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CST: 18/09/2019 16:41:38   

Empire Bancorp Announces Second Quarter Earnings

57 Days ago

Balance Sheet Growth, Solid Asset Quality

ISLANDIA, N.Y., July 23, 2019 (GLOBE NEWSWIRE) -- Empire Bancorp, Inc. (OTCQX: EMPK), today announced its financial results for the quarter and through mid-year ended June 30, 2019.

Mid-Year Highlights

Financial Results              

  • Net income, measured on a consolidated basis, for the first six months of 2019 increased $85 thousand, or 5.6%, to $1.6 million, as compared to the same period in 2018.
  • Diluted earnings per common share for the first six months of 2019 were $0.21, compared with $0.20 for the first six months of 2018.
  • Return on average assets and average common stockholders' equity for the first six months of 2019 were 0.31% and 4.33%, respectively, compared with 0.32% and 4.69%, respectively, for the same period in 2018.

Quarterly Highlights

Financial Results

  • Net income, measured on a consolidated basis, for the second quarter of 2019 was $863 thousand, compared to net income of $742 thousand for the first quarter of 2019, and net income of $1.0 million for the second quarter of 2018.
  • Diluted earnings per common share for the second quarter of 2019 were $0.11, compared with $0.10 for the first quarter of 2019, and $0.13 for the second quarter of 2018.
  • Return on average assets and average common stockholders' equity for the second quarter of 2019 were 0.33% and 4.51%, respectively, compared with 0.29% and 4.15%, respectively, for the first quarter of 2019, and 0.42% and 6.28%, respectively, for the second quarter of 2018.

Franchise Development

  • Total assets were $1.04 billion at June 30, 2019, up 6.8% from $971.4 million at June 30, 2018.
  • Loans outstanding totaled $680.8 million at June 30, 2019, up 13.7% from $598.6 million at June 30, 2018.
  • Deposits totaled $925.4 million at June 30, 2019, up 4.5% from $885.6 million at June 30, 2018.

Continued Financial and Credit Strength

  • Solid asset quality with an allowance for loan and lease losses of 0.96% of total loans and a ratio of non-performing loans to total loans of 0.34%.
  • “Well capitalized” regulatory capital levels at Empire National Bank, as of June 30, 2019:
    ○  Tier 1 leverage capital ratio of 8.90%
    ○  Common equity tier 1 risk-based capital ratio of 13.61%
    ○  Tier 1 risk-based capital ratio of 13.61%
    ○  Total risk-based capital ratio of 14.57%

Balance Sheet

Assets totaled $1.04 billion at June 30, 2019, down $9.3 million, or 0.9%, from March 31, 2019 and up $65.6 million, or 6.8%, from June 30, 2018.  Total cash and cash equivalents decreased $5.9 million, or 13.2%, to $38.6 million from $44.5 million at March 31, 2019, and decreased $6.8 million, or 15.0%, from $45.6 million at June 30, 2018. Gross loans were $680.8 million at June 30, 2019, an increase of $5.5 million, or 0.8%, from $675.3 million at March 31, 2019, and an increase of $82.1 million, or 13.7%, from $598.6 million at June 30, 2018. Investment securities available for sale were $273.1 million at June 30, 2019 down $8.2 million, or 2.9%, from March 31, 2019 and down $17.8 million, or 6.1%, from June 30, 2018.  

Total deposits were $925.4 million at June 30, 2019, down $12.3 million, or 1.3%, from March 31, 2019, and up $39.8 million, or 4.5%, from June 30, 2018.  Demand deposits were $183.7 million, an increase of $5.7 million, or 3.2%, from March 31, 2019, and up $16.2 million, or 9.7%, from June 30, 2018.  Savings, N.O.W. and money market deposits totaled $710.2 million at June 30, 2019, decreased $15.2 million, or 2.1%, from March 31, 2019, due to seasonal fluctuations, and increased $29.9 million, or 4.4%, from June 30, 2018. The growth in these deposits year over year was fueled in large part by new and existing municipal banking relationships. Certificates of deposits of $100,000 or more and other time deposits were $31.4 million at June 30, 2019, down $2.8 million, or 8.1%, from March 31, 2019, and down $6.3 million, or 16.8%, from June 30, 2018.

Stockholders’ equity increased $2.3 million, or 3.0%, to $79.1 million, from March 31, 2019 and increased $13.3 million, or 20.2%, from June 30, 2018. The linked quarter increase was primarily attributable to the positive impact of a decrease in the net unrealized losses on securities available for sale, net of taxes of $1.3 million, net income of $863 thousand, and a $179 thousand net increase associated with stock compensation plans. The increase in stockholders’ equity from June 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 $8.9 million, net income of $3.6 million, and $881 thousand net increase associated with stock compensation plans.

Net Interest Margin/Net Interest Income

Net interest income for the second quarter of 2019 increased slightly by $2 thousand over the first quarter of 2019, and decreased by $9 thousand over second quarter of 2018. Net interest margin was 2.52% for the three months ended June 30, 2019, a decrease from 2.56% for the three months ended March 31, 2019, and a decrease from 2.68% for the three months ended June 30, 2018.

Interest income for the second quarter of 2019 increased $168 thousand, or 1.8%, compared to the first quarter of 2019, and increased $1.2 million, or 14.5%, from the second quarter of 2018. The linked quarter increase was primarily the result of an increase of $228 thousand in income from loans and a $25 thousand increase in deposits with banks, partially offset by decreases in income from investment securities and restricted securities of $62 thousand, and $23 thousand, respectively. The yield on interest earning assets slightly increased to 3.92% for the second quarter of 2019, as compared to 3.91% for the first quarter of 2019, and compared to 3.64% for the second quarter of 2018. The increase in the yield compared to the first quarter of 2019, was primarily related to higher prepayment penalties recorded in the second quarter of 2019. The increase in the yield on interest earning assets over the second quarter of 2018 was primarily attributed to an increase in both the average balance and yield on loans, offset by a decrease in prepayment penalties.

Interest expense was $3.5 million in the most recent quarter, and $3.3 million for the first quarter of 2019, as compared to $2.2 million for the second quarter of 2018. The cost of interest bearing liabilities was 1.83% for the three months ended June 30, 2019, an increase from 1.75% for the three months ended March 31, 2019, and an increase from 1.24% for the three months ended June 30, 2018. The upward trend of the cost of interest bearing liabilities, especially within the competitive public fund deposit base, is the result of higher overall funding costs driven up by, among other things, increases in market rates.

Net interest income increased $107 thousand, or 0.9%, for the first six months in 2019 over the same period in 2018. Net interest margin was 2.54% for the first six months ended June 30, 2019, a decrease from 2.67% for the same period in 2018.

Interest income increased $2.7 million, or 16.5%, for the first six months of 2019 over the same period in 2018. The increase was attributable to growth in income from loans of $3.2 million, partially offset by a decrease in deposits with banks and investment securities available for sale of $331 thousand and $100 thousand, respectively. The yield on interest earning assets increased to 3.92% for the first six months of 2019, compared to 3.55% for the same period in 2018. The increase in the yield on interest earning assets primarily resulted from year over year growth in the percentage of earning assets held as loans, as well as an increase in the yield on loans.

Interest expense was $6.8 million representing an increase of $2.6 million, or 63.3%, for the first six months of 2019, compared to the same period in 2018. The increase was the result of higher interest expenses relative to savings, N.O.W. and money market accounts of $2.5 million, or 74.2%. The decrease in net interest margin was impacted by an increase of 63 basis points in the cost of average interest bearing liabilities to 1.79% for the year ended 2019 compared to 1.16% for the same period in 2018. The cost of interest bearing liabilities, especially within the competitive public fund deposit base, is the result of higher overall funding costs in the market.

Noninterest Income and Expense 

Other income was $578 thousand in the second quarter of 2019, compared to $434 thousand in the first quarter of 2019, and $471 thousand for the second quarter of 2018. The linked quarter increase of $144 thousand resulted primarily from an increase of $99 thousand in gains recognized on the sale of Small Business Administration (SBA) loans, specifically SBA 7(a), as well as a $32 thousand increase in miscellaneous loan fees. The increase of $107 thousand in the second quarter of 2019 compared to the second quarter of 2018 was primarily driven by $76 thousand increase in gains recognized on the sale of SBA 7(a) loans, and an increase of $56 thousand in miscellaneous loan fee income, offset by $14 thousand decrease in customer related fees and service charges.

Other income of $1.0 million year over year represented an increase of $129 thousand, or 14.6%, as compared to the same period in 2018. The increase for 2019 resulted primarily from a $101 thousand increase in gains recognized on the sale of SBA 7(a) loans and an increase of $94 thousand in miscellaneous loan fee income, partially offset by a decrease of $37 thousand in customer related fees and service charges.

Other expense in the second quarter of 2019 totaled $5.6 million, compared with $5.8 million in the first quarter of 2019, and $5.5 million in the second quarter of 2018. The $174 thousand, or 3.0%, decrease from the linked quarter was primarily attributable to a decrease of $157 thousand, or 4.9%, in salaries and employee benefits, a decrease of $57 thousand, or 19.9%, in professional fees, and a decrease of $11 thousand, or 1.7%, in occupancy and equipment fees. These decreases were offset by increases in FDIC insurance of $25 thousand, software services of $16 thousand, and other expense of $10 thousand. Other expense increased $102 thousand, or 1.9%, in the second quarter of 2019 over the second quarter of 2018, primarily as a result of an increase of $140 thousand in other operating expenses and $40 thousand in software services. Other operating expenses include additional expenses for professional practice services of $101 thousand.  These increases were offset by decreases in advertising and business development of $34 thousand, occupancy and equipment of $28 thousand and salaries and employee benefits of $18 thousand.

Other expense for the first six months of 2019 totaled $11.4 million, compared with $11.3 million over the same period in 2018. The increase of $109 thousand in other expense year over year was largely attributable to the increase in other operating expenses of $162 thousand, which were primarily the result of increases in professional practice services. Additionally, software services increased by $144 thousand, and professional fees increased by $57 thousand. These increases were offset by decreases in salaries and employee benefits of $113 thousand, occupancy and equipment fees of $82 thousand, and advertising and business development of $68 thousand.

Income Tax Rate

The effective income tax rate was 19.4% for the second quarter ended June 30, 2019 compared to an effective income tax rate of 19.2% for the first quarter in March 31, 2019, and 18.5% for the second quarter of 2018.  The effective income tax rate was 19.3% for the first six months ended June 30, 2019, and 15.7% for the same period in 2018. The lower tax rate for the first six 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 and compensatory warrants, as well as vesting of restricted stock grants.

Solid Asset Quality/Provision for Loan Losses

A provision of $168 thousand was recorded for the second quarter of 2019. There was no provision recorded for the first quarter of 2019 or second quarter of 2018. Expressed as a percentage of outstanding loans, the allowance for loan and lease losses was 0.96% at June 30, 2019 and March 31, 2019, compared to 1.00% at June 30, 2018.  

Credit quality remained solid at June 30, 2019. Loans classified as nonaccrual were at $2.3 million, or 0.34%, of total loans outstanding at June 30, 2019, compared with $2.4 million, or 0.36%, at March 31, 2019 and $5.7 million or 0.94% at June 30, 2018. The decrease in total nonaccrual loans reflects the company’s experience and ability to work with borrowers, which contributed to the payoff of three nonaccrual loans year over year.  The Company’s allowance for loan losses to total loans of 0.96%, remained unchanged from March 31, 2019, and decreased four basis points from 1.00% at June 30, 2018. The year-over-year decline was attributable to a decrease in the specific reserve for impaired loans, as well as improvements in the Bank’s 12 quarter weighted average loss history as more recent quarters are given a greater weight in this calculation. These adjustments were partially offset by increases related primarily to growth in loans outstanding.

In the second quarter of 2019, there were charge-offs for $74 thousand and no recoveries were recorded. There were no charge-offs or recoveries recorded in the first quarter of 2019, and one charge-off of $78 thousand with no recoveries in the second quarter of 2018.

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.

                     
Consolidated Statements of Condition (unau dited)
(dollars in thousands, except per share data)
    June 30,   March 31,   December 31,   June 30,      
    2019   2019   2018   2018    
ASSETS                    
Total cash and cash equivalents   $ 38,639     $ 44,491     $ 10,511     $ 45,458      
Securities available for sale, at fair value     273,119       281,284       268,999       290,899      
Securities held to maturity     4,750       4,750       4,945       4,750      
Securities, restricted     3,224       3,086       3,170       3,072      
Loans     680,775       675,319       673,568       598,635      
Allowance for loan losses     (6,557 )     (6,463 )     (6,463 )     (6,013 )    
Loans, net     674,218       668,856       667,105       592,622      
Premises and equipment, net     4,370       4,544       4,691       5,099      
Bank-owned life insurance     21,192       21,038       20,886       20,574      
Other assets and accrued interest receivable(1)     17,508       18,313       7,920       8,956      
Total Assets   $ 1,037,020     $ 1,046,362     $ 988,227     $ 971,430      
                     
LIABILITIES AND STOCKHOLDERS' EQUITY                    
Demand Deposits   $ 183,747     $ 178,068     $ 169,275     $ 167,557      
Savings, N.O.W. and money market deposits     710,239       725,443       689,050       680,325      
Certificates of deposit of $100,000 or more                    
and other time deposits     31,378       34,135       34,541       37,720      
Total Deposits     925,364       937,646       892,866       885,602      
Short-term borrowings     -       -       2,595       -      
Subordinated debentures, net     14,847       14,835       14,823       14,800      
Other liabilities and accrued expenses(1)     17,726       17,107       6,234       5,249      
Total Liabilities     957,937       969,588       916,518       905,651      
Total Stockholders' Equity     79,083       76,774       71,709       65,779      
Total Liabilities and Stockholders' Equity   $ 1,037,020     $ 1,046,362     $ 988,227     $ 971,430      
                     
Selected Financial Data (unaudited)                    
Allowance for Loan Losses to Total Loans     0.96 %     0.96 %     0.96 %     1.00 %    
Non-performing Loans to Total Loans     0.34 %     0.36 %     0.57 %     0.94 %    
Non-performing Assets to Total Assets     0.22 %     0.23 %     0.39 %     0.58 %    
Book Value per Share   $ 10.30     $ 9.98     $ 9.37     $ 8.62      
                     
Capital Ratios (unaudited) (2)                    
Tier 1 Leverage Ratio     8.90 %     8.81 %     8.93 %     8.97 %    
Common Equity Tier 1 Risk-Based Capital Ratio   13.61 %     13.16 %     13.20 %     14.36 %    
Tier 1 Risk-Based Capital Ratio     13.61 %     13.16 %     13.20 %     14.36 %    
Total Risk-Based Capital Ratio     14.57 %     14.09 %     14.15 %     15.35 %    
                                     
(1)  Q1 2019 increase largely driven by the adoption of ASU 2016-02, "Leases" which resulted in approximately $10.9 million of  lease assets and approximately $12.7 million of lease liabilities being added to the balance sheet;
(2)  Regulatory capital ratios presented on bank-only basis.
                     
                     
Consolidated Statements of Operations (una udited)
(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,
    2019   2019   2018   2019   2018
Interest income   $ 9,747     $ 9,579     $ 8,514     $ 19,326     $ 16,592  
Interest expense     3,473       3,307       2,231       6,780       4,153  
Net interest income     6,274       6,272       6,283       12,546       12,439  
Provision for loan losses     168       -       -       168       227  
Net interest income after                    
provision for loan losses     6,106       6,272       6,283       12,378       12,212  
Other income(1)      578       434       471       1,012       883  
Other expense(1)      5,614       5,788       5,512       11,402       11,293  
Income before income taxes     1,070       918       1,242       1,988       1,802  
Income tax expense     207       176       230       383       282  
Net income   $ 863     $ 742     $ 1,012     $ 1,605     $ 1,520  
                     
Basic earnings per share   $ 0.11     $ 0.10     $ 0.13     $ 0.21     $ 0.20  
Diluted earnings per share   $ 0.11     $ 0.10     $ 0.13     $ 0.21     $ 0.20  
Weighted average common and equivalent                    
shares outstanding     7,529,413       7,511,729       7,480,769       7,569,895       7,409,504  
                     
Selected Financial Data (unaudited)                    
Return on Average Assets     0.33 %     0.29 %     0.42 %     0.31 %     0.32 %
Return on Average Equity     4.51 %     4.15 %     6.28 %     4.33 %     4.69 %
Net Interest Margin     2.52 %     2.56 %     2.68 %     2.54 %     2.67 %
Efficiency Ratio     81.93 %     86.31 %     81.61 %     84.10 %     84.77 %
                                         
(1)  Certain reclassifications have been made to prior periods to conform  to the current year presentation.            
                     

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

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