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Empire Bancorp Announces Earnings for the Fourth Quarter and the Full Year 2013

ISLANDIA, NY -- (Marketwired) -- 01/28/14 -- Empire Bancorp, Inc. (OTCQB: EMPK) ("Company"), the holding company for Empire National Bank, today announced its operating results for the fourth quarter and full year of 2013. Financial highlights include:

  • Total loans of $294.5 million, a $50.8 million, or 20.8%, increase from December 31, 2012
  • Total assets of $467.1 million, a $28.7 million, or 6.5%, increase from December 31, 2012
  • Total deposits of $391 million, a 27.6 million, or 7.6%, increase from December 31, 2012
  • Solid asset quality with a ratio of non-performing loans to total loans of 0.81%
  • Net income for the quarter ended December 31, 2013 of $361 thousand
  • Net income for the year ended December 31, 2013 of $1.3 million
  • "Well capitalized" regulatory capital levels, as of December 30, 2013:
    • Tier 1 leverage capital ratio of 9.01%
    • Tier 1 risk-based capital ratio of 12.78%
    • Total risk-based capital ratio of 14.03%
  • Operating efficiency ratio at 84.31%


Douglas C. Manditch, Chairman and Chief Executive Officer, reflected on the Company's results, "The results for 2013 set the baseline for our operating performance going forward. During 2013, our foremost priority became booking quality loans at acceptable yields. In meeting this goal, we devoted significant human and financial resources, strengthening our infrastructure in anticipation of our continued growth. As part of these efforts, we expanded our branch network into Nassau County. We also became fully taxable for the entire year of 2013, absorbing the tax impact while demonstrating sound financial performance. Our first five years of operation have been in tumultuous economic times; yet, we are establishing our franchise, maintaining impressive asset quality metrics, and building respectable profitability. We continue to tackle the enormous cost of regulatory compliance that increasingly diminishes the earnings of community banks."

Manditch continued, "During the fourth quarter, we sold select mortgage-backed securities in an effort to reposition our balance sheet mix for potential market adjustments while improving management of our interest rate risk. Excluding net gains and losses on sales of investment securities, our earnings before income taxes increased $1.2 million, or close to 100%, from 2012. Looking forward, our aim is to continue to position ourselves to increase shareholder value through growth in core earnings."

Thomas M. Buonaiuto, President and Chief Operating Officer noted, "During 2013, we absorbed additional operating overhead as we opened a branch along the attractive commercial corridor on Old Country Road in Mineola. Our business strategy of serving small to mid-market businesses, as well as professionals, is expected to serve this vibrant community well. With our other branches positioned in Islandia, Shirley and Port Jefferson Station, we anticipate continued growth in revenues. Asset quality remained strong with non-performing assets at 0.51% of total assets at year-end. We remain cognizant of both credit and interest rate risk, diligently managing our progress and expansion, while entering the next phase of our life cycle in 2014."

Earnings for the Fourth Quarter Ended December 31, 2013

Net income was $361 thousand, or $0.08 per share, for the fourth quarter of 2013, compared to $376 thousand, or $0.09 per share, for the fourth quarter of 2012, representing a decrease of $15 thousand, or $0.01 per share. Earnings before income taxes increased $235 thousand, or 61.5%, to $617 thousand, as compared to $382 thousand for the fourth quarter of 2012. Income tax expense increased from $6 thousand for the fourth quarter of 2012 to $256 thousand for the fourth quarter of 2013, as the Company was fully taxable in 2013.

Net interest income for the fourth quarter increased $512 thousand, or 15.5%, over the fourth quarter of 2012, reflecting the impact of the growth in the Company's average loan and securities portfolio. Net interest margin was 3.36% for the fourth quarter of 2013, an increase of 13 basis points from the quarter ended December 31, 2012.

The Company recognized a net loss of $152 thousand during the fourth quarter of 2013 on sale of investment securities, as compared to a gain of $80 thousand during the fourth quarter of 2012. Excluding net gains and losses on sales of investment securities, noninterest income increased $115 thousand, or 74.7%, from the fourth quarter of 2012. Professional practice revenues represented $78 thousand of that increase. Other expenses increased $160 thousand, or 5.1%, due largely to costs associated with the bank's branch expansion into Nassau County with the opening of its Mineola branch office, enhancements made to its software services, and the commencement in 2013 of the payment of director fees based upon participation in board and committee meetings. The increase in other expenses during the quarter was partially offset by declines in advertising and business development costs, as well as FDIC insurance expense.

Earnings for the Year Ended December 31, 2013

Net income for the year ended December 31, 2013 was $1.3 million, compared to $3.6 million for the year ended December 31, 2012, a decrease of $2.3 million. This reduction in net income was largely attributable to the impact of sales of investment securities, as well as an increase in income tax expense for the fiscal year ended December 31, 2013 as the Company became fully taxable. For the year ended December 31, 2013, the Company recognized a net loss of $149 thousand on sale of investment securities as the Company sold a portion of its mortgage-backed securities to better position the balance sheet for changing market conditions. Comparatively, for the year ended December 31, 2012, the Company recognized net securities gains of $1.3 million on sales of investment securities. Also contributing to the reduction in net income was the reversal of the remaining tax valuation allowance in 2012, which resulted in a credit to earnings, offset by the income tax expense for the year. For the year ended December 31, 2012, this required reversal of the tax valuation allowance increased net income by approximately $2.2 million.

For the year ended December 31, 2013, the Company's net interest income was approximately $14.4 million, an increase of $1.0 million, or 7.5%, which was attributable to the growth in average volume of loans, partially offset by decreased average loan yields. Market competition coupled with the rate environment fostered repricing of certain loans to maintain suitable credit risk and balance sheet quality. The Company's net interest margin was 3.29% for the year ended December 31, 2013 as compared to 3.48% for the year ended December 31, 2012.

Excluding net gains and losses on sales of investment securities, noninterest income increased $442 thousand, or 73.0%, for the year ended December 31, 2013 as compared to the prior fiscal year. Professional practice revenue, recognized for the first time in 2013, was approximately $322 thousand. Total other expenses increased by approximately $522 thousand, or 4.2%. The increase in other expenses resulted primarily from expenses associated with expansion into new markets and services. Salaries and benefits increased $332 thousand, or 5.5%, over the prior year as the bank staffed to meet these new demands. Costs relative to servicing the professional practice clients also increased in 2013. No provision for loan losses was recorded for the year ended December 31, 2013, as compared to $285 thousand for the same period of 2012. The Company's effective income tax rate for the year ended December 31, 2013 was approximately 43.6%, which reflected its blended federal and state income tax rates.

Balance Sheet and Asset Quality

Total assets were $467.1 million at December 31, 2013, an increase of $28.7 million, or 6.5%, from December 31, 2012, which was primarily attributable to an increase in outstanding loan balances of $50.8 million, or 20.8%. Management remains confident in the credit quality of the Company's assets. The Company's ratio of non-performing loans to total loans decreased 28 basis points from December 31, 2012 to December 31, 2013.

Total deposits were $390.9 million at December 31, 2013, an increase of $27.6 million, or 7.6%. Demand deposits at December 31, 2013 totaled $177.3 million, as compared to $172.2 million at December 31, 2012, representing an increase of $5.1 million, or 3.0%.

Stockholders' equity decreased from $42.2 million to $38.5 million from December 31, 2012 to December 31, 2013, primarily reflecting a decrease in accumulated comprehensive income as a result of the impact of an increase in interest rates on the market value of the investment securities portfolio. At December 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 9.01%, 12.78% and 14.03%, respectively.



Balance Sheet (unaudited)
(dollars in thousands)

                                                 December 31,  December 31,
                                                         2013          2012
ASSETS
Total cash and due from banks                    $      5,966  $      4,908
Securities available for sale, at fair value          152,639       180,202
Securities held to maturity                               300             -
Securities, restricted                                  3,450         3,183
Loans, net                                            290,227       239,211
Premises and equipment, net                             6,743         6,412
Other assets and accrued interest receivable            7,743         4,483
Total Assets                                     $    467,068  $    438,399

LIABILITIES AND STOCKHOLDERS' EQUITY
Demand Deposits                                  $    177,252  $    172,165
Savings, N.O.W. and money market deposits             139,524       129,451
Certificates of deposit of $100,000 or more and
 other time deposits                                   74,154        61,742
Total Deposits                                   $    390,930  $    363,358
Short-term borrowings                                  34,500        30,109
Other liabilities and accrued expenses                  3,179         2,716
Total Liabilities                                     428,609       396,183
Total Stockholders' Equity                             38,459        42,216
Total Liabilities and Stockholders' Equity       $    467,068  $    438,399

Selected Financial Data (unaudited)
Allowance for Loan Losses to Total Loans                 1.44%         1.84%
Non-performing Loans to Total Loans                      0.81%         1.09%
Non-performing Assets to Total Assets                    0.51%         0.61%

Capital Ratios (unaudited)
Tier 1 Leverage Ratio                                    9.01%         9.52%
Tier 1 Risk-Based Capital Ratio                         12.78%        14.65%
Total Risk-Based Capital Ratio                          14.03%        15.90%

Book Value per Share                             $       8.78  $       9.64



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

                         For the three months ended     For the year ended
                      December   September  December   December   December
                       31, 2013   30, 2013   31, 2012   31, 2013   31, 2012
Interest income       $   4,259  $   4,119  $   3,769  $  16,216  $  15,696
Interest expense            450        450        472      1,779      2,268
Net interest income   $   3,809  $   3,669  $   3,297  $  14,437  $  13,428
Provision for loan
 losses                                  -          -          -        285
Net interest income
 after provision for
 loan losses              3,809      3,669      3,297     14,437     13,143
Net securities
 (losses) gains            (152)         -         80       (149)     1,336
Other income                269        249        154      1,047        605
Other expense             3,309      3,274      3,149     13,054     12,532
Income before income
 taxes                      617        644        382      2,281      2,552
Income tax (expense)
 benefit                   (256)      (282)        (6)      (995)     1,072
Net income            $     361  $     362  $     376  $   1,286  $   3,624

Basic earnings per
 share                $    0.08  $    0.08  $    0.09  $    0.29  $    0.83
Diluted earnings per
 share                $    0.08  $    0.08  $    0.09  $    0.29  $    0.83

Selected Financial
 Data (unaudited)
Return on Average
 Assets                    0.31%      0.31%      0.35%      0.30%      0.90%
Return on Average
 Equity                    3.76%      3.80%      3.53%      9.10%      8.90%
Net Interest Margin        3.36%      3.22%      3.23%      3.29%      3.48%
Efficiency Ratio          81.13%     83.55%     91.25%     84.31%     89.30%

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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