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Empire Bancorp Announces Earnings for the Fourth Quarter and the Full Year 2016

ISLANDIA, N.Y., Jan. 23, 2017 (GLOBE NEWSWIRE) -- Empire Bancorp, Inc. (OTCQB:EMPK), today announced its financial results for the quarter and year ended December 31, 2016.

“Year-end assets exceeded $781 million, an increase of 24.2% over our balance sheet footings of $629 million at December 31, 2015,” stated Douglas C. Manditch, Chairman and Chief Executive Officer. “Gross loans outstanding at December 31, 2016 increased to $494.3 million approximately 7% over prior year end. In 2016, as in 2015, we remained vigilant with our underwriting standards, vehemently determined to preserve our asset quality. Despite our conservative criteria, we continued to realign our loan mix and loan origination volume was high for both years. Yet overall loan growth was curbed by the elevated level of loan satisfactions and pay downs. Our allowance for loan and lease losses as of year-end was 1.17% of total loans.

As benchmark interest rates rose the refinancing swell of multifamily properties noticeably began to decline as we proceeded into the second half of 2016, and capitalization rates in our market began to increase slightly. Subsequently revenues from loan prepayments recognized in 2016 declined by close to $800 thousand, about half the comparable amount collected in 2015. Net interest income increased $1.8 million or 8.8% over the prior fiscal year, and our net interest margin for the year was 3.05%. Funded by the subordinated debt issued in 2015 and capital infusion of 2014 as well as low cost deposits, greater volume in our loan and securities portfolio contributed to our increase in consolidated net income by $257 thousand or 10.1% year over year. Our capital ratios remain strong. Return on average equity for the year was 4.19% as compared to 3.98% for the year ended December 31, 2015. Long term focus remains on increasing shareholder value.”

Year-to-Date Highlights

Financial Results

  • Net income, measured on a consolidated basis, for 2016 increased $257 thousand, or 10.1%, to $2.8 million from 2015.
  • Diluted earnings per common share for 2016 were $0.40, compared with $0.37 for 2015.
  • Return on average assets and average common stockholders' equity for 2016 were 0.39% and 4.19%, respectively, compared with 0.47% and 3.98%, for 2015.
  • Net income at Empire National Bank for 2016, which excludes the impact of subordinated debt interest expense and other holding company operating expenses, increased $950 thousand, or 36.1%, to $3.6 million, from 2015.

Quarterly Highlights

Financial Results

  • Net income, measured on a consolidated basis, for the fourth quarter of 2016 was $843 thousand, compared with $641 thousand for the third quarter of 2016 and $657 thousand for the fourth quarter of 2015. There were net securities gains of $131 thousand in the fourth quarter of 2016, as compared to $18 thousand in the third quarter of 2016. There were no security gains or losses recognized in the fourth quarter of 2015. This was offset by a provision for loan losses of $300 thousand in the fourth quarter of 2016, as compared to $140 thousand in the third quarter of 2016.
  • Diluted earnings per common share for the fourth quarter of 2016 were $0.12, compared with $0.09 for the third quarter of 2016 and $0.10 for the fourth quarter of 2015.
  • Return on average assets and average common stockholders' equity for the fourth quarter of 2016 were 0.44% and 5.04%, respectively, compared with 0.34% and 3.75%, respectively, for the third quarter of 2016, and 0.43% and 4.03%, respectively, for the fourth quarter of 2015.
  • Net income at Empire National Bank for the fourth quarter of 2016, which excludes the impact of subordinated debt interest expense and other holding company operating expenses, was $1.0 million, compared with $839 thousand for the third quarter of 2016 and $703 thousand for the fourth quarter of 2015.

Franchise Development

  • Total assets were $781.4 million at December 31, 2016, up 24.2% from December 31, 2015;
  • Loans outstanding totaled $488.5 million, up 7.0% from December 31, 2015;
  • Deposits totaled $670.7 million, up 29.5% from December 31, 2015.

Continued Financial and Credit Strength

  • Solid asset quality with an allowance for loan and lease losses of 1.17% of total loans and a ratio of non-performing loans to total loans of 0.48%;
  • “Well capitalized” regulatory capital levels at Empire National Bank, as of December 31, 2016:
    - Tier 1 leverage capital ratio of 10.22%
    - Common equity tier 1 risk-based capital ratio of 16.26%
    - Tier 1 risk-based capital ratio of 16.26%
    - Total risk-based capital ratio of 17.46%

"We are eager to rollout business mobile remote deposit capture to our commercial clients in the first quarter of 2017. Using a phone or tablet, this service allows businesses to easily deposit checks while on the go. Depending on the business model, customers may find it convenient to allow their employees to deposit checks via mobile banking. Practical, efficient and secure, this product enhancement reflects our continued commitment to meet the needs of our customers not only through innovation but also by continued exceptional personal service," commented Thomas M. Buonaiuto, President and Chief Operating Officer.

Balance Sheet

Assets totaled $781.4 million at December 31, 2016, up $13.5 million, or 1.8%, from September 30, 2016 and up $152.3 million, or 24.2%, from December 31, 2015. The year-over-year increase in total assets was driven primarily by increases in securities available for sale and gross loans. Investment securities available for sale were $264.7 million at the recent quarter-end, up $113.7 million, or 75.3%, from December 31, 2015. The significant increase in investment securities was primarily attributable to the increase in deposits from December 31, 2015, as discussed below. Gross loans increased 4.5% to $494.3 million from $472.8 million at September 30, 2016 and increased 7.0% from $461.8 million at December 31, 2015.

Total deposits were $670.7 million at December 31, 2016, down $8.3 million, or 1.2%, from September 30, 2016 and up $152.7 million, or 29.5%, from December 31, 2015. The linked quarter decline was largely due to municipality withdrawals at year-end. Demand deposits were $177.3 million, a $25 million decrease, or 12.4%, from September 30, 2016, and an $11.9 million decrease, or 6.3%, from December 31, 2015. Savings, N.O.W. and money market deposits totaled $465.9 million at December 31, 2016, an increase of $28.1 million, or 6.4%, over September 30, 2016, and $179.3 million, or 62.6%, from December 31, 2015. 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 December 31, 2016, representing 4.1% of total deposits, compared to 8.1% at December 31, 2015.

Stockholders’ equity decreased to $63.0 million at December 31, 2016 from $68.6 million at September 30, 2016 and $64.2 million at December 31, 2015, primarily as a result of a large unrealized security losses of $5.3 million in the fourth quarter. At December 31, 2016, 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 10.22%, 16.26%, 16.26% and 17.46% respectively.

Net Interest Margin/Net Interest Income

Net interest income for the fourth quarter of 2016 increased $109 thousand, or 2.0%, over the third quarter of 2016 and $618 thousand, or 12.2%, over the fourth quarter of 2015. Net interest margin remained at 3.00% for the three months ended December 31, 2016, a decrease of 36 basis points from the same period in 2015. This decrease resulted primarily from the growth in the percentage of earning assets held as investment securities, as well as materially lower revenues from prepayment fees in 2016. The increase in investment securities was attributable to the significant growth in deposits.

Interest income for the fourth quarter of 2016 increased $141 thousand from the third quarter of 2016 and $993 thousand from the fourth quarter of 2015. The linked quarter increase was mostly attributable to an increase in loan income and income from securities available for sale by $27 thousand and $121 thousand, respectively. The yield on average earning assets for the fourth quarter of 2016 remained at 3.46% from the linked quarter and was 3.69% for the fourth quarter of 2015. This decrease in yield on earning assets, as compared to the fourth quarter of 2015, primarily resulted from the growth in the percentage of earning assets held as investment securities, which generated an average yield less than loans. Additionally, prepayment fees for the fourth quarter of 2016 were $167, a decrease of $94 thousand from $261 thousand in the third quarter of 2016. Pre-payment fees decreased year over year by $798 thousand.

Interest expense totaled $880 thousand in the most recent quarter, $848 thousand for the third quarter of 2016, and $505 for the fourth quarter of 2015. The fourth quarter increase in interest expense over the third quarter was due to an increase in the cost of other borrowings and savings, N.O.W. and money market deposits by $35 thousand and $18 thousand, respectively, which was partially offset by a decrease in the expense for certificates of deposit of $100,000 or more by $23 thousand. The cost of average interest-bearing liabilities for the three months ended December 31, 2016 decreased to 0.69% from 0.72% in the third quarter of 2016. The increase from the cost of average interest-bearing liabilities of 0.58% in the fourth quarter of 2015 was primarily attributable to the issuance of subordinated debentures in December 2015 at the holding company level, partially offset by an increase in the percentage of average interest-bearing liabilities held as savings, N.O.W. and money market deposits and a decrease in the cost of these funds from 0.45% in the fourth quarter of 2015 to 0.44% in the fourth quarter of 2016.

Net interest income increased $1.8 million, or 8.8%, for the year ended December 31, 2016 over the prior year. Interest from loans and securities available for sale were responsible for the growth in net income while the subordinated debentures and savings, N.O.W., and money market deposits made up the growth of total interest expense. Net interest margin was 3.05% for 2016, a decrease from 3.75% from the year ended December 31, 2016. The decrease in net interest margin was primarily attributable to a decrease of 55 basis points in the company’s yield on average earning assets for 2016, driven largely by two factors. First, the average yield on loans decreased to 4.31% for 2016 from 4.65% for 2015, primarily due to prepayment fees being materially lower in 2016, due to significant refinancing activity occurring in 2015. Second, investment securities represented a greater percentage of the earning asset mix in 2016 as compared to the prior year. The increase in investment securities was attributable to the significant growth in deposits. Notwithstanding, the decrease in the yield on average earning assets for 2016, interest income for 2016 increased $3.4 million over the same period in 2015 as a result of the growth in the volume of average earning assets.

The decrease in net interest margin was also impacted by an increase of 12 basis points in the cost of average interest-bearing liabilities to 0.72% for 2016 from 0.60% for the same period in 2015. This increase was primarily attributable to the issuance of subordinated debentures in December 2015 at the holding company level with a weighted average cost of 7.42%. To partially offset this higher cost, the mix of average interest-bearing liabilities was managed to increase the average volume of savings, N.O.W. and money market deposits by $186.8 million, while reducing the average cost of funds on these deposits to 0.44% for 2016 from 0.48% for the same period in 2015.

Noninterest Income and Expense

Other income of $268 thousand for the fourth quarter of 2016 represented a decrease of $2 thousand over the linked quarter and an increase of $26 thousand over the same period in 2015. The company recognized net securities gains of $131 thousand in the fourth quarter of 2016 compared to net securities gains of $18 thousand in the third quarter of 2016. There were no securities gains or losses in the fourth quarter of 2015.

Other income of $1.1 million for the year ended 2016 represented an increase of $55 thousand, or 5.1%, as compared to the same period in 2015. The company recognized net securities gains of $346 thousand in 2016 as compared to net securities losses of $71 thousand in the same period in 2015.

Other expense in the fourth quarter of 2016 totaled $4.5 million, compared with $4.7 million in the third quarter of 2016 and $4.0 million in the fourth quarter of 2015. The linked quarter decrease in other expense was primarily attributable to a decrease in salaries and employee benefits expense of $211 thousand, or 8.3%, largely attributable to unfilled positions. The year to date increase in other expense was largely due to an increase in salaries and employee benefits of $246 thousand, or 11.7%, over the fourth quarter of 2015, due primarily to the hiring of new employees to support growth and strategic plans. Net occupancy and equipment costs increased $15 thousand, or 2.0%, over the previous quarter, and increased $103 thousand, or 15.8%, over the same quarter last year. Advertising and business development expense increased $61 thousand over the previous quarter, and increased $93 thousand, or 46.7%, over the fourth quarter of 2015. FDIC insurance decreased $34 thousand, or 37.0%, over the previous quarter, and decreased $17 thousand, or 22.7%, over the fourth quarter of 2015. For the linked quarter other operating expenses decreased by $31 thousand.

Other expense in 2016 totaled $18.1 million, compared with $16.0 million in the same period of 2015. The increase in other expense was primarily attributable to an increase in salaries and employee benefits expense of $1.5 million, or 18.6%, over the previous year, due primarily to the hiring of new employees to support growth and strategic plans. Net occupancy and equipment costs increased $245 thousand, or 9.5%, over the same period last year, primarily as a result of the increased footprint of the bank’s main office lease and the opening of a loan and deposit production office in Manhattan. Costs associated with the collateralization of municipal deposits increased $97 thousand over the same period last year. Advertising and business development expense increased $191 thousand, or 24.1%, as compared to the same period in 2015. FDIC insurance increased $51 thousand, or 16.9%, during 2016 as compared to same period in 2015, as a direct result of the increase in average assets.

Strong Asset Quality/Provision for Loan Losses

Credit quality remained solid at December 31, 2016 with loans classified as nonaccrual at $2.4 million, or 0.48% of total loans outstanding at December 31, 2016, compared with $325 thousand, or 0.07%, at September 30, 2016 and $548 thousand, or 0.12%, at December 31, 2015.

Based on management’s assessment of the adequacy of the allowance for loan and lease losses, a provision of $300 thousand was recorded for the fourth quarter of 2016, as compared with $140 thousand for the third quarter of 2016 and $250 thousand for the fourth quarter of 2015. Expressed as a percentage of outstanding loans, the allowance for loan and lease losses was 1.17% at December 31, 2016, compared with 1.16% at September 30, 2016 and 1.14% at December 31, 2015.

In the fourth quarter of 2016, there were no net charge-offs but there were net recoveries of $11 thousand. In the third quarter of 2016 net charge-offs were $111 thousand and no net recoveries. In the fourth quarter of 2015 there were no charge-offs or recoveries.

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 and 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)
December 31, September 30, December 31,
2016 2016 2015
ASSETS
Total cash and cash equivalents$ 6,354 $ 21,028 $ 5,621
Securities available for sale, at fair value 264,734 265,168 151,043
Securities held to maturity 3,000 - -
Securities, restricted 4,131 2,937 3,712
Loans, net 488,475 467,335 456,512
Premises and equipment, net 6,052 6,242 6,687
Other assets and accrued interest receivable 8,689 5,157 5,558
Total Assets$ 781,435 $ 767,867 $ 629,133
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand Deposits$ 177,299 $ 202,263 $ 189,200
Savings, N.O.W. and money market deposits 465,890 437,808 286,635
Certificates of deposit of $100,000 or more
and other time deposits 27,494 38,910 42,198
Total Deposits$ 670,683 $ 678,981 $ 518,033
Short-term borrowings 26,477 - 26,064
Subordinated debentures, net 14,735 14,725 14,697
Other liabilities and accrued expenses 6,548 5,611 6,185
Total Liabilities$ 718,443 $ 699,317 $ 564,979
Total Stockholders' Equity 62,992 68,550 64,154
Total Liabilities and Stockholders' Equity$ 781,435 $ 767,867 $ 629,133
Selected Financial Data (unaudited)
Allowance for Loan Losses to Total Loans 1.17% 1.16% 1.14%
Non-performing Loans to Total Loans 0.48% 0.07% 0.12%
Non-performing Assets to Total Assets 0.30% 0.04% 0.09%
Book Value per Share, as converted $ 9.07 $ 9.88 $ 9.32
Capital Ratios (unaudited)(1)
Tier 1 Leverage Ratio 10.22% 10.31% 12.22%
Common Equity Tier 1 Risk-Based Capital Ratio 16.26% 16.67% 16.83%
Tier 1 Risk-Based Capital Ratio 16.26% 16.67% 16.83%
Total Risk-Based Capital Ratio 17.46% 17.85% 18.01%
(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 year ended
December 31, September 30, December 31, December 31, December 31,
2016 2016 2015 2016 2015
Interest income$ 6,546 $ 6,405 $ 5,553 $ 24,868 $ 21,504
Interest expense 880 848 505 3,301 1,689
Net interest income$ 5,666 $ 5,557 $ 5,048 $ 21,567 $ 19,815
Provision for loan losses 300 140 250 632 867
Net interest income after
provision for loan losses 5,366 5,417 4,798 20,935 18,948
Net securities gains (losses) 131 18 - 346 (71)
Other income 268 270 242 1,131 1,076
Other expense 4,449 4,706 4,012 18,068 15,998
Income before income taxes 1,316 999 1,028 4,344 3,955
Income tax expense 473 358 371 1,554 1,421
Net income$ 843 $ 641 $ 657 $ 2,790 $ 2,534
Basic earnings per share$ 0.12 $ 0.09 $ 0.10 $ 0.40 $ 0.42
Diluted earnings per share$ 0.12 $ 0.09 $ 0.10 $ 0.40 $ 0.37
Weighted average common shares outstanding 6,941,711 6,940,702 6,879,970 6,936,561 6,100,689
Weighted average common and common
equivalent shares outstanding 7,080,205 6,942,421 6,890,323 6,955,993 6,879,970
Selected Financial Data (unaudited)
Return on Average Assets 0.44% 0.34% 0.43% 0.39% 0.47%
Return on Average Equity 5.04% 3.75% 4.03% 4.19% 3.98%
Net Interest Margin 3.00% 3.00% 3.36% 3.05% 3.75%
Efficiency Ratio 74.99% 80.76% 75.84% 79.60% 76.58%

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

Source:Empire National Bank