Esquire Financial Holdings, Inc. (ESQ) SEC Filing 10-K Annual report for the fiscal year ending Tuesday, December 31, 2019

Exhibit 99.1

ESQUIRE FINANCIAL HOLDINGS, INC.

REPORTS FOURTH QUARTER AND FULL YEAR 2019 RESULTS

Fourth Quarter Loan and Deposit Growth Concludes Overall Record Year

Jericho, NY – January 24, 2020 – 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:

“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.

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)

(dollars in thousands except per share data)