U.S. Markets close in 4 hrs 39 mins

Esquire Financial Holdings, Inc. Reports Second Quarter 2019 Results

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

JERICHO, N.Y., July 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 three and six months ended June 30, 2019. Significant achievements during the quarter include:

  • Net income increased 56% to $3.5 million, or $0.45 per diluted share, for the current quarter compared to net income of $2.2 million, or $0.29 per diluted share, for the comparable period in 2018.
  • Returns on average assets and common equity were 1.89% and 14.04%, respectively, as compared to 1.51% and 10.47% for the quarter ended June 30, 2018.
  • Supported by a strong net interest margin of 4.89%, net interest income for the second quarter increased $1.9 million, or 29%, to $8.6 million compared to 2018.
  • Total assets increased 21% annualized, or $68.6 million, to $732.5 million when compared to December 31, 2018.
  • Loans increased 20% annualized, or $24.5 million on a linked quarter basis, to $514.6 million, primarily driven by our higher yielding commercial and consumer loan portfolios.
  • Continued solid asset quality metrics with no non-performing assets and an allowance for loan losses to total loans of 1.25% at June 30, 2019.
  • Merchant services fees increased 139% to $2.9 million compared to the quarter ended June 30, 2018. Total fee income represented 26.5% of total revenue for the quarter.
  • Efficiency ratio declined to 55.7% for the second quarter of 2019 compared to 61.4% for the comparable period of 2018.
  • Deposits totaled $623.2 million, a $54.8 million, or 19% annualized increase from December 31, 2018 with a cost of funds of 0.43% (including demand deposits). Deposit growth was primarily driven by our litigation and merchant platforms.
  • Average demand deposits represent approximately 39% of our average total deposits for the three and six months ended June 30, 2019.
  • Esquire Bank remains well above the bank regulatory "Well Capitalized" standards.

"Our continued strong performance and industry leading financial metrics are a testament to our unique business model and talented management group," stated Tony Coelho, Chairman of the Board.

"We will continue to invest in talented people and technology to drive shareholder returns, leveraging our current and future business platforms," stated Andrew C. Sagliocca, President and Chief Executive Officer.

Second Quarter Net Earnings and Returns

Net income for the quarter ended June 30, 2019 was $3.5 million, or $0.45 per diluted share, compared to $2.2 million, or $0.29 per diluted share for the same period in 2018. Returns on average assets and common equity for the current quarter were 1.89% and 14.04% compared to 1.51% and 10.47% for the same period of 2018.

Net interest income for the second quarter of 2019 increased $1.9 million, or 29.3%, to $8.6 million, primarily due to growth in average interest earning assets totaling $128.6 million, or 22.4%, to $703.4 million when compared to 2018. Our net interest margin increased to 4.89% for the second quarter of 2019 compared to 4.63% in 2018 primarily due to volume increases in higher yielding loan categories and, to a lesser extent, increases in short-term interest rates. Average loans in the quarter increased $134.7 million, or 36.3%, to $505.7 million when compared to the second quarter of 2018. Loan growth was primarily driven by commercial loans. Increases in loans represent organic growth funded with core deposits (total deposits excluding certificates of deposit). Core deposits represent 96.8% of total deposits at June 30, 2019 while our loan-to-deposit ratio was 82.6%.

The provision for loan losses was $400 thousand for the second quarter of 2019, $100 thousand higher than the comparable period in 2018 which is reflective of growth in the loan portfolio. As of June 30, 2019, Esquire had no non-performing assets.

Noninterest income increased $1.1 million, or 56.1%, to $3.1 million for the second quarter of 2019. Our merchant services platform experienced strong growth, offset by decreased administrative service payment ("ASP") fees on off-balance sheet funds. Merchant processing income increased $1.7 million or 139.1% compared to the second quarter of 2018. This increase was due to the expansion of our sales channels through independent sales organizations ("ISOs"), merchants and additional fee allocation arrangements with our ISO business partners. We continue to focus on prudently growing this source of stable fee income.  Other noninterest income, consisting primarily of ASP fee income, declined by $574 thousand or 74.6% compared to the quarter ended June 30, 2018. Our ASP fee income is impacted by the volume and duration of off-balance sheet funds as well as short-term interest rates.

Noninterest expense increased $1.2 million to $6.5 million for the second quarter of 2019, driven by increases in employee compensation and benefits, data processing, professional and consulting services and marketing costs. The increase in employee compensation and benefits costs was due to an increase in the number of employees as well as the impact of year end salary increases. Data processing costs were higher due to increased processing volume primarily driven by our merchant services platform as well as additional costs related to certain system implementations. Professional and consulting costs increased due to our IT enterprise-wide architecture assessments and other pre-development IT costs. Advertising costs increased due to certain targeted events focused on our commercial attorney platform. The Company's efficiency ratio continued to improve to 55.7% for the three months ended June 30, 2019 as compared to the period ended 2018.

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

Year to Date Net Earnings and Returns

Net income for the six months ended June 30, 2019 was $6.5 million, or $0.83 per diluted share, compared to $4.2 million, or $0.54 per diluted share for the same period in 2018. Returns on average assets and common equity for the six months ended June 30, 2019 were 1.84% and 13.47% compared to 1.50% and 10.00% for the same period of 2018.

For the six months ended June 30, 2019, net interest income increased $3.8 million, or 29.6%, to $16.5 million, primarily due to growth in average interest earning assets totaling $125.3 million, or 22.7%, to $677.4 million when compared to the same period in 2018. Our net interest margin increased to 4.92% for the six months ended 2019 compared to 4.65% for the same period in 2018 primarily due to volume increases in higher yielding loan categories coupled with increases in short-term interest rates. Average loans for the six months ended 2019 increased $121.0 million, or 33.3%, to $484.1 million and average securities increased $8.7 million, or 6.0%, to $154.2 million when compared to the six months ended 2018.  Loan growth was primarily driven by commercial loans. Increases in loans represent organic growth funded with core deposits.

The provision for loan losses was $825 thousand for the six months ended June 30, 2019, $300 thousand higher than the comparable period in 2018. The higher provision is reflective of growth as well as the composition of the loan portfolio.

Noninterest income increased $1.1 million, or 27.5%, to $5.2 million for the six months ended 2019. Our merchant services platform experienced strong growth, offset by decreased ASP fees. Merchant processing income increased $2.5 million or 111.0% compared to the six months ended 2018. This increase was due to the expansion of our sales channels through independent sales organizations ("ISOs"), merchants and additional fee allocation arrangements with our ISO business partners. Other noninterest income, consisting primarily of ASP fee income, declined by $1.4 million or 74.7% compared to the six months ended June 30, 2018.

Noninterest expense increased $1.4 million to $12.0 million for the six months ended 2019, driven by an increase in compensation and benefits and data processing costs. The increase in compensation and benefits costs was due to an increase in the number of employees as well as the impact of year end salary increases. Data processing costs were higher due to increased processing volume primarily driven by our merchant services platform as well as additional costs related to certain system implementations. The Company's efficiency ratio continued to improve to 55.3% for the six months ended June 30, 2019 as compared to the period ended 2018.

The effective tax rate for the six months ended 2019 was approximately 27%.

Balance Sheet

At June 30, 2019, total assets were $732.5 million, reflecting a $145.3 million, or 24.7% increase from June 30, 2018. This increase is primarily attributable to increases in loans totaling $122.9 million, or 31.4%, to $514.6 million, primarily driven by commercial attorney related, commercial real estate and consumer loans. This growth was funded with core low-cost deposits. The allowance for loan losses was $6.4 million, or 1.25% of total loans, as compared to $4.8 million, or 1.22% of total loans at June 30, 2018.

Total deposits were $623.2 million at June 30, 2019, a $126.1 million, or 25.4% increase from June 30, 2018. This was primarily due to a $63.8 million, or 37.4% increase in noninterest bearing demand deposits to $234.5 million and a $58.8 million, or 19.0% increase in Savings, NOW and Money Market deposits to $368.8 million. Both increases are primarily due to increases in commercial and escrow low-cost deposits from our litigation and merchant customers.

Stockholders' equity increased $15.9 million to $102.4 million at June 30, 2019 compared to June 30, 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)














June 30, 


December 31, 


June 30, 




2019


2018


2018


ASSETS











Cash and cash equivalents


$

40,152


$

30,562


$

27,504


Securities available for sale, at fair value



147,693



145,698



147,768


Securities, restricted at cost



2,665



2,583



2,343


Loans



514,558



468,101



391,673


Less: allowance for loan losses



(6,433)



(5,629)



(4,789)


Loans, net of allowance



508,125



462,472



386,884


Premises and equipment, net



2,902



2,694



2,493


Other assets



30,913



19,890



20,195


Total Assets


$

732,450


$

663,899


$

587,187













LIABILITIES AND STOCKHOLDERS' EQUITY











Demand deposits


$

234,507


$

212,721


$

170,712


Savings, NOW and money market deposits



368,793



335,283



309,954


Certificates of deposit



19,870



20,417



16,449


Total deposits



623,170



568,421



497,115


Other liabilities



6,929



2,704



3,576


Total liabilities



630,099



571,125



500,691


Total stockholders' equity



102,351



92,774



86,496


Total Liabilities and Stockholders' Equity


$

732,450


$

663,899


$

587,187













Selected Financial Data











Common shares outstanding



7,536,723



7,532,723



7,445,723


Book value per share


$

13.58


$

12.32


$

11.62


Equity to assets



13.97

%


13.97

%


14.73

%












Capital Ratios (1)











Tier 1 leverage ratio



12.85

%


13.26

%


12.87

%

Common equity tier 1 capital ratio



16.63

%


17.54

%


17.53

%

Tier 1 capital ratio



16.63

%


17.54

%


17.53

%

Total capital ratio



17.79

%


18.70

%


18.67

%












Asset Quality Ratios











Allowance for loan losses to total loans



1.25

%


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


Six months ended




June 30, 


June 30, 




2019


2018


2019


2018


Interest income


$

9,322


$

6,864


$

17,806


$

13,133


Interest expense



738



223



1,294



397


Net interest income



8,584



6,641



16,512



12,736


Provision for loan losses



400



300



825



525


Net interest income after provision for loan losses



8,184



6,341



15,687



12,211
















Noninterest income:














Merchant processing income



2,895



1,211



4,709



2,232


Other noninterest income



195



769



462



1,823


Total noninterest income



3,090



1,980



5,171



4,055
















Noninterest expense:














Employee compensation and benefits



3,587



3,008



7,023



6,069


Other expenses



2,920



2,281



4,965



4,492


Total noninterest expense



6,507



5,289



11,988



10,561


Income before income taxes



4,767



3,032



8,870



5,705


Income taxes



1,299



811



2,417



1,526


Net income


$

3,468


$

2,221


$

6,453


$

4,179
















Earnings Per Share














Basic


$

0.47


$

0.30


$

0.87


$

0.57


Diluted


$

0.45


$

0.29


$

0.83


$

0.54
















Selected Financial Data














Return on average assets



1.89

%


1.51

%


1.84

%


1.50

%

Return on average common equity



14.04

%


10.47

%


13.47

%


10.00

%

Net interest margin



4.89

%


4.63

%


4.92

%


4.65

%

Efficiency ratio(1)



55.7

%


61.4

%


55.3

%


62.9

%















__________________________________

(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)





















For the Three Months Ended June 30, 




2019


2018










(Dollars in thousands)









Average





Average


Average





Average




Balance


Interest


Yield/Rate


Balance


Interest


Yield/Rate


INTEREST EARNING ASSETS


















Loans


$

505,688


$

8,020


6.36

%

$

370,981


$

5,657


6.12

%

Securities, includes restricted stock



154,284



1,058


2.75

%


154,224



1,006


2.62

%

Interest earning cash



43,471



244


2.25

%


49,686



201


1.62

%

Total interest earning assets



703,443



9,322


5.32

%


574,891



6,864


4.79

%



















NONINTEREST EARNING ASSETS



32,867








13,534

























TOTAL AVERAGE ASSETS


$

736,310







$

588,425

























INTEREST BEARING LIABILITIES




































Savings, NOW, Money Markets


$

364,699


$

611


0.67

%

$

272,929


$

167


0.25

%

Time deposits



19,932



126


2.54

%


33,780



51


0.61

%

Total deposits



384,631



737


0.77

%


306,709



218


0.29

%

Short-term borrowings



1




%


1




%

Secured borrowings



88



1


4.56

%


275



5


7.29

%

Total interest bearing liabilities



384,720



738


0.77

%


306,985



223


0.29

%



















NONINTEREST BEARING LIABILITIES


















Demand deposits



244,072








193,555







Other liabilities



8,442








2,848







Total noninterest bearing liabilities



252,514








196,403







Stockholders' equity



99,076








85,037

























TOTAL AVG. LIABILITIES AND EQUITY


$

736,310







$

588,425







Net interest income





$

8,584







$

6,641




Net interest spread








4.55

%







4.50

%

Net interest margin








4.89

%







4.63

%

 

ESQUIRE FINANCIAL HOLDINGS, INC.

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





















For the Six Months Ended June 30, 




2019


2018










(Dollars in thousands)









Average





Average


Average





Average




Balance


Interest


Yield/Rate


Balance


Interest


Yield/Rate


INTEREST EARNING ASSETS


















Loans


$

484,076


$

15,212


6.34

%

$

363,085


$

10,946


6.08

%

Securities, includes restricted stock



154,174



2,123


2.78

%


145,450



1,870


2.59

%

Interest earning cash



39,109



471


2.43

%


43,539



317


1.47

%

Total interest earning assets



677,359



17,806


5.30

%


552,074



13,133


4.80

%



















NONINTEREST EARNING ASSETS



28,259








9,906

























TOTAL AVERAGE ASSETS


$

705,618







$

561,980

























INTEREST BEARING LIABILITIES




































Savings, NOW, Money Markets


$

344,247


$

1,040


0.61

%

$

258,499


$

289


0.23

%

Time deposits



20,101



251


2.52

%


31,991



98


0.62

%

Total deposits



364,348



1,291


0.71

%


290,490



387


0.27

%

Short-term borrowings



1




%


2




%

Secured borrowings



89



3


6.80

%


276



10


7.31

%

Total interest bearing liabilities



364,438



1,294


0.72

%


290,768



397


0.28

%



















NONINTEREST BEARING LIABILITIES


















Demand deposits



237,460








184,645







Other liabilities



7,114








2,308







Total noninterest bearing liabilities



244,574








186,953







Stockholders' equity



96,606








84,259

























TOTAL AVG. LIABILITIES AND EQUITY


$

705,618







$

561,980







Net interest income





$

16,512







$

12,736




Net interest spread








4.58

%







4.52

%

Net interest margin








4.92

%







4.65

%

 

 

Cision

View original content:http://www.prnewswire.com/news-releases/esquire-financial-holdings-inc-reports-second-quarter-2019-results-300890711.html