ISLANDIA, N.Y., Jan. 29, 2020 (GLOBE NEWSWIRE) -- Empire Bancorp, Inc. (OTCQX: EMPK), (the “Company”) today announced its financial results for the quarter and year ended December 31, 2019.

Year-to-Date Highlights

Financial Results

• Net income, measured on a consolidated basis, for 2019 increased $389 thousand, or 11.2%, to $3.9 million, as compared to the same period in 2018.
• Diluted earnings per common share for 2019 were $0.50, compared with $0.45 for 2018.
• Return on average assets and average common stockholders' equity for 2019 were 0.38% and 4.97%, respectively, compared with 0.36% and 5.31%, respectively, for the same period in 2018.

Quarterly Highlights

Financial Results

• Net income, measured on a consolidated basis, for the fourth quarter of 2019 was $1.2 million, compared to $1.1 million for the third quarter of 2019, and $840 thousand for the fourth quarter of 2018.
• Diluted earnings per common share for the fourth quarter of 2019 were $0.15, compared with $0.14 for the third quarter of 2019, and $0.11 for the fourth quarter of 2018.
• Return on average assetsandaverage common stockholders' equity for the fourth quarter of 2019 were 0.47% and 5.76%, respectively, compared with 0.42% and 5.34%, respectively, for the third quarter of 2019, and 0.34% and 5.09%, respectively, for the fourth quarter in 2018.

Franchise Development

• Total assets were $978.6 million at December 31, 2019, down 1.0% from $988.2 million at December 31, 2018.
• Loans outstanding totaled $678.7 million at December 31, 2019, up 0.8% from $673.6 million at December 31, 2018.
• Deposits totaled $863.0 million at December 31, 2019, down 3.3% from $892.9 million at December 31, 2018.

Continued Financial and Credit Strength

• Solid asset quality with an allowance for loan and lease losses of 0.94% of total loans and a ratio of non-performing loans to total loans of 0.49%. 
• “Well capitalized” regulatory capital levels at Empire National Bank, as of December 31, 2019:
  - Tier 1 leverage capital ratio of 9.51%
  - Common equity tier 1 risk-based capital ratio of 14.60%
  - Tier 1 risk-based capital ratio of 14.60%
  - Total risk-based capital ratio of 15.57%

Balance Sheet

Assets totaled $978.6 million at December 31, 2019, down $34.0 million, or 3.4%, from September 30, 2019, and down $9.7 million, or 1.0%, from December 31, 2018. Total cash and cash equivalents decreased $11.4 million, or 23.3%, to $37.6 million from $49.0 million at September 30, 2019, and increased $27.0 million, or 257.3%, from $10.5 million at December 31, 2018. Gross loans were $678.7 million at December 31, 2019, an increase of $8.4 million, or 1.3%, from $670.3 million at September 30, 2019, and an increase of $5.1 million, or 0.8%, from $673.6 million at December 31, 2018. Investment securities available for sale were $223.0 million at December 31, 2019 down $31.2 million, or 12.3%, from September 30, 2019, and down $46.0 million, or 17.1%, from December 31, 2018. During the third quarter of 2019, $4.8 million in held to maturity securities were transferred to available for sale, and subsequently sold for a gain.

Total deposits were $863.0 million at December 31, 2019, down $36.6 million, or 4.0%, from September 30, 2019, and down $29.9 million, or 3.3%, from December 31, 2018. Demand deposits were $157.2 million, a decrease of $28.2 million, or 15.2%, from September 30, 2019, and down $12.1 million, or 7.1%, from December 31, 2018. The decrease in these deposits was a result of a normal decline within the professional practice deposit base. Savings, N.O.W. and money market deposits totaled $677.8 million at December 31, 2019 and decreased $8.2 million, or 1.1%, from September 30, 2019, and decreased $11.3 million, or 1.6%, from December 31, 2018 due to seasonal fluctuations within our municipal customer base. Certificates of deposits of $100,000 or more and other time deposits were $28.0 million at December 31, 2019, down $209 thousand, or 0.7%, from September 30, 2019, and down $6.5 million, or 18.8%, from December 31, 2018.

Stockholders’ equity increased $3.0 million, or 3.7%, to $84.2 million, from September 30, 2019, and increased $12.5 million, or 17.4%, from December 31, 2018. The linked quarter increase was primarily attributable to a $1.6 million net increase associated with stock compensation plans and the exercise of warrants and stock options, net income of $1.2 million, and the positive impact of a decrease in the net unrealized losses on securities available for sale, net of taxes of $225 thousand. The increase of $12.5 million in stockholders’ equity from December 31, 2018 was primarily attributable to the positive impact of a decrease in the net unrealized losses on securities available for sale, net of taxes of $6.6 million, net income of $3.9 million, and a $2.0 million net increase associated with stock compensation plans and the exercise of both warrants and stock options.

Net Interest Margin/Net Interest Income

Net interest income for the fourth quarter of 2019 increased by $221 thousand, or 3.6%, from the third quarter of 2019, and decreased by $87 thousand, or 1.4%, from the fourth quarter of 2018. Net interest margin was 2.61% for the three months ended December 31, 2019, an increase from 2.48% for the three months ended September 30, 2019, and a slight decrease from 2.62% for the three months ended December 31, 2018.

Interest income for the fourth quarter of 2019 decreased $166 thousand, or 1.7%, compared to the third quarter of 2019, and decreased $106 thousand, or 1.1%, from the fourth quarter of 2018. The linked quarter decrease was primarily the result of a decrease of $218 thousand in income from available for sale securities, partially offset by an increase of $42 thousand in income from loans, and a $14 thousand increase in income from deposits with banks. The yield on interest-earning assets remained relatively flat at 3.85% for the fourth quarter of 2019, as compared to 3.86% for the third quarter of 2019 and fourth quarter of 2018.

Interest expense was $3.0 million in the most recent quarter, and $3.4 million for the third quarter of 2019, as compared to $3.0 million for the fourth quarter of 2018. The cost of interest-bearing liabilities was 1.64% for the three months ended December 31, 2019, a decrease from 1.83% at September 30, 2019, and an increase from 1.60% for the three months ended December 31, 2018. The fluctuation in the cost of interest bearing liabilities quarter over quarter is a direct response to the overall changes in the Fed Funds target rate throughout 2019 affecting market funding costs upward for the third quarter of 2019 and then downward in the fourth quarter of 2019.

Net interest income decreased $202 thousand, or 0.8%, for 2019 year end compared to the same period in 2018. Net interest margin was 2.54% for 2019, a decrease from 2.64% in 2018.

Interest income increased $3.1 million, or 8.7%, for the year ended December 31, 2019 compared to the same period in 2018. The increase was attributable to an increase in income from loans of $4.1 million, partially offset by decreases in securities and deposits with banks collective of approximately $1.0 million. The yield on interest earning assets increased to 3.89% at December 31, 2019 compared to 3.68% for the same period last year. The increase in the yield on interest-earning assets primarily resulted from growth in the percentage of interest earning assets held as loans, as well as a higher yield on loans which had a greater impact on the overall average interest earning assets offset by a decrease in the average balance of securities available for sale.

Interest expense was $13.2 million representing an increase of $3.3 million, or 33.0%, for the year ended December 31, 2019 compared to the same period in 2018, which was driven primarily by an increase in interest expense relative to savings, N.O.W. and money market accounts of approximately $3.4 million. The cost of interest-bearing liabilities was 1.76% for the year ending 2019 compared to 1.35% for the same period in 2018. The increase in the cost of average interest-bearing liabilities year over year resulted primarily by an increase of 45 basis points in the average cost of funds on savings, N.O.W. and money market from 1.19% in 2018 to 1.64% for 2019. 

Noninterest Income and Expense

Other income was $462 thousand in the fourth quarter of 2019, compared to $471 thousand in the third quarter of 2019, and $423 thousand in the fourth quarter of 2018. The decrease of $9 thousand from the linked quarter resulted primarily from a decrease of $8 thousand in miscellaneous income. The increase of $39 thousand in other income in the fourth quarter of 2019 compared to the fourth quarter of 2018 was primarily driven by an increase of $30 thousand in customer related fees and service charges, and an increase of $9 thousand in other operating income. There was a $10 thousand net gain recognized on the sale of securities in the fourth quarter of 2019, compared to a $79 thousand gain recognized in the third quarter of 2019 and a $50 thousand loss recognized for the fourth quarter of 2018.

Other income was $1.9 million for the year ended December 31, 2019 and represented an increase of $232 thousand, or 13.5%, compared to 2018. The increase for 2019 resulted primarily from a $133 thousand gain recognized on the sale of SBA loans, and an increase of $124 thousand in miscellaneous loan fee income, offset by a decrease of $22 thousand in income from bank owned life insurance.  There was an $89 thousand net gain recognized on the sale of securities in 2019, compared to a loss of $50 thousand recognized for the same period in 2018.

Other expense in the fourth quarter of 2019 totaled $5.4 million, compared with $5.3 million in the third quarter of 2019, and $5.6 million in the fourth quarter of 2018. The $106 thousand, or 2.0%, increase from the linked quarter was primarily attributable to an increase of $364 thousand, or 176.7%, in professional fees. Professional fees included additional costs associated with the Company’s proposed merger with Flushing Financial Corporation.  The increase in professional fees was offset by decreases in advertising and business development, other operating expenses, and salaries and employee benefits of $110 thousand, $77 thousand, and $46 thousand, respectively. Other expense decreased $101 thousand, or 1.8%, in the fourth quarter of 2019 over the fourth quarter of 2018, primarily as a result of decreases in salaries and employee benefits, FDIC insurance, and advertising and business development of $161 thousand, $133 thousand, $111 thousand, respectively. The decrease in FDIC expense was the result of FDIC small business assessment credit. These decreases were offset by an increase of $351 thousand in professional fees, resulting primarily from costs associated with the Company’s proposed merger with Flushing Financial Corporation.

Other expense for the year ended December 31, 2019 totaled $22.2 million, compared with $22.0 million over the same period in 2018. The increase of $164 thousand in other expense year over year was largely attributable to increases in professional fees, other operating expenses, and software services of $419 thousand, $259 thousand, and $176 thousand, respectively. These increases were offset by decreases in FDIC insurance, advertising and business development, occupancy and equipment expenses, and salaries and employee benefits of $292 thousand, $213 thousand, $126 thousand, and $59 thousand, respectively. Professional fees included additional costs associated with the Company’s proposed merger with Flushing Financial Corporation. Other operating expense included increases due to the elimination of the professional practice revenue. The increase in software services expense was due to expenses directly linked to the increase in fed funds rate. The decrease in FDIC expense was the result of FDIC small business assessment credit.

Income Tax Rate

The effective income tax rate was 13.8% for the fourth quarter ended December 31, 2019, compared to an effective income tax rate of 19.9% for the third quarter at September 30, 2019, and 19.0% for the fourth quarter of 2018. The effective income tax rate was 17.8% for 2019 and 17.0% for the same period in 2018.

Solid Asset Quality/Provision for Loan Losses

There was no provision for loan losses recorded in the fourth and third quarters of 2019, compared to a provision of $230 thousand recorded in the fourth quarter of 2018.  Expressed as a percentage of outstanding loans, the allowance for loan and lease losses was 0.94% at December 31, 2019, 0.95% at September 30, 2019, and 0.96% at December 31, 2018. The provision for loan losses was $168 thousand for the year ended December 31, 2019 compared to $682 thousand for the same period in 2018.

Credit quality remained solid at December 31, 2019. Loans classified as nonaccrual totaled $3.3 million or 0.49% of total loans outstanding at December 31, 2019, compared with $3.3 million, or 0.50%, at September 30, 2019 and $3.8 million, or 0.57%, at December 31, 2018.

In the fourth quarter of 2019, there were net charge-offs of $13 thousand recorded, as compared to net charge-offs of $182 thousand in the third quarter of 2019. There were no charge-offs recorded for the fourth quarter of 2018, while a recovery of $7 thousand was recorded. Net charge-offs for year ending 2019 were $269 thousand as compared to net charge-offs of $94 thousand recorded at year end 2018.

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. 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.

Forward-Looking Statements

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 charge 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.

Important Other Information

In connection with the Company’s proposed merger with Flushing Financial Corporation (“Flushing”), Flushing has filled with the SEC a registration statement on Form S-4 (No. 333-235411) to register the shares of Flushing capital stock to be issued in connection with the proposed transaction. The registration statement includes a proxy statement for the special meeting of shareholders of the Company to consider, among other things, the proposed merger with Flushing, and a prospectus with respect to the common stock of Flushing. That proxy statement-prospectus has been sent to the shareholders of the Company as of the record date for the special meeting seeking their approval of the proposed transaction.

This communication does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval. INVESTORS AND SHAREHOLDERS OF THE COMPANY ARE URGED TO READ, AS FILED TO DATE AND AS AMENDED IN THE FUTURE, THE REGISTRATION STATEMENT ON FORM S-4, THE PROXY STATEMENT-PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, FLUSHING, AND THE PROPOSED TRANSACTION.

Investors and shareholders will be able to obtain a free copy of the registration statement, including the proxy statement-prospectus, as well as other relevant documents filed with SEC containing information about Flushing, without charge, at the SEC website (http://www.sec.gov). Copies of the registration statement, including the joint proxy statement-prospectus, can also be obtained, without charge, by directing a request to William Franz, Director of Investor Relations, Empire Bancorp, Inc, 1707 Veterans Highway, Islandia, New York, 11749, telephone (631) 348-4444.

(1) The increase between December 31, 2018 and the current year periods is largely driven by the adoption of  ASU 2016-02, "Leases" which resulted in the recording of  a right of  use asset for approximately $10.9 million recorded in Other Assets and approximately $12.7 million of  lease liabilities recorded in Other Liabilities on the date of  adoption, January 1, 2019;
(2) Regulatory capital ratios presented on bank-only basis.

(1)  Certain reclassifications have been made to prior periods to conform  to the current year presentation.