Press Release

Esquire Financial Holdings, Inc. Reports Fourth Quarter and Full Year 2019 Results

Fourth Quarter Loan and Deposit Growth Concludes Overall Record Year

Company Release - 1/24/2020 8:30 AM ET

JERICHO, N.Y., Jan. 24, 2020 /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 fourth quarter and year end for 2019. Significant achievements during the quarter and year include:

  • Net income increased 35% to $3.9 million, or $0.50 per diluted share, for the current quarter compared to net income of $2.9 million, or $0.37 per diluted share, for the quarter ended December 31, 2018.
  • Returns on average assets and common equity were 2.01% and 14.19%, respectively, and 1.93% and 13.95%, respectively for the quarter and year ended December 31, 2019.
  • Supported by a strong net interest margin of 4.79%, net interest income for the fourth quarter increased $1.1 million, or 15%, to $8.9 million compared to the same period in 2018.
  • Total assets increased $134.1 million, or 20%, to $798.0 million when compared to December 31, 2018.
  • Loans increased $97.3 million, or 21%, to $565.4 million at December 31, 2019 from $468.1 million at December 31, 2018, primarily driven by our commercial attorney and commercial real estate loan portfolios. On a linked quarter basis, our loans increased $31.4 million, or 23% annualized.
  • Continued solid asset quality metrics with 0.26% in nonperforming loans to total loans and an allowance for loan losses to total loans of 1.24% at December 31, 2019.
  • Merchant services fees increased 109% to $3.0 million compared to the quarter ended December 31, 2018. Total fee income represented 26.3% of total revenue for the quarter.
  • Efficiency ratio improved to 52.8% for the fourth quarter of 2019 compared to 55.6% for the fourth quarter of 2018.
  • Deposits totaled $680.6 million, a $112.2 million, or 20% increase from December 31, 2018 with a year to date cost of funds of 0.41% (including demand deposits). This growth was primarily driven by our litigation market customers.
  • Esquire Bank remains well above the bank regulatory "Well Capitalized" standards.

"Our industry leading performance metrics continue to demonstrate the strength of our business platforms as well as the strength and depth of our management team," stated Tony Coelho, Chairman of the Board. "We will continue to invest in technology and people as we build out our platforms and brand in 2020."

"We have experienced continued strong growth in both the legal and merchant verticals despite competitive pressures in both markets in 2019," stated Andrew C. Sagliocca, President and Chief Executive Officer. "Through our talented management team, we will continue to execute in both key markets and outperform industry norms as we invest in the future of our Company."

Fourth Quarter Earnings

Net income for the quarter ended December 31, 2019 was $3.9 million, or $0.50 per diluted share, compared to $2.9 million, or $0.37 per diluted share for the same period in 2018. Returns on average assets and common equity for the current quarter were 2.01% and 14.19% compared to 1.74% and 12.74% for the same period of 2018.

Net interest income for the fourth quarter of 2019 increased $1.1 million, or 14.6%, to $8.9 million, primarily due to growth in average interest earning assets totaling $98.2 million, or 15.5%, to $733.4 million when compared to the same period in 2018. Our net interest margin decreased slightly to 4.79% for the fourth quarter of 2019 compared to 4.83% in 2018 due to reductions in short-term interest rates in 2019. Average loans in the quarter increased $81.8 million, or 18.1%, to $532.9 million when compared to the fourth quarter of 2018. Loan growth was primarily driven by commercial attorney and commercial real estate loans representing organic growth funded with core deposits (total deposits excluding certificates of deposit). Core deposits represent 97.1% of total deposits at December 31, 2019 while our loan-to-deposit ratio was 83.1%.

The provision for loan losses was $600 thousand for the fourth quarter of 2019, a $200 thousand increase from the comparable period in 2018. The higher provision for the three months ended December 31, 2019 is primarily due to a chargeoff of a NFL consumer post settlement loan in the fourth quarter of 2019. As of December 31, 2019, Esquire had nonperforming loans to total loans of 0.26%.

Noninterest income increased $1.2 million, or 58.2%, to $3.2 million for the fourth quarter of 2019 as compared to the fourth quarter 2018. Our merchant services platform experienced strong growth in 2019, offset by decreased margins on administrative service payment ("ASP") fees on off-balance sheet funds. Merchant processing income increased $1.6 million or 108.7% compared to the fourth 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 as we continue to focus on prudently growing this source of stable fee income. On a linked quarter basis, merchant revenues decreased $301 thousand, or 9.2%, due to increased competitive pressure on certain fee allocation arrangements with certain ISOs. Other noninterest income, consisting primarily of ASP fee income, declined by $390 thousand compared to the quarter ended December 31, 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 $936 thousand, or 17.3%, to $6.3 million for the fourth quarter of 2019 as compared to the fourth quarter of 2018. This increase was primarily driven by increases in employee compensation and benefits and data processing costs. Employee compensation and benefits costs increased due to an increase in the number of employees as well as the impact of salary and bonus increases in 2019. Data processing costs increased as processing volumes increased as well as additional costs related to certain system implementations. The Company's efficiency ratio continued to improve to 52.8% for the three months ended December 31, 2019 as compared to 55.6% for the same period ended 2018.

The effective tax rate for the fourth quarter of 2019 was approximately 24% as compared to approximately 27% for the fourth quarter of 2018. This decrease was primarily a result of tax credits from our investment in proprietary technology and the continued expansion of our national litigation and merchant platforms.

Full Year Earnings

Net income for the year ended December 31, 2019 was $14.1 million, or $1.82 per diluted share, compared to $8.7 million, or $1.13 per diluted share for 2018. Returns on average assets and common equity for the year ended December 31, 2019 were 1.93% and 13.95% compared to 1.45% and 10.12% for 2018.

For the year ended December 31, 2019, net interest income increased $6.4 million, or 23.0%, to $34.1 million, primarily due to growth in average interest earning assets totaling $116.2 million, or 19.8%, to $702.3 million when compared to the year ended 2018. Our net interest margin increased to 4.86% for the year ended 2019 compared to 4.73% for the same period in 2018. Average loans for the year ended 2019 increased $108.9 million, or 27.3%, to $507.5 million. Loan growth was primarily driven by commercial attorney and commercial real estate loans which represents organic growth funded with core deposits.

The provision for loan losses was $1.9 million for the year ended December 31, 2019, $475 thousand higher than the year ended 2018. The higher provision is reflective of growth, composition of the loan portfolio, and a year-end chargeoff of a NFL consumer post settlement loan.

Noninterest income increased $4.0 million, or 50.4%, to $11.8 million for the year ended 2019. Our merchant services platform experienced strong growth in 2019, offset by decreased ASP fees. Merchant processing income increased $6.0 million or 121.2% compared to the year ended 2018. This increase was due to the expansion of our sales channels through ISOs, merchants and additional fee allocation arrangements. Other noninterest income, consisting primarily of ASP fee income, declined by $2.1 million or 71.1% compared to the year ended December 31, 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 $2.6 million, or 11.8%, to $24.9 million for the year ended 2019 as compared to the year ended 2018 driven by an increase in compensation and benefits, data processing and professional and consulting services costs. Employee compensation and benefits costs increased due to an increase in the number of employees as well as increases in salary and bonuses in 2019. Data processing costs increased as processing volumes increased as well as additional costs related to certain system implementations. Professional and consulting costs increased due to our IT enterprise-wide architecture assessments and our investment in certain proprietary technology. The Company's efficiency ratio continued to improve to 54.3% for the year ended December 31, 2019 as compared to 59.3% for the year ended 2018.

The effective tax rate for the year ended 2019 was approximately 26% as compared to approximately 27% for the year ended 2018.

Asset Quality

Nonperforming assets, consisting of several nonaccrual consumer loans, totaled $1.5 million as of December 31, 2019. Nonperforming assets as a percentage of total assets was 0.18%. There were no nonperforming assets as of December 31, 2018. The allowance for loan losses was $7.0 million, or 1.24% of total loans, as compared to $5.6 million, or 1.20% of total loans at December 31, 2018. The increase in the allowance as a percentage of loans was primarily related to loan growth in the commercial, commercial real estate and consumer loan categories.

Balance Sheet

At December 31, 2019, total assets were $798.0 million, reflecting a $134.1 million, or 20.2% increase from December 31, 2018. This increase is attributable to increases in loans totaling $97.3 million, or 20.8%, to $565.4 million, primarily driven by commercial attorney related, commercial real estate and consumer loans, funded with core low-cost deposits.

Total deposits were $680.6 million as of December 31, 2019, a $112.2 million, or 19.7% increase from December 31, 2018. This was primarily due to a $123.8 million, or 36.9% increase in Savings, NOW and Money Market deposits to $459.0 million, offset by a $10.9 million, or 5.1% decrease in noninterest bearing demand deposits to $201.8 million and a decrease in time deposits of $671 thousand, or 3.3%, to $19.7 million. The increase was primarily driven by commercial and escrow low-cost deposits from our litigation customers.

Stockholders' equity increased $18.3 million to $111.1 million at December 31, 2019 compared to December 31, 2018. Esquire Bank remains well above bank regulatory "Well Capitalized" standards.

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.

 

 

ESQUIRE FINANCIAL HOLDINGS, INC.

Condensed Consolidated Statement of Condition (unaudited)

(dollars in thousands except per share data)




December 31, 


December 31, 




2019


2018


ASSETS








Cash and cash equivalents


$

61,806


$

30,562


Securities available for sale, at fair value



146,419



145,698


Securities, restricted at cost



2,665



2,583


Loans



565,369



468,101


Less: allowance for loan losses



(6,989)



(5,629)


Loans, net of allowance



558,380



462,472


Premises and equipment, net



2,835



2,694


Other assets



25,903



19,890


Total Assets


$

798,008


$

663,899










LIABILITIES AND STOCKHOLDERS' EQUITY








Demand deposits


$

201,837


$

212,721


Savings, NOW and money market deposits



459,037



335,283


Certificates of deposit



19,746



20,417


Total deposits



680,620



568,421


Other liabilities



6,326



2,704


Total liabilities



686,946



571,125


Total stockholders' equity



111,062



92,774


Total Liabilities and Stockholders' Equity


$

798,008


$

663,899










Selected Financial Data








Common shares outstanding



7,652,170



7,532,723


Book value per share


$

14.51


$

12.32


Equity to assets



13.92

%


13.97

%









Capital Ratios (1)








Tier 1 leverage ratio



13.50

%


13.26

%

Common equity tier 1 capital ratio



16.77

%


17.54

%

Tier 1 capital ratio



16.77

%


17.54

%

Total capital ratio



17.94

%


18.70

%









Asset Quality








Nonperforming loans 


$

1,476


$


Allowance for loan losses to total loans



1.24

%


1.20

%

Nonperforming loans to total loans



0.26

%


%

Nonperforming assets to total assets



0.18

%


%

Allowance/nonperforming loans



473.51

%


%

_______________

(1) Regulatory capital ratios presented on bank-only basis.

 

 

ESQUIRE FINANCIAL HOLDINGS, INC.

Condensed Consolidated Income Statement (unaudited)

(dollars in thousands except per share data)




Three months ended


Year ended




December 31, 


December 31, 




2019


2018


2019


2018


Interest income


$

9,356


$

8,198


$

36,659


$

28,951


Interest expense



504



471



2,548



1,212


Net interest income



8,852



7,727



34,111



27,739


Provision for loan losses



600



400



1,850



1,375


Net interest income after provision for loan losses



8,252



7,327



32,261



26,364
















Noninterest income:














Merchant processing income



2,983



1,429



10,976



4,961


Other noninterest income



181



571



835



2,894


Total noninterest income



3,164



2,000



11,811



7,855
















Noninterest expense:














Employee compensation and benefits



3,836



2,810



14,677



13,039


Other expenses



2,505



2,595



10,257



9,256


Total noninterest expense



6,341



5,405



24,934



22,295


Income before income taxes



5,075



3,922



19,138



11,924


Income taxes



1,202



1,049



4,995



3,190


Net income


$

3,873


$

2,873


$

14,143


$

8,734
















Earnings Per Share














Basic


$

0.52


$

0.39


$

1.91


$

1.18


Diluted


$

0.50


$

0.37


$

1.82


$

1.13


Basic - adjusted (1)


$

0.52


$

0.39


$

1.91


$

1.30


Diluted - adjusted (1)


$

0.50


$

0.37


$

1.82


$

1.24
















Selected Financial Data














Return on average assets



2.01

%


1.74

%


1.93

%


1.45

%

Return on average common equity



14.19

%


12.74

%


13.95

%


10.12

%

Adjusted return on average assets (1)



2.01

%


1.74

%


1.93

%


1.60

%

Adjusted return on average common equity (1)



14.19

%


12.74

%


13.95

%


11.12

%

Net interest margin



4.79

%


4.83

%


4.86

%


4.73

%

Efficiency ratio(2)



52.8

%


55.6

%


54.3

%


59.3

%

_______________

(1) Figures have been adjusted to exclude a $1.2 million one-time charge (pretax) related to the passing of the Company's Executive Chairman in 2018. See non-GAAP reconciliation provided elsewhere herein.


(2) Efficiency ratio represents noninterest expenses divided by the sum of net interest income plus noninterest income. See non-GAAP reconciliation provided elsewhere herein addressing non-recurring charges.

 

 

ESQUIRE FINANCIAL HOLDINGS, INC.

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

(dollars in thousands)




For the Three Months Ended December 31, 




2019


2018




Average





Average


Average





Average




Balance


Interest


Yield/Cost


Balance


Interest


Yield/Cost


INTEREST EARNING ASSETS


















Loans


$

532,938


$

8,266


6.15

%

$

451,122


$

6,997


6.15

%

Securities, includes restricted stock



136,401



836


2.43

%


153,969



1,039


2.68

%

Interest earning cash



64,073



254


1.57

%


30,111



162


2.13

%

Total interest earning assets



733,412



9,356


5.06

%


635,202



8,198


5.12

%



















NONINTEREST EARNING ASSETS



31,939








19,018

























TOTAL AVERAGE ASSETS


$

765,351







$

654,220

























INTEREST BEARING LIABILITIES




































Savings, NOW, Money Markets


$

394,969


$

405


0.41

%

$

330,043


$

329


0.40

%

Time deposits



19,909



98


1.95

%


26,679



135


2.01

%

Total interest bearing deposits



414,878



503


0.48

%


356,722



464


0.52

%

Short-term borrowings



1




%


763



4


2.08

%

Secured borrowings



87



1


4.56

%


159



3


7.49

%

Total interest bearing liabilities



414,966



504


0.48

%


357,644



471


0.52

%



















NONINTEREST BEARING LIABILITIES


















Demand deposits



232,267








202,349







Other liabilities



9,817








4,781







Total noninterest bearing liabilities



242,084








207,130







Stockholders' equity



108,301








89,446

























TOTAL AVG. LIABILITIES AND EQUITY


$

765,351







$

654,220







Net interest income





$

8,852







$

7,727




Net interest spread








4.58

%







4.60

%

Net interest margin








4.79

%







4.83

%

 

 

ESQUIRE FINANCIAL HOLDINGS, INC.

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

(dollars in thousands)




For the Year Ended December 31, 




2019


2018




Average





Average


Average





Average




Balance


Interest


Yield/Cost


Balance


Interest


Yield/Cost


INTEREST EARNING ASSETS


















Loans


$

507,546


$

31,790


6.26

%

$

398,614


$

24,375


6.11

%

Securities, includes restricted stock



147,737



3,909


2.65

%


150,668



3,945


2.62

%

Interest earning cash



47,059



960


2.04

%


36,898



631


1.71

%

Total interest earning assets



702,342



36,659


5.22

%


586,180



28,951


4.94

%



















NONINTEREST EARNING ASSETS



30,700








14,233

























TOTAL AVERAGE ASSETS


$

733,042







$

600,413

























INTEREST BEARING LIABILITIES




































Savings, NOW, Money Markets


$

366,430


$

2,070


0.56

%

$

293,936


$

908


0.31

%

Time deposits



20,002



473


2.36

%


27,014



275


1.02

%

Total interest bearing deposits



386,432



2,543


0.66

%


320,950



1,183


0.37

%

Short-term borrowings



1




%


478



12


2.51

%

Secured borrowings



88



5


5.68

%


246



17


6.91

%

Total interest bearing liabilities



386,521



2,548


0.66

%


321,674



1,212


0.38

%



















NONINTEREST BEARING LIABILITIES


















Demand deposits



236,918








188,911







Other liabilities



8,216








3,536







Total noninterest bearing liabilities



245,134








192,447







Stockholders' equity



101,387








86,292

























TOTAL AVG. LIABILITIES AND EQUITY


$

733,042







$

600,413







Net interest income





$

34,111







$

27,739




Net interest spread








4.56

%







4.56

%

Net interest margin








4.86

%







4.73

%

 

 

ESQUIRE FINANCIAL HOLDINGS, INC.

Condensed Consolidated Non-GAAP Financial Measure Reconciliation (unaudited)

 (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 in 2018.


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 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(losses) 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



Year ended




December 31, 



December 31, 



2019


2018


2019


2018


Net income

$

3,873


$

2,873


$

14,143


$

8,734


Add: compensation charge


-



-



-



1,173


Less: tax impact


-



-



-



314


Compensation charge, net


-



-



-



859


Adjusted net income

$

3,873


$

2,873


$

14,143


$

9,593















Return on average assets-GAAP


2.01

%


1.74

%


1.93

%


1.45

%

Add: compensation charge


0.00

%


0.00

%


0.00

%


0.15

%

Adjusted return on average assets


2.01

%


1.74

%


1.93

%


1.60

%














Return on average common equity-GAAP


14.19

%


12.74

%


13.95

%


10.12

%

Add: compensation charge


0.00

%


0.00

%


0.00

%


1.00

%

Adjusted return on average common equity


14.19

%


12.74

%


13.95

%


11.12

%














Diluted earnings per share-GAAP

$

0.50


$

0.37


$

1.82


$

1.13


Add: compensation charge


0.00



0.00



0.00



0.11


Adjusted diluted earnings per share

$

0.50


$

0.37


$

1.82


$

1.24















Efficiency Ratio













Net interest income

$

8,852


$

7,727


$

34,111


$

27,739


Noninterest income


3,164



2,000



11,811



7,855


Recurring revenue

$

12,016


$

9,727


$

45,922


$

35,594















Total noninterest expense

$

6,341


$

5,405


$

24,934


$

22,295


Less: compensation charge


-



-



-



1,173


Recurring noninterest expense

$

6,341


$

5,405


$

24,934


$

21,122















Efficiency ratio


52.8

%


55.6

%


54.3

%


59.3

%

 

Cision View original content:http://www.prnewswire.com/news-releases/esquire-financial-holdings-inc-reports-fourth-quarter-and-full-year-2019-results-300992755.html

SOURCE Esquire Financial Holdings, Inc.