Empire Bancorp Announces Third Quarter Earnings

ISLANDIA, N.Y., Oct. 22, 2019 (GLOBE NEWSWIRE) — Empire Bancorp, Inc. (OTCQX: EMPK), today announced its financial results for the quarter and nine months ended September 30, 2019.
Year-to-Date HighlightsFinancial ResultsNet income, measured on a consolidated basis, for the first nine months of 2019 increased $38 thousand, or 1.4%, to $2.7 million, as compared to the same period in 2018.Diluted earnings per common share for the first nine months of 2019 were $0.35, compared with $0.34 for the first nine months of 2018.Return on average assets and average common stockholders’ equity for the first nine months of 2019 were 0.35% and 4.69%, respectively, compared with 0.36% and 5.39%, respectively, for the same period in 2018.Quarterly HighlightsFinancial ResultsNet income, measured on a consolidated basis, for the third quarter of 2019 was $1.1 million, compared to $863 thousand for the second quarter of 2019, and $1.1 million for the third quarter of 2018.Diluted earnings per common share for the third quarter of 2019 were $0.14, compared with $0.11 for the second quarter of 2019, and $0.15 for the third quarter of 2018.Return on average assets and average common stockholders’ equity for the third quarter of 2019 were 0.42% and 5.34%, respectively, compared with 0.33% and 4.51%, respectively, for the second quarter of 2019, and 0.45% and 6.76%, respectively, for the third quarter of 2018.Franchise DevelopmentTotal assets were $1.01 billion at September 30, 2019, up 2.7% from $985.6 million at September 30, 2018.Loans outstanding totaled $670.3 million at September 30, 2019, up 5.1% from $637.6 million at September 30, 2018.Deposits totaled $899.6 million at September 30, 2019, down 0.03% from $899.8 million at September 30, 2018.Continued Financial and Credit Strength
Solid asset quality with an allowance for loan and lease losses of 0.95% of total loans and a ratio of non-performing loans to total loans of 0.50%.
 
“Well capitalized” regulatory capital levels at Empire National Bank, as of September 30, 2019:
o Tier 1 leverage capital ratio of 9.18%
o Common equity tier 1 risk-based capital ratio of 14.43%
o Tier 1 risk-based capital ratio of 14.43%
o Total risk-based capital ratio of 15.42%
Balance SheetAssets totaled $1.01 billion at September 30, 2019, down $24.5 million, or 2.4%, from June 30, 2019, and up $26.9 million, or 2.7%, from September 30, 2018. Total cash and cash equivalents increased $10.4 million, or 26.8%, to $49.0 million from $38.6 million at June 30, 2019, and increased $17.8 million, or 56.8%, from $31.2 million at September 30, 2018. Gross loans were $670.3 million at September 30, 2019, a decrease of $10.5 million, or 1.5%, from $680.8 million at June 30, 2019, and an increase of $32.7 million, or 5.1%, from $637.6 million at September 30, 2018. Investment securities available for sale were $254.2 million at September 30, 2019 down $19.0 million, or 6.9%, from June 30, 2019, and down $25.8 million, or 9.2%, from September 30, 2018. In the third quarter of 2019, $4.8 million in held to maturity securities were transferred to available for sale, sold, and gains were recognized.Total deposits were $899.6 million at September 30, 2019, down $25.8 million, or 2.8%, from June 30, 2019, and down $234 thousand, or 0.03%, from September 30, 2018. Demand deposits were $185.4 million, an increase of $1.7 million, or 0.9%, from June 30, 2019, and up $18.7 million, or 11.2%, from September 30, 2018. Savings, N.O.W. and money market deposits totaled $685.9 million at September 30, 2019, decreased $24.3 million, or 3.4%, from June 30, 2019, and decreased $7.6 million, or 1.10%, from September 30, 2018 due to seasonal fluctuations within our municipal customer base. Certificates of deposits of $100,000 or more and other time deposits were $28.2 million at September 30, 2019, down $3.1 million, or 10.0%, from June 30, 2019, and down $11.3 million, or 28.5%, from September 30, 2018.
                                                                                                                                              
Stockholders’ equity increased $2.1 million, or 2.7%, to $81.2 million, from June 30, 2019, and increased $16.1 million, or 24.7%, from September 30, 2018. The linked quarter increase was primarily attributable to the net income of $1.1 million, the positive impact of a decrease in the net unrealized losses on securities available for sale, net of taxes of $879 thousand, and a $183 thousand net increase associated with stock compensation plans. The increase of $16.1 million in stockholders’ equity from September 30, 2018 was primarily attributable to the positive impact of a decrease in the net unrealized losses on securities available for sale, net of taxes of $11.9 million, net income of $3.5 million, and a $644 thousand net increase associated with stock compensation plans.
Net Interest Margin/Net Interest IncomeNet interest income for the third quarter of 2019 decreased by $138 thousand from the second quarter of 2019, and decreased by $222 thousand from the third quarter of 2018. Net interest margin was 2.48% for the three months ended September 30, 2019, a decrease from 2.52% for the three months ended June 30, 2019, and a decrease from 2.61% for the three months ended September 30, 2018.Interest income for the third quarter of 2019 decreased $200 thousand, or 2.1%, compared to the second quarter of 2019, and increased $445 thousand, or 4.9%, from the third quarter of 2018. The linked quarter decrease was primarily the result of a decrease of $196 thousand in income from available for sale and held to maturity securities and a $44 thousand decrease in income from loans, partially offset by a $33 thousand increase in income from deposits with banks. The yield on interest-earning assets decreased to 3.86% for the third quarter of 2019, as compared to 3.92% for the second quarter of 2019, and increased as compared to 3.74% for the third quarter of 2018. The decrease in the yield on interest-earning assets for the third quarter of 2019 compared to the second quarter of 2019, was primarily related to the $27.6 million reduction in the average balance of securities, as well as lower yields on loans, securities and deposits with banks, which were reflective of the two quarter point Fed Funds rate cuts during the third quarter.Interest expense was $3.4 million in the most recent quarter, and $3.5 million for the second quarter of 2019, as compared to $2.7 million for the third quarter of 2018. The cost of interest-bearing liabilities was 1.83% for the three months ended September 30, 2019, which was unchanged from the three months ended June 30, 2019, and an increase from 1.46% for the three months ended September 30, 2018. The upward trend of the cost of interest-bearing liabilities year over year, especially within the competitive public fund deposit base, was the result of higher overall funding costs driven up by, among other things, increases in market rates.Net interest income decreased $115 thousand for the first nine months in 2019 over the same period in 2018. Net interest margin was 2.52% for the first nine months ended September 30, 2019, a decrease from 2.65% for the same period in 2018.The increase in total interest income of $3.2 million year over year was outpaced by an increase of $3.3 million in total interest expense over the same periods. The growth in interest expense for the nine months ended September 30, 2019 over the prior year was a result of an increase in the cost of average interest-bearing liabilities, as well as an increase in average balance deposits. The increase in the cost of average interest-bearing liabilities year over year was primarily due to the higher overall funding costs due in part to the Fed Funds rate increases throughout 2018.  In a rising rate environment, the company’s interest-bearing liabilities generally reprice or mature more quickly than its interest-earning assets. This resulted in the cost of funds increasing faster than the yield on interest earning assets. These adverse factors culminated in a net interest income decrease of $115 thousand, as well as a net interest margin decrease of 13 basis points year over year.Interest income increased $3.2 million, or 12.4%, for the first nine months of 2019 over the same period in 2018. The increase was attributable to growth in income from loans of $3.8 million, partially offset by a decrease in income from investment securities available for sale and held to maturity of $395 thousand, and a $284 thousand decrease in income from deposits with banks. The yield on interest-earning assets increased to 3.90% for the first nine months of 2019, compared to 3.62% for the same period in 2018. The increase in the yield on interest-earning assets primarily resulted from growth in the percentage of interest earning assets held as loans, as well as higher yields on loans and securities.Interest expense was $10.2 million representing an increase of $3.3 million, or 47.8%, for the first nine months of 2019, compared to the same period in 2018, which was driven primarily by an increase in interest expense relative to savings, N.O.W. and money market accounts of $3.2 million, or 56.5%. The decrease in net interest margin was impacted by an increase of 54 basis points in the cost of average interest-bearing liabilities to 1.80% for the first nine months ended 2019, compared to 1.26% for the same period in 2018. The cost of interest-bearing liabilities, especially within the competitive public fund deposit base, was the result of higher overall funding costs in the market.Noninterest Income and Expense Other income was $471 thousand in the third quarter of 2019, compared to $578 thousand in the second quarter of 2019, and $407 thousand in the third quarter of 2018. The decrease of $107 thousand from the linked quarter resulted primarily from a decrease of $94 thousand in gains recognized on the sale of Small Business Administration (SBA) loans, and a decrease of $41 thousand in miscellaneous loan fee income, offset by an increase of $23 thousand in customer related fees and service charges. The increase of $64 thousand in other income in the third quarter of 2019 compared to the third quarter of 2018 was primarily driven by an increase of $21 thousand recognized on the sale of SBA loans, an increase of $20 thousand in customer related fees and service charges, and an increase of $18 thousand in miscellaneous loan fee income. There was a $79 thousand net gain recognized on the sale of securities in the third quarter of 2019, compared to no securities gains or losses recognized in the second quarter of 2019 or third quarter of 2018.Other income was $1.5 million for the first nine months of 2019 and represented an increase of $193 thousand, or 15.0%. The increase for 2019 resulted primarily from a $122 thousand gain recognized on the sale of SBA loans, and an increase of $112 thousand in miscellaneous loan fee income, offset by a decrease of $18 thousand in income from bank owned life insurance, and a decrease of $17 thousand in customer related fees and service charges.  There was a $79 thousand net gain recognized on the sale of securities, compared to no gain or loss recognized for the same period in 2018.Other expense in the third quarter of 2019 totaled $5.3 million, compared with $5.6 million in the second quarter of 2019, and $5.2 million in the third quarter of 2018. The $271 thousand, or 4.8%, decrease from the linked quarter was primarily attributable to a decrease of $138 thousand, or 114.1%, in FDIC insurance, a decrease of $89 thousand, or 2.9%, in salaries and employee benefits, and a decrease of $37 thousand, or 5.0%, in other operating expenses. These decreases were offset by an increase of $14 thousand, or 2.3%, in occupancy and equipment fees. Other expense increased $156 thousand, or 3.0%, in the third quarter of 2019 over the third quarter of 2018, primarily as a result of an increase of $215 thousand, or 7.8%, in salaries and employee benefits, an increase of $111 thousand, or 18.5%, in other operating expenses, and an increase of $40 thousand, or 8.3%, in software services. These increases were offset by decreases in FDIC insurance, advertising and business development, and occupancy and equipment of $168 thousand, $35 thousand, and $19 thousand, respectively.Other expense for the first nine months of 2019 totaled $16.7 million, compared with $16.5 million over the same period in 2018. The increase of $265 thousand in other expense year over year was largely attributable to the increase of $273 thousand, or 14.2%, in other operating expenses primarily due to increases in professional practice expenses. Increases in software services, salaries and employee benefits, and professional fees of $184 thousand, $102 thousand, and $69 thousand, respectively, were offset by decreases in FDIC insurance, advertising and business development, and occupancy and equipment expenses of $159 thousand, $103 thousand, and $101 thousand, respectively.Income Tax RateThe effective income tax rate was 19.9% for the third quarter ended September 30, 2019, compared to an effective income tax rate of 19.4% for the second quarter at June 30, 2019, and 17.1% for the third quarter of 2018. The effective income tax rate was 19.5% for the first nine months ended September 30, 2019 and 16.3% for the same period in 2018. The lower tax rate for the first nine months of 2018 compared to the same period in 2019 was the result of excess tax benefits recognized relative to the exercise of stock options, as well as vesting of restricted stock grants.Solid Asset Quality/Provision for Loan LossesThere was no provision for loan losses recorded in the third quarter of 2019, compared to a provision of $168 thousand recorded in the second quarter of 2019, and a provision of $225 thousand recorded in the third quarter of 2018. Expressed as a percentage of outstanding loans, the allowance for loan and lease losses was 0.95% at September 30, 2019, 0.96% at June 30, 2019, and 0.98% at September 30, 2018.Credit quality remained solid at September 30, 2019. Loans classified as nonaccrual totaled $3.3 million or 0.50% of total loans outstanding at September 30, 2019, compared with $2.3 million, or 0.34%, at June 30, 2019 and $3.9 million, or 0.61%, at September 30, 2018. The increase in nonaccrual loans is principally caused by one borrower relationship whose loans are secured by commercial real estate and other collateral.Charge-offs of $182 thousand, $74 thousand, and $12 thousand were recorded in the third quarter of 2019, second quarter of 2019, and third quarter of 2018, respectively.  There were no recoveries during any of these time periods.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 loan production 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.Empire Bancorp, Inc. (OTCQX: EMPK) is traded on OTCQX® Best Market which is the top tier of OTC Markets Group Inc.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 charge 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:    
William Franz – SVP, Director of Marketing & Investor Relations
(631) 348-4444

 

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