Empire National Bank Announces Earnings for the First

ISLANDIA, NY--(Marketwired - Apr 26, 2013) -  Empire National Bank (OTCQB: EMPK), today announced its operating results for the first quarter of 2013. Highlights for the quarter ended March 31, 2013 include:

• Total assets of $441.6 million, a $52.0 million, or 13.4%, increase from March 31, 2012;
• Total loans of $240.0 million, a $19.5 million, or 8.8%, increase from March 31, 2012;
• Demand deposits of $164.8 million, a $54.0 million, or 48.7%, increase from March 31, 2012;
• Core earnings (excluding the impact of tax expense and benefits) of $455 thousand, a $98 thousand, or 27.5%, increase from the quarter ended March 31, 2012;
• Net income of $251 thousand, a $106 thousand, or 29.7%, decrease from the quarter ended March 31, 2012;
• Solid asset quality with an allowance for loan and lease losses of 1.77% of total loans and a ratio of non-performing loans to total loans of 1.08%;
• "Well capitalized" regulatory capital levels, as of March 31, 2013:
  • Tier 1 leverage capital ratio of 9.25%
  • Tier 1 risk-based capital ratio of 14.83%
  • Total risk-based capital ratio of 16.09%
• Increased book value per share to $9.50 as of March 31, 2013, an increase of 8.7% as compared to March 31, 2012.

Douglas C. Manditch, Chairman and Chief Executive Officer, stated, "As we just celebrated our fifth year of operation, we are very pleased with the continued profitability of our bank. Our financial performance for the first quarter highlights our strong liquidity, solid asset quality and well capitalized position. As this year represents the first full fiscal year of fully taxable income, we elected to compare our core earnings, which increased $98 thousand, or 27.5%, over last year's first quarter pre-tax income. This year, we are also pursuing the formation of a bank holding company, which we believe will enhance our access to capital resources to support growth and facilitate the acquisition of related businesses as opportunities arise. In addition, we are excited about the prospects of having our new Mineola branch open this summer, which will serve our Nassau County customers."

Earnings

Core earnings (excluding the impact of tax expense and benefits) were $455 thousand for the quarter ended March 31, 2013, representing an increase of $98 thousand, or 27.5%, as compared to the quarter ended March 31, 2012. Net income was $251 thousand or $0.06 per share for the first quarter of 2013, compared to $357 thousand or $0.08 per share for the first quarter of 2012, representing a decrease of $106 thousand. 

Net interest income increased $301 thousand, or 9.4%, year-over-year as average earning assets increased to $428.5 million as of March 31, 2013, an increase of $83.9 million or 24.4%. The bank's net interest margin was 3.31% for the quarter ended March 31, 2013, a reduction from 3.73% for the quarter ended March 31, 2012. The bank's yield on interest earning assets in the first quarter of 2013 averaged 3.73%, as compared to an average of 4.49% for the first quarter of 2012. The bank's cost of interest bearing liabilities averaged 0.78% for the first quarter of 2013, a decrease from an average of 1.0% over the first quarter of 2012. The decline in the net interest margin reflected the impact of lower yields in our loan and securities portfolio partially offset by growth in our average loans and average demand deposits as compared to the same period last year. No provision for loan losses was recorded in the first quarter of 2013 or 2012.

Increases in total other income are largely attributed to professional practice revenues of $93 thousand recognized in the first quarter of 2013. For the three months ended March 31, 2013 and March 31, 2012, total other expense was approximately $3.3 million and $3.0 million, respectively. The increase was primarily attributable to increases in salaries and employee benefits expense and other operating expenses. Salaries and employee benefits increased $170 thousand, or 11.7%, primarily due to an increase in employees hired to support our growth. Other operating expenses increased approximately $206 thousand, or 60.2%, due largely to costs associated with our commitment and focus in providing financial products and services targeted to professional practices. We also experienced moderate increases in the other components of other expense, except FDIC insurance expense and data processing expense. Our data processing expenses declined over the same periods by $136 thousand, or 51.1%, largely due to the acceleration of expenses associated with the upgrade of our online banking system in the first quarter of 2012. This upgrade resulted in lower recurring data processing expenses, as compared to our prior system. We experienced modest increases in net occupancy and equipment expense, professional fees and advertising associated with our continued development including the upcoming opening of a new branch office in Mineola, New York. 

Income tax recorded for the three months ended March 31, 2013 was at $204 thousand while no income tax expense was recorded for the three month period ended March 31, 2012. Entering 2013, we had reversed any remaining deferred tax valuation allowance in 2012 which resulted in a credit to earnings reducing the income tax expense for the year. Our effective income tax rate for 2013 is expected to more closely reflect our blended federal and state income tax rates. 

Balance Sheet and Asset Quality

Total assets were $441.6 million at March 31, 2013, an increase of $52.0 million year-over-year, or 13.4%, which was primarily attributable to an increase in securities available for sale of $30.0 million, or 19.2% and an increase in outstanding loan balances of $19.5 million. The bank's ratio of non-performing loans to total loans remains a respectable 1.08% as of March 31, 2013 with the allowance for loan losses at 1.77% of total loans. 

Total deposits were $368.1 million at March 31, 2013, a year-over-year increase of $20.3 million, or 5.8%. Demand deposits increased $54.0 million, or 48.7%, year-over-year. Average demand deposits for the first three months of 2013 totaled $167.2 million, as compared to average demand deposits of $54.4 million over the same period in 2012. 

Stockholders' equity grew from $38.3 million to $41.6 million from March 31, 2012 to March 31, 2013, primarily as a result of the bank's earnings during that period. At March 31, 2013, the bank was "well capitalized" as defined by OCC regulation, with leverage, Tier 1 risk-based and total risk-based capital ratios of 9.25%, 14.83% and 16.09%, respectively.

Opportunities and Challenges

"As the current low interest rate environment languishes, adding assets to the balance sheet that meet our underwriting standards while within our interest rate risk parameters grows ever more challenging. Our plans are to apply a balanced approach to managing the bank, which entails expanding our geographic footprint to the Mineola branch location; building a pipeline of both business and personal relationships; and making prudent loan decisions," commented Thomas M. Buonaiuto, President and Chief Operating Officer. "Our focus will remain on enhancing the long term shareholder value of the bank."

Balance Sheet (unaudited)
(dollars in thousands)
			March 31,				December 31,				March 31,
			2013				2012				2012
ASSETS
Total cash and cash equivalents			$	4,723			$	4,908			$	5,652
Securities available for sale, at fair value				186,245				180,202				156,286
Securities held to maturity				300				-				-
Securities, restricted				3,122				3,183				1,539
Loans, net				235,727				239,211				216,282
Premises and equipment, net				6,268				6,412				6,851
Other assets and accrued interest receivable				5,182				4,483				2,956
	Total Assets		$	441,567			$	438,399			$	389,566
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand Deposits			$	164,810			$	172,165			$	110,805
Savings, N.O.W. and money market deposits				142,253				129,451				141,355
Certificates of deposit of $100,000 or more and other time deposits				61,033				61,742				95,613
	Total Deposits		$	368,096			$	363,358			$	347,773
Short-term borrowings				29,065				30,109				617
Other liabilities and accrued expenses				2,776				2,716				2,886
Total Liabilities			$	399,937			$	396,183			$	351,276
Total Stockholders' Equity				41,630				42,216				38,290
Total Liabilities and Stockholders' Equity			$	441,567			$	438,399			$	389,566
Selected Financial Data (unaudited)
Allowance for Loan Losses to Total Loans				1.77	%			1.84	%			1.91	%
Non-performing Loans to Total Loans				1.08	%			1.09	%			1.00	%
Non-performing Assets to Total Assets				0.59	%			0.61	%			0.56	%
Capital Ratios (unaudited)
Tier 1 Leverage Ratio				9.25	%			9.52	%			10.44	%
Tier 1 Risk-Based Capital Ratio				14.83	%			14.65	%			14.56	%
Total Risk-Based Capital Ratio				16.09	%			15.90	%			15.81	%
Book Value per Share			$	9.50			$	9.64			$	8.74
Statement of Operations (unaudited)
(dollars in thousands, except per share data)
			For the three months ended
			March 31,				December 31,				March 31,
			2013				2012				2012
Interest income			$	3,943			$	3,769			$	3,848
Interest expense				444				472				650
Net interest income			$	3,499			$	3,297			$	3,198
Provision for loan losses				-				-				-
Net interest income after provision for loan losses				3,499				3,297				3,198
Net securities (losses) gains				-				80				-
Other income				266				154				153
Other expense				3,310				3,149				2,994
Income before income taxes				455				382				357
Income tax				204				6				-
Net income			$	251			$	376			$	357
Basic earnings per share			$	0.06			$	0.09			$	0.08
Diluted earnings per share			$	0.06			$	0.09			$	0.08
Selected Financial Data (unaudited)
Return on Average Assets				0.23	%			0.35	%			0.40	%
Return on Average Equity				2.42	%			3.53	%			3.76	%
Net Interest Margin				3.31	%			3.23	%			3.73	%
Efficiency Ratio				87.91	%			91.25	%			89.34	%

About Empire National Bank

Empire National Bank is 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 our newest location in 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 report 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 Empire National Bank's control. The forward looking statements included in this report are made only as of the date of this report. We have no intention, and do not assume any obligation, to update these forward looking statements.