 748,751 | 705,922 | 670,683 | 644,437 | ||||||||||||||||
| Short-term borrowings | – | 578 | 26,477 | – | ||||||||||||||||
| Subordinated debentures, net | 14,756 | 14,746 | 14,735 | 14,715 | ||||||||||||||||
| Other liabilities and accrued expenses | 5,480 | 11,092 | 6,548 | 45,789 | ||||||||||||||||
| Total Liabilities | 768,987 | 732,338 | 718,443 | 704,941 | ||||||||||||||||
| Total Stockholders’ Equity | 67,868 | 64,684 | 62,992 | 67,826 | ||||||||||||||||
| Total Liabilities and Stockholders’ Equity | $ | 836,855 | $ | 797,022 | $ | 781,435 | $ | 772,767 | ||||||||||||
| Selected Financial Data (unaudited) | ||||||||||||||||||||
| Allowance for Loan Losses to Total Loans | 1.19 | % | 1.18 | % | 1.17 | % | 1.18 | % | ||||||||||||
| Non-performing Loans to Total Loans | 0.40 | % | 0.46 | % | 0.48 | % | 0.11 | % | ||||||||||||
| Non-performing Assets to Total Assets | 0.24 | % | 0.29 | % | 0.30 | % | 0.07 | % | ||||||||||||
| Book Value per Share | $ | 9.59 | $ | 9.16 | $ | 9.07 | $ | 9.77 | ||||||||||||
| Capital Ratios (unaudited)(1) | ||||||||||||||||||||
| Tier 1 Leverage Ratio | 9.71 | % | 9.96 | % | 10.22 | % | 10.69 | % | ||||||||||||
| Common Equity Tier 1 Risk-Based Capital Ratio | 16.27 | % | 15.82 | % | 16.26 | % | 16.27 | % | ||||||||||||
| Tier 1 Risk-Based Capital Ratio | 16.27 | % | 15.82 | % | 16.26 | % | 16.27 | % | ||||||||||||
| Total Risk-Based Capital Ratio | 17.45 | % | 17.00 | % | 17.46 | % | 17.43 | % | ||||||||||||
| (1) Regulatory capital ratios presented on bank-only basis | ||||||||||||||||||||
| Consolidated Statements 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, | ||||||||||||||||
| 2017 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
| Interest income | $ | 7,515 | $ | 6,919 | $ | 6,133 | $ | 14,434 | $ | 11,917 | ||||||||||
| Interest expense | 1,105 | 881 | 818 | 1,986 | 1,573 | |||||||||||||||
| Net interest income | 6,410 | 6,038 | 5,315 | 12,448 | 10,344 | |||||||||||||||
| Provision for loan losses | 140 | 130 | 17 | 270 | 192 | |||||||||||||||
| Net interest income after | ||||||||||||||||||||
| provision for loan losses | 6,270 | 5,908 | 5,298 | 12,178 | 10,152 | |||||||||||||||
| Net securities gains | – | – | 215 | – | 197 | |||||||||||||||
| Other income | 344 | 308 | 292 | 652 | 593 | |||||||||||||||
| Other expense | 4,966 | 4,896 | 4,536 | 9,862 | 8,913 | |||||||||||||||
| Income before income taxes | 1,648 | 1,320 | 1,269 | 2,968 | 2,029 | |||||||||||||||
| Income tax expense | 574 | 452 | 449 | 1,026 | 723 | |||||||||||||||
| Net income | $ | 1,074 | $ | 868 | $ | 820 | $ | 1,942 | $ | 1,306 | ||||||||||
| Basic earnings per share | $ | 0.15 | $ | 0.12 | $ | 0.12 | $ | 0.28 | $ | 0.19 | ||||||||||
| Diluted earnings per share | $ | 0.15 | $ | 0.12 | $ | 0.12 | $ | 0.27 | $ | 0.19 | ||||||||||
| Weighted average common and equivalent | ||||||||||||||||||||
| shares outstanding | 7,172,737 | 7,139,139 | 6,955,850 | 7,155,965 | 6,946,277 | |||||||||||||||
| Selected Financial Data (unaudited) | ||||||||||||||||||||
| Return on Average Assets | 0.52 | % | 0.44 | % | 0.46 | % | 0.48 | % | 0.38 | % | ||||||||||
| Return on Average Equity | 6.50 | % | 5.51 | % | 4.98 | % | 6.02 | % | 4.00 | % | ||||||||||
| Net Interest Margin | 3.14 | % | 3.13 | % | 3.04 | % | 3.13 | % | 3.11 | % | ||||||||||
| Efficiency Ratio | 73.54 | % | 77.15 | % | 80.89 | % | 75.29 | % | 81.49 | % | ||||||||||
CONTACT: Contact: William Franz - SVP, Director of Marketing & Investor Relations (631) 348-4444