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Esquire Financial Holdings, Inc. Reports First Quarter 2019 Results

Record Net Income, Growth in Loans, Deposits and Merchant Processing Income

JERICHO, N.Y., April 25, 2019 /PRNewswire/ -- Esquire Financial Holdings, Inc. (ESQ) (the "Company"), the holding company for Esquire Bank, National Association ("Esquire Bank"), today announced its operating results for the first quarter of 2019. Significant achievements during the quarter include:

  • Net income increased 52% to $3.0 million, or $0.39 per diluted common share, for the current quarter compared to net income of $2.0 million, or $0.26 per diluted common share, for the comparable period in 2018.
  • Returns on average assets and common equity were 1.79% and 12.86%, respectively, as compared to 1.48% and 9.52% for the quarter ended March 31, 2018.
  • Supported by an enviable net interest margin of 4.94%, net interest income for the first quarter increased $1.8 million, or 30%, to $7.9 million compared to 2018.
  • Total assets increased 34% annualized, or $56.2 million, to $720.1 million when compared to December 31, 2018.
  • Loans increased 19% annualized to $490.0 million on a linked quarter basis, primarily driven by our commercial attorney loan portfolio.
  • Continued solid asset quality metrics with no non-performing assets and an allowance for loan losses to total loans of 1.23% at March 31, 2019.
  • Merchant services fees increased 78% to $1.8 million compared to the quarter ended March 31, 2018.
  • Efficiency ratio declined to 54.8% for the first quarter of 2019 compared to 64.5% for the comparable period of 2018.
  • Deposits totaled $615.0 million, a $46.6 million, or 33% annualized increase from December 31, 2018 with an impressive cost of funds of 0.39% (including demand deposits). Deposit growth was primarily driven by our litigation market customers.
  • Announced a stock repurchase program for up to 300,000 shares of common stock, or approximately 4.0% of the Company's outstanding shares, on January 9, 2019.
  • Esquire Bank remains well above the bank regulatory "Well Capitalized" standards.

"Industry leading returns were driven by our strong net interest margin, low cost branchless deposits, diverse mix of revenue and a strong efficiency ratio," stated Tony Coelho, Chairman of the Board.

"We believe in building long-term shareholder value through focused growth, quality earnings, diversification of revenue streams and investing in talented people and technology," stated Andrew C. Sagliocca, President and Chief Executive Officer. "The continued success of our unique model will be the key to delivering outstanding financial results in the future."

First Quarter Net Earnings and Returns

Net income for the quarter ended March 31, 2019 was $3.0 million, or $0.39 per diluted common share, compared to $2.0 million, or $0.26 per diluted common share for the same period in 2018. Returns on average assets and common equity for the current quarter were 1.79% and 12.86% compared to 1.48% and 9.52% for the same period of 2018.

Net interest income for the first quarter of 2019 increased $1.8 million, or 30.1%, to $7.9 million, primarily due to growth in average interest earning assets totaling $122.0 million, or 23.1%, to $651.0 million when compared to 2018. Our net interest margin increased to 4.94% for the first quarter of 2019 compared to 4.67% in 2018 due to volume increases in higher yielding loan categories coupled with increases in short-term interest rates. Average loans in the quarter increased $107.1 million, or 30.2%, to $462.2 million and average securities increased $17.5 million, or 12.8%, to $154.1 million when compared to the first quarter of 2018.  Loan growth was primarily driven by commercial attorney and commercial real estate loans while management also took advantage of increases in short-term interest rates by deploying excess funds into the investment portfolio. Increases in loans represent organic growth funded with core deposits, defined by management as total deposits excluding certificates of deposit. Core deposits represent 96.7% of total deposits at March 31, 2019 while our loan-to-deposit ratio was 79.7%.

The provision for loan losses was $425 thousand for the first quarter of 2019, $200 thousand higher than the comparable period in 2018. The higher provision for the three months ended March 31, 2019 is reflective of growth in the loan portfolio. As of March 31, 2019, Esquire had no delinquent loans and no non-performing assets.

Non-interest income was $2.1 million for the first quarter of 2019 consistent with the prior year quarter. Our merchant services platform experienced strong growth, offset by decreased administrative service payments ("ASP"). Merchant processing income increased $793 thousand or 77.7% compared to the first quarter of 2018.  The increase in merchant processing income was a direct result of growth in our sales channels through independent sales organizations ("ISOs") and merchants.  We continue to focus on prudently growing this source of stable fee income.  Other non-interest income, consisting primarily of ASP fee income on off-balance sheet funds, declined by $787 thousand or 74.7% compared to the quarter ended March 31, 2018. Our ASP fee income is impacted by the volume of off-balance sheet funds, the duration of these funds, and short-term interest rates.

Non-interest expense was $5.5 million for the first quarter of 2019, $208 thousand higher than the comparable period in 2018 which was driven by an increase in compensation and benefits partially offset by a decrease in professional and consulting costs. The increase in compensation and benefits costs was due to an increase in the number of employees and related compensation.  Professional and consulting costs were higher in prior year due to additional costs related to commencing strategic projects during the first quarter of 2018. The Company's efficiency ratio continued to improve to 54.8% for the three months ended March 31, 2019.

The effective tax rate for the first quarter of 2019 was approximately 27%.

Balance Sheet

At March 31, 2019, total assets were $720.1 million, reflecting a $151.0 million, or 26.5% increase from March 31, 2018. This increase is primarily attributable to increases in loans totaling $122.4 million, or 33.3%, to $490.0 million and increases in securities available for sale totaling $8.1 million, or 5.6%, to $152.9 million at March 31, 2019. Loan growth was primarily driven by commercial attorney and commercial real estate loans while management also took advantage of increases in short-term interest rates by deploying excess funds into the investment portfolio.  The growth in loans and securities was funded with core low-cost deposits. The allowance for loan losses was $6.0 million, or 1.23% of total loans, as compared to $4.5 million, or 1.22% of total loans at March 31, 2018.

Total deposits were $615.0 million at March 31, 2019, a $133.3 million, or 27.7% increase from March 31, 2018. This was primarily due to a $84.6 million, or 30.2% increase in Savings, NOW and Money Market deposits to $364.8 million and a $65.0 million, or 39.4% increase in non-interest bearing demand deposits to $230.1 million.  Both increases are primarily due to increases in commercial and escrow low-cost deposits from our litigation and merchant customers.

Stockholders' equity increased $12.8 million to $97.5 million at March 31, 2019 compared to March 31, 2018. Esquire Bank remains well above bank regulatory "Well Capitalized" standards.

The Company anticipates continued earnings growth in 2019 driven by its lending pipelines as well as its merchant services fee income opportunities.

About Esquire Financial Holdings, Inc.

Esquire Financial Holdings, Inc. is a bank holding company headquartered in Jericho, New York, with one branch office in Jericho, New York and an administrative office in Boca Raton, Florida. Its wholly-owned subsidiary, Esquire Bank, National Association, is a full service commercial bank dedicated to serving the financial needs of the legal industry and small businesses nationally, as well as commercial and retail customers in the New York metropolitan area. The bank offers tailored products and solutions to the legal community and their clients as well as dynamic and flexible merchant services solutions to small business owners. For more information, visit www.esquirebank.com.

Cautionary Note Regarding Forward-Looking Statements

This press release includes "forward-looking statements" relating to future results of the Company. Forward-looking statements are subject to many risks and uncertainties, including, but not limited to: changes in business plans as circumstances warrant; changes in general economic, business and political conditions, including changes in the financial markets; and other risks detailed in the "Cautionary Note Regarding Forward-Looking Statements," "Risk Factors" and other sections of the Company's 10-K as filed with the Securities and Exchange Commission. The forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "might," "should," "could," "predict," "potential," "believe," "expect," "attribute," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "goal," "target," "outlook," "aim," "would," "annualized" and "outlook," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise, except as may be required by law.

Contact Information:

Eric S. Bader
Executive Vice President and Chief Operating Officer
Esquire Financial Holdings, Inc.
(516) 535-2002
eric.bader@esqbank.com

 

ESQUIRE FINANCIAL HOLDINGS, INC.

Condensed Consolidated Statement of Condition (unaudited)

(all dollars in thousands except per share data)




March 31, 


December 31, 


March 31, 




2019


2018


2018


ASSETS











Cash and cash equivalents


$

49,913


$

30,562


$

42,542


Securities available for sale, at fair value



152,909



145,698



144,859


Securities, restricted at cost



2,583



2,583



2,183


Loans



490,019



468,101



367,654


Less: allowance for loan losses



(6,049)



(5,629)



(4,489)


Loans, net of allowance



483,970



462,472



363,165


Premises and equipment, net



2,920



2,694



2,461


Other assets



27,788



19,890



13,886


Total Assets


$

720,083


$

663,899


$

569,096













LIABILITIES AND STOCKHOLDERS' EQUITY











Demand deposits


$

230,062


$

212,721


$

165,076


Savings, NOW and money market deposits



364,805



335,283



280,224


Certificates of deposit



20,115



20,417



36,432


Total deposits



614,982



568,421



481,732


Other liabilities



7,628



2,704



2,700


Total liabilities



622,610



571,125



484,432


Total stockholders' equity



97,473



92,774



84,664


Total Liabilities and Stockholders' Equity


$

720,083


$

663,899


$

569,096













Selected Financial Data











Common shares outstanding



7,532,723



7,532,723



7,445,723


Book value per common share


$

12.94


$

12.32


$

11.37


Equity to assets



13.54%



13.97%



14.88%













Capital Ratios (1)











Tier 1 leverage ratio



13.38%



13.26%



13.00%


Common equity tier 1 capital ratio



16.84%



17.54%



17.66%


Tier 1 capital ratio



16.84%



17.54%



17.66%


Total capital ratio



17.99%



18.70%



18.81%













Asset Quality Ratios











Allowance for loan losses to total loans



1.23%



1.20%



1.22%


Non-performing loans to total loans



—%



—%



—%


Non-performing assets to total assets



—%



—%



—%









(1)

Regulatory capital ratios presented on bank-only basis.

 


 

ESQUIRE FINANCIAL HOLDINGS, INC.

Condensed Consolidated Income Statement (unaudited)

(all dollars in thousands except per share data)




Three months ended




March 31, 


December 31, 


March 31, 




2019


2018


2018


Interest income


$

8,483


$

8,198


$

6,270


Interest expense



555



471



174


Net interest income



7,928



7,727



6,096


Provision for loan losses



425



400



225


Net interest income after provision for loan losses



7,503



7,327



5,871













Non-interest income:











Merchant processing income



1,814



1,429



1,021


Other non-interest income



267



571



1,054


Total non-interest income



2,081



2,000



2,075













Non-interest expense:











Employee compensation and benefits



3,436



2,810



3,061


Other expenses



2,045



2,595



2,212


Total non-interest expense



5,481



5,405



5,273


Income before income taxes



4,103



3,922



2,673


Income taxes



1,118



1,049



715


Net income


$

2,985


$

2,873


$

1,958













Earnings per Common Share











Basic


$

0.40


$

0.39


$

0.27


Diluted


$

0.39


$

0.37


$

0.26













Selected Financial Data











Return on average assets



1.79%



1.74%



1.48%


Return on average common equity



12.86%



12.74%



9.52%


Net interest margin



4.94%



4.83%



4.67%


Efficiency ratio(1)



54.8%



55.6%



64.5%









(1)

Efficiency ratio represents noninterest expenses divided by the sum of net interest income plus noninterest income.

 

 

 

ESQUIRE FINANCIAL HOLDINGS, INC.

Condensed Consolidated Average Balance Sheets and Average Yields/Cost (unaudited)

(all dollars in thousands)




For the Three Months Ended March 31, 




2019


2018










(Dollars in thousands)









Average





Average


Average





Average




Balance


Interest


Yield/Rate


Balance


Interest


Yield/Rate


INTEREST EARNING ASSETS


















Loans


$

462,225


$

7,192


6.31%


$

355,101


$

5,289


6.04%


Securities, includes restricted stock



154,063



1,065


2.80%



136,577



865


2.57%


Interest earning cash



34,698



226


2.64%



37,323



116


1.26%


Total interest earning assets



650,986



8,483


5.28%



529,001



6,270


4.81%




















NON-INTEREST EARNING ASSETS



23,598








6,241

























TOTAL AVERAGE ASSETS


$

674,584







$

535,242

























INTEREST-BEARING LIABILITIES




































Savings, NOW, Money Markets


$

323,568


$

429


0.54%


$

243,909


$

121


0.20%


Time deposits



20,271



125


2.50%



30,182



48


0.64%


Total deposits



343,839



554


0.65%



274,091



169


0.25%


Short-term borrowings



1




-%



2




—%


Secured borrowings



89



1


6.37%



278



5


7.29%


Total interest-bearing liabilities



343,929



555


0.65%



274,371



174


0.26%




















NON-INTEREST BEARING LIABILITIES


















Demand deposits



230,774








175,636







Other liabilities



5,773








1,762







Total non-interest bearing liabilities



236,547








177,398







Stockholders' equity



94,108








83,473

























TOTAL AVG. LIABILITIES AND EQUITY


$

674,584







$

535,242







Net interest income





$

7,928







$

6,096




Net interest spread








4.63%








4.55%




















Net interest margin








4.94%








4.67%


 

Cision

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