Exhibit 99.1
ESQUIRE FINANCIAL HOLDINGS, INC.
REPORTS SECOND QUARTER 2019 RESULTS
Record Net Income, Growth in Loans, Deposits and Merchant Processing Income
Jericho, NY – July 25, 2019 – Esquire Financial Holdings, Inc. (NASDAQ: 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 | % |
