ISLANDIA, NY--(Marketwire - Nov 5, 2012) - Empire National Bank (
Douglas C. Manditch, Chairman and Chief Executive Officer stated, "We are pleased with our continued growth and ability to leverage our shareholder equity during this very challenging economic period, which has been characterized by slow growth, economic uncertainty and an extended low interest rate environment driven by Federal Reserve monetary policy. Our balance sheet reflects the deliberate expansion of both our loan portfolio and core deposit base. We remain steadfast and confident in the quality of our loan portfolio, which has been built on our culture of conservative and sensible underwriting guidelines. We are closely managing our investment securities portfolio, as well as the pricing of our loan portfolio in this competitive environment, remaining mindful that this prolonged environment of low interest rates could change rapidly and considerably. When prudent, we are willing to sacrifice short term rewards to better position our balance sheet to produce long term value for our investors."
Earnings for the Third Quarter Ended September 30, 2012
Net income was $145 thousand, or $0.03 per share, for the third quarter of 2012, compared to $2.3 million for the third quarter of 2011, a decrease of $2.2 million. The decrease in net income was primarily attributable to reductions in security gains of $1.8 million. The bank recognized an increase in net interest income of $357 thousand, which was attributable to growth in average earning assets, partially offset by a reduction in the bank's net interest margin.
The decrease in the net interest margin was due primarily to the continued historically low interest rate environment, challenging economic conditions and an increase in securities available for sale and due from banks as a percentage of average earning assets, as compared to loans. The increase in net interest income was partially offset by an increase in salaries and employee benefits primarily associated with the continued growth of the bank, as well as from costs largely attributable to our commitment and focus to providing financial products and services targeted to professional practices. In addition, the bank's provision for loan losses increased $285 thousand during the third quarter of 2012, as compared to same period in 2011, reflecting the overall growth in the loan portfolio and management's assessment of the adequacy of the loan loss allowance. As of September 30, 2012, the bank maintained an allowance for loan losses ratio to total loans of 1.85%. For the first time since its inception, the bank recognized income tax expense of $130 thousand associated with its results of operations for this quarter.
Manditch also stated, "The bank's net interest margin was 3.36% for the quarter ended September 30, 2012, a significant decrease of 50 basis points, or 13%, from the same period in 2011. The weak economy and the extended low interest rate environment continues to make profitable deployment of funds more challenging, further diminishing our net interest margin. These conditions have also resulted in an extremely competitive marketplace for high quality loans, including those currently on our balance sheet that we seek to retain, creating downward pressure on our loan yields and interest income. This interest rate environment, which affects our entire industry, also continues downward pressure on our expanded securities portfolio with an even more exaggerated result."
Earnings for the Nine Months Ended September 30, 2012
Net income for the nine months ended September 30, 2012 was $3.2 million, an increase of $68 thousand, or 2.1%, as compared to the nine months ended September 30, 2011. Earnings per share were $0.74 and $0.76 for the nine month periods ended September 30, 2012 and 2011, respectively. The increase in net income was primarily attributable to increases in the bank's net interest income and income tax benefit. For the nine months ended September 30, 2012, the bank's net interest income was approximately $10.1 million, an increase of approximately $1.1 million, or 12.7%, as compared to net interest income of approximately $9.0 million for the nine months ended September 30, 2011. The net interest margin was 3.57% for the nine months ended September 30, 2012 as compared to 3.78% for the same nine month period a year ago. The decrease in the net interest margin was due primarily to the continued historically low interest rate environment, challenging economic conditions and an increase in securities available for sale and total due from banks as a percentage of average earning assets, as compared to loans. The increase in net income was partially offset by a decrease of approximately $676 thousand in net securities gains and an increase of approximately $1.3 million in other expense. The increase in other expense was primarily attributable to salaries and employee benefits principally associated with the continued growth of the bank, and from costs largely attributable to our commitment and focus to providing financial products and services targeted to professional practices.
Balance Sheet and Asset Quality
Total assets were $438.0 million at September 30, 2012, reflecting an increase of 3.9% from $421.7 million at June 30, 2012 and an increase of 28.9% from $339.7 million at December 31, 2011. The growth in total assets was primarily due to increases in net loan balances, securities available for sale, and total cash and cash equivalents. Net loans grew 4.5% from $227.5 million at June 30, 2012 and 13.9% from $208.7 million at December 31, 2011. Available for sale securities grew 3.2% from $139.1 million at June 30, 2012 and 25.4% at December 31, 2011. Cash and cash equivalents have increased $40.1 million since December 31, 2011.
Non-performing assets, consisting of two non-performing loans, were $3.0 million at September 30, 2012. At September 30, 2012, the bank's ratio of non-performing loans to total loans was 1.24%, and its ratio of non-performing assets to total assets was 0.69%, remaining below those of the bank's peers. The allowance for loan losses to total loans was 1.85% at September 30, 2012, as compared to 1.81% at June 30, 2012.
Total deposits were $388.6 million at September 30, 2012, a year-over-year increase of $123.6 million, or 46.6%. On a linked quarter basis, total deposits increased by $11.3 million, or 3.0%. Demand deposits increased $125.9 million, or 274.9%, year-over-year and $8.9 million, or 5.5%, on a linked quarter basis to $171.6 million at September 30, 2012.
Stockholders' equity grew from $37.4 million to $42.7 million from December 31, 2011 to September 30, 2012, primarily as a result of the bank's earnings during that period. At September 30, 2012, the bank was "well capitalized" as defined by OCC regulation, with leverage, Tier 1 risk-based and total risk-based capital ratios of 9.42%, 14.49% and 15.74%, respectively.
Opportunities and Challenges
"Continued margin compression has made this environment very challenging. The competitive, low interest rate environment has forced downward pressure on commercial lending yields. Although deposit rates have also decreased, we continue to manage our cost of funds, in such a way to remain competitive in our market. With a customer-centric and relationship banking business model, we continue to channel our resources on the development of products and services that serve small businesses and professional practices. During the third quarter, we upgraded our business online banking product and introduced several new mobile banking products designed to make banking easier and more convenient for our customers and potential prospects," remarked Thomas M. Buonaiuto, President and Chief Operating Officer.
|Balance Sheet (unaudited)|
|(dollars in thousands)|
|30, 2012||30, 2012||31, 2011||30, 2011|
|Total cash and due from banks||$||44,470||$||42,158||$||4,388||$||3,722|
|Securities available for sale, at fair value||143,589||139,092||114,502||84,060|
|Premises and equipment, net||6,612||6,732||6,850||7,153|
|Other assets and accrued interest receivable||3,813||4,524||2,331||2,274|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Savings, N.O.W. and money market deposits||147,367||137,484||126,335||128,901|
|Certificates of deposit of $100,000 or more and other time deposits||69,589||77,111||92,920||89,032|
|Other liabilities and accrued expenses||6,758||3,146||2,832||7,027|
|Total Stockholders' Equity||42,663||41,332||37,432||35,446|
|Total Liabilities and Stockholders' Equity||$||438,002||$||421,732||339,733||310,131|
|Selected Financial Data (unaudited)|
|Allowance for Loan Losses to Total Loans||1.85||%||1.81||%||1.98||%||1.96||%|
|Non-performing Loans to Total Loans||1.24||%||0.95||%||1.03||%||1.03||%|
|Non-performing Assets to Total Assets||0.69||%||0.52||%||0.65||%||0.71||%|
|Capital Ratios (unaudited)|
|Tier 1 Leverage Ratio||9.42||%||9.84||%||10.80||%||10.54||%|
|Tier 1 Risk-Based Capital Ratio||14.49||%||14.41||%||15.36||%||14.71||%|
|Total Risk-Based Capital Ratio||15.74||%||15.66||%||16.62||%||15.97||%|
|Book Value per Share||$||9.74||$||9.44||$||8.60||$||8.41|
|Statement of Operations (unaudited)|
|(dollars in thousands, except per share data)|
|For the three months ended||For the nine months ended|
|30, 2012||30, 2012||30, 2011||30, 2012||30, 2011|
|Net interest income||$||3,417||$||3,515||$||3,060||$||10,130||$||8,987|
|Provision for loan losses||285||-||-||285||-|
|Net interest income after provision for loan losses||3,132||3,515||3,060||9,845||8,987|
|Net securities (losses) gains||94||1,162||1937||1,256||1,932|
|Income before income taxes||275||1,538||2348||2,170||3,180|
|Income tax (expense) benefit||(130||)||1,208||-||1,078||-|
|Basic earnings per share||$||0.03||$||0.63||$||0.56||$||0.74||$||0.76|
|Diluted earnings per share||$||0.03||$||0.63||$||0.56||$||0.74||$||0.76|
|Selected Financial Data (unaudited)|
|Return on Average Assets||0.14||%||2.74||%||2.84||%||1.09||%||1.29||%|
|Return on Average Equity||1.39||%||27.53||%||27.19||%||10.81||%||13.21||%|
|Net Interest Margin||3.36||%||3.64||%||3.86||%||3.57||%||3.78||%|
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 three banking offices located in Islandia, Shirley and Port Jefferson Station. Our bankers take pride in understanding the needs of each and every 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.
VP, Director of Marketing & Investor Relations