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Empire Bancorp Announces 88.8% Increase in Earnings for the Second Quarter of 2014

ISLANDIA, NY -- (Marketwired) -- 07/17/14 -- Empire Bancorp, Inc. (OTCQB: EMPK) today announced its operating results for the second quarter of 2014. Highlights for the three and six months ended June 30, 2014 include:

  • Net income of $1.1 million, a $500 thousand, or 88.8%, increase from the six months ended June 30, 2013, and a $165 thousand, or 36.8%, increase from the three months ended March 31, 2014
  • Total loans of $320.8 million, a $70.5 million, or 28.2%, increase from June 30, 2013
  • Total assets of $490.7 million, a $36.1 million, or 8.0%, increase from June 30, 2013
  • Demand deposits of $202.1 million, a $37.7 million, or 22.9%, increase from June 30, 2013, and a $29.0 million, or 16.8%, increase from March 31, 2014
  • Solid asset quality with an allowance for loan and lease losses of 1.33% of total loans and a ratio of non-performing loans to total loans of 0.27%, a decrease from 0.74% as of March 31, 2014
  • Earnings per share of $0.14 for the three months ended June 30, 2014, as compared to $0.10 for the three months ended March 31, 2014 and $0.07 for the three months ended June 30, 2013
  • Book value per share at $9.63 as of June 30, 2014, an increase of $0.42, or 4.6%, from March 31, 2014
  • "Well capitalized" regulatory capital levels, as of June 30, 2014:
    • Tier 1 leverage capital ratio of 8.72%
    • Tier 1 risk-based capital ratio of 12.37%
    • Total risk-based capital ratio of 13.61%

Douglas C. Manditch, Chairman and Chief Executive Officer stated, "We are especially pleased with our operating results for the second quarter, which derived from various factors. We have shifted our asset mix to a higher percentage of loans, which resulted in an 8.4% increase in interest income as compared to the first three months of 2014. By continuing to also manage the mix and pricing of our liabilities, including strong growth in our demand deposits, we are seeing a decline in our cost of funds. Our effective tax rate continues to decline partially offsetting a portion of the additional costs year over year generated by our now fully operational branch office in Mineola, New York. Finally, as we mature into our infrastructure, we expect our operating efficiency to continue to trend downward.

Although our substantial improvement in core earnings in part supports our growth, exploring additional alternatives to augment our capital remains a priority. Equally significant is maintaining the health of our balance sheet to preserve high asset quality while optimizing return. As of June 30, 2014, our nonperforming loans to total loans had declined to 0.27%. As the number of true community banks on Long Island continues to decline, we believe that our business plan represents a sensible, viable roadmap to enhance shareholder value going forward."

Earnings for the Three Months Ended June 30, 2014

Net income was $614 thousand, or $0.14 per share, for the second quarter of 2014, compared to $312 thousand, or $0.07 per share, for the second quarter of 2013, representing an increase of $302 thousand, or $0.07 per share.

Net interest income increased $826 thousand, or 23.9%, over the same period last year as average interest earning assets increased to $478.2 million as of June 30, 2014, an increase of $54.3 million or 12.8%. Net interest margin was 3.59% for the three months ended June 30, 2014, an increase from 3.27% for the three months ended June 30, 2013 and from 3.45% for the three months ended March 31, 2014. The yield on interest earning assets for the second quarter of 2014 averaged 3.97%, as compared to 3.69% for the second quarter of 2013 and 3.86% for the first quarter of 2014. The increase in yield on earning assets was primarily attributable to a planned shift in asset mix from investment securities to loans, which was partially offset by a lower average yield on loans. The cost of interest bearing liabilities averaged 0.69% for the second quarter of 2014, a decrease from 0.76% over the second quarter of 2013 and a decrease from 0.74% over the first quarter of 2014. Based upon growth of our loan portfolio, a provision of $120 thousand was recorded for the second quarter of 2014. No provision for loan losses was recorded in the second quarter 2013.

Total other income increased $4 thousand, or 1.5%, largely from increased collection of customer-related fees partially offset by a decline in professional practice revenue. Total other expenses increased approximately $227 thousand, or 7.2%, as compared to the same period in 2013. The increase was primarily attributable to an increase in salaries and employee benefits expense of $176 thousand, or 11.8%, over the second quarter of 2013, which was largely due to base salary increases, hiring new employees to support growth and branch expansion, and an increase in employee benefit costs. Net occupancy and equipment costs increased $51.8 thousand, or 9.9%, primarily resulting from the expenses associated with bank's new Mineola branch. Professional fees decreased by $27.0 thousand, or 17.1%, primarily as a result of the elimination of expenses associated with the formation of the holding company in 2013. Software services increased $58 thousand, or 17.1%, largely from the introduction of the bank's call center as well as other software enhancements. The combined effective tax rate for the second quarter of 2014 decreased to 41.4% from 44.7% for the second quarter of 2013.

Earnings for the Six Months Ended June 30, 2014

Net income was $1.1 million, or $0.24 per share, for the six months of 2014, compared to $563 thousand, or $0.13 per share, for the six months of 2013, representing an increase of $500 thousand or 88.8%.

Net interest income increased $1.2 million, or 17.8%, over the same period in 2013 as average interest earning assets increased to $468.9 million as of June 30, 2014, an increase of $42.7 million or 9.1%. Net interest margin was 3.52% for the six months ended June 30, 2014, an increase from 3.29% for the six months ended June 30, 2013. The yield on interest earning assets in the first half of 2014 averaged 3.92%, as compared to an average of 3.71% for the first half of 2013. The increase in yield on earning assets was primarily attributable to a deliberate shift in asset mix from investment securities to loans, which was partially offset by a lower average yield on loans. The cost of interest bearing liabilities averaged 0.71% for the first half of 2014, a decrease from an average of 0.77% over the first half of 2013. Based upon growth of our loan portfolio, a provision of $120 thousand was recorded for the first six months of 2014. No provision for loan losses was recorded in the first six months of 2013.

Total other income increased $15 thousand, or 2.8%, largely from increased collection of customer-related fees partially offset by a decline in professional practice revenue. Total other expenses increased approximately $327 thousand, or 5.1%, as compared to the same period in 2013. The increase was primarily attributable to an increase in salaries and employee benefits expense of $293.0 thousand, or 9.4%, over the first six months of 2014, which was largely due to base salary increases, hiring new employees to support growth and branch expansion, and an increase in employee benefit costs. Net occupancy and equipment costs increased $78.0 thousand, or 7.4%, primarily resulting from the expenses associated with the bank's new Mineola branch. Professional fees decreased by $73 thousand, or 22.1%, primarily as a result of the elimination of expenses associated with the formation of the holding company in 2013. Software services increased $103.0 thousand, or 15.4%, largely from the introduction of the bank's call center as well as other software enhancements. The combined effective tax rate for the first six months of 2014 decreased to 41.7% from 44.8% for the first six months of 2013.

Balance Sheet and Asset Quality

Total assets were $490.7 million at June 30, 2014, an increase of $36.1 million over June 30, 2013, or 8.0%, which was primarily attributable to an increase in outstanding loan balances of $70.5 million, or 28.2%, which was partially offset by a decrease of $30.6 million, or 17.3%, in securities available for sale. The ratio of non-performing loans to total loans improved to 0.27% as of June 30, 2014, as compared to 1.0% as of June 30, 2013 and 0.74% as of March 31, 2014. The quarter over quarter decrease was primarily attributable to the full repayment of a restructured loan. The allowance for loan losses totaled 1.33% of total loans as of June 30, 2014.

Total deposits were $421.2 million at June 30, 2014, an increase of $50.3 million over June 30, 2013, or 13.6%. Demand deposits increased $37.7 million, or 22.9%, over June 30, 2013 and $ 29.0 million, or 16.8%, over March 31, 2014. Savings, NOW and money market deposits increased $10.0 million or 7.0% from June 30, 2013 to a total of $154.1 million at quarter end. Certificates of deposit of $100,000 or more and other time deposits increased by $2.6 million or 4.1% over June 30, 2013. Short-term borrowings, which primarily represent Federal Home Loan Bank borrowings, decreased $19.9 million, or 46.2%, from June 30, 2013, and $31.5 million, or 57.6%, from March 31, 2014.

Stockholders' equity increased to $42.2 million at June 30, 2014 from $37.7 million at June 30, 2013, primarily as a result of changes in the net unrealized loss on available for sale securities, net of taxes. At June 30, 2014, the bank was "well capitalized" as defined by OCC regulation, with leverage, Tier 1 risk-based and total risk-based capital ratios of 8.72%, 12.37% and 13.61%, respectively.

Opportunities and Challenges

"We continue to carefully manage the mix of both our assets and liabilities, and looking ahead we anticipate continued earnings growth. We have been successful in supporting our loan growth since June 30, 2013 primarily through demand deposit growth, which has enabled us to expand our net interest margin over the same period. Our lending focus remains primarily on commercial real estate as we employ our experience and familiarity with the current conditions of this market. However, we remain cognizant of closely monitoring credit and interest rate risks as we enter the remaining half of the year," commented Thomas M. Buonaiuto, President and Chief Operating Officer.



Balance Sheet (unaudited)
(dollars in thousands)

                         June 30,     March 31,  December 31,      June 30,
                             2014          2014          2013          2013
                     ------------  ------------  ------------  ------------
ASSETS
Total cash and cash
 equivalents         $      8,347  $      9,420  $      5,966  $      8,574
Securities available
 for sale, at fair
 value                    146,388       152,150       152,639       177,011
Securities held to
 maturity                       -             -           300           300
Securities,
 restricted                 3,048         4,331         3,450         3,909
Loans, net                320,811       310,077       290,227       250,349
Premises and
 equipment, net             6,479         6,651         6,743         6,569
Other assets and
 accrued interest
 receivable                 5,662         6,608         7,743         7,884
                     ------------  ------------  ------------  ------------
  Total Assets       $    490,735  $    489,237  $    467,068  $    454,596
                     ============  ============  ============  ============

LIABILITIES AND
 STOCKHOLDERS'
 EQUITY
Demand Deposits      $    202,087  $    173,052  $    177,252  $    164,387
Savings, N.O.W. and
 money market
 deposits                 154,110       155,657       139,524       144,070
Certificates of
 deposit of $100,000
 or more and other
 time deposits             64,980        62,258        74,155        62,428
                     ------------  ------------  ------------  ------------
  Total Deposits     $    421,177  $    390,967  $    390,931  $    370,885
Short-term
 borrowings                23,163        54,629        34,500        43,083
Other liabilities
 and accrued
 expenses                   4,229         3,310         3,177         2,968
                     ------------  ------------  ------------  ------------
Total Liabilities    $    448,569  $    448,906  $    428,608  $    416,936
                     ------------  ------------  ------------  ------------
Total Stockholders'
 Equity                    42,166        40,331        38,460        37,660
                     ------------  ------------  ------------  ------------
Total Liabilities
 and Stockholders'
 Equity              $    490,735  $    489,237  $    467,068  $    454,596
                     ============  ============  ============  ============

Selected Financial
 Data (unaudited)
Allowance for Loan
 Losses to Total
 Loans                       1.33%         1.35%         1.44%         1.67%
Non-performing Loans
 to Total Loans              0.27%         0.74%         0.81%         1.00%
Non-performing
 Assets to Total
 Assets                      0.18%         0.47%         0.51%         0.56%

Capital Ratios
 (unaudited)
Tier 1 Leverage
 Ratio                       8.72%         8.91%         9.01%         9.41%
Tier 1 Risk-Based
 Capital Ratio              12.37%        12.26%        12.78%        13.93%
Total Risk-Based
 Capital Ratio              13.61%        13.49%        14.03%        15.18%

Book Value per Share $       9.63  $       9.21  $       8.78  $       8.60



Statement of Operations (unaudited)
(dollars in thousands, except per share data)

                                                        For the six months
                      For the three months ended              ended
                  ---------------------------------   ---------------------
                   June 30,   March 31,    June 30,    June 30,    June 30,
                       2014        2014        2013        2014        2013
                  ---------   ---------   ---------   ---------   ---------
Interest income   $   4,739   $   4,374   $   3,896   $   9,113   $   7,838
Interest expense        453         466         436         920         880
                  ---------   ---------   ---------   ---------   ---------
Net interest
 income           $   4,286   $   3,908   $   3,460   $   8,193   $   6,958
Provision for
 loan losses            120           -           -         120           -
                  ---------   ---------   ---------   ---------   ---------
Net interest
 income after
 provision for
 loan losses          4,166       3,908       3,460       8,073       6,958
Net securities
 (losses) gains           4           -           4           4           4
Other income            267         279         263         545         530
Other expense         3,390       3,411       3,163       6,799       6,472
                  ---------   ---------   ---------   ---------   ---------
Income before
 income taxes         1,047         776         564       1,823       1,020
Income tax              433         327         252         760         457
                  ---------   ---------   ---------   ---------   ---------
Net income        $     614   $     449   $     312   $   1,063   $     563
                  =========   =========   =========   =========   =========

Basic earnings
 per share        $    0.14   $    0.10   $    0.07   $    0.24   $    0.13
Diluted earnings
 per share        $    0.14   $    0.10   $    0.07   $    0.24   $    0.13

Selected
 Financial Data
 (unaudited)
Return on Average
 Assets                0.50%       0.39%       0.29%       0.45%       0.26%
Return on Average
 Equity                5.99%       4.61%       3.00%       5.32%       2.71%
Net Interest
 Margin                3.59%       3.45%       3.27%       3.52%       3.29%
Efficiency Ratio      74.46%      81.45%      84.94%      77.81%      86.43%


About Empire Bancorp, Inc.

Empire Bancorp, Inc. is a bank holding company for Empire National Bank, a Long Island-based independent community bank that specializes in serving the financial needs of small and medium sized businesses, professionals, nonprofit organizations, real estate investors, and consumers. The bank has four banking offices located in Islandia, Shirley, Port Jefferson Station and Mineola, New York. 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.

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

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