ISLANDIA, N.Y., Oct. 23, 2017 (GLOBE NEWSWIRE) — Empire Bancorp, Inc. (OTCQB:EMPK), today announced its financial results for the quarter ended September 30, 2017.
“Our year to date rise in both profits and returns over the first nine months of 2017 reflects a team effort producing income across various revenue lines. Going into the fourth quarter we are expanding our Small Business Administration loan program, specifically SBA 7(a) lending, to meet the needs of small to midsized commercial borrowers. Patience with the pace of growth of our loan portfolio is fundamental as loan prepayment penalties accelerated this year, boosting both net interest income and earnings while offsetting much of our new loan growth,” stated Douglas C. Manditch, Chairman and Chief Executive Officer. “Credit quality remains strong as we enter the final quarter of 2017. Total assets grew to $875.7 million at quarter end reflecting an increase of $107.8 million or 14.0% from September 30, 2016.”
Year-to-Date Highlights
Financial Results
- Net income, measured on a consolidated basis, for the first nine months of 2017 increased $918 thousand, or 47.1%, to $2.9 million, as compared to the same period in 2016.
- Net income at Empire National Bank for the first nine months of 2017, without the impact of the subordinated debt interest expense and other holding company operating expenses, increased $928 thousand, or 36.6%, to $3.5 million, as compared to the same period in 2016.
- Diluted earnings per common share for the first nine months of 2017 were $0.39, compared with $0.28 for the same period in 2016.
- Return on average assets and average common stockholders’ equity for the first nine months of 2017 were 0.46% and 5.78%, respectively, compared with 0.37% and 3.91%, for the same period in 2016.
Quarterly Highlights
Financial Results
- Net income, measured on a consolidated basis, for the third quarter of 2017 was $923 thousand, compared with $1.1 million for the second quarter of 2017 and $641 thousand for the third quarter of 2016. The provision for loan losses was $164 thousand in the third quarter of 2017, as compared to $140 thousand in each of the second quarter of 2017 and the third quarter of 2016.
- Diluted earnings per common share for the third quarter of 2017 were $0.12, compared with $0.15 for the second quarter of 2017 and $0.09 for the third quarter of 2016.
- Return on average assets and average common stockholders’ equity for the third quarter of 2017 were 0.42% and 5.34%, respectively, compared with 0.52% and 6.50%, respectively, for the second quarter of 2017, and 0.34% and 3.75%, respectively, for the third quarter of 2016.
- Net income at Empire National Bank for the third quarter of 2017, which excludes the impact of subordinated debt interest expense and other holding company operating expenses, was $1.1 million, compared with $1.3 million for the second quarter of 2017 and $839 thousand for the third quarter of 2016.
Franchise Development
- Total assets were $875.7 million at September 30, 2017, up from $767.9 million or 14.0% at September 30, 2016.
- Loans outstanding totaled $490.8 million at September 30, 2017, up from $472.8 million or 3.8% at September 30, 2016.
- Deposits totaled $765.3 million at September 30, 2017, up from $679.0 million or 12.7% at September 30, 2016.
Continued Financial and Credit Strength
- Strong asset quality with an allowance for loan and lease losses of 1.16% of total loans and a ratio of non-performing loans to total loans of 0.33%.
- “Well capitalized” regulatory capital levels at Empire National Bank, as of September 30, 2017:
- Tier 1 leverage capital ratio of 9.46%
- Common equity tier 1 risk-based capital ratio of 15.80%
- Tier 1 risk-based capital ratio of 15.80%
- Total risk-based capital ratio of 16.89%
“Financial institutions are acutely sensitive to the information security risks faced by all businesses, including the small to midsized firms at the core of our customer base. Attacks such as data breaches and identity fraud are ever more complex in nature. To broaden understanding of these cyber threats we are working toward rolling out a cyber security awareness program designed specifically for both retail and commercial banking customers. Safeguarding targeted personal information is a shared responsibility,” commented Thomas M. Buonaiuto, President and Chief Operating Officer.
Balance Sheet
Assets totaled $875.7 million at September 30, 2017, up $38.8 million, or 4.6%, from June 30, 2017 and up $107.8 million, or 14.0%, from September 30, 2016. Investment securities available for sale were $338.5 million at the most recent quarter-end, up $33.6 million, or 11.0%, from June 30, 2017 and up $73.4 million or 27.7% from September 30, 2016. Gross loans were $490.8 million at September 30, 2017, down 0.8% from $495.0 million at June 30, 2017 and up 3.8% from $472.8 million from September 30, 2016.
Total deposits were $765.3 million at September 30, 2017, up $16.5 million, or 2.2%, from June 30, 2017 and up $86.3 million, or 12.7%, from September 30, 2016. Demand deposits were $171.1 million, a decrease of $1.3 million, or 0.7% from June 30, 2017, and down $31.2 million, or 15.4%, from September 30, 2016. Savings, N.O.W. and money market deposits totaled $576.2 million at September 30, 2017, an increase of $18.9 million, or 3.4%, over June 30, 2017, and $138.4 million, or 31.6%, from September 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 September 30, 2017, representing 2.3% of total deposits, compared to 5.7% at September 30, 2016.
Stockholders’ equity rose to $70.1 million at September 30, 2017 from $67.9 million at June 30, 2017 and $68.6 million at September 30, 2016. The linked quarter increase was primarily attributable to net income of $923 thousand, the reduced net unrealized loss on securities available for sale, net of taxes, of $678 thousand and the exercise of warrants in the amount of $450 thousand. The increase in stockholders’ equity from September 30, 2016 resulted from net income of $3.7 million and $1.1 million 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 $3.3 million. At September 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 9.46%, 15.80%, 15.80% and 16.89%, respectively.
Net Interest Margin/Net Interest Income
Net interest income for the third quarter of 2017 decreased $197 thousand, or 3.1%, over the second quarter of 2017, and increased $656 thousand, or 11.8%, over the third quarter of 2016. Net interest margin was 2.91% for the three months ended September 30, 2017, a decrease from 3.14% for the three months ended June 30, 2017, and from 3.00% for the three months ended September 30, 2016.
Interest income increased $65 thousand, or 0.9% for the third quarter of 2017, from the second quarter of 2017, and $1.2 million, or 18.3%, from the third quarter of 2016. The year over year quarter increase was attributable to an increase in income from securities available for sale, loans, and deposits with banks, by $562 thousand, $456 thousand and $95 thousand, respectively. The yield on interest earning assets decreased to 3.55% for the third quarter of 2017 compared to 3.68% for the second quarter of 2017 and increased from 3.46% for the third quarter of 2016. The increase over the third quarter of 2016 was attributed to an increase in the average rate of return of all interest earning assets. The linked quarter over quarter decrease was attributed to shift in the asset mix, whereas the average balance of interest earnings deposits, a lower yielding investment than loans, increased while the average loan balance decreased. Additionally, prepayment fees of $291 thousand in the third quarter of 2017 represented a decrease from $308 thousand in the second quarter of 2017 and an increase from $261 thousand in the third quarter of 2016.
Interest expense was $1.4 million in the most recent quarter and $1.1 million for the second quarter of 2017, as compared to $848 thousand for the third quarter of 2016. The cost of interest bearing liabilities was 0.88% for the three months ended September 30, 2017, an increase from 0.76% from the three months ended June 30, 2017, and an increase from 0.72% for the three months ended September 30, 2016.
Net interest income increased $2.8 million, or 17.4%, for the first nine months of 2017 over the same period in 2016. Net interest margin was 3.05% for the first nine months of 2017, a decrease from 3.07% for the same period in 2016.
Interest income increased $3.7 million, or 20.2% for the first nine months of 2017 over the same period in 2016. The increase was principally attributed to an increase in income from both securities available for sale and loans by $2.1 million and $1.4 million, respectively. Average interest earning assets increased $124.7 million for the first nine months of 2017 over the first nine months of 2016. In addition, the yield on interest earning assets increased six basis points to 3.60% for the first nine 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 4.45% for the first nine months of 2017 from 4.32% for the first nine months of 2016, primarily due to loan prepayment fees being higher in the first nine months of 2017. Additionally, investment securities available for sale represented a greater percentage of the earning asset mix over the first nine 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 basis points over 2016.
The decrease in net interest margin was impacted by an increase of three basis points in the cost of average interest-bearing liabilities to 0.77% for the first nine months of 2017 from 0.74% for the same period in 2016.
Noninterest Income and Expense
Other income of $386 thousand for the third quarter of 2017 represented an increase of $42 thousand over the linked quarter and an increase of $116 thousand over the same period in 2016. The linked quarter increase resulted primarily from income on bank-owned life insurance of $92 thousand partially offset by decreased collection of miscellaneous loan charges of $49 thousand. The increase in the third quarter of 2017 over the third quarter of 2016 resulted from both increased collection of miscellaneous loan charges, increased customer related fees and service charges, and from income on bank-owned life insurance offset by the decrease in professional practice revenue.
Other income of $1.0 million for the first nine months of 2017 represented an increase of $175 thousand, or 20.3%, as compared to the same period in 2016. The net increase resulted from income on bank-owned life insurance and both increased collection of miscellaneous loan charges, increased customer related fees and service charges offset by the decrease in professional practice revenue.
Other expense in the third quarter of 2017 remained relatively flat at $5.0 million, compared with the second quarter of 2017 and increased $325 thousand over the third quarter of 2016. The increase in the third quarter of 2017 over the third quarter of 2016 was primarily attributable to an increase in salaries and employee benefits expense of $182 thousand, or 7.1%, an increase in advertising and business development expense of $83 thousand, or 35.9%, and an increase of professional fees of $36 thousand or 21.6%.
Other expense in the first nine months of 2017 totaled $14.9 million, compared with $13.6 million in the first nine months of 2016. The increase in other expense was primarily attributable to an increase in salaries and employee benefits expense of $732 thousand, or 10.0%, 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 $241 thousand, or 34.8%, and professional fees increased $56 thousand or 10.6% as compared to the same period in 2016. Net occupancy and equipment costs increased $67 thousand, or 3.2%, over the same period last year, 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 $48 thousand over the same period last year.
Income Tax Rate
For the first nine months of 2017 the effective income tax rate was 34.0% as compared to 35.7% for the same period in 2016. This decrease year over year was mainly attributable to the purchase of bank-owned life insurance in the third quarter of 2017.
Strong Asset Quality/Provision for Loan Losses
Credit quality remained strong with loans classified as nonaccrual at $1.6 million, or 0.33% of total loans outstanding at September 30, 2017, compared with $2.0 million, or 0.40%, at June 30, 2017 and $325 thousand, or 0.07%, at September 30, 2016.
Based on management’s assessment of the adequacy of the allowance for loan and lease losses, a provision of $164 thousand was recorded for the third quarter of 2017, as compared with $140 thousand in each of the second quarter of 2017 and the third quarter of 2016. For the first nine months of 2017 a provision of $434 thousand was recorded as compared to $332 thousand for the first nine months of 2016. Expressed as a percentage of outstanding loans, the allowance for loan and lease losses was 1.16% at September 30, 2017, compared with 1.19% at June 30, 2017, and 1.16% at September 30, 2016.
In the third quarter of 2017 there were net charge-offs of $352 thousand as compared to net charge-offs of $199 thousand in the second quarter of 2017 and $111 thousand in the third quarter of 2016. Net charge-offs for the first nine months of 2017 were $551 thousand as compared to $111 thousand for the first nine months 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) | ||||||||||||||||
| September 30, | June 30, | December 31, | September 30, | |||||||||||||
| 2017 | 2017 | 2016 | 2016 | |||||||||||||
| ASSETS | ||||||||||||||||
| Total cash and cash equivalents | $ | 10,486 | $ | 21,957 | $ | 6,354 | $ | 21,028 | ||||||||
| Securities available for sale, at fair value | 338,531 | 304,948 | 264,734 | 265,168 | ||||||||||||
| Securities held to maturity | 4,750 | 4,000 | 3,000 | – | ||||||||||||
| Securities, restricted | 3,390 | 3,071 | 4,131 | 2,937 | ||||||||||||
| Loans | 490,843 | 495,010 | 494,274 | 472,824 | ||||||||||||
| Allowance for loan losses | (5,682 | ) | (5,870 | ) | (5,799 | ) | (5,489 | ) | ||||||||
| Loans, net | 485,161 | 489,140 | 488,475 | 467,335 | ||||||||||||
| Premises and equipment, net | 5,628 | 5,798 | 6,052 | 6,242 | ||||||||||||
| Bank-owned life insurance | 20,092 | – | – | – | ||||||||||||
| Other assets and accrued interest receivable | 7,648 | 7,941 | 8,689 | 5,157 | ||||||||||||
| Total Assets | $ | 875,686 | $ | 836,855 | $ | 781,435 | $ | 767,867 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Demand Deposits | $ | 171,111 | $ | 172,378 | $ | 177,299 | $ | 202,263 | ||||||||
| Savings, N.O.W. and money market deposits | 576,237 | 557,353 | 465,890 | 437,808 | ||||||||||||
| Certificates of deposit of $100,000 or more | ||||||||||||||||
| and other time deposits | 17,936 | 19,020 | 27,494 | 38,910 | ||||||||||||
| Total Deposits | 765,284 | 748,751 | 670,683 | 678,981 | ||||||||||||
| Short-term borrowings | 9,975 | – | 26,477 | – | ||||||||||||
| Subordinated debentures, net | 14,767 | 14,756 | 14,735 | 14,725 | ||||||||||||
| Other liabilities and accrued expenses | 15,605 | 5,480 | 6,548 | 5,611 | ||||||||||||
| Total Liabilities | 805,631 | 768,987 | 718,443 | 699,317 | ||||||||||||
| Total Stockholders’ Equity | 70,055 | 67,868 | 62,992 | 68,550 | ||||||||||||
| Total Liabilities and Stockholders’ Equity | $ | 875,686 | $ | 836,855 | $ | 781,435 | $ | 767,867 | ||||||||
| Selected Financial Data (unaudited) | ||||||||||||||||
| Allowance for Loan Losses to Total Loans | 1.16% | 1.19% | 1.17% | 1.16% | ||||||||||||
| Non-performing Loans to Total Loans | 0.33% | 0.40% | 0.48% | 0.07% | ||||||||||||
| Non-performing Assets to Total Assets | 0.18% | 0.24% | 0.30% | 0.04% | ||||||||||||
| Book Value per Share | $ | 9.75 | $ | 9.59 | $ | 9.07 | $ | 9.88 | ||||||||
| Capital Ratios (unaudited)(1) | ||||||||||||||||
| Tier 1 Leverage Ratio | 9.46% | 9.71% | 10.22% | 10.31% | ||||||||||||
| Common Equity Tier 1 Risk-Based Capital Ratio | 15.80% | 16.27% | 16.26% | 16.67% | ||||||||||||
| Tier 1 Risk-Based Capital Ratio | 15.80% | 16.27% | 16.26% | 16.67% | ||||||||||||
| Total Risk-Based Capital Ratio | 16.89% | 17.45% | 17.46% | 17.85% | ||||||||||||
| (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 nine months ended | ||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | September 30, | |||||||||||||||
| 2017 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Interest income | $ | 7,580 | $ | 7,515 | $ | 6,405 | $ | 22,014 | $ | 18,322 | |||||||||
| Interest expense | 1,367 | 1,105 | 848 | 3,353 | 2,421 | ||||||||||||||
| Net interest income | 6,213 | 6,410 | 5,557 | 18,661 | 15,901 | ||||||||||||||
| Provision for loan losses | 164 | 140 | 140 | 434 | 332 | ||||||||||||||
| Net interest income after | |||||||||||||||||||
| provision for loan losses | 6,049 | 6,270 | 5,417 | 18,227 | 15,569 | ||||||||||||||
| Net securities (losses) gains | (28 | ) | – | 18 | (28 | ) | 215 | ||||||||||||
| Other income | 386 | 344 | 270 | 1,038 | 863 | ||||||||||||||
| Other expense | 5,031 | 4,966 | 4,706 | 14,893 | 13,619 | ||||||||||||||
| Income before income taxes | 1,376 | 1,648 | 999 | 4,344 | 3,028 | ||||||||||||||
| Income tax expense | 453 | 574 | 358 | 1,479 | 1,081 | ||||||||||||||
| Net income | $ | 923 | $ | 1,074 | $ | 641 | $ | 2,865 | $ | 1,947 | |||||||||
| Basic earnings per share | $ | 0.13 | $ | 0.15 | $ | 0.09 | $ | 0.41 | $ | 0.28 | |||||||||
| Diluted earnings per share | $ | 0.12 | $ | 0.15 | $ | 0.09 | $ | 0.39 | $ | 0.28 | |||||||||
| Weighted average common and equivalent | |||||||||||||||||||
| shares outstanding | 7,271,145 | 7,172,737 | 6,942,421 | 7,194,476 | 6,941,824 | ||||||||||||||
| Selected Financial Data (unaudited) | |||||||||||||||||||
| Return on Average Assets | 0.42% | 0.52% | 0.34% | 0.46% | 0.37% | ||||||||||||||
| Return on Average Equity | 5.34% | 6.50% | 3.75% | 5.78% | 3.91% | ||||||||||||||
| Net Interest Margin | 2.91% | 3.14% | 3.00% | 3.05% | 3.07% | ||||||||||||||
| Efficiency Ratio | 76.24% | 73.54% | 80.76% | 75.60% | 81.24% | ||||||||||||||
CONTACT: Contact: William Franz - SVP, Director of Marketing & Investor Relations (631) 348-4444