ES Bancshares, Inc. Reports Record Return On Average Assets

  • NET INTERST MARGIN IMPROVES TO 3.63% FOR THE QUARTER ENDED SEPTEMBER 30, 2021 COMPARED TO 3.11% FOR THE COMPARABLE 2020 QUARTER.
  • SEPTEMBER 30, 2021 QUARTERLY EARNINGS OF $1.2 MILLION, OR $0.18 PER SHARE, AS COMPARED TO $616 THOUSAND, OR $0.09 PER SHARE FOR THE QUARTER ENDED SEPTEMBER 30, 2020.
  • SEPTEMBER 30, 2021 NINE MONTHS EARNINGS OF $3.3 MILLION, OR $0.49 PER SHARE, AS COMPARED TO $893 THOUSAND, OR $0.13 PER SHARE FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020.

NEWBURGH, N.Y., Oct. 28, 2021 (Globalrelease Wire) — ES Bancshares, Inc. (OTCQX: ESBS) (the “Company”) the holding company for Empire State Bank, (the “Bank”) today announced net income of $1.2 million, or $0.18 per basic common share and $0.17 per diluted common share for the quarter ended September 30, 2021, as compared to a net income of $616 thousand, or $0.09 per common and diluted share for the quarter ended September 30, 2020. The increase was largely driven by a $735 thousand increase in net interest income and a $400 thousand decrease in loan loss provision compared to the 2020 period. The increase in net interest income was primarily impacted by a $368 thousand increase in interest income coupled with a $367 thousand decrease in the cost of deposits and borrowings. The weighted average cost of deposits and borrowings decreased to 0.72% for the quarter ended September 30, 2021 from 1.09% for the comparable 2020 quarter. The increase in net interest income resulted in an improvement to the net interest margin increasing to 3.63% from 3.11% for the comparable 2020 period.

Net income for the nine months ended September 30, 2021 was $3.3 million, or $0.49 per basic share and $0.47 per diluted share compared to $893 thousand, or $0.13 per basic and diluted share for the nine months ended September 30, 2020. The increase was largely driven by a $2.7 million increase in net interest income as the weighted average cost of deposits and borrowings decreased to 0.85% for the period ended September 30, 2021 from 1.41% for the comparable 2020 period. Further, a $1.6 million decrease in loan loss provision compared to the 2020 period also contributed.

Chief Executive Officer Philip Guarnieri stated, “We are very pleased with the third quarter results.   Our plan and the execution of replacing PPP loans with traditional loans, and their respective interest income, are showing up in our third quarter earnings.”  He continued, “The Banks core loan pipeline and closings have risen to pre-COVID levels and continue to show excellent strength.”

President and Chief Operating Officer Thomas Sperzel stated, “Our sixth banking center opened in September located at the Corporate Commons complex in Staten Island, NY. This will further expand our footprint and provide additional core liquidity to fund the loan origination pipeline.”

FINANCIAL HIGHLIGHTS

  • Net interest margin of 3.63% for the quarter ended September 30, 2021 compared to 3.11% for the comparable period in 2020, representing an increase of 52 bps, or 16.7%
  • Return on Average Assets and Equity of 0.95% and 12.98%, respectively for the quarter ended September 30, 2021 compared to 0.49% and 7.17% for the 2020 period.
  • Net income of $1.2 million for the quarter ended September 30, 2021 compared to $616 thousand for the comparable period in 2020, representing an increase of $601 thousand, or 97.6%.
  • Net income of $3.3 million for the nine months ended September 30, 2021 compared to $893 thousand for the comparable period in 2020.
  • Net interest income of $4.53 million for the quarter ended September 30, 2021 compared to $3.80 million for the comparable period in 2020, representing an increase of $735 thousand, or 19.4%
  • Net interest income of $13.19 million for the nine months ended September 30, 2021 compared to $10.48 million for the comparable period in 2020, representing an increase of $2.71 million, or 25.9%
  • Loan loss reserves as a percentage of total loans of 1.48% (1) as of September 30, 2021 compared to 1.40% at September 30, 2020.
  • Total deposits of $415.2 million for the quarter ended September 30, 2021, compared to $353.6 million for the comparable period in 2020, representing an increase of $61.6 million, or 17.4%
  • Capital ratios of 9.6%, 15.6% and 16.9% for each of the Tier 1 Leverage ratio, Tier 1 Risk Based Capital ratio and Total risk Based Capital ratio, respectively.

(1) Not including SBA PPP loans and other government guaranteed loans

Comparison of Financial Condition at September 30, 2021 and December 31, 2020

Total assets at September 30, 2021, amounted to $504.3 million, representing an decrease of $11.5 million, or 2.2%, from $515.8 million as of December 31, 2020. The decrease in assets consisted primarily of decreases in cash and cash equivalents of $16.4 million, partially offset by increases in other assets of $3.8 million and premises and equipment of $1.7 million.

Loans receivable, net, remained unchanged at $429.0 million. Commercial and multifamily real estate loans increased $18.5 million, or 10.0 %, from $183.9 million to $202.4 million. Commercial loans and commercial lines of credit decreased $17.6 million, or 24.3%, from $72.5 million to $54.9 million. This decrease was largely due to the Bank’s participation in the SBA PPP loan program, and the forgiveness of $15.6 million of these loans by the SBA. $42.5 million of SBA PPP loans are included in loans receivable at September 30, 2021. Residential real estate mortgage loans decreased $452 thousand, or 0.26%, from $174.2 million to $173.8 million. Home equity and consumer loans decreased $192 thousand to $2.0 million at September 30, 2021. Management continues to emphasize the origination of high-quality loans for retention in the loan portfolio.

Deposits increased by $40.2 million to $415.2 million at September 30, 2021 from $375.0 million at December 31, 2020. Non-interest bearing deposits increased $28.8 million and interest bearing deposits increased $11.4 million. Over this nine month period the net deposit activity consisted mainly of increases in DDA and NOW accounts of $34.3 million and savings accounts of $28.7 million, partially offset by decreases in certificates of deposit of $22.3 million, and in money market accounts of $478 thousand.

Borrowings decreased by $56.3.million to $34.3 million at September 30, 2021 from $90.7 million as of December 31, 2020.

Stockholders’ equity increased by $3.2 million to $37.9 million at September 30, 2021, from $34.7 million as of December 31, 2020. The increase was primarily attributable to a $3.3 million increase in retained earnings. The ratio of stockholders’ equity to total assets increased to 7.52% at September 30, 2021 from 6.73% at December 31, 2020. Book value per share increased to $5.71 at September 30, 2021, from $5.22 at December 31, 2020.

                 
  ES BANCSHARES, INC.              
  STATEMENTS OF CONDITION            
  (In Thousands)              
  (Unaudited)              
                 
                 
    9/30/2021   6/30/2021   3/31/2021   12/31/2020
  ASSETS              
  Cash and cash equivalents: $ 46,108     $ 45,379     $ 45,340     $ 62,533  
                 
  Securities – Available For Sale   4,365       4,873       5,589       6,464  
  Securities – Held To Maturity   1,500                    
  Total Securities   5,865       4,873       5,589       6,464  
                 
  Loans   434,831       449,148       464,291       434,417  
  Less: allowance for loan losses   (5,791 )     (5,709 )     (5,709 )     (5,453 )
  Loans, net   429,040       443,439       458,582       428,964  
                 
  Premises and equipment, net   6,107       5,526       5,144       4,432  
  Other assets   17,159       17,516       13,363       13,381  
  Total Assets $ 504,279     $ 516,733     $ 528,018     $ 515,774  
                 
  LIABILITIES AND SHAREHOLDERS’ EQUITY        
  Deposits:              
  Demand and NOW deposit accounts $ 170,533     $ 156,945     $ 159,009     $ 136,227  
  Money market accounts   9,897       10,361       11,361       10,375  
  Savings accounts   166,643       179,637       142,958       137,964  
  Certificates of deposit   68,128       73,008       82,296       90,453  
  Total Deposits   415,201       419,951       395,624       375,019  
                 
  Borrowings   34,316       42,917       77,538       90,659  
  Other Liabilities   16,831       17,140       19,171       15,391  
  Total Liabilities   466,348       480,008       492,333       481,069  
                 
  Total Shareholders’ Equity   37,931       36,725       35,685       34,705  
  Total Liabilities and Shareholders’ Equity $ 504,279     $ 516,733     $ 528,018     $ 515,774  
                 

Results of Operations for the Quarters Ended September 30, 2021 and September 30, 2020

General. For the quarter ended September 30, 2021, the Company recognized net income of $1.2 million, or $0.18 per basic and $0.17 per diluted share, as compared to net income of $616 thousand, or $0.09 per basic and diluted share, for the quarter ended September 30, 2020.

Interest Income. Interest income increased to $5.1 million for the quarter ended September 30, 2021 compared to $4.8 million for the quarter ended September 30, 2020.

The average balance of the loan portfolio increased to $440.0 million for the quarter ended September 30, 2021 from $433.9 million for the quarter ended September 30, 2020 while the average yield increased to 4.58% for the quarter ended September 30, 2021 from 4.27% for the quarter ended September 30, 2020. The average balance and yield of the Bank’s investment securities for the quarter ended September 30, 2021 was $4.7 million and 2.64%, respectively, as compared to an average balance of $7.2 million and a yield of 2.62% for the comparable quarter ended one-year earlier.

Interest Expense. Total interest expense for the quarter ended September 30, 2021 decreased by $367 thousand to $598 thousand from $965 thousand for the prior year period. Average balances of total interest-bearing liabilities decreased $22.5 million to $327.5 million for the quarter ended September 30, 2021, from $350.0 million for the quarter ended September 30, 2020. The average cost for those liabilities decreased to 0.72% from 1.09% for the same respective period one year earlier.

The average balances of the Bank’s certificates of deposit portfolio decreased to $71.7 million at an average cost of 0.65% over the quarter ended September 30, 2021, from $97.0 million at an average cost of 1.66% over the same quarter ended one-year earlier. Regular savings account average balances increased to $179.4 million for the quarter ended September 30, 2021, from $127.4 million for the quarter ended September 30, 2020. These had an average cost of 0.32% for the quarter ended September 30, 2021 compared to an average cost of 0.67% for the quarter ended September 30, 2020.

Average money market account balances decreased $129 thousand to $10.2 million at an average cost of 0.19% for the quarter ended September 30, 2021, from $10.4 million at an average cost of 0.27% for the quarter ended September 30, 2020.

For the quarter ended September 30, 2021, the average balance of the Company’s borrowed funds was $38.6 million with an average cost of 3.10%, as compared to $98.0 million and an average cost of 1.29% for the quarter ended September 30, 2020.   This average cost increased largely due to the declining use of the Federal Reserve Bank Paycheck Protection Program Liquidity Facility for funding of SBA PPP loans, in addition to the issuance of Subordinated Notes in October 2020.

Net Interest Income.   Net interest income was approximately $4.5 million for the quarter ended September 30, 2021, as compared to $3.8 million for the same quarter in the prior year. The average interest rate spread increased to 3.43% for the quarter ended September 30, 2021, from 2.80% for the quarter ended September 30, 2020, while the net interest margin increased to 3.63%, from 3.11% over the same respective periods.

Provision for Loan Losses. For the quarter ended September 30, 2021, management recorded a $80 thousand provision for loan losses. Comparatively, there was a $480 thousand provision for loan loss for the quarter ended September 30, 2020. 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. The decrease in loan loss provision is primarily due to higher provisions in the quarter ended September 30, 2020 resulting from the potential credit impact of the COVID-19 pandemic.

Non-Interest Income. Non-interest income for the quarter ended September 30, 2021 was $478 thousand as compared to $144 thousand for the quarter ended September 30, 2020.The Bank recorded a $248 thousand gain on sale of an SBA loan in the 2021 quarter.

Non-Interest Expense. Non-interest expense for the quarter ended September 30, 2021 increased $705 thousand when compared to the same quarter in 2020. This increase primary resulted in an increase of $499 thousand in compensation and benefits and in occupancy and equipment of $161 thousand. These increases result from additional staffing and occupancy costs for branch expansion.

Income Tax Expense. Income tax expense was $338 thousand for the quarter ended September 30, 2021 as compared to $175 thousand for the quarter ended September 30, 2020.

Results of Operations for the Nine Months Ended September 30, 2021 and September 30, 2020

General.   For the nine months ended September 30, 2021, the Company recognized net income of $3.3 million, or $0.49 per basic and $0.47 per diluted share, as compared to net gain of $893 thousand, or $0.13 per basic and diluted share, for the nine months ended September 30, 2020.

Interest Income. Interest income increased by $1.3 million, from $14.0 million to $15.3 million, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. This increase was primarily attributable to increase in interest income from loans of $1.5 million partially offset by a decrease in securities of $109 thousand.

The average balance of the loan portfolio increased to $449.8 million for the nine months ended September 30, 2021 from $407.6 million for the nine months ended September 30, 2020, while the average yield increased from 4.43% for the nine months ended September 30, 2020 to 4.45% for the nine months ended September 30, 2021. The average balance and yield of the Bank’s investment securities for the nine months ended September 30, 2021, was $5.1 million and 2.29%, respectively, as compared to an average balance of $9.7 million and a yield of 2.72% for the comparable nine month period one-year earlier.

Interest Expense. Total interest expense for the nine months ended September 30, 2021, decreased by $1.4 million, from $3.5 million to $2.1 million, when compared to the prior year period. Average balances of total interest-bearing liabilities decreased $165 thousand to $334.2 million for the nine months ended September 30, 2021, from $334.1 million for the nine months ended September 30, 2020. The average cost for those liabilities decreased to 0.85% from 1.41% for the same respective period one year earlier.

The average balances of the Bank’s certificates of deposit portfolio decreased to $78.2 million at an average cost of 0.89% over the nine months ended September 30, 2021, from $106.4 million at an average cost of 1.95% over the same period one-year earlier. Regular savings account average balances increased by $32.4 million to $157.3 million. These had an average cost of 0.38% for the nine months ended September 30, 2021 compared to an average cost of 1.02% for the nine months ended September 30, 2020.

Average money market account balances increased $1.1 million to $11.1 million at an average cost of 0.20% for the nine months ended September 30, 2021, from $10.0 million at an average cost of 0.36% for the nine months ended September 30, 2020.

For the nine months ended September 30, 2021, the average balance of the Company’s borrowed funds was $61.4 million, and its average cost was 2.27%, as compared to $76.7 million and an average cost of 1.64% for the nine months ended September 30, 2020.

Net Interest Income. Net interest income was approximately $13.2 million for the nine months ended September 30, 2021, as compared to $10.5 million for the same period in the prior year. The interest rate spread increased to 3.24% for the nine months ended September 30, 2021, from 2.57% for the nine months ended September 30, 2020, while the net interest margin increased to 3.53% from 2.98%, over the same respective periods.

Provision for Loan Losses. For the nine months ended September 30, 2021 the Company recorded a $590 thousand provision for loan losses. Comparatively, the provision was $2.2 million for the nine months ended September 30, 2020. 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. The decrease in loan loss provision is primarily due to higher provisions in the nine months ended September 30, 2020 resulting from the potential credit impact of the COVID-19 pandemic.

Non-Interest Income. Non-interest income for the nine months ended September 30, 2021 increased $229 thousand to approximately $855 thousand as compared to $626 thousand for the nine months ended September 30, 2020. The increase was primarily the result of a $248 thousand gain on sale of SBA loans, and, to a lesser extent higher loan and deposit services charges in the 2021 quarter. This was partially offset by net decreases in the gain on securities sales of $194 thousand.

Non-Interest Expense. Non-interest expense for the nine months ended September 30, 2021 increased $1.5 million when compared to the same period in 2020.   This increase was primarily the result of net increases in compensation and benefits of $943 thousand and in occupancy and equipment of $477 thousand. These increases result from additional staffing and occupancy costs for branch expansion.

Income Tax Expense. Income tax expense was $912 thousand for the nine months ended September 30, 2021 as compared to $275 for the nine months ended September 30, 2020.

ES BANCSHARES, INC.              
STATEMENTS OF INCOME              
(In Thousands)              
(Unaudited)              
               
  Quarter to
Date
  Quarter to
Date
  Year to
Date
  Year to
Date
  9/30/2021   9/30/2020   9/30/2021   9/30/2020
               
Total interest income $ 5,130   $ 4,762   $ 15,302   $ 14,005
Total interest expense   598     965     2,113     3,529
Net interest income   4,532     3,797     13,189     10,476
Provision for loan losses   80     480     590     2,181
               
Net interest income after              
provision for loan loss   4,452     3,317     12,599     8,295
               
Total non-interest income   478     144     855     626
               
Compensation and benefits   1,805     1,306     4,838     3,895
Occupancy and equipment   620     459     1,807     1,330
Professional fees   229     165     498     468
Data processing service fees   206     189     625     545
NYS Banking & FDIC Assessment   73     73     227     200
Other operating expenses   442     478     1,261     1,315
Total non-interest expense   3,375     2,670     9,256     7,753
               
Net Income (Loss) Before Taxes   1,555     791     4,198     1,168
               
Provision for income taxes   338     175     912     275
Net income (loss)   1,217     616     3,286     893
               
               
               
  Quarter
Ended
  Quarter
Ended
  Quarter
Ended
  Quarter
Ended
  9/30/2021   6/30/2021   3/31/2021   12/31/2020
               
Total interest income $ 5,130   $ 4,999   $ 5,173   $ 4,783
Total interest expense   598     710     805     901
Net interest income   4,532     4,289     4,368     3,882
Provision for loan losses   80     120     390     600
               
Net interest income after              
provision for loan loss   4,452     4,169     3,978     3,282
               
Other non-interest income   478     168     209     159
               
Compensation and benefits   1,805     1,575     1,458     1,441
Occupancy and equipment   620     604     583     531
Professional fees   229     96     173     192
Data processing service fees   206     215     204     189
NYS Banking & FDIC Assessment   73     76     78     72
Other operating expenses   442     421     398     610
Total non-interest expense   3,375     2,987     2,894     3,035
               
Net Income Before Taxes   1,555     1,350     1,293     406
               
Provision for income taxes   338     293     281     94
Net income   1,217     1,057     1,012     312
               
Basic Earnings per Share $ 0.18   $ 0.16   $ 0.15   $ 0.05
               
Diluted Earnings per Share $ 0.17   $ 0.15   $ 0.15   $ 0.04
ES BANCSHARES, INC.              
OTHER FINANCIAL MEASURES            
($ in Thousands)              
(Unaudited)              
  Quarter
Ended
  Quarter
Ended
  Quarter
Ended
  Quarter
Ended
  9/30/2021   6/30/2021   3/31/2021   12/31/2020
Asset Quality              
Allowance for Loan Losses $ 5,791     $ 5,709     $ 5,709     $ 5,453  
Nonperforming Loans / Total Loans   0.43%       0.39%       0.40%       0.46%  
Nonperforming Assets / Total Assets   0.39%       0.36%       0.38%       0.42%  
ALLL / Nonperforming Loans   311.85%       327.35%       305.29%       273.20%  
ALLL / Loans, Gross   1.33%       1.27%       1.23%       1.26%  
ALLL / Loans, Gross (excl SBA PPP loans)   1.48%       1.49%       1.49%       1.45%  
               
Capital              
Shares Issue – Basic   6,648,320       6,648,320       6,648,320       6,648,320  
Book Value per Share $ 5.71     $ 5.52     $ 5.37     $ 5.22  
Tangible Book Value per Share $ 5.62     $ 5.44     $ 5.28     $ 5.13  
Tier 1 Capital Ratio   9.58%       9.58%       9.67%       9.70%  
Tier 1 Risk Based Capital Ratio   15.64%       15.66%       15.67%       15.47%  
Total Risk Based Capital Ratio   16.90%       16.92%       16.92%       16.73%  
               
               
  Quarter Ended   Quarter Ended   Quarter Ended   Quarter Ended
  9/30/2021   6/30/2021   3/31/2021   12/31/2020
Profitability              
Yield on Average Earning Assets   4.15%       3.99%       4.12%       3.80%  
Cost of Avg. Interest Bearing Liabilities   0.72%       0.86%       0.95%       0.99%  
Net Spread   3.43%       3.14%       3.17%       2.81%  
Net Margin   3.63%       3.43%       3.48%       3.08%  
Return on Average Assets   0.95%       0.82%       0.79%       0.24%  
Return on Average Equity   12.98%       11.59%       11.43%       3.57%  
               

This release may contain certain forward-looking statements 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 ES Bancshares, Inc’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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