Market Overview

ES Bancshares, Inc. reports robust loan and deposit growth for the six months ended June 30, 2018

Share:

Loans increased $40.2 million, or 15.7%, to $297.0 million at June 30, 2018 compared to $256.8 million at December 31, 2017.

Deposits increased $50.7 million, or 23.3% to $267.9 million at June 30, 2018 compared to $217.2 million at December 31, 2017.

NEWBURGH, N.Y., Aug. 07, 2018 (GLOBE NEWSWIRE) -- ES Bancshares, Inc. (OTC:ESBS) (the "Company") the holding company for Empire State Bank, (the "Bank") today announced net income of $104 thousand, or $0.03 per common share for the quarter ended June 30, 2018, as compared to $744 thousand, or $0.22 per common share for the quarter ended June 30, 2017.  The decrease in net income was primarily due to a one-time non-recurring $1.8 million gain on the sale of a branch in the quarter ended June 30, 2017.  This was partially offset by changes in provision for loan losses and income taxes.

Net income for the six months ended June 30, 2018 was $347 thousand, or $0.09 per share compared to $867 thousand, or $0.26 per share for the period ended June 30, 2017.  The decrease in net income was primarily due to a one-time non-recurring $1.8 million gain on the sale of a branch in the six month period ended June 30, 2017.  This was partially offset by changes in provision for loan losses and income taxes.

Net interest income increased $535 thousand, or 12.7% to $4.7 million.  The increase in net interest income was largely due to a $68.7 million or 30.1% increase in loans receivable to $297.0 million as of June 30, 2018 compared to $228.3 million as of June 30, 2017. 

The Bank also reported strong deposit growth over the twelve month period ending June 30, 2018.  Total deposits have grown $63.7 million or 31.2% to $267.9 million at June 30, 2018.

Chief Executive Officer Philip Guarnieri stated that, "We are pleased with the growth in the loan and deposit portfolios over the last year and the contribution to core earnings.  In addition the Bank has gained market share in a very competitive market." Mr. Guarnieri also commented on the Bank's growth initiatives with two branches opening in the coming quarter.  He further stated that, "Management is now focusing on capital growth opportunities to support this continued growth."

President and Chief Operating Officer Thomas Sperzel commented that "Management is eager to open the two new branches in Brooklyn and Staten Island, NY in the third quarter of 2018."  He continued by stating that, "the Bank has already received a warm welcome from the community and is looking forward to providing the same knowledgeable and friendly service to our new customers."

FINANCIAL HIGHLIGHTS

  • Loans have increased $40.2 million, or 15.7%, to $297.0 million at June 30, 2018 compared to $256.8 million at December 31, 2017.
  • Deposits have increased $50.7 million, or 23.3% to $267.9 million at June 30, 2018 compared to $217.2 million at December 31, 2017.
  • Net income of $104 thousand for the quarter ended June 30, 2018 compared to $744 thousand for the comparable period in 2017, representing a decrease of $640 thousand, or 86%.
  • Net income of $347 thousand for the year to date ended June 30, 2018 compared to $867 thousand for the comparable period in 2017.
  • Net income before taxes of $240 thousand for the quarter ended June 30, 2018 compared to $1.18 million for the comparable period in 2017, representing a decrease of $940 thousand, or 80%.
  • Net income before taxes of $664 thousand on for the year to date ended June 30, 2018 compared to $1.47 million for the comparable period in 2017, representing a decrease of $806 thousand, or 55%.
  • The decrease in net income noted above was primarily due to a one-time non-recurring $1.8 million gain on the sale of a branch in the six month period ended June 30, 2017.
  • Net interest income of $2.40 million for the quarter ended June 30, 2018 compared to $2.19 million for the comparable period in 2017, representing an increase of $214 thousand, or 10%.
  • Net margin of 2.98% for the quarter ended June 30, 2018 compared to 3.49% for the comparable period in 2017, representing a decrease of 51 bps, or 15%.
  • Capital ratios of 8.2%, 10.8% and 12.1% for each of the Tier 1 Leverage ratio, Tier 1 Risk Based Capital ratio and Total risk Based Capital ratio, respectively.

Comparison of Financial Condition at June 30, 2018 and December 31, 2017

Total assets at June 30, 2018, amounted to $339.5 million, representing an increase of $50.9 million, or 17.6%, from $288.6 million at December 31, 2017.  The increase in assets consisted primarily of increases in total loans receivable, net of $39.6 million and in total securities of $9.1 million.

Loans receivable, net, increased $39.6 million, or 15.6%, to $293.4 million at June 30, 2018 from $253.8 million at December 31, 2017. Residential real estate mortgage loans increased $26.3 million, or 42.2%, from $62.2 million to $88.5 million. Commercial and multifamily real estate loans increased $16.0 million, or 10.0%, from $159.7 million to $175.7 million. Home equity and consumer loans increased $318 thousand to $4.5 million at June 30, 2018. Commercial loans and commercial lines of credit decreased $2.7 million, or 9.6%, from $28.3 million to $25.6 million. Management continues to emphasize the origination of high quality loans for retention in the loan portfolio.

Deposits increased by $50.7 million to $267.9 million at June 30, 2018 from $217.2 million at December 31, 2017. Interest bearing deposits increased $38.2 million and non-interest bearing deposits increased $12.5 million. Over this six month period the net deposit activity consisted mainly of increases in certificates of deposit of $38.4 million, in DDA and NOW accounts of $12.2 million, and in savings accounts of $4.3 million, partially offset by a decrease in money market accounts of $4.2 million.

Borrowings decreased by $1.0 million to $47.5 million at June 30, 2018 from $48.5 million at December 31, 2017.

Stockholders' equity increased by $305 thousand to $20.0 million at June 30, 2018, from $19.7 million at December 31, 2017. The increase was primarily attributable to a $347 thousand increase in retained earnings, partially offset by a decrease in unrealized gain in securities held for sale of $52 thousand. The ratio of stockholders' equity to total assets decreased to 5.9% at June 30, 2018 from 6.8% at December 31, 2017. Book value per share increased to $5.17 at June 30, 2018, from $5.10 at December 31, 2017.

                   
  ES BANCSHARES, INC.                
  STATEMENTS OF CONDITION              
  (In Thousands)                
  (Unaudited)                
                   
                   
    6/30/2018   3/31/2018   12/31/2017   9/30/2017  
  ASSETS                
  Cash and cash equivalents: $   17,295     $   14,591     $   15,745     $   11,353    
                   
  Securities - Available For Sale     6,200         6,271         4,397         4,469    
  Securities - Held To Maturity     12,416         4,881         5,146         5,440    
  Total Securities     18,616         11,152         9,543         9,909    
                   
  Loans     297,018         279,090         256,819         241,252    
  Less:  allowance for loan losses     (3,561 )       (3,268 )       (2,982 )       (3,449 )  
  Loans, net      293,457         275,822         253,837         237,803    
                   
  Premises and equipment, net     3,157         3,017         2,963         2,973    
  Other assets     7,018         7,188         6,532         7,388    
  Total Assets $   339,543     $   311,770     $   288,620     $   269,426    
                   
  LIABILITIES AND SHAREHOLDERS' EQUITY          
  Deposits:                
     Demand and NOW deposit accounts $   92,957     $   75,565     $   80,725     $   76,328    
     Money market accounts     12,223         14,022         16,446         19,736    
     Savings accounts     69,938         62,510         65,625         56,149    
     Certificates of deposit     92,798         77,183         54,422         54,440    
                   Total Deposits     267,916         229,280         217,218         206,653    
                   
  Borrowings     47,500         59,000         48,500         41,500    
  Other Liabilities     4,130         3,597         3,210         4,139    
  Total Liabilities     319,546         291,877         268,928         252,292    
                   
  Total Shareholders' Equity     19,997         19,893         19,692         17,134    
  Total Liabilities and Shareholders' Equity $   339,543     $   311,770     $   288,620     $   269,426    
                   

Results of Operations for the Quarters Ended June 30, 2018 and June 30, 2017

General.  For the quarter ended June 30, 2018, the Company recognized net income of $104 thousand, or $0.03 per basic and diluted share, as compared to net income of $744 thousand, or $0.22 per basic and diluted share, for the quarter ended June 30, 2017. The decrease in net income was substantially due to a one-time non-recurring $1.8 million gain on the sale of a branch in quarter ended June 30, 2017. This was partially offset by changes in provision for loan losses and income taxes.

Interest Income.  Interest income increased $706 thousand, or 26.1%, to $3.41 million for the quarter ended June 30, 2018 compared to $2.71 million for the quarter ended June 30, 2017.

This increase was largely due to the increase in the average balance of the loan portfolio to $285.3 million for the quarter ended June 30, 2018 from $228.4 million for the quarter ended June 30, 2017 while the average yield decreased to 4.44% for the quarter ended June 30, 2018 from 4.52% for the quarter ended June 30, 2017. The average balance and yield of the Bank's investment securities for the quarter ended June 30, 2018 was $15.0 million and 3.10%, respectively, as compared to an average balance of $10.6 million and a yield of 3.03% for the comparable quarter ended one-year earlier.
           
Interest Expense.  Total interest expense for the quarter ended June 30, 2018 increased by $492 thousand to $1.0 million from $519 thousand for the prior year period. The increase was largely due to the $55.5 million increase in the average balances of total interest-bearing liabilities to $229.9 million for the quarter ended June 30, 2018, from $174.4 million for the quarter ended June 30, 2017. The average cost of those liabilities increased to 1.76% from 1.19% for the same respective period one year earlier.

The average balances of the Bank's certificates of deposit portfolio increased to $86.4 million at an average cost of 1.88% over the quarter ended June 30, 2018, from $56.8 million at an average cost of 1.33% over the same quarter ended one-year earlier. Regular savings account average balances increased to $66.9 million, from $49.8 million for the quarter ended June 30, 2017. These had an average cost of 1.51% for the quarter ended June 30, 2018 compared to an average cost of 0.98% for the quarter ended June 30, 2017.

Average money market account balances decreased $13.7 million to $12.3 million at an average cost of 0.42% for the quarter ended June 30, 2018, from $26.0 million at an average cost of 0.45% for the quarter ended June 30, 2017.

For the quarter ended June 30, 2018, the average balance of the Company's borrowed funds was $51.7 million with an average cost of 2.51%, as compared to $23.1 million and an average cost of 2.74% for the quarter ended June 30, 2017.

Net Interest Income.  Net interest income was approximately $2.4 million for the quarter ended June 30, 2018, as compared to $2.2 million for the same quarter in the prior year.  The average interest rate spread decreased to 2.47% for the quarter ended June 30, 2018, from 3.12% for the quarter ended June 30, 2017, while our net interest margin decreased to 2.98%, from 3.49% over the same respective periods.  This decrease was largely due to the rising interest rate environment encountered over the previous year as the federal funds rate increased 1.75% from 0.25% at June 30, 2017 to 2.0% at June 30, 2018.  Further exacerbating the rise in the federal funds rate was the "flattening" of the yield curve, as longer term rates increased at a lesser pace than short term rates. 

Provision for Loan Losses.  For the quarter ended June 30, 2018, management recorded a $325 thousand provision for loan losses. Comparatively, there was a $1.1 million provision for loan loss for the quarter ended June 30, 2017. The decrease in provision was largely due to the restructuring of certain taxi medallion loans during 2017.   

The Bank continues to evaluate the collateral values of the taxi medallion loan portfolio, and has established additional specific reserves now totaling $1.3 million against this portfolio. Recent medallion transfer prices and a discounted cash flow model valuation output further supported by recent industry valuation trends were weighted to derive an estimated fair value of $275,000 as of June 30, 2018.     

As of June 30, 2018, the Taxi Medallion portfolio equaled $3.2 million, net of specific reserves, representing 1.1% of the Bank's total loan portfolio. These loans were all performing as of June 30, 2018.

Overall, non-performing assets declined $361 thousand to $2.6 million as of June 30, 2018 compared to $3.0 million at June 30, 2017. 

Management records loan loss provision to reflect the overall growth in the portfolio as well as the evaluated risk in the portfolio. The provision recorded during the period was done so in conjunction with the Bank's allowance for loan loss methodology. It is calculated using a historical charge-off basis as well as other qualitative factors which reflect management's overall perceived risk in the portfolio.

Non-Interest Income.  Non-interest income for the quarter ended June 30, 2018 decreased $1.7 million to $299 thousand as compared to $2.0 million for the quarter ended June 30, 2017. This decrease is primarily resulting from the decrease in the June 2017 non-recurring gain on branch sale of $1.8 million, partially offset by increases in loan fee income of $23 thousand and in deposit account service charges of $20 thousand.

Non-Interest Expense.  Non-interest expense for the quarter ended June 30, 2018 increased $206 thousand when compared to the same quarter in 2017, primarily resulting from net increases of $199 thousand in compensation and benefits due to the planned opening of two new branches, and other expense of $43 thousand, partially offset by a decrease in professional fees of $56 thousand. 

Income Tax Expense.  Income tax expense was $136 thousand for the quarter ended June 30, 2018 as compared to $436 thousand for the quarter ended June 30, 2017.

Results of Operations for the Six Months Ended June 30, 2018 and June 30, 2017

General.  For the six months ended June 30, 2018, the Company recognized net income of $347 thousand, or $0.09 per basic and diluted share, as compared to net gain of $867 thousand, or $0.26 per basic and diluted share, for the six months ended June 30, 2017. The decrease in net income was substantially due to a one-time non-recurring $1.8 million gain on the sale of a branch in the six month period ended June 30, 2017.  This was partially offset by changes in provision for loan losses and income taxes.

Interest Income.  Interest income increased by $1.3 million, from $5.2 million to $6.5 million, for the six months ended June 30, 2018 compared to the six months ended June 30, 2017. This increase was primarily attributable to increase in interest income from loans of $1.2 million.

This increase was largely due to the increase in the average balance of the loan portfolio to $276.1 million for the six months ended June 30, 2018 from $220.4 million for the six months ended June 30, 2017, while the average yield decreased from 4.46% for the six months ended June 30, 2017 to 4.44% for the six ended June 30, 2018. The average balance and yield of the Bank's investment securities for the six months ended June 30, 2018, was $12.7 million and 3.06%, respectively, as compared to an average balance of $10.9 million and a yield of 3.13% for the comparable six month period one-year earlier.

Interest Expense.  Total interest expense for the six months ended June 30, 2018, increased by $815 thousand, from $967 thousand to $1.78 million, when compared to the prior year period. The increase was largely due to the $49.7 million increase in the average balances of total interest-bearing liabilities to $217.6 million for the six months ended June 30, 2018, from $167.9 million for the six months ended June 30, 2017. The average cost for those liabilities increased to 1.65% from 1.16% for the same respective period one year earlier.

The average balances of the Bank's certificates of deposit portfolio increased to $75.8 million at an average cost of 1.77% over the six months ended June 30, 2018, from $56.0 million at an average cost of 1.28% over the same period one-year earlier. Regular savings account average balances increased by $18.3 million to $66.4 million. These had an average cost of 1.31% for the six months ended June 30, 2018 compared to an average cost of 0.97% for the six months ended June 30, 2017.

Average money market account balances decreased $14.7 million to $13.2 million at an average cost of 0.41% for the six months ended June 30, 2018, from $27.9 million at an average cost of 0.44% for the six months ended June 30, 2017.

For the six months ended June 30, 2018, the average balance of the Company's borrowed funds was $49.9 million and its average cost was 2.50%, as compared to $17.8 million and an average cost of 3.10% for the six months ended June 30, 2017.

Net Interest Income.  Net interest income was approximately $4.7 million for the six months ended June 30, 2018, as compared to $4.2 million for the same period in the prior year. Our interest rate spread decreased to 2.58% for the six months ended June 30, 2018, from 3.08% for the six months ended June 30, 2017, while our net interest margin decreased to 3.08% from 3.45%, over the same respective periods. This decrease was largely due to the rising interest rate environment encountered over the previous year as the federal funds rate increased 1.75% from 0.25% at June 30, 2017 to 2.0% at June 30, 2018. Further exacerbating the rise in the federal funds rate was the "flattening" of the yield curve, as longer term rates increased at a lesser pace than short term rates. 

Provision for Loan Losses.  For the six months ended June 30, 2018 the Company recorded a $630 thousand provision for loan losses. Comparatively, the provision was $1.3 million for the six months ended June 30, 2017. The decrease in provision was largely due to the restructuring of certain taxi medallion loans during 2017.  

The Bank continues to evaluate the collateral values of the taxi medallion loan portfolio, and has established additional specific reserves now totaling $1.3 million against this portfolio.  Recent medallion transfer prices and a discounted cash flow model valuation output further supported by recent industry valuation trends were weighted to derive an estimated fair value of $275,000 as of June 30, 2018.     

As of June 30, 2018, the Taxi Medallion portfolio equaled $3.2 million, net of specific reserves, representing 1.1% of the Bank's total loan portfolio.  These loans were all performing as of June 30, 2018.

Overall, non-performing assets declined $361 thousand to $2.6 million as of June 30, 2018 compared to $3.0 million at June 30, 2017. 

Management records loan loss provision to reflect the overall growth in the portfolio as well as the evaluated risk in the portfolio. The provision recorded during the period was done so in conjunction with the Bank's allowance for loan loss methodology. It is calculated using a historical charge-off basis as well as other qualitative factors which reflect management's overall perceived risk in the portfolio.

Non-Interest Income.  Non-interest income for the six months ended June 30, 2018 decreased $1.8 million to approximately $594 thousand as compared to $2.4 million for the six months ended June 30, 2017. This decrease was primarily the result of the decrease in the June 2017 non-recurring gain on branch sale of $1.8 million. This decrease was partially offset by an increase in gain on loan fee income of $76 thousand and deposit account service charges of $32 thousand.

Non-Interest Expense.  Non-interest expense for the six months ended June 30, 2018 increased $270 thousand when compared to the same period in 2017. This increase was primarily the result of net increases in compensation and benefits of $219 thousand due to the planned opening of two new branches, other expense of $102 thousand, partially offset by a decrease in professional fees of $73 thousand.

Income Tax Expense.  Income tax expense was $317 thousand for the six months ended June 30, 2018 as compared to $600 thousand for the six months ended June 30, 2017.

                   
  ES BANCSHARES, INC.                
  STATEMENTS OF INCOME                
  (In Thousands)                
  (Unaudited)                
                   
    Quarter to
Date
  Quarter to
Date
  Year to
Date
  Year to
Date
 
    6/30/2018   6//30/2017   6/30/2018   6/30/2017  
                   
  Total interest income $   3,411     $   2,705     $   6,526     $   5,176    
  Total interest expense     1,011         519         1,782         967    
  Net interest income   2,400       2,186       4,744       4,209    
  Provision for loan losses   325       1,125       630       1,320    
                   
  Net interest income after                
  provision for loan loss   2,075       1,061       4,114       2,889    
                   
  Total non-interest income   299       2,047       594       2,352    
                   
  Compensation and benefits   1,178       979       2,217       1,998    
  Occupancy and equipment   280       245       540       516    
  Professional fees   130       186       263       336    
  Data processing service fees   103       111       203       220    
  NYS Banking & FDIC Assessment   64       56       119       116    
  Other operating expenses   379       351       702       588    
  Total non-interest expense   2,134       1,928       4,044       3,774    
                   
  Net Income Before Taxes   240       1,180       664       1,467    
                   
  Provision for income taxes   136       436       317       600    
  Net income   104       744       347       867    
                   
                   
                   
    Quarter
Ended
  Quarter
Ended
  Quarter
Ended
  Quarter
Ended
 
    6/30/2018   3/31/2018   12/31/2017   9/30/2017  
                   
  Total interest income $   3,411     $   3,115     $   2,884     $   2,692    
  Total interest expense     1,011         771         639         607    
  Net interest income   2,400       2,344       2,245       2,085    
  Provision for loan losses   325       305       490       173    
                   
  Net interest income after                
  provision for loan loss   2,075       2,039       1,755       1,912    
                   
  Total non-interest income   299       295       383       203    
                   
  Compensation and benefits   1,178       1,039       969       970    
  Occupancy and equipment   280       260       240       231    
  Professional fees   130       133       80       103    
  Data processing service fees   103       100       99       108    
  NYS Banking & FDIC Assessment   64       55       51       49    
  Other operating expenses   379       323       294       254    
  Total non-interest expense   2,134       1,910       1,733       1,715    
                   
  Net Income Before Taxes   240       424       405       400    
                   
  Provision for income taxes   136       181       521       165    
  Net income   104       243       (116 )     235    
                   
  Basic Earnings per Share $   0.03     $   0.06     $   (0.03 )   $   0.07    
                   
                   
               
  ES BANCSHARES, INC.              
  OTHER FINANCIAL MEASURES              
  (In Thousands)              
  (Unaudited)                
    Quarter
Ended
  Quarter
Ended
  Quarter
Ended
  Quarter
Ended
 
    6/30/2018   3/31/2018   12/31/2017   9/30/2017  
  Asset Quality                
     Allowance for Loan Losses $   3,561     $   3,268     $   2,982     $   3,449    
     Nonperforming Loans / Total Loans   0.9 %     1.1 %     1.2 %     1.6 %  
     Nonperforming Assets / Total Assets   0.9 %     1.1 %     1.2 %     1.7 %  
     ALLL / Nonperforming Loans   137.8 %     110.0 %     101.0 %     91.0 %  
     ALLL / Loans, Gross   1.2 %     1.2 %     1.2 %     1.4 %  
                   
  Capital                
     Shares Issue - Basic   3,868,084       3,868,084       3,864,888       3,312,867    
     Book Value per Share $   5.17     $   5.14     $   5.10     $   5.17    
     Tangible Book Value per Share $   5.02     $   4.99     $   4.94     $   5.00    
     Tier 1 Capital Ratio   8.21 %     9.05 %     9.45 %     9.05 %  
     Tier 1 Risk Based Capital Ratio   10.84 %     11.40 %     11.90 %     11.23 %  
     Total Risk Based Capital Ratio   12.09 %     12.65 %     13.15 %     12.49 %  
                   
                   
    Quarter
Ended
  Quarter
Ended
  Quarter
Ended
  Quarter
Ended
 
    6/30/2018   3/31/2018   12/31/2017   9/30/2017  
  Profitability                
     Yield on Average Earning Assets   4.24 %     4.31 %     4.27 %     4.22 %  
     Cost of Avg. Interest Bearing Liabilities   1.76 %     1.52 %     1.35 %     1.34 %  
     Net Spread   2.47 %     2.79 %     2.91 %     2.88 %  
     Net Margin   2.98 %     3.25 %     3.32 %     3.27 %  
                   

This release may contain certain forward-looking statements within the within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may", "will", "expect", "believe", "anticipate", "estimate" or "continue" or comparable terminology, are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within Empire State Bank's control. The forward looking statements included in this report are made only as of the date of this report. We have no intention, and do not assume any obligation, to update these forward-looking statements.

Contacts:
Philip Guarnieri, CEO
Thomas Sperzel, President & COO
Frank J. Gleeson, SVP & CFO
(845) 451-7800

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