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Blue Lion Capital sends letter to Empire Bancorp (EMPK) urging sale

DALLAS, Jan. 31, 2019 /PRNewswire/ --


The Board of Directors of Empire Bancorp, Inc.
c/o Douglas C. Manditch 1707 Veterans
Highway Islandia, NY 1 1749

Blue Lion Capital is a significant shareholder of Empire Bancorp (EMPK). Currently, we own approximately 4.6% of EMPK's outstanding shares (including 1.1% owned by me personally). We are writing as a follow up to our previous letter from August 2018. As you can imagine, we were disappointed that we received no response from the board. As a result, we have elected to attach this letter to a press release.

Since our initial letter, we have only grown more dissatisfied with both the bank's operational metrics as well as the share price performance. While EMPK has a valuable deposit franchise as well as a favorable loan to deposit ratio, virtually every operational metric is abysmal. During the fourth quarter of 2018, EMPK reported a return on assets (ROA) of 34bps, which was down from an already unacceptable level of 46bps in the previous quarter. The bank's efficiency ratio increased 403bps to an eye-popping 80.8%. Furthermore, the bank's return on tangible common equity (ROTCE) fell to 4.91%, which we estimate is not even half of the bank's cost of capital. For now, we will set aside many of the issues (i.e., auto allowances, board size, etc.) that we believe are meaningful contributors to the bank's egregious expense levels as well as poor returns on capital and assets. While we are disappointed with EMPK's operational progress, we applaud management for maintaining solid credit quality, which could otherwise significantly compromise the franchise value of the bank.

Echoing the message from our previous letter, we vehemently believe a sale of the bank is the best possible outcome for shareholders and estimate $15-$17 is achievable. Furthermore, if a stock transaction materialized, any EMPK shareholder would have the opportunity to participate in an acquirer's cost rationalization of EMPK's existing operations as well as revenue synergies. Lastly, we recommend EMPK explore adding new directors who are significant owners of the bank, to ensure that shareholders' interests are adequately represented in the boardroom.

We are happy to discuss any of these topics with you should you so desire.


Johnny Guerry
Blue Lion Capital

81 15 Preston Road, Suite 550 - Dallas, TX 75225 Tel (214) 855-2430 Fax (214) 855-2431



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