Press Release

Esquire Financial Holdings, Inc. Reports Third Quarter 2018 Results

Growth in Net Income, Loans, Core Deposits and Fee Income

Company Release - 10/25/2018 8:30 AM ET

JERICHO, N.Y., Oct. 25, 2018 /PRNewswire/ -- 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 nine months ended September 30, 2018. Significant achievements during the quarter include:

  • Net income was $1.7 million or $0.22 per diluted common share for the quarter ended September 30, 2018. Adjusted net income(1) increased 123% to $2.5 million, or $0.33 per diluted common share, compared to $1.1 million, or $0.16 per diluted common share, for the comparable period in 2017.
  • Returns on average assets and common equity were 1.07% and 7.66%, respectively for the third quarter of 2018. Adjusted returns on average assets(1) and common equity(1) were 1.62% and 11.57%, respectively, compared to 0.97% and 5.56%, for the quarter ended September 30, 2017.
  • Supported by a strong net interest margin of 4.75%, net interest income for the third quarter increased $2.1 million or 39%, to $7.3 million compared to 2017.
  • Total assets increased $164.8 million, or 34%, to $645.6 million when compared to September 30, 2017.
  • Loans increased $88.9 million or 34% annualized to $437.9 million from $349.0 million at December 31, 2017, primarily driven by our commercial and commercial real estate loan categories.
  • Continued solid asset quality metrics with no non-performing assets and an allowance for loan losses to total loans of 1.19% at September 30, 2018.
  • Non-interest income increased 34% to $1.8 million compared to 2017 and represented 20% of total revenue.
  • Efficiency ratio declined to 56.8% for the third quarter of 2018.
  • Deposits totaled $552.2 million, a $157.3 million, or 40%, increase from the third quarter of 2017 with a cost of funds of 0.25% (including demand deposits).
  • Esquire Bank remains well above the bank regulatory "Well Capitalized" standards.

"Our management team continues to successfully execute on our long-term vision of transforming Esquire into a top performing institution in the industry," stated Tony Coelho, Chairman. 

"Our strong growth and performance metrics continue to demonstrate the strength of Esquire's business model," stated Andrew C. Sagliocca, President and Chief Executive Officer. "Our robust net interest margin coupled with our stable merchant fee income are a solid foundation as rates and competition continue to increase."

(1) Figures have been adjusted to exclude a $1.2 million one-time charge (pretax) related to the passing of the Company's former Executive Chairman, Dennis Shields.  See non-GAAP reconciliation provided elsewhere herein.

Net Earnings and Returns

Net income for the quarter ended September 30, 2018 was $1.7 million or $0.22 per diluted common share, compared to $1.1 million or $0.16 per diluted common share for the same period in 2017. Returns on average assets and common equity for the current quarter were 1.07% and 7.66% compared to 0.97% and 5.56% in 2017, respectively. Excluding the one-time compensation related charge for the recent passing of our Executive Chairman totaling $859 thousand after tax, net income increased to $2.5 million or $0.33 per diluted common share, representing a 122.7% increase from the prior year quarter. Returns on average assets and common equity were 1.62% and 11.57% for the quarter ended September 30, 2018 excluding the compensation charge.  Net income for the nine months ended September 30, 2018 was $5.9 million or $0.76 per diluted common share, compared to $3.0 million or $0.51 per diluted common share for 2017. Returns on average assets and common equity for the nine months ended September 30, 2018 were 1.35% and 9.19% compared to 0.91% and 6.38% in 2017, respectively. Excluding the compensation charge, net income increased to $6.7 million or $0.87 per diluted common share, representing a 125.3% increase when compared to the nine months ended 2017.

Net interest income for the third quarter of 2018 increased $2.1 million, or 39.2%, to $7.3 million, primarily due to growth in average interest earning assets totaling $149.8 million, or 32.7%, to $607.4 million when compared to 2017. Our net interest margin increased to 4.75% for the third quarter of 2018 compared to 4.53% in 2017 due to the positive effects of increases in short-term interest rates coupled with the composition of our interest earning assets. Average loans in the quarter increased $101.0 million or 32.1%, to $416.0 million and average securities increased $49.5 million, or 45.7%, to $157.6 million when compared to the third quarter of 2017.  Loan growth was primarily driven by commercial and commercial real estate loans while management also took advantage of increases in short-term interest rates, deploying excess funds into the investment portfolio. For the nine months ended September 30, 2018, net interest income increased $5.9 million, or 41.5%, to $20.0 million, primarily due to growth in average interest earning assets totaling $138.4 million, or 32.0%, to $570.7 million when compared to the nine months ended 2017. The Company's net interest margin increased to 4.69% for the nine months ended 2018 compared to 4.37% in 2017.  Average loans for the nine months ended 2018 increased $86.2 million, or 29.2%, to $380.9 million and average securities increased $45.8 million, or 44.1%, to $149.6 million when compared to the nine months ended 2017. Increases in loans for the quarter and nine months ended September 30, 2018 represent organic growth funded with low cost core deposits.

The provision for loan losses was $450 thousand for the third quarter of 2018, $175 thousand higher than the comparable period in 2017 and $975 thousand for the nine months ended September 30, 2018, $250 thousand higher than for the same period in 2017. The higher provision for the three and nine months ended September 30, 2018 is reflective of growth in the loan portfolio. As of September 30, 2018, Esquire had no delinquent loans and no non-performing assets.

Non-interest income increased $455 thousand, or 33.8%, to $1.8 million for the third quarter of 2018, and increased $1.9 million, or 49.8%, to $5.9 million for the nine months ended 2018, primarily due to the increases in merchant processing income. The increases in merchant processing income were a result of growth in our monthly processing volumes and merchants. Other non-interest income is primarily comprised of off-balance sheet administrative service payments, which is impacted by both the volume of off-balance sheet funds and short-term interest rates. 

Non-interest expense increased $1.9 million to $6.3 million in the third quarter of 2018 and increased $4.3 million to $16.9 million for the nine months ended September 30, 2018. These increases were primarily driven by increases in employee compensation and benefits costs, professional and consulting services and other operating expenses. The increase in compensation and benefits costs was due to the previously mentioned $1.2 million one-time compensation charge, hiring to support our future growth and technology efforts, and salary and incentive increases. The increase in professional and consulting services as well as other expenses was due primarily to additional costs related to being a public company and costs related to certain strategic projects. The Company's efficiency ratio continued to improve to 56.8% and 60.8% for the three and nine months ended September 30, 2018.

The effective tax rate on a year to date basis and for the third quarter of 2018 was 26.8%.

Balance Sheet

At September 30, 2018, total assets were $645.6 million, reflecting a $164.8 million, or 34.3% increase from September 30, 2017. This increase is primarily attributable to increases in loans totaling $109.2 million, or 33.2%, to $437.9 million and increases in securities totaling $39.7 million, or 36.8%, to $147.5 million at September 30, 2018. Loan growth was primarily driven by commercial and commercial real estate loans while management also took advantage of increases in short-term interest rates, deploying excess funds into the investment portfolio. The growth in loans and securities was funded with low cost core deposits. The allowance for loan losses was $5.2 million, or 1.19% of total loans, as compared to $4.1 million, or 1.24% of total loans, at September 30, 2017.

Total deposits were $552.2 million at September 30, 2018, a $157.3 million, or 39.8% increase from September 30, 2017. This was primarily due to a $100.7 million, or 43.5% increase in Savings, NOW and Money Market deposits to $332.0 million and a $53.8 million, or 39.5% increase in non-interest bearing demand deposits to $190.0 million.

Stockholders' equity increased $5.2 million to $88.5 million at September 30, 2018 compared to September 30, 2017. Esquire Bank remains well above bank regulatory "Well Capitalized" standards.

With excess capital as a foundation, the Company anticipates continued earnings growth in 2018 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 Garden City, 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 Financial 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)
























September 30, 


December 31, 


September 30, 




2018


2017


2017


ASSETS











Cash and cash equivalents


$

39,840


$

43,077


$

31,446


Securities available for sale, at fair value



147,522



128,758



107,816


Securities, restricted at cost



2,403



2,183



1,883


Loans



437,883



348,978



328,670


Less: allowance for loan losses



(5,229)



(4,264)



(4,084)


Loans, net of allowance



432,654



344,714



324,586


Premises and equipment, net



2,616



2,546



2,627


Other assets



20,568



12,279



12,404


Total Assets


$

645,603


$

533,557


$

480,762













LIABILITIES AND STOCKHOLDERS' EQUITY











Demand deposits


$

189,960


$

190,847


$

136,196


Savings, NOW and money market deposits



332,016



230,715



231,303


Certificates of deposit



30,215



26,932



27,422


Total deposits



552,191



448,494



394,921


Other liabilities



4,917



1,680



2,588


Total liabilities



557,108



450,174



397,509


Total stockholders' equity



88,495



83,383



83,253


Total Liabilities and Stockholders' Equity


$

645,603


$

533,557


$

480,762













Selected Financial Data











Common shares outstanding



7,445,723



7,326,536



7,326,536


Book value per common share


$

11.89


$

11.38


$

11.36


Equity to assets



13.71

%


15.63

%


17.32

%












Capital Ratios (1)











Tier 1 leverage ratio



13.40

%


12.82

%


13.64

%

Common equity tier 1 capital ratio



17.78

%


17.32

%


18.22

%

Tier 1 capital ratio



17.78

%


17.32

%


18.22

%

Total capital ratio



18.92

%


18.47

%


19.41

%












Asset Quality Ratios











Allowance for loan losses to total loans



1.19

%


1.22

%


1.24

%

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


Nine months ended




September 30, 


September 30, 




2018


2017


2018


2017


Interest income


$

7,620


$

5,354


$

20,754


$

14,542


Interest expense



344



128



741



402


Net interest income



7,276



5,226



20,013



14,140


Provision for loan losses



450



275



975



725


Net interest income after provision for loan losses



6,826



4,951



19,038



13,415
















Non-interest income:














Merchant processing income



1,300



797



3,532



2,467


Other non-interest income



500



548



2,322



1,442


Total non-interest income



1,800



1,345



5,854



3,909
















Non-interest expense:














Employee compensation and benefits



4,161



2,466



10,230



7,180


Other expenses



2,169



1,959



6,661



5,438


Total non-interest expense



6,330



4,425



16,891



12,618


Income before income taxes



2,296



1,871



8,001



4,706


Income taxes



614



730



2,140



1,723


Net income


$

1,682


$

1,141


$

5,861


$

2,983
















Earnings per Common Share














Basic


$

0.23


$

0.16


$

0.80


$

0.51


Diluted


$

0.22


$

0.16


$

0.76


$

0.51


Basic - adjusted (1)


$

0.34


$

0.16


$

0.91


$

0.51


Diluted - adjusted (1)


$

0.33


$

0.16


$

0.87


$

0.51
















Selected Financial Data














Return on average assets



1.07

%


0.97

%


1.35

%


0.91

%

Return on average common equity



7.66

%


5.56

%


9.19

%


6.38

%

Adjusted return on average assets (1)



1.62

%


0.97

%


1.54

%


0.91

%

Adjusted return on average common equity (1)



11.57

%


5.56

%


10.54

%


6.38

%

Net interest margin



4.75

%


4.53

%


4.69

%


4.37

%

Efficiency ratio (1)



56.82

%


67.34

%


60.76

%


69.91

%


(1) Figures have been adjusted to exclude a $1.2 million one-time charge (pretax) related to the passing of the Company's former Executive Chairman, Dennis Shields.  See non-GAAP reconciliation provided elsewhere herein.

 

ESQUIRE FINANCIAL HOLDINGS, INC.

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

(all dollars in thousands)





















For the Three Months Ended September 30, 




2018


2017




Average





Average


Average





Average




Balance


Interest


Yields/Cost


Balance


Interest


Yields/Cost


EARNING ASSETS


















Loans


$

416,004


$

6,432


6.13

%

$

315,005


$

4,630


5.83

%

Securities, includes restricted stock



157,635



1,035


2.60

%


108,168



631


2.31

%

Interest earning cash



33,777



153


1.80

%


34,471



93


1.07

%

Total interest earning assets



607,416



7,620


4.98

%


457,644



5,354


4.64

%



















NON-INTEREST EARNING ASSETS


















Cash and due from banks



2,766








537







Other assets



12,037








7,711

























TOTAL AVERAGE ASSETS


$

622,219







$

465,892

























INTEREST-BEARING LIABILITIES


















Savings, NOW, Money Markets


$

327,548


$

291


0.35

%

$

212,535


$

101


0.19

%

Time deposits



17,555



41


0.93

%


27,430



22


0.32

%

Total deposits



345,103



332


0.38

%


239,965



123


0.20

%

Short-term borrowings



1,131



7


2.46

%


2




%

Secured borrowings



273



5


7.27

%


282



5


7.03

%

Total interest-bearing liabilities



346,507



344


0.39

%


240,249



128


0.21

%



















NON-INTEREST BEARING LIABILITIES


















Demand deposits



183,864








142,086







Other liabilities



4,708








2,192







Total non-interest bearing liabilities



188,572








144,278







Stockholders' equity



87,140








81,365

























TOTAL AVG. LIABILITIES AND EQUITY


$

622,219







$

465,892







Net interest income





$

7,276







$

5,226




Net interest spread








4.58

%







4.43

%



















Net interest margin








4.75

%







4.53

%

 

ESQUIRE FINANCIAL HOLDINGS, INC.

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

(all dollars in thousands)





















For the Nine Months Ended September 30, 




2018


2017




Average





Average


Average





Average




Balance


Interest


Yields/Cost


Balance


Interest


Yields/Cost


EARNING ASSETS


















Loans


$

380,918


$

17,378


6.10

%

$

294,725


$

12,519


5.68

%

Securities, includes restricted stock



149,556



2,906


2.60

%


103,792



1,809


2.33

%

Interest earning cash



40,249



470


1.56

%


33,840



214


0.85

%

Total interest earning assets



570,723



20,754


4.86

%


432,357



14,542


4.50

%



















NON-INTEREST EARNING ASSETS


















Cash and due from banks



1,345








544







Other assets



10,211








7,646

























TOTAL AVERAGE ASSETS


$

582,279







$

440,547

























INTEREST-BEARING LIABILITIES


















Savings, NOW, Money Markets


$

281,768


$

580


0.28

%

$

217,717


$

316


0.19

%

Time deposits



27,126



140


0.69

%


23,289



70


0.40

%

Total deposits



308,894



720


0.31

%


241,006



386


0.21

%

Short-term borrowings



382



6


2.10

%


2




%

Secured borrowings



275



15


7.29

%


302



16


7.08

%

Total interest-bearing liabilities



309,551



741


0.32

%


241,310



402


0.22

%



















NON-INTEREST BEARING LIABILITIES


















Demand deposits



184,382








134,533







Other liabilities



3,117








1,730







Total non-interest bearing liabilities



187,499








136,263







Stockholders' equity



85,229








62,974

























TOTAL AVG. LIABILITIES AND EQUITY


$

582,279







$

440,547







Net interest income





$

20,013







$

14,140




Net interest spread








4.54

%







4.27

%



















Net interest margin








4.69

%







4.37

%

 

ESQUIRE FINANCIAL HOLDINGS, INC.

Condensed Consolidated Non-GAAP Financial Measure Reconciliation (unaudited)

(all dollars in thousands except per share data)


Adjusted net income, which is used to compute adjusted return on average assets, adjusted return on average common equity and
adjusted earnings per common share, excludes the impact of a one-time charge relating to compensation expense as a result of the
passing of our Executive Chairman.


We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in
understanding our financial position, results and ratios. However, these non-GAAP financial measures are supplemental and are not a
substitute for an analysis based on GAAP measures. As other companies may use different calculations for this measure, this
presentation may not be comparable to other similarly titled measures by other companies.


The efficiency ratio is a non-GAAP measure of expense control relative to adjusted revenue. We calculate the efficiency ratio by
dividing total noninterest expenses excluding non-recurring items by the sum of total net interest income and total noninterest income,
each as determined under GAAP, but excluding net gains on securities and other non-recurring income sources, if applicable, from
this calculation, which we refer to as recurring revenue. We believe that this provides one reasonable measure of recurring expenses
relative to recurring revenue.

















Three months ended



Nine months ended




September 30, 



September 30, 



2018


2017


2018


2017


Net income

$

1,682


$

1,141


$

5,861


$

2,983


Add: compensation charge


1,173



-



1,173



-


Less: tax impact


314



-



314



-


Compensation charge, net


859



-



859



-


Adjusted net income

$

2,541


$

1,141


$

6,720


$

2,983















Return on average assets-GAAP


1.07

%


0.97

%


1.35

%


0.91

%

Add: compensation charge


0.55

%


0.00

%


0.19

%


0.00

%

Adjusted return on average assets


1.62

%


0.97

%


1.54

%


0.91

%














Return on average common equity-GAAP


7.66

%


5.56

%


9.19

%


6.38

%

Add: compensation charge


3.91

%


0.00

%


1.35

%


0.00

%

Adjusted return on average common equity


11.57

%


5.56

%


10.54

%


6.38

%














Diluted earnings per share-GAAP

$

0.22


$

0.16


$

0.76


$

0.51


Add: compensation charge


0.11



0.00



0.11



0.00


Adjusted diluted earnings per share

$

0.33


$

0.16


$

0.87


$

0.51















Efficiency Ratio













Net interest income

$

7,276


$

5,226


$

20,013


$

14,140


Noninterest income


1,800



1,345



5,854



3,909


Recurring revenue

$

9,076


$

6,571


$

25,867


$

18,049















Total noninterest expense

$

6,330


$

4,425


$

16,891


$

12,618


Less: compensation charge


1,173



-



1,173



-


Recurring noninterest expense

$

5,157


$

4,425


$

15,718


$

12,618















Efficiency ratio


56.8

%


67.3

%


60.8

%


69.9

%

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SOURCE Esquire Financial Holdings, Inc.