Summer is off to a good start for ES Bancshares in Newburgh, N.Y.
The $254 million-asset parent of Empire State Bank was eager to tout continued turnaround efforts, disclosing that it expects a profit of $577,000 to $727,000 for the first half of this year. The forecast includes proceeds from a recent branch sale.
That would be a marked improvement over the company's first-quarter profit of $123,000. Earnings for the first half could quadruple 2016's first-half profit.
The company also plans to expand in two key boroughs in New York City.
The recently sold branch, in New Paltz, N.Y., was a solid performer with about $31 million in deposits, CEO Philip Guarnieri said. But stiff competition from banks and credit unions made it difficult to make loans, prompting the decision to sell the location to Salisbury Bancorp in Lakeville, Conn., he said.
ES booked “a sizable gain” on the sale, Guarnieri said, declining to provide a price.
The branch sale squares with the company's longer-term strategy of focusing on higher-growth markets around New York. Empire State has branches in Brooklyn and Staten Island. It plans to open a second branch in each borough.
While plenty of banks conduct business in New York City, most are larger and are looking to make bigger loans, Guarnieri said.
“Their appetite is for deals of $5 million and up,” Guarnieri said. “There’s very little competition for loans of less than $2 million.”
Loan growth in Brooklyn and Staten Island is surging, Guarnieri said.
In the short term, that has created some growing pains. Empire State’s loan-to-deposit ratio stood at 102% on March 31 — and that doesn’t take into account losing the deposits at the recently sold branch. The average ratio for banks with $100 million to $1 billion in assets is 79.3%, according to data from the Federal Deposit Insurance Corp.
For now, ES is relying on borrowings such as Federal Home Loan Bank advances to help fund new loans until its planned branches start bringing in deposits, Guarnieri said.