Due to COVID-19 Pandemic Related Expenses, the Company Reported a Quarterly Net Loss of $95 Thousand, or $0.01 per Common Share, Compared to Net Income of $414 Thousand, or $0.10 per Common Share for the Quarter Ended March 31, 2019

NEWBURGH, N.Y., May 05, 2020 (GLOBE NEWSWIRE) -- ES Bancshares, Inc. (OTC: ESBS) (the “Company”) the holding company for Empire State Bank, (the “Bank”) today announced a net loss of $95 thousand, or $0.01 per common share on 6.6 million shares outstanding for the quarter ended March 31, 2020, as compared to net income of $414 thousand, or $0.10 per common share on 4.1 million shares outstanding for the quarter ended March 31, 2019.  The decrease was largely driven by a $951 thousand provision for loan losses in the quarter ended March 31, 2020 compared to $85 thousand in the comparable 2019 period, and a $220 thousand increase in operating expenses quarter over quarter.  The additional reserve was provided for the potential credit impact of the COVID-19 pandemic.  This was partially offset by a $230 increase in non-interest income, a $204 thousand increase in net interest income and a $143 thousand decrease in income taxes.

The increase in net interest income for the three month period ended March 31, 2020 was largely driven by an improvement in the net interest margin to 3.02% for the three months ended March 31, 2020 from 2.95% for the comparable 2019 period.  This increase resulted primarily from a $26.4 million increase in non-interest bearing deposits coupled with a $2.4 million decrease in interest bearing deposits quarter over quarter.    

The increase in non-interest income was largely due to the sale of $6.5 million of securities resulting in a gain on sale of $194 thousand. 

Chief Executive Officer Philip Guarnieri stated, “The recent developments of the COVID-19 pandemic have impacted nearly every aspect of our community.”  Mr. Guarnieri also commented that, “We are working to minimize the impact to the Bank’s operations, and as part of the community in which we live and work, we understand the economic impact the COVID-19 pandemic has had on small businesses and individuals.”

President and Chief Operating Officer Thomas Sperzel stated, “The Bank is participating in every aspect of the Small Business Administration’s Paycheck Protection Program (PPP), and is committed to helping small businesses who have been severely impacted by COVID-19.” 

FINANCIAL HIGHLIGHTS

• Net loss of $95 thousand for the quarter ended March 31, 2020 compared to net income of $414 thousand for the comparable period in 2019, representing a decrease of $509 thousand, or 536%.
• Provision for loan losses of $951 thousand in an effort to reinforce reserves due to the potential credit impact of the COVID-19 pandemic.
• Net loss before taxes of $106 thousand for the quarter ended March 31, 2020 compared to net income of $546 thousand for the comparable period in 2019, representing a decrease of $652 thousand, or 615%.
• Net interest income of $3.09 million for the quarter ended March 31, 2020 compared to $2.89 million for the comparable period in 2019, representing an increase of $200 thousand, or 7%
• Net margin of 3.02% for the quarter ended March 31, 2020 compared to 2.95% for the comparable period in 2019, representing an increase of 7 bps, or 2%
• Loans, net of $368.9 million for the quarter ended March 31, 2020 compared to $355.7 million for the comparable period in 2019, representing an increase of $13.2 million, or 4%
• Total deposits of $339.5 million for the quarter ended March 31, 2020, compared to $315.4 million for the comparable period in 2019, representing an increase of $24.1 million, or 8%
• Capital ratios of 9.3%, 13.4% and 15.0% for each of the Tier 1 Leverage ratio, Tier 1 Risk Based Capital ratio and Total risk Based Capital ratios, respectively.

Comparison of Financial Condition at March 31, 2020 and December 31, 2019

Total assets at March 31, 2020, amounted to $429.3 million, representing an increase of $8.5 million, or 2.0%, from $420.8 million at December 31, 2019.  The increase in assets consisted primarily of increases in cash and cash equivalents of $12.8 million and loans receivable, net, of $3.3 million, partially offset by a decrease in total securities of $7.2 million.

Loans receivable, net, increased $3.3 million, or 0.9%, to $368.9 million at March 31, 2020 from $365.6 million at December 31, 2019. Residential real estate mortgage loans increased $3.7 million, or 2.2%, from $166.1 million to $169.8 million. Commercial and multifamily real estate loans increased $1.7 million, or 0.9%, from $176.6 million to $178.3 million.  Commercial loans, including taxi medallion, US government agency guaranteed loans, and commercial lines of credit decreased $1.0 million, or 4.9%, from $20.8 million to $19.8 million. Home equity and consumer loans decreased $164 thousand to $3.0 million at March 31, 2020. Management continues to emphasize the origination of high quality loans for retention in the loan portfolio.

Deposits increased by $11.6 million to $339.5 million at March 31, 2020 from $327.9 million at December 31, 2019. Non-interest bearing deposits increased $19.9 million while interest bearing deposits decreased $8.3 million. Over this three month period the net deposit activity consisted mainly of increases in DDA and NOW accounts of $14.6 million, savings accounts of $4.4 million, and money market accounts of $73 thousand, partially offset by a decrease in certificates of deposit of $7.4 million.

Borrowings decreased by $2.0 million to $49.5 million at March 31, 2020 from $51.5 million at December 31, 2019.

Stockholders’ equity increased by $153 thousand to $33.4 million at March 31, 2020, from $33.2 million at December 31, 2019. The increase was primarily attributable to an increase of accumulated other comprehensive income of $244 thousand, partially offset by a decrease of $95 thousand in retained earnings. The increase in other comprehensive income resulted primarily from the reclassification of securities from Held to Maturity to Available for Sale.  The ratio of stockholders’ equity to total assets decreased to 7.8% at March 31, 2020 from 7.9% at December 31, 2019. Book value per share increased to $5.02 at March 31, 2020, from $5.00 at December 31, 2019.

	ES BANCSHARES, INC.
	STATEMENTS OF CONDITION
	(In Thousands)
	(Unaudited)
		3/31/2020				12/31/2019				9/30/2019				6/30/2019
	ASSETS
	Cash and cash equivalents:	$	38,043			$	25,275			$	24,722			$	25,823
	Securities - Available For Sale		8,386				3,304				3,435				3,627
	Securities - Held To Maturity		-				12,265				12,188				13,011
	Total Securities		8,386				15,569				15,623				16,638
	Loans		373,411				369,194				369,450				364,052
	Less:  allowance for loan losses		(4,491	)			(3,539	)			(3,643	)			(3,538	)
	Loans, net		368,920				365,655				365,807				360,514
	Premises and equipment, net		4,488				4,606				4,706				4,764
	Other assets		9,453				9,718				10,929				11,038
	Total Assets	$	429,290			$	420,823			$	421,787			$	418,777
	LIABILITIES AND SHAREHOLDERS' EQUITY
	Deposits:
	Demand and NOW deposit accounts	$	95,358			$	80,789			$	79,559			$	73,043
	Money market accounts		9,697				9,624				8,424				13,504
	Savings accounts		122,386				118,000				110,173				88,485
	Certificates of deposit		112,031				119,449				128,203				145,939
	Total Deposits		339,472				327,862				326,359				320,971
	Borrowings		49,500				51,500				63,500				66,500
	Other Liabilities		6,939				8,235				8,880				8,635
	Total Liabilities		395,911				387,597				398,739				396,106
	Total Shareholders' Equity		33,379				33,226				23,048				22,671
	Total Liabilities and Shareholders' Equity	$	429,290			$	420,823			$	421,787			$	418,777

Results of Operations for the Quarters Ended March 31, 2020 and March 31, 2019

General.  For the quarter ended March 31, 2020, the Company recognized a net loss of $95 thousand, or $0.01 per basic and diluted share, as compared to net income of $414 thousand, or $0.10 per basic and diluted share, for the quarter ended March 31, 2019.

Interest Income.  Interest income increased to $4.51 million for the quarter ended March 31, 2020 compared from $4.43 million for the quarter ended March 31, 2019. This increase was primarily attributable to a $115 thousand increase in loan interest income and partially offset by a decrease in interest income from securities of $61 thousand.

The average balance of the loan portfolio increased to $371.8 million for the three months ended March 31, 2020 from $363.1 million for the three months ended March 31, 2019 while the average yield increased from 4.60% for the quarter ended March 31, 2019 to 4.62% for the quarter ended March 31, 2020. The average balance and yield of the Bank’s investment securities for the quarter ended March 31, 2020 was $14.0 million and 2.80%, respectively, as compared to an average balance of $20.0 million and a yield of 3.19% for the comparable quarter ended one-year earlier.

Interest Expense.  Total interest expense for the quarter ended March 31, 2020 decreased by $123 thousand to $1.42 million from $1.54 million for the prior year period. Average balances of total interest-bearing liabilities increased $1.43 million to $308.2 million for the quarter ended March 31, 2020, from $306.8 million for the quarter ended March 31, 2019. The average cost for those liabilities decreased to 1.85% from 2.04% for the same respective period one year earlier reflecting lower market interest rates and a higher level of non-interest bearing deposits.

The average balances of the Bank’s certificates of deposit portfolio decreased to $116.8 million at an average cost of 2.14% over the quarter ended March 31, 2020, from $122.3 million at an average cost of 2.16% over the same quarter ended one-year earlier.  Regular savings account average balances increased to $120.8 million, or $35.9 million, from $84.9 million for the quarter ended March 31, 2019. These had an average cost of 1.55% for the quarter ended March 31, 2020 and a cost of 1.66% for the quarter ended March 31, 2019.  

Average money market account balances decreased $2.7 million to $8.8 million at an average cost of 0.55% for the quarter ended March 31, 2020, from $11.5 million at an average cost of 0.47% for the quarter ended March 31, 2019. 

For the quarter ended March 31, 2020 the average balance of the Company’s borrowed funds was $46.91 million with an average cost of 2.59%, as compared to $75.1 million and an average cost of 2.77% for the quarter ended March 31, 2019.

Net Interest Income.  Net interest income was approximately $3.09 million for the quarter ended March 31, 2020, as compared to $2.89 million for the same quarter in the prior year.  The average interest rate spread increased to 2.55% for the quarter ended March 31, 2020, from 2.48% for the quarter ended March 31, 2019, while the net interest margin increased to 3.02% from 2.95%, over the same respective periods. These changes were primarily attributable to increased levels of non-interest bearing deposits and a generally lower level of market interest rates. 
           
Provision for Loan Losses.  For the three months ended March 31, 2020, management recorded $951 thousand provision for loan losses. Management records loan loss provisions based on historical loss experience and other qualitative factors. Comparatively, management recorded a provision for loan losses for the quarter ended March 31, 2019 of $85 thousand. The increase in the provision was primarily due to the potential credit impact of the COVID-19 pandemic. 

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 March 31, 2020 increased $230 thousand to $382 thousand as compared to $152 thousand for the quarter ended March 31, 2019. The increase was primarily attributable to a net gain on security sales of $194 thousand.

Non-Interest Expense.  Non-interest expense for the quarter ended March 31, 2020 increased $220 thousand when compared to the same quarter in 2019. The increase is primarily attributable to a net increase in other expenses of $179 thousand, which was due to accruals for expenses related to staffing, professional, additional computer hardware and office maintenance/cleaning related to the COVID-19 pandemic. 

Income Tax Expense.  Due to a pre-tax loss, an income tax benefit of $11 thousand was recognized for the quarter ended March 31, 2020 as compared to $132 thousand expense for the quarter ended March 31, 2019.

	ES BANCSHARES, INC.
	STATEMENTS OF INCOME
	(In Thousands)
	(Unaudited)
		Quarter to Date				Quarter to Date			Year to Date				Year to Date
		3/31/2020				3/31/2019			3/31/2020				3/31/2019
	Total interest income	$	4,507			$	4,426		$	4,507			$	4,426
	Total interest expense		1,417				1,540			1,417				1,540
	Net interest income		3,090				2,886			3,090				2,886
	Provision for loan losses		951				85			951				85
	Net interest income after
	provision for loan loss		2,139				2,801			2,139				2,801
	Total non-interest income		382				152			382				152
	Compensation and benefits		1,352				1,323			1,352				1,323
	Occupancy and equipment		414				384			414				384
	Professional fees		154				148			154				148
	Data processing service fees		176				148			176				148
	NYS Banking & FDIC Assessment		79				102			79				102
	Other operating expenses		452				302			452				302
	Total non-interest expense		2,627				2,407			2,627				2,407
	Net Income Before Taxes		(106	)			546			(106	)			546
	Provision for income taxes		(11	)			132			(11	)			132
	Net income		(95	)			414			(95	)			414
		Quarter Ended				Quarter Ended			Quarter Ended				Quarter Ended
		3/31/2020				12/31/2019			9/30/2019				6/30/2019
	Total interest income	$	4,507			$	4,497		$	4,570			$	4,413
	Total interest expense		1,417				1,664			1,683				1,617
	Net interest income		3,090				2,833			2,887				2,796
	Provision for loan losses		951				40			105				95
	Net interest income after
	provision for loan loss		2,139				2,793			2,782				2,701
	Other non-interest income		382				314			230				299
	Compensation and benefits		1,352				1,339			1,324				1,297
	Occupancy and equipment		414				437			445				412
	Professional fees		154				138			145				104
	Data processing service fees		176				153			159				156
	NYS Banking & FDIC Assessment		79				61			41				97
	Other operating expenses		452				468			400				382
	Total non-interest expense		2,627				2,596			2,514				2,448
	Net Income Before Taxes		(106	)			511			498				552
	Provision for income taxes		(11	)			124			122				134
	Net income		(95	)			387			376				418
	Basic Earnings per Share	$	(0.02	)		$	0.06		$	0.09			$	0.10
	Diluted Earnings per Share	$	(0.01	)		$	0.06		$	0.09			$	0.09

	ES BANCSHARES, INC.
	OTHER FINANCIAL MEASURES
	(In Thousands)
	(Unaudited)
		Quarter Ended				Quarter Ended				Quarter Ended				Quarter Ended
		3/31/2020				12/31/2019				9/30/2019				6/30/2019
	Asset Quality
	Allowance for Loan Losses	$	4,491			$	3,539			$	3,643			$	3,538
	Nonperforming Loans / Total Loans		0.48%				0.46%				0.40%				0.76%
	Nonperforming Assets / Total Assets		0.47%				0.46%				0.52%				0.84%
	ALLL / Nonperforming Loans		251.46%				206.72%				248.67%				127.73%
	ALLL / Loans, Gross		1.20%				0.96%				0.99%				0.97%
	Capital
	Shares Issue - Basic		6,648,320				6,648,320				4,120,613				4,120,613
	Book Value per Share	$	5.02			$	5.00			$	5.59			$	5.50
	Tangible Book Value per Share	$	4.93			$	4.91			$	5.45			$	5.36
	Tier 1 Capital Ratio		9.28%				9.26%				7.41%				7.50%
	Tier 1 Risk Based Capital Ratio		13.73%				13.62%				10.38%				10.26%
	Total Risk Based Capital Ratio		14.98%				14.86%				11.63%				11.48%
		Quarter Ended				Quarter Ended				Quarter Ended				Quarter Ended
		3/31/2020				12/31/2019				9/30/2019				6/30/2019
	Profitability
	Yield on Average Earning Assets		4.40%				4.39%				4.61%				4.57%
	Cost of Avg. Interest Bearing Liabilities		1.85%				2.12%				2.12%				2.11%
	Net Spread		2.55%				2.26%				2.49%				2.46%
	Net Margin		3.02%				2.74%				2.92%				2.90%

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