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Empire Bancorp Announces First Quarter 2018 Results

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ISLANDIA, N.Y., April 24, 2018 (GLOBE NEWSWIRE) -- Empire Bancorp, Inc. (OTCQX:EMPK), today announced its financial results for the quarter March 31, 2018.

"During the first quarter of 2018 we marked our landmark tenth anniversary of operations.   We have built an infrastructure that is scalable and we are beginning to recognize benefits from our scale, as we continue to focus on ensuring that credit quality remains solid.   Over the last twelve months, our loan portfolio grew $36.8 million.  As compared to the prior year first quarter results, earnings reflect increased costs largely relative to employing our strategic goals including residential mortgage and Small Business Administration loan originations," stated Douglas C. Manditch, Chairman and Chief Executive Officer.

Quarterly Highlights

Financial Results

  • Net income, measured on a consolidated basis, for the first quarter of 2018 was $508 thousand, compared with net loss of $1.4 million for the fourth quarter of 2017 and net income of $868 thousand for the first quarter of 2017. 
  • Diluted earnings (loss) per common share for the first quarter of 2018 were $0.07, compared with ($0.20) for the fourth quarter of 2017 and $0.12 for the first quarter of 2017.
  • Return on average assets and average common stockholders' equity for the first quarter of 2018 were 0.21% and 3.11%, respectively, compared with (0.63)% and (8.16)%, respectively, for the fourth quarter of 2017, and 0.44% and 5.51%, respectively, for the first quarter of 2017.
  • Net income at Empire National Bank for the first quarter of 2018, which excludes the impact of subordinated debt interest expense and other holding company operating expenses, was $750 thousand, compared with net loss of $1.2 million for the fourth quarter of 2017 and net income of $1.1 million for the first quarter of 2017.            

Franchise Development

  • Total assets were $947.0 million at March 31, 2018, up from $797.0 million or 18.8% at March 31, 2017.
  • Loans outstanding totaled $538.2 million at March 31, 2018, up from $501.3 million or 7.4% at March 31, 2017.
  • Deposits totaled $861.0 million at March 31, 2018, up from $705.9 million or 22.0% at March 31, 2017.

Continued Financial and Credit Strength

  • Solid asset quality with an allowance for loan and lease losses of 1.13% of total loans and a ratio of non-performing loans to total loans of 1.08%.
     
  • "Well capitalized" regulatory capital levels at Empire National Bank, as of March 31, 2018:
    • Tier 1 leverage capital ratio of  8.80%
    • Common equity tier 1 risk-based capital ratio of 15.42%
    • Tier 1 risk-based capital ratio of 15.42%
    • Total risk-based capital ratio of 16.52%

"Although our existing retail and corporate deposits are integral to meeting our funding goals, over the past two years we have grown our deposit base substantially by actively soliciting public fund deposits.  Currently we are earning a spread on the cash flow while we remain attentive to our loan pipeline and funding costs as the rate environment shifts," commented Thomas M. Buonaiuto, President and Chief Operating Officer.

Balance Sheet

Assets totaled $947.0 million at March 31, 2018, up $47.0 million, or 5.2%, from December 31, 2017 and up $150.0 million, or 18.8%, from March 31, 2017.  Total cash and cash equivalents increased 69.6% to $77.8 million from $45.9 million at December 31, 2017 and increased 858.3% from $8.1 million at March 31, 2017. Gross loans increased 3.6% to $538.2 million from $519.5 million at December 31, 2017 and increased 7.4% from $501.3 million at March 31, 2017. Investment securities available for sale were $294.9 million at the recent quarter-end, down $5.1 million, or 1.7%, from December 31, 2017 and up $22.1 million or 8.1% from March 31, 2017.  

Total deposits were $861.0 million at March 31, 2018, up $48.5 million, or 6.0% from December 31, 2017 and up $155.1 million, or 22.0%, from March 31, 2017.  Demand deposits were $160.1 million, a decrease of $4.7 million, or 2.9% from December 31, 2017, and down $17.0 million, or 9.6%, from March 31, 2017.  Savings, N.O.W. and money market deposits totaled $668.6 million at March 31, 2018, an increase of $46.8 million, or 7.5%, over December 31, 2017, and $161.2 million, or 31.8%, from March 31, 2017. The growth in these deposits was driven in large part by existing municipal banking relationships.  Certificates of deposits of $100,000 or more and other time deposits were $32.4 million at March 31, 2018, up $6.4 million or 24.9% from December 31, 2017 and up $10.8 million or 50.1% from March 31, 2017.
                                                                                                                                              
Stockholders' equity decreased to $66.0 million at March 31, 2018 from $67.6 million at December 31, 2017 while increasing from $64.7 million at March 31, 2017.  The linked quarter decrease was primarily attributable to increase in the unrealized net securities losses on securities available for sale, net of taxes of $4.5 million offset by equity contributions of $2.4 million associated with stock compensation plans and the exercise of both warrants and stock options, and net income of $508 thousand. The increase in stockholders' equity from March 31, 2017 primarily resulted from $3.2 million associated with stock compensation plans and the exercise of both warrants and stock options, and from net income, offset by the increase in the net unrealized losses on securities available for sale, net of taxes of $3.6 million. At March 31, 2018, 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 8.80%, 15.42%, 15.42% and 16.52% respectively.

Net Interest Margin/Net Interest Income

Net interest income for the first quarter of 2018 increased $101 thousand, or 1.7%, over the fourth quarter of 2017 and $118 thousand or 2.0%, over the first quarter of 2017.  Net interest margin was 2.65% for the three months ended March 31, 2018, a decrease from 2.77% for the three months ended December 31, 2017, and a decrease from 3.13% for the three months ended March 31, 2017.

Interest income for the first quarter of 2018 increased $460 thousand, or 6.0%, from the fourth quarter of 2017, and $1.2 million, or 16.8%, from the first quarter of 2017.  The linked quarter increase was principally a result of increases in deposits with banks of $343 thousand as well as loan income of $262 thousand, offset by a decrease of $162 thousand in income from securities available for sale. The yield on interest earning assets decreased to 3.47% for the first quarter of 2018, compared to 3.49% for the fourth quarter of 2017, and decreased from 3.59% for the first quarter of 2017.  The decrease in yield on earning assets, as compared to both fourth quarter and first quarter of 2017 respectively, primarily resulted from the growth in the percentage of earning assets held as deposits with banks, which generated an average yield less than loans.

Interest expense was $1.9 million in the most recent quarter and $1.6 million for the fourth quarter of 2017, as compared to $881 thousand for the first quarter of 2017.   The cost of interest bearing liabilities was 1.07% for the three months ended March 31, 2018, an increase from 0.96% for the three months ended December 31, 2017 and an increase from 0.66% for the three months ended March 31, 2017. The upward trend of the cost of interest bearing liabilities, especially within our public fund deposit base, is the result of higher overall funding costs driven up by, among other things, increases in the federal funds target rate from 0.75% to 1.75%.

Noninterest Income and Expense

Other income was $432 thousand in the recently completed quarter compared with $440 thousand in the fourth quarter of 2017 and $308 thousand in the first quarter of 2017. The linked quarter decrease resulted primarily from a decrease of $31 thousand in income from professional practice revenue, offset by an increase of $18 thousand in income from customer related fees and service charges and an increase of $5 thousand in other operating income. The increase of $124 thousand compared to the first quarter of 2017 was driven mainly by income on bank-owned life insurance and higher customer related fees and service charges.

Other expense in the first quarter of 2018 totaled $5.8 million, compared with $4.6 million in the fourth quarter of 2017 and $4.9 million in the first quarter of 2017.  Salaries and employee benefits expense increased $912 thousand or 37.7% over the previous quarter, and $681 thousand or 25.7% over the first quarter of 2017.  During the first quarter of 2018, the Company made several changes to its employee compensation structure to salaries and employee benefits to share a portion of the benefit that the Company received as a result of the Tax Cut and Jobs Act.  Accordingly, companywide salaries increased five percent, the match on the employee 401K program increased by two percent, and all non-executive full time employees received a one-time bonus of $1,000, net of payroll taxes.  The increase in these expenses for the first quarter of 2018, as compared to the first quarter of 2017, also reflect hiring of new employees to implement strategic initiatives such as expansion of the Small Business Administration loan program and entry into the jumbo residential mortgage market.  Accelerated expenses relative to the employee recognition and retention program totaled $200.2 thousand in the first quarter of 2018.  Advertising and business development increased $33 thousand, or 11.1%, over the fourth quarter of 2017 and increased $39 thousand or 13.4% over the first quarter of 2017 and professional fees increased $31 thousand, or 15.3%, over the linked quarter and $40 thousand, or 20.6%, over the first quarter of 2017, principally as a result of additional services associated with the Company's organic growth.

Income Tax Rate

The effective income tax rate dropped to 9.3% for the three months ended March 31, 2018 from 34.2% at March 31, 2017, as a 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 during 2017.  Additionally, excess tax benefits were recognized during the quarter relative to the exercise of stock options and compensatory warrants as well as the vesting of restricted stock grants. Certain tax deductions are limited in 2018 and going forward as a result of the recent enactment of tax legislation. The Company recognized excess tax benefits relative to the exercise of stock options by employees in the fourth quarter of 2017.  There were no excess tax benefits recognized by the Company in the first quarter of 2017.

Strong Asset Quality/Provision for Loan Losses

Based on management's assessment of the adequacy of the allowance for loan and lease losses, a provision of $227 thousand was recorded for the first quarter of 2018, as compared to $210 thousand for the fourth quarter of 2017 and $130 thousand for the first quarter of 2017.  Expressed as a percentage of outstanding loans, the allowance for loan and lease losses was 1.13% at March 31, 2018, compared to 1.13% at December 31, 2017 and 1.18% at March 31, 2017.  

Credit quality remained solid as the Company had no delinquencies over thirty days past due in the loan portfolio at March 31, 2018. In addition, the overall number of criticized and classified loans declined as compared to December 31, 2017. Loans classified as nonaccrual were at $5.8 million, or 1.08% of total loans outstanding at March 31, 2018, compared with $5.9 million, or 1.14%, at December 31, 2017 and $2.3 million or 0.46%, at March 31, 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)      
    March 31,       December 31,       March 31,      
    2018       2017       2017      
ASSETS              
Total cash and cash equivalents $   77,831     $   45,879     $   8,122      
Securities available for sale, at fair value     294,913         299,969         272,788      
Securities held to maturity     4,750         4,750         3,000      
Securities, restricted     2,931         2,946         2,960      
Loans     538,150         519,540         501,309      
Allowance for loan losses     (6,091 )       (5,875 )       (5,929 )    
Loans, net     532,059         513,665         495,380      
Premises and equipment, net     5,279         5,506         6,006      
Bank-owned life insurance     20,413         20,254         -       
Other assets and accrued interest receivable     8,826         7,062         8,766      
Total Assets $   947,002     $   900,031     $   797,022      
               
LIABILITIES AND STOCKHOLDERS' EQUITY              
Demand Deposits $   160,074     $   164,790     $   177,044      
Savings, N.O.W. and money market deposits     668,554         621,742         507,314      
Certificates of deposit of $100,000 or more               
and other time deposits     32,375         25,932         21,564      
Total Deposits     861,003         812,464         705,922      
Short-term borrowings     -          -          578      
Subordinated debentures, net     14,789         14,778         14,746      
Other liabilities and accrued expenses     5,216         5,204         11,092      
Total Liabilities     881,008         832,446         732,338      
Total Stockholders' Equity     65,994         67,585         64,684      
Total Liabilities and Stockholders' Equity $   947,002     $   900,031     $   797,022      
               
Selected Financial Data (unaudited)              
Allowance for Loan Losses to Total Loans   1.13 %     1.13 %     1.18 %    
Non-performing Loans to Total Loans   1.08 %     1.14 %     0.46 %    
Non-performing Assets to Total Assets   0.62 %     0.66 %     0.29 %    
Book Value per Share $   8.70     $   9.26     $   9.16      
               
Capital Ratios (unaudited)(1)              
Tier 1 Leverage Ratio   8.80 %     9.06 %     9.96 %    
Common Equity Tier 1 Risk-Based Capital Ratio    15.42 %     14.93 %     15.82 %    
Tier 1 Risk-Based Capital Ratio   15.42 %     14.93 %     15.82 %    
Total Risk-Based Capital Ratio   16.52 %     16.01 %     17.00 %    
               
(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    
    March 31,        December 31,       March 31,       
    2018       2017       2017      
Interest income $   8,078     $   7,618     $   6,919      
Interest expense     1,922         1,563         881      
Net interest income     6,156         6,055         6,038      
Provision for loan losses     227         210         130      
Net interest income after              
provision for loan losses     5,929         5,845         5,908      
Net securities (losses)     -          (1,568 )       -       
Other income     432         440         308      
Other expense     5,801         4,599         4,896      
Income before income taxes     560         118         1,320      
Income tax expense     52         1,536         452      
Net income (loss)  $   508     $   (1,418 )   $   868      
               
Basic earnings  (loss) per share $   0.07     $   (0.20 )   $   0.12      
Diluted earnings (loss) per share $   0.07     $   (0.20 )   $   0.12      
Weighted average common and equivalent              
shares outstanding      7,337,335         7,273,077         7,139,139      
               
Selected Financial Data (unaudited)              
Return on Average Assets   0.21 %     (0.63 )%     0.44 %    
Return on Average Equity   3.11 %     (8.16 )%     5.51 %    
Net Interest Margin   2.65 %     2.77 %     3.13 %    
Efficiency Ratio   88.05 %     70.81 %     77.15 %    
               

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

 

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