ISLANDIA, New York, Oct. 23, 2018 (GLOBE NEWSWIRE) -- Empire Bancorp, Inc. (OTCQX: EMPK), today announced its financial results for the quarter ended September 30, 2018.
“Robust loan growth totaling approximately $39 million or 6.5% during the third quarter of 2018 positively contributed to our quarterly net interest income. Asset quality remains solid amid a notable decline in non-performing assets from our prior year-end. We remain steadfast to our underwriting standards in anticipation of mitigating any future credit quality deterioration when economic growth slows. On the funding side, our year to date cost of interest bearing deposits has risen 44 basis points reflecting the pressure of a rising rate environment,” stated Douglas C. Manditch, Chairman and Chief Executive Officer.
Quarterly Highlights
Financial Results
- Net income, measured on a consolidated basis, for the third quarter of 2018 was $1.1 million, compared with $1.0 million for the second quarter of 2018 and $0.9 million for the third quarter of 2017.
- Diluted earnings per common share for the third quarter of 2018 were $0.15, compared with $0.13 for the second quarter of 2018 and $0.12 for the third quarter of 2017.
- Return on average assets and average common stockholders' equity for the third quarter of 2018 were 0.45% and 6.76%, respectively, compared with 0.42% and 6.28%, respectively, for the second quarter of 2018, and 0.42% and 5.34%, respectively, for the third quarter of 2017.
- Net income at Empire National Bank for the third quarter of 2018, which excludes the impact of subordinated debt interest expense and other holding company operating expenses, was $1.4 million, compared with $1.3 million, for the second quarter of 2018 and $1.1 million for the third quarter of 2017.
Franchise Development
- Total assets were $985.6 million at September 30, 2018, up 12.6% from $875.7 million at September 30, 2017.
- Loans outstanding totaled $637.6 million at September 30, 2018, up 29.9% from $490.8 million at September 30, 2017.
- Deposits totaled $899.8 million at September 30, 2018, up 17.6% from $765.3 million at September 30, 2017.
Continued Financial and Credit Strength
- Solid asset quality with an allowance for loan and lease losses of 0.98% of total loans and a ratio of non-performing loans to total loans of 0.61%.
- “Well capitalized” regulatory capital levels at Empire National Bank, as of September 30, 2018:
- Tier 1 leverage capital ratio of 8.87%
- Common equity tier 1 risk-based capital ratio of 13.43%
- Tier 1 risk-based capital ratio of 13.43%
- Total risk-based capital ratio of 14.37%
“Cybersecurity remains a key focus of our operations, and we are taking active steps to increase customer cybersecurity awareness, including through the Cybersecurity Information Center on our website. Educating our customers to better recognize schemes such as phishing and malware aids them as much as us. The center offers quality training videos and literature explaining the nuances of cybersecurity and offers ways to protect yourself from financial loss,” commented Thomas M. Buonaiuto, President and Chief Operating Officer.
Balance Sheet
Assets totaled $985.6 million at September 30, 2018, up $14.2 million, or 1.5%, from June 30, 2018 and up $109.9 million, or 12.6%, from September 30, 2017. Total cash and cash equivalents decreased 31.3% to $31.2 million from $45.5 million at June 30, 2018, and increased 197.9% from $10.5 million at September 30, 2017. Gross loans were $637.6 million at September 30, 2018, an increase of $39.0 million or 6.5% from $598.6 million at June 30, 2018 and an increase of $146.8 million or 29.9% from $490.8 million at September 30, 2017. Investment securities available for sale were $280.0 million at the recent quarter end, down $10.9 million, or 3.8%, from June 30, 2018 and down $58.6 million, or 17.3%, from September 30, 2017.
Total deposits were $899.8 million at September 30, 2018, up $14.2 million, or 1.6%, from June 30, 2018 and up $134.5 million, or 17.6%, from September 30, 2017. Demand deposits were $166.8 million, a decrease of $0.8 million, or 0.5%, from June 30, 2018, and down $4.4 million, or 2.6%, from September 30, 2017. Savings, N.O.W. and money market deposits totaled $693.6 million at September 30, 2018, an increase of $13.2 million, or 2.0%, over June 30, 2018, and $117.3 million, or 20.4%, from September 30, 2017. The growth in these deposits was driven in large part by municipal banking relationships. Certificates of deposits of $100,000 or more and other time deposits were $39.5 million at September 30, 2018, up $1.8 million, or 4.8%, from June 30, 2018 and up $21.6 million, or 120.4%, from September 30, 2017.
Stockholders’ equity decreased $0.6 million, or 1.0%, to $65.2 million, from June 30, 2018 and decreased $4.9 million, or 7.0%, from September 30, 2017. The linked quarter decrease was primarily attributable to the increase in the net unrealized losses on securities available for sale, net of taxes of $2.1 million, partially offset by net income of $1.1 million and a $0.4 million net increase associated with stock compensation plans and the exercise of warrants. The decrease in stockholders’ equity from September 30, 2017 primarily resulted from the increase in the net unrealized losses on securities available for sale, net of taxes of $10.1 million, a $3.4 million net increase associated with stock compensation plans and the exercise of warrants and stock options, partially offset by net income of $1.8 million.
Net Interest Margin/Net Interest Income
Net interest income for the third quarter of 2018 increased $75 thousand, or 1.2%, over the second quarter of 2018 and increased $145 thousand, or 2.3%, over the third quarter of 2017. Net interest margin was 2.61% for the three months ended September 30, 2018, a decrease from 2.68% for the three months ended June 30, 2018, and a decrease from 2.91% for the three months ended September 30, 2017.
Interest income for the third quarter of 2018 increased $588 thousand, or 6.9%, from the second quarter of 2018, and $1.5 million, or 20.1%, from the third quarter of 2017. The linked quarter increase was the result of an increase of $696 thousand in income from loans, partially offset by a decrease of $118 thousand in interest income from deposits with banks, as loans which are higher yielding assets were funded during the most recent quarter. The increase in yield on interest earning assets to 3.74% for the third quarter of 2018, as compared to 3.64% for the second quarter of 2018 and 3.55% for the third quarter of 2017, primarily resulted from the growth in the percentage of earning assets held as loans, which generated an average yield greater than investment securities and deposits held with banks. Increased yield on securities held for sale also positively impacted the higher yield on total interest earning assets.
Interest expense was $2.7 million in the most recent quarter and $2.2 million for the second quarter of 2018, as compared to $1.4 million for the third quarter of 2017. The cost of interest bearing liabilities was 1.46% for the three months ended September 30, 2018, an increase from 1.24% for the three months ended June 30, 2018 and an increase from 0.88% for the three months ended September 30, 2017. 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 $136 thousand, or 0.7%, for the nine months of 2018 over the same period in 2017. Net interest margin was 2.65% for the nine months ended September 30, 2018, a decrease from 3.05% for the same period in 2017.
Interest income increased $3.7 million, or 16.7%, for the nine months of 2018 over the same period in 2017. The increase was attributable to growth in income from loans, deposits with banks, and investment securities of $2.4 million, $645 thousand, and $600 thousand respectively. The yield on interest earning assets increased to 3.62% for the nine months of 2018, compared to 3.60% for the same period in 2017. The increase in the yield on interest earning assets over the same period of 2017 primarily resulted from a change in the mix of average earning assets with a higher percentage being held in deposits with banks, which has a lower yield, as compared to the average balance of loans.
Interest expense was $6.9 million, an increase of $3.5 million, or 105.7%, for the nine months of 2018 compared to the same period in 2017. The increase was principally a result of an increase in interest expense relative to savings, N.O.W. and money market accounts of $3.3 million. The cost of interest bearing liabilities was 1.26% for the nine months ended September 30, 2018, an increase from 0.77% for the nine months ended September 30, 2017. 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 $436 thousand in the third quarter of 2018 compared with $499 thousand in the second quarter of 2018, and $386 thousand in the third quarter of 2017. The linked quarter decline resulted primarily from overall lower fees recognized in other operating income, as well as a decrease in customer related fees and service charges. The increase of $50 thousand in the third quarter of 2018 over the third quarter of 2017 resulted from an increase of $73 thousand, or 35.4%, in other operating income as a result of $65 thousand additional income on bank-owned life insurance and $57 thousand gain recognized on the sale of Small Business Administration (SBA) loans, partially offset by a decrease of $24 thousand in professional practice revenue.
Other income of $1.4 million for the nine months of 2018 represented an increase of $329 thousand, or 31.7%, as compared to the same period in 2017. The net increase for the nine months of 2018, resulted from a $385 thousand gain recognized on income from bank-owned life insurance and a $57 thousand gain recognized on the sale of SBA loans, partially offset by a $90 thousand decrease in professional practice revenue, and a $53 thousand decrease in miscellaneous loan fee income.
Other expense in the third quarter of 2018 totaled $5.2 million, compared with $5.5 million in the second quarter of 2018 and $5.0 million in the third quarter of 2017. The $0.3 million, or 5.9%, decrease from the linked quarter was primarily attributable to a decrease of $322 thousand or 10.4% in salaries and employee benefits, as well as a decrease of $30 thousand or 13.4% in professional fees. The other expense increase of $185 thousand or 3.7%, in the third quarter of 2018 over the third quarter of 2017 resulted primarily from $128 thousand, or 36.1%, increase in software services, and a $64 thousand, or 73.6%, increase in FDIC insurance.
Other expense for the nine months of 2018 totaled $16.6 million, compared with $14.9 million over the same period in 2017. The increase in other expense was primarily attributable to an increase in salaries and employee benefits expense of $1.2 million, or 14.6%, over the same period in 2017 largely due to base salary increases as well as employee recognition and retention plans. Additionally, software services increased $286 thousand, or 26.6%, other operating expenses increased $130 thousand, or 7.0%, and a $97 thousand, or 37.0%, increase in FDIC insurance due to an increase in average assets year over year.
Income Tax Rate
The effective income tax rate was 17.1% for the three months ended September 30, 2018, compared to 18.5% for the three months ended June 30, 2018 and 32.9% for the three months ended September 30, 2017. The lower rates in the second and third quarter of 2018 compared to the prior year were a result of the reduction from 34% to 21% in the federal marginal tax rate for corporations enacted at the end of 2017, as well as the positive impact of tax-exempt bank-owned life insurance. Additionally, during the second quarter of 2018, excess tax benefits were recognized relative to the exercise of stock options and compensatory warrants as well as the vesting of restricted stock grants. There were no excess tax benefits recognized by the Company in the third quarter of 2018.
The effective income tax rate was 16.3% for the nine months of 2018, compared to 34.0% over the same period in 2017. The lower tax rate was the result of the reduction in marginal federal income tax rates for corporations and the effect of tax-exempt income on bank-owned life insurance purchased in the third quarter of 2017. Additionally, excess tax benefits were recognized during the first six months of 2018 relative to the exercise of stock options and compensatory warrants, as well as the vesting of restricted stock grants.
Strong Asset Quality/Provision for Loan Losses
A provision for $225 thousand was recorded for the third quarter of 2018 as compared to no provision recorded for the second quarter of 2018, and compared to $164 thousand for the third quarter of 2017. Expressed as a percentage of outstanding loans, the allowance for loan and lease losses was 0.98% at September 30, 2018, compared to 1.00% at June 30, 2018 and 1.16% at September 30, 2017.
Credit quality remained solid as the Company had no delinquencies over thirty days past due in the loan portfolio at September 30, 2018. Loans classified as nonaccrual were at $3.9 million, or 0.61%, of total loans outstanding at September 30, 2018, compared with $5.7 million, or 0.94%, at June 30, 2018 and $1.6 million or 0.33%, at September 30, 2017. The Company’s allowance for loan losses to total loans of 0.98% decreased two basis points from 1.00% at June 30, 2018. The Company’s allowance for loan losses to total loans decreased fifteen basis points from 1.13% at year-end 2017. The decrease was mainly attributable to a decrease in the specific reserve on an impaired loan, as well as the partial charge off of an impaired loan against the allowance for loan losses that was specifically reserved for at year-end. These adjustments were partially offset by increases related primarily to growth in loans outstanding.
In the third and second quarter of 2018 the Company recorded charges off of $12 thousand and $78 thousand respectively and no recoveries, as compared to a net charge off of $352 thousand recorded in the third quarter of 2017.
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.
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-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, | |||||||||||||
| 2018 | 2018 | 2017 | 2017 | |||||||||||||
| ASSETS | ||||||||||||||||
| Total cash and cash equivalents | $ | 31,236 | $ | 45,458 | $ | 45,879 | $ | 10,486 | ||||||||
| Securities available for sale, at fair value | 279,971 | 290,899 | 299,969 | 338,531 | ||||||||||||
| Securities held to maturity | 4,750 | 4,750 | 4,750 | 4,750 | ||||||||||||
| Securities, restricted | 3,073 | 3,072 | 2,946 | 3,390 | ||||||||||||
| Loans | 637,557 | 598,635 | 519,540 | 490,843 | ||||||||||||
| Allowance for loan losses | (6,227 | ) | (6,013 | ) | (5,875 | ) | (5,682 | ) | ||||||||
| Loans, net | 631,330 | 592,622 | 513,665 | 485,161 | ||||||||||||
| Premises and equipment, net | 4,891 | 5,099 | 5,506 | 5,628 | ||||||||||||
| Bank-owned life insurance | 20,731 | 20,574 | 20,254 | 20,092 | ||||||||||||
| Other assets and accrued interest receivable | 9,616 | 8,956 | 7,062 | 7,648 | ||||||||||||
| Total Assets | $ | 985,598 | $ | 971,430 | $ | 900,031 | $ | 875,686 | ||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
| Demand Deposits | $ | 166,750 | $ | 167,557 | $ | 164,790 | $ | 171,111 | ||||||||
| Savings, N.O.W. and money market deposits | 693,561 | 680,325 | 621,742 | 576,237 | ||||||||||||
| Certificates of deposit of $100,000 or more | ||||||||||||||||
| and other time deposits | 39,522 | 37,720 | 25,932 | 17,936 | ||||||||||||
| Total Deposits | 899,833 | 885,602 | 812,464 | 765,284 | ||||||||||||
| Short-term borrowings | - | - | - | 9,975 | ||||||||||||
| Subordinated debentures, net | 14,811 | 14,800 | 14,778 | 14,767 | ||||||||||||
| Other liabilities and accrued expenses | 5,800 | 5,249 | 5,204 | 15,605 | ||||||||||||
| Total Liabilities | 920,444 | 905,651 | 832,446 | 805,631 | ||||||||||||
| Total Stockholders' Equity | 65,154 | 65,779 | 67,585 | 70,055 | ||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 985,598 | $ | 971,430 | $ | 900,031 | $ | 875,686 | ||||||||
| Selected Financial Data (unaudited) | ||||||||||||||||
| Allowance for Loan Losses to Total Loans | 0.98 | % | 1.00 | % | 1.13 | % | 1.16 | % | ||||||||
| Non-performing Loans to Total Loans | 0.61 | % | 0.94 | % | 1.14 | % | 0.33 | % | ||||||||
| Non-performing Assets to Total Assets | 0.40 | % | 0.58 | % | 0.66 | % | 0.18 | % | ||||||||
| Book Value per Share | $ | 8.51 | $ | 8.62 | $ | 9.26 | $ | 9.75 | ||||||||
| Capital Ratios (unaudited)(1) | ||||||||||||||||
| Tier 1 Leverage Ratio | 8.87 | % | 8.97 | % | 9.06 | % | 9.46 | % | ||||||||
| Common Equity Tier 1 Risk-Based Capital Ratio | 13.43 | % | 14.36 | % | 14.93 | % | 15.80 | % | ||||||||
| Tier 1 Risk-Based Capital Ratio | 13.43 | % | 14.36 | % | 14.93 | % | 15.80 | % | ||||||||
| Total Risk-Based Capital Ratio | 14.37 | % | 15.35 | % | 16.01 | % | 16.89 | % | ||||||||
| (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, | |||||||||||||||
| 2018 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| Interest income | $ | 9,102 | $ | 8,514 | $ | 7,580 | $ | 25,694 | $ | 22,014 | |||||||||
| Interest expense | 2,744 | 2,231 | 1,367 | 6,897 | 3,353 | ||||||||||||||
| Net interest income | 6,358 | 6,283 | 6,213 | 18,797 | 18,661 | ||||||||||||||
| Provision for loan losses | 225 | - | 164 | 452 | 434 | ||||||||||||||
| Net interest income after | |||||||||||||||||||
| provision for loan losses | 6,133 | 6,283 | 6,049 | 18,345 | 18,227 | ||||||||||||||
| Net securities (losses) | - | - | (28 | ) | - | (28 | ) | ||||||||||||
| Other income | 436 | 499 | 386 | 1,367 | 1,038 | ||||||||||||||
| Other expense | 5,216 | 5,540 | 5,031 | 16,557 | 14,893 | ||||||||||||||
| Income before income taxes | 1,353 | 1,242 | 1,376 | 3,155 | 4,344 | ||||||||||||||
| Income tax expense | 231 | 230 | 453 | 513 | 1,479 | ||||||||||||||
| Net income | $ | 1,122 | $ | 1,012 | $ | 923 | $ | 2,642 | $ | 2,865 | |||||||||
| Basic earnings per share | $ | 0.15 | $ | 0.13 | $ | 0.13 | $ | 0.35 | $ | 0.41 | |||||||||
| Diluted earnings per share | $ | 0.15 | $ | 0.13 | $ | 0.12 | $ | 0.34 | $ | 0.39 | |||||||||
| Weighted average common and equivalent | |||||||||||||||||||
| shares outstanding | 7,505,265 | 7,480,769 | 7,271,145 | 7,441,852 | 7,194,476 | ||||||||||||||
| Selected Financial Data (unaudited) | |||||||||||||||||||
| Return on Average Assets | 0.45 | % | 0.42 | % | 0.42 | % | 0.36 | % | 0.46 | % | |||||||||
| Return on Average Equity | 6.76 | % | 6.28 | % | 5.34 | % | 5.39 | % | 5.78 | % | |||||||||
| Net Interest Margin | 2.61 | % | 2.68 | % | 2.91 | % | 2.65 | % | 3.05 | % | |||||||||
| Efficiency Ratio | 76.77 | % | 81.70 | % | 76.24 | % | 82.11 | % | 75.60 | % | |||||||||
| Contact: | William Franz - SVP, Director of Marketing & Investor Relations (631) 348-4444 |