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Empire Bancorp Announces 79% Increase in First Quarter 2014 Earnings


April 22, 2014 - Islandia, NY

Empire Bancorp, Inc. (OTCQB: EMPK), today announced its operating results for the first quarter of 2014. Highlights for the quarter ended March 31, 2014 include:

  • Net income of $449 thousand, a $198 thousand, or 78.9%, increase from the quarter ended March 31, 2013;
  • Total loans of $314.3 million, a $74.4 million, or 31.0%, increase from March 31, 2013;
  • Total assets of $489.2 million, a $47.6 million, or 10.8%, increase from March 31, 2013;
  • Demand deposits of $173.1 million, a $8.3 million, or 5.0%, increase from March 31, 2013;
  • Solid asset quality with an allowance for loan and lease losses of 1.35% of total loans and a ratio of non-performing loans to total loans of 0.74%;
  • Book value per share at $9.21 as of March 31, 2014;
  • "Well capitalized" regulatory capital levels, as of March 31, 2014:
    • Tier 1 leverage capital ratio of 8.91%
    • Tier 1 risk-based capital ratio of 12.26%
    • Total risk-based capital ratio of 13.49%

Douglas C. Manditch, Chairman and Chief Executive Officer stated, "Net income for the first quarter of 2014 totaled $449 thousand, an increase of $198 thousand or 78.9%, over the first three months of 2013. Total assets at March 31, 2014 were $489.2 million, an increase of $22.1 million or 4.7% over December 31, 2013. Earnings, largely driven by growth in net interest income, reflect our prudent management of capital and balance sheet mix as well as our consistent sound asset quality. When booking assets we remain selective both in our underwriting criteria and our pricing. Notwithstanding these stringent criteria, our loan portfolio grew $19.8 million over the first quarter of 2014. Recognizing growth in core earnings is a key driver behind shareholder value, we continue to explore alternatives to best manage the capital needs coupled with the expansion of our balance sheet."

Earnings

Net income was $449 thousand or $0.10 per share for the first quarter of 2014, compared to $251 thousand or $0.06 per share for the first quarter of 2013, representing an increase of $198 thousand or 78.9%.

Net interest income increased $409 thousand, or 11.7%, year-over-year as average earning assets increased to $459.3 million as of March 31, 2014, an increase of $30.8 million or 7.2%. The bank's net interest margin was 3.45% for the quarter ended March 31, 2014, an increase from 3.31% for the quarter ended March 31, 2013. The bank's yield on interest earning assets in the first quarter of 2014 averaged 3.86%, as compared to an average of 3.73% for the first quarter of 2013. The increase in yield on earning assets was primarily attributable to a shift in asset mix from investment securities to loans, which was partially offset by a lower average yield on loans. The bank's cost of interest bearing liabilities averaged 0.74% for the first quarter of 2014, a decrease from an average of 0.78% over the first quarter of 2013. No provision for loan losses was recorded in the first quarter of 2014 or 2013.

Total other income increased $13 thousand, or 4.9%, largely from increased collection of customer related fees partially offset by a decline in professional practice revenue. Total other expenses increased approximately $101 thousand, or 3.1%, to a total of $3.4 million for the three months ended March 31, 2014 when compared to the three months ended March 31, 2013. The increase was primarily attributable to an increase in salaries and employee benefits expense of $116 thousand, or 7.1%, over the first quarter of 2013, which was largely due to base salary increases, hiring new employees to support our growth and branch expansion, and an increase in employee benefit costs. Professional fees decreased by $46 thousand, or 26.6%, primarily as a result of the elimination of expenses associated with the formation of the holding company in 2013. Advertising and business development expenses declined by $28 thousand, or 13.9%, as compared to the same period in 2013. Software services increased $45 thousand, or 13.7%, largely from the introduction of the bank's call center as well as other software enhancements. The bank also experienced a modest increase in net occupancy and equipment expense as a result of the addition of the bank's Mineola branch. The combined effective tax rate for the first quarter of 2014 decreased to 42.1% from 44.8% for the first quarter of 2013.

Balance Sheet and Asset Quality

Total assets were $489.2 million at March 31, 2014, an increase of $47.6 million year-over-year, or 10.8%, which was primarily attributable to an increase in outstanding loan balances of $74.4 million, or 31.0%. The bank's ratio of non-performing loans to total loans improved to 0.74% as of March 31, 2014 with the allowance for loan losses at 1.35% of total loans. Securities available for sale decreased $34.0 million, or 18.3%, to a total of $152.2 million at March 31, 2014.

Total deposits were $391.0 million at March 31, 2014, a year-over-year increase of $22.9 million, or 6.2%. Demand deposits increased $8.3 million, or 5.0%, year-over-year. Savings, NOW and money market deposits increased $13.4 million or 9.4% from March 31, 2013 to a total of $155.7 million at quarter end.

Stockholders' equity declined from $41.6 million to $40.3 million from March 31, 2013 to March 31, 2014, primarily as a result of changes in the net unrealized loss on available for sale securities, net of taxes. At March 31, 2014, the bank was "well capitalized" as defined by OCC regulation, with leverage, Tier 1 risk-based and total risk-based capital ratios of 8.91%, 12.26% and 13.49%, respectively.

Opportunities and Challenges

"Balance sheet management and control over non-interest expenses chiefly drove our improved financial performance going into the new fiscal year," commented Thomas M. Buonaiuto, President and Chief Operating Officer. "We have continued to shift the mix of our assets from investment securities to loans, which has resulted in the expansion of our net interest margin and an increase in net interest income. At the same time, we have remained vigilant with respect to asset quality, as evidenced by the continued improvement in our asset quality metrics. Even after absorbing the additional costs of our Mineola branch, which opened in November 2013, non-interest expenses grew only 3.1% as compared to the first three months of 2013. Going forward, our focus remains on leveraging our organization through measured growth and improved efficiency," commented Thomas M. Buonaiuto, President and Chief Operating Officer.



Balance Sheet (unaudited)
(dollars in thousands)

March 31, December 31, March 31,
2014 2013 2013
---------- ------------ ----------
ASSETS
Total cash and cash equivalents $ 9,420 $ 5,966 $ 4,723
Securities available for sale, at
fair value 152,150 152,639 186,245
Securities held to maturity - 300 300
Securities, restricted 4,331 3,450 3,122
Loans, net 310,077 290,227 235,727
Premises and equipment, net 6,651 6,743 6,268
Other assets and accrued interest
receivable 6,608 7,743 5,182
---------- ------------ ----------
Total Assets $ 489,237 $ 467,068 $ 441,567
========== ============ ==========

LIABILITIES AND STOCKHOLDERS'
EQUITY
Demand Deposits $ 173,052 $ 177,252 $ 164,810
Savings, N.O.W. and money market
deposits 155,657 139,524 142,253
Certificates of deposit of $100,000
or more and other time deposits 62,258 74,155 61,033
---------- ------------ ----------
Total Deposits $ 390,967 $ 390,931 $ 368,096
Short-term borrowings 54,629 34,500 29,065
Other liabilities and accrued
expenses 3,310 3,177 2,776
---------- ------------ ----------
Total Liabilities $ 448,906 $ 428,608 $ 399,937
---------- ------------ ----------
Total Stockholders' Equity 40,331 38,460 41,630
---------- ------------ ----------
Total Liabilities and Stockholders'
Equity $ 489,237 $ 467,068 $ 441,567
========== ============ ==========

Selected Financial Data (unaudited)
Allowance for Loan Losses to Total
Loans 1.35% 1.44% 1.77%
Non-performing Loans to Total Loans 0.74% 0.81% 1.08%
Non-performing Assets to Total
Assets 0.47% 0.51% 0.59%

Capital Ratios (unaudited)
Tier 1 Leverage Ratio 8.91% 9.01% 9.25%
Tier 1 Risk-Based Capital Ratio 12.26% 12.78% 14.83%
Total Risk-Based Capital Ratio 13.49% 14.03% 16.09%

Book Value per Share $ 9.21 $ 8.78 $ 8.74



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

For the three months ended
--------------------------------------
March 31, December 31, March 31,
2014 2013 2013
---------- ------------ ----------
Interest income $ 4,374 $ 4,259 $ 3,943
Interest expense 466 450 444
---------- ------------ ----------
Net interest income $ 3,908 $ 3,809 $ 3,499
Provision for loan losses - - -
---------- ------------ ----------
Net interest income after provision
for loan losses 3,908 3,809 3,499
Net securities (losses) gains - (152) -
Other income 279 269 266
Other expense 3,411 3,309 3,310
---------- ------------ ----------
Income before income taxes 776 617 455
Income tax 327 256 204
---------- ------------ ----------
Net income $ 449 $ 361 $ 251
========== ============ ==========

Basic earnings per share $ 0.10 $ 0.08 $ 0.06
Diluted earnings per share $ 0.10 $ 0.08 $ 0.06

Selected Financial Data (unaudited)
Return on Average Assets 0.39% 0.31% 0.23%
Return on Average Equity 4.61% 3.76% 2.42%
Net Interest Margin 3.45% 3.36% 3.31%
Efficiency Ratio 81.45% 81.13% 87.91%

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, 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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