Esquire Financial Holdings, Inc 8-K, filed Oct 25, 2021
Esquire Financial Holdings, Inc. (ESQ)
About this 8-K
Esquire Financial Holdings, Inc filed this 8-K on October 25, 2021.
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Item 2.02Results of Operations and Financial Condition.
On October 25, 2021, Esquire Financial Holdings, Inc. (the “Company”), the holding company for Esquire Bank, National Association (“Esquire Bank”), issued a press release announcing its earnings for the quarter ended September 30, 2021. A copy of the press release is attached as Exhibit 99.1 hereto and incorporated herein by reference.
The information contained in this Item 2.02 and Exhibit 99.1 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any filings made by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as expressly set forth by specific reference in such filing.
Item 7.01.Regulation FD Disclosure.
Esquire Financial Holdings, Inc. (the “Company”) intends to distribute and make available to investors, and to post on its website, the written presentation attached hereto as Exhibit 99.2. The presentation is furnished in this Current Report on Form 8-K, pursuant to this Item 7.01, as Exhibit 99.2, and is incorporated herein by reference.
The information contained in this Item 7.01 and Exhibit 99.2 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any filings made by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as expressly set forth by specific reference in such filing.
Item 9.01.Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. | | Description |
99.1 | | |
99.2 | | Written presentation to be distributed and made available to investors and posted |
104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| ESQUIRE FINANCIAL HOLDINGS, INC. |
| |
| |
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Dated: October 25, 2021 | By:/s/ Andrew C. Sagliocca |
| Andrew C. Sagliocca |
| President and Chief Executive Officer |
Exhibit 99.1
ESQUIRE FINANCIAL HOLDINGS, INC.
REPORTS THIRD QUARTER 2021 RESULTS
Industry Leading Loan Growth Drives Record Revenues
Jericho, NY – October 25, 2021 – Esquire Financial Holdings, Inc. (NASDAQ: ESQ) (the “Company”), the financial holding company for Esquire Bank, National Association (“Esquire Bank”), today announced its operating results for the third quarter of 2021. Significant achievements during the quarter include:
| ● | Net income of $2.5 million, or $0.32 per diluted share, as compared to $4.5 million, or $0.57 per diluted share on a linked quarter basis. |
| ● | Returns on average assets and common equity of 0.97% and 7.32%, respectively, as compared to 1.84% and 13.76% on a linked quarter basis. |
| ● | Industry leading net interest margin of 4.50% despite historically low interest rate environment. |
| ● | Reclassified its legacy NFL consumer post settlement loan portfolio totaling $23.6 million to loans held for sale, incurring a pretax charge totaling $3.4 million ($2.5 million net of tax), or $0.31 per diluted share. The fair value of these loans held for sale was $14.2 million. Excluding this charge, adjusted (1) net income, diluted earnings per share, return on average assets, and return on average common equity would have been $5.0 million, $0.63, 1.93%, and 14.49%, respectively. This accounting reclassification to held for sale is reflective of management’s intent to sell these assets to a fund in the near term as previously disclosed. |
| ● | Loans held for investment increased $36.7 million, or 21% annualized, to $744.1 million on a linked quarter basis. Excluding the effects of the NFL reclassification and repayments on Paycheck Protection Program (“PPP”) loans totaling $23.6 million and $11.9 million, respectively, loans held for investment increased 41% annualized on a linked quarter basis. The Company continues to deploy excess liquidity from core deposits into higher yielding loans. |
| ● | Deposits increased $62.4 million on a linked quarter basis, or 27% annualized, to $977.0 million, primarily driven by commercial deposits, with a cost of funds of 0.09% (including demand deposits). Demand deposits, totaling $416.8 million, represent 43% of total deposits while off-balance sheet sweep funds totaled $443.9 million at quarter end, demonstrating the continued strength of our branchless business model. |
| ● | Total assets increased $65.2 million on a linked quarter basis, or 24% annualized, to $1.1 billion. |
| ● | Payment processing fee income totaled $5.2 million in the current quarter, consistent with the prior quarter and an increase of $1.5 million, or 41%, as compared to the third quarter of 2020. Payment processing fee income represented 32% of total revenues. |
| ● | Continued solid asset quality metrics with a reserve for loan losses to total loans of 1.16%. Excluding Small Business Administration (“SBA”) guaranteed PPP loans totaling $11.7 million, our reserve for loan losses to total loans was 1.18%. |
| ● | Esquire Bank remains well above the bank regulatory “Well Capitalized” standards. |
“Our unique business model, focus on financial technology and commitment to our employees and customers, continues to demonstrate Esquire’s leadership within the banking industry. We are well positioned to continue delivering exceptional products to our customers, resulting in excellent returns for our investors” stated Tony Coelho, Chairman of the Board.
| (1) | Adjusted to exclude the $2.5 million charge, net of tax, related to the reclassification of our legacy NFL consumer post settlement loan portfolio from held for investment to held for sale. See non-GAAP reconciliation provided elsewhere herein. |
“Our investment in our technology platform and digital marketing has been instrumental in driving our continued industry leading growth and performance metrics,” stated Andrew C. Sagliocca, President and Chief Executive Officer. “Our brand image nationally continues to grow as we evolve as thought leaders in the verticals we serve.”
Third Quarter Earnings
Net income for the quarter ended September 30, 2021 was $2.5 million, or $0.32 per diluted share, compared to $3.6 million, or $0.48 per diluted share for the same period in 2020. Returns on average assets and common equity for the current quarter were 0.97% and 7.32%, respectively, compared to 1.60% and 11.99% for the same period of 2020.
Net interest income for the third quarter of 2021 increased $2.1 million, or 22.6%, to $11.3 million, due to growth in average interest earning assets totaling $128.9 million, or 14.9%, to $994.2 million when compared to the same period in 2020. Our net interest margin increased to 4.50% for the third quarter of 2021 compared to 4.23% for the same period in 2020 primarily due to the origination of higher yielding commercial litigation loans during the period. Average loans in the quarter increased $130.0 million, or 21.4%, to $738.3 million when compared to the third quarter of 2020 fueled by growth in our litigation and multifamily loan portfolios. Our loan-to-deposit ratio was 76.2% as our low cost deposit base increased $231.5 million, or 31%, from the comparable quarter in 2020.
The provision for loan losses was $3.8 million for the third quarter of 2021, a $2.9 million increase from the same period in 2020. In the third quarter of 2021, the Company reclassified its legacy NFL consumer post settlement loan portfolio totaling $23.6 million from held for investment to held for sale as management intends to sell these assets to a fund in the near term, which will reduce our exposure and extend the portfolio’s duration as previously disclosed. This change in accounting model to the lower of cost or market resulted in a $9.0 million charge-off, of which $3.0 million was recognized as a component of the third quarter’s provision for loan losses. The remaining provision relates to an increase in the general reserve attributable to loan growth. As of September 30, 2021, Esquire had nonperforming loans held for investment of $12 thousand and an allowance to loans ratio of 1.16%. Excluding SBA guaranteed PPP loans totaling $11.7 million, our reserve for loan losses to total loans was 1.18%.
Noninterest income increased $1.0 million, or 26.8%, to $4.9 million for the third quarter of 2021, as compared to the third quarter of 2020, driven by our payment processing platform partially offset by a $384 thousand charge related to the NFL loan portfolio valuation. Payment processing volumes for the platform increased $2.0 billion, or 47.6%, to $6.2 billion for the quarter ended September 30, 2021, as compared to the same period in 2020, driven by expansion of our sales channels through ISOs, increased number of merchants, volume increases and increased fee allocation arrangements, as well as the reopening of the economy as the pandemic restrictions continued to ease nationally.
Noninterest expense increased $1.7 million, or 23.6%, to $9.0 million for the third quarter of 2021, as compared to the same period in 2020. This increase was primarily driven by increases in employee compensation and benefits, data processing, recruiting costs, advertising and marketing and occupancy and equipment costs. Employee compensation and benefits costs increased $1.2 million, or 26.3%, due to increases in staffing of 16% to support our investment in digital platforms and related sales/marketing divisions, and the impact of salary and stock-based compensation increases. Data processing costs increased $205 thousand, or 26.6%, due to increased processing volume, primarily driven by our core banking platform, and additional costs related to our technology implementations. Other operating expenses increased $151 thousand, or 39.5%, primarily due to hiring efforts to support our investment in digital platforms and related sales/marketing divisions as well as general increases in staffing to support our continued growth. Advertising and marketing costs increased $118 thousand, or 69.0%, as we continue our digital marketing efforts and thought leadership in our national verticals. We have also re-engaged in our traditional high touch marketing and sales efforts at conferences and other in-person industry forums. Occupancy and equipment costs increased $81 thousand, or 13.2%, primarily due to amortization of our investments in internally developed software to support our new digital platform and additional office space to support our continued growth.
The Company’s efficiency ratio was 55.6% for the three months ended September 30, 2021, consistent with the comparable period in 2020.
The effective tax rate was 27.0% for the third quarter of 2021, as compared to 26.5% for the same period in 2020.
Year to Date Earnings
Net income for the nine months ended September 30, 2021 was $11.2 million, or $1.42 per diluted share, compared to $8.7 million, or $1.14 per diluted share for the same period in 2020. Returns on average assets and common equity for the nine months ended September 30, 2021 were 1.52% and 11.36%, respectively, compared to 1.36% and 10.03% for the same period of 2020.
Net interest income for the first nine months of 2021 increased $4.4 million, or 16.1%, to $32.0 million, due to growth in average interest earning assets totaling $125.9 million, or 15.3%, to $951.2 million when compared to the same period in 2020. Our net interest margin
2
increased 4 basis points to 4.50% for the nine months ended 2021 compared to 4.46% for the same period in 2020 primarily due to the stability of our interest earning asset yields and the decline in our cost of deposits. Average loans for the nine months increased $118.3 million, or 20.1%, to $705.6 million when compared to the same period in 2020 with growth in our litigation and multifamily loan portfolios.
The provision for loan losses was $6.4 million for the nine months ended 2021, a $1.7 million increase from the same period in 2020. In the third quarter of 2021, the Company reclassified its legacy NFL consumer post settlement loan portfolio totaling $23.6 million from held for investment to held for sale as management intends to sell these assets to a fund in the near term, which will reduce our exposure and extend the portfolio’s duration as previously disclosed. This change in accounting model to the lower of cost or market resulted in a $9.0 million charge-off, of which $3.0 million was recognized as a component of the current quarter provision for loan losses. The remaining 2021 provision relates to an increase in the general reserve attributable to loan growth.
Noninterest income increased $5.9 million, or 59.2%, to $15.9 million for the nine months ended 2021, as compared to the same period in 2020, driven by our payment processing platform. Payment processing volumes for this platform increased $7.0 billion, or 67.3%, to $17.4 billion for the nine months ended September 30, 2021, as compared to the same period in 2020, driven by expansion of our sales channels through ISOs, increased number of merchants, volume increases and increased fee allocation arrangements as well as the reopening of the economy as the pandemic restrictions continued to ease nationally.
Noninterest expense increased $5.4 million, or 25.7%, to $26.3 million for the nine months ended 2021, as compared to the same period in 2020. This increase was primarily driven by increases in employee compensation and benefits, advertising and marketing, data processing and occupancy and equipment costs. Employee compensation and benefits costs increased $3.7 million, or 30.1%, due to increases in staffing of 16% to support our investment in digital platforms and related sales/marketing divisions, and the impact of salary and stock-based compensation increases. Advertising and marketing costs increased $647 thousand as we continue our new digital marketing efforts and thought leadership in our national verticals. We also re-engaged in our traditional high touch marketing and sales efforts at conferences and other in-person industry forums. Data processing costs increased $462 thousand, or 20.3%, due to increased processing volume, primarily driven by our core banking platform, and additional costs related to our technology implementations. Occupancy and equipment costs increased $369 thousand, or 21.3%, primarily due to amortization of our investments in internally developed software to support our new digital platform, precautionary office cleaning costs related to COVID-19 and additional office space to support our continued growth.
The Company’s efficiency ratio was 55.0% for the nine months ended September 30, 2021, as compared to 55.8% for the same period in 2020.
The effective tax rate decreased to 26.1% for the nine months ended 2021, as compared to 27.0% for the same period in 2020, due to certain discrete tax benefits related to share based compensation recognized in 2021.
Asset Quality
Nonperforming loans held for investment, totaling $12 thousand, consisted of several nonaccrual consumer loans. As of September 30, 2021, the allowance for loan losses was $8.7 million, or 1.16% of total loans, as compared to $11.6 million, or 1.82% of total loans at September 30, 2020. The decrease in the allowance as a percent of loans is a result of the charge-off of $9.0 million upon reclassification of the legacy NFL consumer post settlement loan portfolio from held for investment to held for sale as our overall reserve for loan losses to total loans returned to pre-pandemic levels. Excluding SBA guaranteed PPP loans totaling $11.7 million, our allowance for loan losses to total loans was 1.18%.
In 2020, management implemented a customer payment deferral program (principal and interest) under the CARES Act to assist business borrowers and certain consumers that may have been experiencing financial hardship due to COVID-19 related challenges. As of September 30, 2021, there were no participants in our payment deferral program.
We are participating in the PPP administered by the SBA and have originated $45.5 million PPP loans to date. As of September 30, 2021, our outstanding PPP loan balance was $11.7 million and $33.8 million have been fully repaid by the SBA.
Balance Sheet
At September 30, 2021, total assets were $1.1 billion, reflecting a $242.4 million, or 27.5% increase from September 30, 2020. This increase is attributable to increases in loans held for investment totaling $108.4 million, or 17.1%, to $744.1 million, driven by litigation and multifamily loans, funded with low-cost deposits. In the third quarter of 2021, the Company reclassified its legacy consumer NFL loan portfolio totaling $23.6 million to loans held for sale, incurring a pretax charge totaling $3.4 million ($2.5 million net of tax), or $0.31 per diluted share. As of September 30, 2021, the fair value of these loans held for sale was approximately $14.2 million based on an independent third-party valuation. This accounting reclassification to held for sale is reflective of management’s intent to sell these
3
assets to a fund in the near term. These loans held for sale totaling $14.2 million have been included in the Other assets financial statement caption on the statement of financial condition.
Commencing in the fourth quarter of 2020, we invested excess deposit funds in reverse repurchase agreements, collateralized by GNMA eligible mortgage loans, which totaled $50.9 million at September 30, 2021. Our available for sale securities portfolio increased $31.3 million, or 28.3%, to $141.7 million as compared to September 30, 2020.
The following table provides information regarding the composition of our loan portfolio for the periods presented:
| | At September 30, | | | At December 31, | | At September 30, |
| |||||||||
| | 2021 | | | 2020 | | 2020 |
| |||||||||
|
| Amount |
| Percent |
| | Amount |
| Percent |
| Amount |
| Percent |
| |||
| | (Dollars in thousands) |
| ||||||||||||||
Real estate: |
| |
|
|
|
| | |
|
|
|
| |
|
|
| |
1 – 4 family | | $ | 44,022 |
| 5.91 | % | | $ | 48,433 |
| 7.20 | % | $ | 48,925 |
| 7.69 | % |
Multifamily | |
| 240,055 |
| 32.24 | | |
| 169,817 |
| 25.24 | |
| 168,743 |
| 26.54 | |
Commercial real estate | |
| 53,437 |
| 7.18 | | |
| 54,717 |
| 8.13 | |
| 54,097 |
| 8.51 | |
Construction | |
| — |
| — | | |
| — |
| — | |
| — |
| — | |
Total real estate | |
| 337,514 |
| 45.33 | | |
| 272,967 |
| 40.57 | |
| 271,765 |
| 42.74 | |
Commercial | |
| 398,511 |
| 53.51 | | |
| 358,410 |
| 53.28 | |
| 320,970 |
| 50.48 | |
Consumer | |
| 8,651 |
| 1.16 | | |
| 41,362 |
| 6.15 | |
| 43,082 |
| 6.78 | |
Total loans held for investment | | $ | 744,676 |
| 100.00 | % | | $ | 672,739 |
| 100.00 | % | $ | 635,817 |
| 100.00 | % |
Deferred loan fees and unearned premiums, net | |
| (584) |
|
| | |
| (318) |
|
| |
| (150) |
|
| |
Allowance for loan losses | |
| (8,665) |
|
| | |
| (11,402) |
|
| |
| (11,557) |
|
| |
Loans held for investment, net | | $ | 735,427 |
|
| | | $ | 661,019 |
|
| | $ | 624,110 |
|
| |
| | | | | | | | | | | | | | | | | |
Loans held for sale, net (included in Other assets) | | $ | 14,200 |
|
| | | $ | — |
|
| | $ | — |
|
| |
Total deposits were $977.0 million as of September 30, 2021, a $231.5 million, or 31.1%, increase from September 30, 2020. This was primarily due to a $129.2 million, or 30.8%, increase in Savings, NOW and Money Market deposits to $549.1 million, a $95.5 million, or 29.7%, increase in noninterest bearing demand deposits to $416.8 million, and a $6.8 million, or 158.2%, increase in time deposits. The increase in deposits was primarily driven by commercial and escrow low-cost deposits from our litigation and small business platforms. Off-balance sheet sweep funds totaled $443.9 million at quarter end. Our deposit growth and our off-balance sheet funds continue to demonstrate the strength of our unique branchless and low-cost funding model.
Stockholders’ equity increased $15.2 million to $137.2 million as of September 30, 2021, compared to September 30, 2020. Esquire Bank remains well above bank regulatory “Well Capitalized” standards.
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About Esquire Financial Holdings, Inc.
Esquire Financial Holdings, Inc. is a financial 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 litigation industry and small businesses nationally, as well as commercial and retail customers in the New York metropolitan area. The bank offers tailored financial and payment processing solutions to the litigation community and their clients as well as dynamic and flexible payment processing 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 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q 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. Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially remain reopened, and higher levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase; collateral for loans, especially real estate, may decline in value; our allowance for loan losses may increase if borrowers experience financial difficulties; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and our cyber security risks are increased as the result of an increase in the number of employees working remotely. 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
5
ESQUIRE FINANCIAL HOLDINGS, INC.
Condensed Consolidated Statement of Condition (unaudited)
(dollars in thousands except per share data)
| | September 30, | | December 31, | | September 30, |
| |||
|
| 2021 |
| 2020 |
| 2020 |
| |||
ASSETS |
| |
|
| |
|
| |
| |
Cash and cash equivalents | | $ | 138,235 | | $ | 65,185 | | $ | 110,593 | |
Securities purchased under agreements to resell, at cost | |
| 50,899 | |
| 51,726 | |
| — | |
Securities available for sale, at fair value | |
| 141,703 | |
| 117,655 | |
| 110,421 | |
Securities, restricted at cost | |
| 2,680 | |
| 2,694 | |
| 2,694 | |
Loans held for investment | |
| 744,092 | |
| 672,421 | |
| 635,667 | |
Less: allowance for loan losses | |
| (8,665) | |
| (11,402) | |
| (11,557) | |
Loans, net of allowance | |
| 735,427 | |
| 661,019 | |
| 624,110 | |
Premises and equipment, net | |
| 3,443 | |
| 3,017 | |
| 2,857 | |
Other assets | |
| 50,883 | |
| 35,418 | |
| 30,224 | |
Total Assets | | $ | 1,123,270 | | $ | 936,714 | | $ | 880,899 | |
| | | | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
|
| |
|
| |
|
| |
Demand deposits | | $ | 416,849 | | $ | 351,692 | | $ | 321,343 | |
Savings, NOW and money market deposits | |
| 549,069 | |
| 441,160 | |
| 419,859 | |
Certificates of deposit | |
| 11,125 | |
| 11,202 | |
| 4,308 | |
Total deposits | |
| 977,043 | |
| 804,054 | |
| 745,510 | |
Other liabilities | |
| 9,046 | |
| 6,584 | |
| 13,443 | |
Total liabilities | |
| 986,089 | |
| 810,638 | |
| 758,953 | |
Total stockholders' equity | |
| 137,181 | |
| 126,076 | |
| 121,946 | |
Total Liabilities and Stockholders' Equity | | $ | 1,123,270 | | $ | 936,714 | | $ | 880,899 | |
| | | | | | | | | | |
Selected Financial Data | |
|
| |
|
| |
|
| |
Common shares outstanding | |
| 7,847,494 | |
| 7,793,482 | |
| 7,662,840 | |
Book value per share | | $ | 17.48 | | $ | 16.18 | | $ | 15.91 | |
Equity to assets | |
| 12.21 | % |
| 13.46 | % |
| 13.84 | % |
| | | | | | | | | | |
Capital Ratios (1) | |
|
| |
|
| |
|
| |
Tier 1 leverage ratio | |
| 11.32 | % |
| 12.51 | % |
| 12.21 | % |
Common equity tier 1 capital ratio | |
| 14.79 | % |
| 15.44 | % |
| 15.67 | % |
Tier 1 capital ratio | |
| 14.79 | % |
| 15.44 | % |
| 15.67 | % |
Total capital ratio | |
| 15.90 | % |
| 16.69 | % |
| 16.93 | % |
| | | | | | | | | | |
Asset Quality | |
|
| |
|
| |
|
| |
Loans 90 days past due and still accruing | | $ | — | | $ | — | | $ | 5,837 | |
Nonaccrual loans held for investment | | | 12 | | | 2,303 | | | 1,779 | |
Nonperforming loans | | $ | 12 | | $ | 2,303 | | $ | 7,616 | |
| | | | | | | | | | |
Allowance for loan losses to total loans | |
| 1.16 | % |
| 1.70 | % |
| 1.82 | % |
Nonperforming loans to total loans | |
| 0.00 | % |
| 0.34 | % |
| 1.20 | % |
Nonperforming assets to total assets | |
| 0.00 | % |
| 0.25 | % |
| 0.86 | % |
Allowance to nonperforming loans | | | 72,140 | % | | 495 | % |
| 152 | % |
(1) Regulatory capital ratios presented on bank-only basis.
6
ESQUIRE FINANCIAL HOLDINGS, INC.
Condensed Consolidated Income Statement (unaudited)
(dollars in thousands except per share data)
| | Three months ended | | Nine months ended |
| ||||||||
| | September 30, | | September 30, |
| ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||
Interest income | | $ | 11,493 | | $ | 9,496 | | $ | 32,600 | | $ | 28,535 | |
Interest expense | |
| 209 | |
| 289 | |
| 597 | |
| 978 | |
Net interest income | |
| 11,284 | |
| 9,207 | |
| 32,003 | |
| 27,557 | |
Provision for loan losses | |
| 3,750 | |
| 900 | |
| 6,400 | |
| 4,700 | |
Net interest income after provision for loan losses | |
| 7,534 | |
| 8,307 | |
| 25,603 | |
| 22,857 | |
| | | | | | | | | | | | | |
Noninterest income: | |
|
| |
|
| |
|
| |
|
| |
Payment processing fees | |
| 5,227 | |
| 3,721 | |
| 15,948 | |
| 9,527 | |
Other noninterest income | |
| 81 | |
| 163 | |
| 292 | |
| 432 | |
Unrealized loss on loans held for sale | |
| (384) | |
| — | |
| (384) | |
| — | |
Total noninterest income | |
| 4,924 | |
| 3,884 | |
| 15,856 | |
| 9,959 | |
| | | | | | | | | | | | | |
Noninterest expense: | |
|
| |
|
| |
|
| |
|
| |
Employee compensation and benefits | |
| 5,523 | |
| 4,372 | |
| 16,189 | |
| 12,448 | |
Other expenses | |
| 3,484 | |
| 2,913 | |
| 10,124 | |
| 8,482 | |
Total noninterest expense | |
| 9,007 | |
| 7,285 | |
| 26,313 | |
| 20,930 | |
Income before income taxes | |
| 3,451 | |
| 4,906 | |
| 15,146 | |
| 11,886 | |
Income taxes | |
| 932 | |
| 1,300 | |
| 3,951 | |
| 3,150 | |
Net income | | $ | 2,519 | | $ | 3,606 | | $ | 11,195 | | $ | 8,736 | |
| | | | | | | | | | | | | |
Earnings Per Share | |
|
| |
|
| |
|
| |
|
| |
Basic | | $ | 0.34 | | $ | 0.49 | | $ | 1.50 | | $ | 1.18 | |
Diluted | | $ | 0.32 | | $ | 0.48 | | $ | 1.42 | | $ | 1.14 | |
Basic - adjusted (1) | | $ | 0.67 | | $ | 0.49 | | $ | 1.84 | | $ | 1.18 | |
Diluted - adjusted (1) | | $ | 0.63 | | $ | 0.48 | | $ | 1.73 | | $ | 1.14 | |
| | | | | | | | | | | | | |
Selected Financial Data | |
|
| |
|
| |
|
| |
|
| |
Return on average assets | |
| 0.97 | % |
| 1.60 | % |
| 1.52 | % |
| 1.36 | % |
Return on average equity | |
| 7.32 | % |
| 11.99 | % |
| 11.36 | % |
| 10.03 | % |
Adjusted return on average assets (1) | |
| 1.93 | % |
| 1.60 | % |
| 1.86 | % |
| 1.36 | % |
Adjusted return on average common equity (1) | |
| 14.49 | % |
| 11.99 | % |
| 13.87 | % |
| 10.03 | % |
Net interest margin | |
| 4.50 | % |
| 4.23 | % |
| 4.50 | % |
| 4.46 | % |
Efficiency ratio (2) | |
| 55.6 | % |
| 55.6 | % |
| 55.0 | % |
| 55.8 | % |
| (2) | Adjusted to exclude a $2.5 million charge, net of tax, related to the reclassification of our legacy NFL consumer post settlement loan portfolio from held for investment to held for sale. See non-GAAP reconciliation provided elsewhere herein. |
| (3) | Efficiency ratio represents noninterest expenses divided by the sum of net interest income plus noninterest income. |
7
ESQUIRE FINANCIAL HOLDINGS, INC.
Condensed Consolidated Average Balance Sheets and Average Yield/Cost (unaudited)
(dollars in thousands)
| | For the Three Months Ended September 30, |
| ||||||||||||||
| | 2021 | | 2020 |
| ||||||||||||
| | | | | | | | (Dollars in thousands) | | | | | | | |||
| | Average | |
| | | Average | | Average | |
| | | Average |
| ||
|
| Balance |
| Interest |
| Yield/Cost |
| Balance |
| Interest |
| Yield/Cost |
| ||||
INTEREST EARNING ASSETS |
| |
|
| |
|
|
|
| |
|
| |
|
|
| |
Loans held for investment | | $ | 738,281 | | $ | 10,709 |
| 5.75 | % | $ | 608,313 | | $ | 8,936 |
| 5.84 | % |
Securities, includes restricted stock | |
| 138,200 | |
| 583 |
| 1.67 | % |
| 113,580 | |
| 494 |
| 1.73 | % |
Securities purchased under agreements to resell | |
| 50,972 | |
| 150 |
| 1.17 | % |
| — | |
| — |
| — | % |
Interest earning cash and other | |
| 66,726 | |
| 51 |
| 0.30 | % |
| 143,420 | |
| 66 |
| 0.18 | % |
Total interest earning assets | |
| 994,179 | |
| 11,493 |
| 4.59 | % |
| 865,313 | |
| 9,496 |
| 4.37 | % |
| | | | | | | | | | | | | | | | | |
NONINTEREST EARNING ASSETS | |
| 33,765 | |
|
|
|
| |
| 28,708 | |
|
|
|
| |
| | | | | | | | | | | | | | | | | |
TOTAL AVERAGE ASSETS | | $ | 1,027,944 | |
| | | | | $ | 894,021 | |
| | | | |
| | | | | | | | | | | | | | | | | |
INTEREST BEARING LIABILITIES | |
|
| |
|
|
|
| |
|
| |
|
|
|
| |
| | | | | | | | | | | | | | | | | |
Savings, NOW, Money Market deposits | | $ | 453,678 | | $ | 189 |
| 0.17 | % | $ | 430,511 | | $ | 203 |
| 0.19 | % |
Time deposits | |
| 11,126 | |
| 19 |
| 0.68 | % |
| 17,751 | |
| 85 |
| 1.90 | % |
Total interest bearing deposits | |
| 464,804 | |
| 208 |
| 0.18 | % |
| 448,262 | |
| 288 |
| 0.26 | % |
Borrowings | |
| 54 | |
| 1 |
| 7.35 | % |
| 87 | |
| 1 |
| 4.56 | % |
Total interest bearing liabilities | |
| 464,858 | |
| 209 |
| 0.18 | % | | 448,349 | |
| 289 |
| 0.26 | % |
| | | | | | | | | | | | | | | | | |
NONINTEREST BEARING LIABILITIES | |
|
| |
|
|
|
| |
|
| |
|
|
|
| |
Demand deposits | |
| 414,930 | |
|
|
|
| |
| 315,761 | |
|
|
|
| |
Other liabilities | |
| 11,550 | |
|
|
|
| |
| 10,260 | |
|
|
|
| |
Total noninterest bearing liabilities | |
| 426,480 | |
|
|
|
| |
| 326,021 | |
|
|
|
| |
Stockholders' equity | |
| 136,606 | |
|
|
|
| |
| 119,651 | |
|
|
|
| |
| | | | | | | | | | | | | | | | | |
TOTAL AVG. LIABILITIES AND EQUITY | | $ | 1,027,944 | |
|
|
|
| | $ | 894,021 | |
|
|
|
| |
Net interest income | |
|
| | $ | 11,284 |
| | |
|
| | $ | 9,207 |
| | |
Net interest spread | | | | | | | | 4.41 | % | | | | | | | 4.11 | % |
Net interest margin | |
|
| |
|
|
| 4.50 | % |
|
| |
|
|
| 4.23 | % |
8
ESQUIRE FINANCIAL HOLDINGS, INC.
Condensed Consolidated Average Balance Sheets and Average Yield/Cost (unaudited)
(dollars in thousands)
| | For the Nine Months Ended September 30, |
| ||||||||||||||
| | 2021 | | 2020 |
| ||||||||||||
| | | | | | | | (Dollars in thousands) | | | | | | | |||
| | Average | |
| | | Average | | Average | |
| | | Average |
| ||
|
| Balance |
| Interest |
| Yield/Cost |
| Balance |
| Interest |
| Yield/Cost |
| ||||
INTEREST EARNING ASSETS |
| |
|
| |
|
|
|
| |
|
| |
|
|
| |
Loans held for investment | | $ | 705,609 | | $ | 30,408 |
| 5.76 | % | $ | 587,282 | | $ | 26,055 |
| 5.93 | % |
Securities, includes restricted stock | |
| 131,019 | |
| 1,588 |
| 1.62 | % |
| 129,791 | |
| 2,132 |
| 2.19 | % |
Securities purchased under agreements to resell | |
| 51,185 | |
| 470 |
| 1.23 | % |
| — | |
| — |
| — | % |
Interest earning cash and other | |
| 63,354 | |
| 134 |
| 0.28 | % |
| 108,229 | |
| 348 |
| 0.43 | % |
Total interest earning assets | |
| 951,167 | |
| 32,600 |
| 4.58 | % |
| 825,302 | |
| 28,535 |
| 4.62 | % |
| | | | | | | | | | | | | | | | | |
NONINTEREST EARNING ASSETS | |
| 32,054 | |
|
|
|
| |
| 29,793 | |
|
|
|
| |
| | | | | | | | | | | | | | | | | |
TOTAL AVERAGE ASSETS | | $ | 983,221 | |
| | | | | $ | 855,095 | |
| | | | |
| | | | | | | | | | | | | | | | | |
INTEREST BEARING LIABILITIES | |
|
| |
|
|
|
| |
|
| |
|
|
|
| |
| | | | | | | | | | | | | | | | | |
Savings, NOW, Money Market deposits | | $ | 424,468 | | $ | 536 |
| 0.17 | % | $ | 426,347 | | $ | 697 |
| 0.22 | % |
Time deposits | |
| 11,098 | |
| 59 |
| 0.71 | % |
| 19,001 | |
| 277 |
| 1.95 | % |
Total interest bearing deposits | |
| 435,566 | |
| 595 |
| 0.18 | % |
| 445,348 | |
| 974 |
| 0.29 | % |
Borrowings | |
| 70 | |
| 2 |
| 3.82 | % |
| 105 | |
| 4 |
| 5.09 | % |
Total interest bearing liabilities | |
| 435,636 | |
| 597 |
| 0.18 | % | | 445,453 | |
| 978 |
| 0.29 | % |
| | | | | | | | | | | | | | | | | |
NONINTEREST BEARING LIABILITIES | |
|
| |
|
|
|
| |
|
| |
|
|
|
| |
Demand deposits | |
| 405,427 | |
|
|
|
| |
| 283,841 | |
|
|
|
| |
Other liabilities | |
| 10,393 | |
|
|
|
| |
| 9,421 | |
|
|
|
| |
Total noninterest bearing liabilities | |
| 415,820 | |
|
|
|
| |
| 293,262 | |
|
|
|
| |
Stockholders' equity | |
| 131,765 | |
|
|
|
| |
| 116,380 | |
|
|
|
| |
| | | | | | | | | | | | | | | | | |
TOTAL AVG. LIABILITIES AND EQUITY | | $ | 983,221 | |
|
|
|
| | $ | 855,095 | |
|
|
|
| |
Net interest income | |
|
| | $ | 32,003 |
| | |
|
| | $ | 27,557 |
| | |
Net interest spread | | | | | | | | 4.40 | % | | | | | | | 4.33 | % |
Net interest margin | |
|
| |
|
|
| 4.50 | % |
|
| |
|
|
| 4.46 | % |
9
ESQUIRE FINANCIAL HOLDINGS, INC.
Condensed Consolidated Non-GAAP Financial Measure Reconciliation (unaudited)
(all dollars in thousands except per share data)
Adjusted net income, which is used to compute adjusted return on average assets, adjusted return on average common equity and adjusted earnings per common share, excludes the impact of the charge relating to the reclassification of our legacy NFL consumer post settlement loan portfolio from held for investment at amortized cost to held for sale (“HFS”) at the lower of cost or market.
We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial position, results and ratios. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for this measure, this presentation may not be comparable to other similarly titled measures by other companies.
| | Three months ended | | | Nine months ended | | ||||||
| | September 30, | | | September 30, | | ||||||
| 2021 | | 2020 | | 2021 | | 2020 | | ||||
Net income - GAAP | $ | 2,519 | | $ | 3,606 | | $ | 11,195 | | $ | 8,736 | |
Add: provision for loan losses related to HFS | | 3,000 | | | — | | | 3,000 | | | — | |
Add: noninterest income – unrealized loss HFS | | 384 | | | — | | | 384 | | | — | |
Less: income tax impact | | 914 | | | — | | | 914 | | | — | |
Loans held for sale charge, net of tax | | 2,470 | | | — | | | 2,470 | | | — | |
Adjusted net income | $ | 4,989 | | $ | 3,606 | | $ | 13,665 | | $ | 8,736 | |
| | | | | | | | | | | | |
Return on average assets – GAAP | | 0.97 | % | | 1.60 | % | | 1.52 | % | | 1.36 | % |
Adjusted return on average assets | | 1.93 | % | | 1.60 | % | | 1.86 | % | | 1.36 | % |
| | | | | | | | | | | | |
Return on average common equity – GAAP | | 7.32 | % | | 11.99 | % | | 11.36 | % | | 10.03 | % |
Adjusted return on average common equity | | 14.49 | % | | 11.99 | % | | 13.87 | % | | 10.03 | % |
| | | | | | | | | | | | |
Basic earnings per share – GAAP | $ | 0.34 | | $ | 0.49 | | $ | 1.50 | | $ | 1.18 | |
Adjusted basic earnings per share | $ | 0.67 | | $ | 0.49 | | $ | 1.84 | | $ | 1.18 | |
| | | | | | | | | | | | |
Diluted earnings per share – GAAP | $ | 0.32 | | $ | 0.48 | | $ | 1.42 | | $ | 1.14 | |
Adjusted diluted earnings per share | $ | 0.63 | | $ | 0.48 | | $ | 1.73 | | $ | 1.14 | |
10
Exhibit 99.2
| Ensuring our Clients and Our Institution Succeed Boldly Listed as ESQ Esquire Financial Holdings, Inc. (Financial Holding Company for Esquire Bank, N.A.) 3Q 2021 Investor Presentation Exhibit 99.2 |
| Forward Looking Disclosure This presentation contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not historical fact and express management’s current expectations, forecasts of future events or long-term goals and, by their nature, are subject to assumptions, risks and uncertainties, many of which are beyond the control of the Company. These statements are may be identified through the use of words or phrases 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 the negative version of those words or other comparable words or phrases of a future or forward-looking nature. Forward-looking statements speak only as of the date they are made and are inherently subject to uncertainties and changes in circumstances, including those described under the heading “Risk Factors” in the Company’s 10-K and 10-Q, filed with the Securities and Exchange Commission (“SEC”). Forward-looking statements are not guarantees of future performance and should not be relied upon as representing management’s views as of any subsequent date. Actual results could differ materially from those indicated. The Company undertakes no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. The forward-looking statements speak as of the date of this presentation. The delivery of this presentation shall not, under any circumstances, create any implication there has been no change in the affairs of the Company after the date hereof. This presentation includes industry and market data that we obtained from periodic industry publications, third-party studies and surveys. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. Although we believe the industry and market data to be reliable as of the date of this presentation, this information could prove to be inaccurate. Industry and market data could be wrong because of the method by which sources obtained their data and because information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. In addition, we do not know all of the assumptions regarding general economic conditions or growth that were used in preparing the forecasts from the sources relied upon or cited herein. This presentation contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Management uses these “non-GAAP” measures in its analysis of our performance. Management believes that these non-GAAP financial measures allows for better comparability with prior periods, as well as with peers in the industry who provide a similar presentation, and provide a greater understanding of our ongoing operations. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non- GAAP performance measures that may be presented by other companies. A reconciliation of the non-GAAP measures used in this presentation to the most directly comparable GAAP measures is provided in the Appendix to this presentation. 2 |
| Ensuring that our Company and clients succeed boldly with innovative products and technology, driving client success through relationship banking Our Mission |
| Expertise in the litigation market for 14+ years Client centric – relationship banking with a single point of contact Unique products and services tailored to client’s needs Strong underwriting and excellent commercial credit metrics How Our Clients Succeed Boldly Expertise in sales, risk, and compliance management for 25+ years Independent Sales Organization (“ISO”) model Support multiple processing platforms Strong growth and stable payment processing fee income - Compound Annual Growth Rate (“CAGR”) of 62% since 2017 Relationship based commercial real estate lending with a focus on multifamily Selective process and prudent growth Personal Banking tailored to our unique markets – full suite of online and mobile banking products A digital-first bank with best-in-class technology fueling future growth and industry leading client retention rates Customized and fully integrated Customer Relationship Management (“CRM”) for excellence in client service and operational efficiency Investments made in artificial intelligence (“AI”) to facilitate precision marketing and client acquisition across our national verticals A Branchless Financial Institution with Innovative Technology and Industry Leading Returns Litigation Commercial Banking Nationally Commercial Real Estate (“CRE”) Lending & Personal Banking NY Metro Area / Focused on Unique Verticals Payment Processing (Merchant Services) Small Business Banking Nationally Technology A Catalyst for Strong Growth 4 |
| Financial Highlights How Esquire Succeeds Boldly Key Highlights Industry leading returns from our unique national business models Stable payment processing fee income – noninterest income totaled 30% of revenue Branchless low-cost deposits with a cost of funds of 0.09% at September 30, 2021 * Book value per share and equity to assets are $17.48 and 12.21% at September 30, 2021, respectively Raymond James’ #1 Top Performing Community Bank (2020, 2019) Piper Sandler & Co.’s “2021 FSG Top Ideas” 5 at September 30, 2021 *Included noninterest bearing demand deposits (“DDA”) (1) Adjusted to exclude the $2.5 million charge, net of tax, related to the reclassification of our legacy NFL consumer post settlement loan portfolio from held for investment to held for sale. See non-GAAP reconciliation provided elsewhere herein. |
| Financial Highlights, cont’d How Esquire Succeeds Boldly 6 at September 30, 2021 *EPS – Diluted Earnings Per Share (1) Adjusted to exclude the $2.5 million charge, net of tax, related to the reclassification of our legacy NFL consumer post settlement loan portfolio from held for investment to held for sale. See non-GAAP reconciliation provided elsewhere herein. |
| Strong Growth Driven by Unique National Verticals How Esquire Succeeds Boldly Key Highlights Strong growth in higher yielding loans Stable low-cost deposit model Equity to Assets of 12.21% 7 at September 30, 2021 |
| Strong Revenue Growth How Esquire Succeeds Boldly 8 (1) Includes a $384 thousand charge related to the NFL loan portfolio valuation. Key Highlights Strong net interest margin Stable payment processing fee income |
| Stable low-cost deposit model Strong commercial deposits franchise DDA and escrow-based NOW accounts represent 43% and 36% of total deposits at September 30, 2021, respectively Higher yielding variable rate commercial loans anchored by our litigation (attorney related) portfolio How Esquire Succeeds Boldly 9 Industry Leading Net Interest Margin *Included noninterest bearing demand deposits (“DDA”) |
| Loan Portfolio Diversification with Focused Growth Focused growth in higher yielding commercial loans with strong credit metrics Selective multifamily loan growth with strong historical performance in the NY metro market How Esquire Succeeds Boldly 10 at September 30, 2021 |
| Approximately 54% of our loan portfolio is variable rate of which 87% have interest rate floor protection at September 30, 2021 Asset sensitive – estimated sensitivity of projected annualized net interest income (“NII”) up 100 and 200 basis point rate scenarios increases projected NII by 9.3% and 19.0%, respectively at June 30, 2021 Loan Portfolio Diversification with Focused Growth How Esquire Succeeds Boldly 11 |
| Esquire’s Bold Opportunities New York City properties total $1.3 trillion in Market Value.* A Significant Growth Opportunity Thoughtful in our property and borrower selection process Minimal historical losses Average debt-service coverage (“DSCR”) of approximately 1.5x Average loan-to-value (“LTV”) of 55% Strong owner and operators with high quality net worth CRE exposure is less than 225% of total capital plus the allowance for loan losses (“ALLL”) 12 *NYC Department of Finance publishes fiscal year 2022 tentative property tax assessment roll issued on January 15, 2021 |
| Solid Credit Metrics, Asset Quality and ALLL Coverage How Esquire Succeeds Boldly 13 at September 30, 2021 *ALLL – Allowance for loan and lease losses Note – All asset quality metrics are based on our loans held for investment portfolio (1) Reclassified the legacy NFL consumer loan portfolio from held for investment to held for sale which is accounted for at the lower of cost or market driving a $9.0 million charge off. |
| *Note: Excludes sweeps totaling $444 million Deposit Composition and Growth DDA and NOW (escrow funds) deposits total 79% of total deposits, representing stable funding sources in various interest rate scenarios Litigation and payment processing deposits represent 68% and 16% of total deposits at September 30, 2021, respectively Off-balance sheet commercial litigation funds (“sweeps”) total $444 million at September 30, 2021, representing an additional source of funding Commercial customers utilize our corporate cash management suite, including remote deposit capture (“RDC”) while leveraging our mobile banking application for personal banking, creating a highly efficient branchless platform How Esquire Succeeds Boldly 14 |
| Recognized for Succeeding Boldly Raymond James’ #1 Top Performing Community Bank (2020, 2019) Piper Sandler & Co.’s FSG Top Ideas (2021, 2020) 2019 Bank and Thrift SM – All Stars 15 Strong Financial Metrics = Industry Leading Performance Consistent recognition of exemplary performance from the industry |
| National Litigation Market Law firms need bold financial partners |
| The Esquire Competitive Advantage Esquire’s Bold Opportunities U.S. Litigation Market A Significant Growth Opportunity U.S. Tort actions are estimated to consume 1.5-2.0% of U.S. GDP* annually or $429 billion** Esquire does not compete with non-bank finance companies Significant barriers to entry – management expertise, brand awareness, regulatory/compliance, and decades of experience 15-Year Industry Track Record Extensive Litigation Experience In-House Deep Relationships with Respected Firms Nationally Daily Resources and Research Cash Flow Lending Coupled with Borrowing Base or Asset Based Approach Tailoring unique products other banks do not offer Typically advancing more than traditional banks, on traditional banking terms 17 Key Highlights $429 billion** Total Addressable Market (“TAM”) in litigation vertical Esquire is a tailored, differentiated brand and thought leader in the litigation market *US Tort actions are estimated to consume 1.5-2.0% of U.S. GDP annually. – Towers Watson US Tort Trends **$429 billion estimated annual US tort costs by US Chamber of Commerce – US Chamber of Commerce IRL Costs and Compensation of US Tort System |
| Commercial Litigation (Law Firm) Loans Full annual underwriting: 3 years financials and tax returns (business and personal) Full case inventory valuation process Collateral assignment of full case inventory Diversity across law firm inventories and collateral Personal guarantees Average LTV of less than 20% Average DSCR is typically greater than 1.70x Average draws against committed and uncommitted line-of-credit (“LOC”) and case disbursement loans of 54% Weighted average interest rate approximately 7% Funded with low-cost litigation deposits Litigation deposits to litigation loans drawn is 187% How Esquire Succeeds Boldly 18 |
| Payment Processing Succeed Boldly with flexible payment options across several payment platforms |
| The payments industry grew nearly 3% from 2019 to 2020 to an estimated total payment volume of $7.6 trillion Esquire’s Bold Opportunities Payment Volume Trends – A Significant Growth Opportunity Sources: Company Financial Records,, Note: PayPalfigures represent PayPal’s estimated U.S.percent share of “Total Payment Volume” (TPV).PayPalvolume includes volume from a bank account, a PayPal account balance, a PayPalCredit account, a credit or debit card or other stored value products such ascoupons and gift cards. Assuch, some of this volume may be included in other networks aswell. PayPal’s classification in the payments industry ecosystem is varied/debated asit performs functions attributed to a payment network, an issuer, acquirer, etc., and its financial reporting does not directly align with other payment network reporting structures and methods. Discover volume includes Discover Network and PulseNetwork transactions. 2018-2019: +10.3% CAGR 2019-2020: +2.9% CAGR 20 at December 31, 2020 ($ in billions) |
| Independent Sales Organization (ISO) Model How Esquire Succeeds Boldly What is an ISO? ISO Responsibilities They Do Merchant Vertical and Technology Focus Sales Agent Model Performs Initial Underwriting Boards Merchant to Payment Processing Platform Installation of Merchant Equipment Manage Call Center for Merchant Clients Merchant Risk and PCI Compliance Bank Responsibilities We Do Robust Policies Card Brand and Regulatory Compliance Support Multiple Processing Systems Assess ISO Verticals Re-underwrite Merchant Applications Utilize Industry Leading Risk Management Technology Daily and Month End Risk and Compliance Management Treasury Function for Merchant Clearing Maintaining and Monitor ISO and Merchant Reserves (DDA) 21 |
| Currently servicing 63,000+ merchants across 50 states Noninterest income, primarily payment processing fees, represents 30% of total revenue, at September 30, 2021 How Esquire Succeeds Boldly *Payment processing CAGR is 62% 22 Strong Growth in Stable Noninterest Income at September 30, 2021 *Payment processing CAGR is 62% (1) Includes a $384 thousand charge related to the NFL loan portfolio valuation. |
| How Esquire Succeeds Boldly Key Highlights Strong and stable DDA reserves Protection from merchant chargebacks and returns 23 Protecting Our Company with Strong Payment Processing Reserves at September 30, 2021 |
| High Tech, High Touch Growing boldly with financial technology for the future |
| Technology Driving Bold Success Client Centric Technology A Key Driver for Future Growth Website Artificial Intelligence* Marketing Sales Underwriting Onboarding Marketing Cloud AI to facilitate precision marketing and exponential customer acquisition across all verticals Website analytics, data enrichment and thought leadership content marketing Precision marketing – right offer right time Sales enablement, pipeline management and forecasting Underwriting efficiency & risk management / cash management and mobile banking / online applications Customer onboarding / core banking Partnering with best-in-class software vendors and solutions, with custom development to service all verticals at the bank Proprietary CRM built on Salesforce platform housing all client data touch points from prospect to boarding with a single client view, enabling high volume client acquisition strategies and excellence in client service SIGNATURE * Deployment of AI technologies applicable only to sales and marketing processes and not used as a decisioning tool for loan underwriting processes. 25 |
| 26 Digitally Transforming The Business of Law Aligning Law Firm Case Inventory Lifecycle to Customer Retention Client Incident Receive Intake Case Management Settlement/ Verdict Disbursement $ 1-3 Years (+) Products Case Cost Loans Working Capital and Term Loans Qualified Settlement Loans (“QSF”) Escrow Banking QSF Settlement Services Plaintiff Banking including Exclusive Prepaid Card Offering Technology Esquire Insight – Case Management Technology Commercial Cash Management Case Cost Management Online Applications Thought Leadership - Digital Assets and Content 26 |
| Large national markets primed for disruption: $429 billion for the litigation vertical and $7.6 trillion in the payment processing vertical Key Takeaways Why Esquire is Set to Succeed Boldly Tremendous untapped potential: Esquire’s current market share is a fraction of both national verticals We are thought leaders in the litigation vertical Differentiated and positioned for growth: With industry leading tailored products and state-of-the-art technology geared towards effective client acquisition 27 |
| Appendix (all dollars in thousands except per share data) 28 Non-GAAP Financial Measure Reconciliation Adjusted net income, which is used to compute adjusted return on average assets, adjusted return on average common equity and adjusted earnings per common share, excludes the impact of the charge relating to the reclassification of our legacy NFL consumer post settlement loan portfolio from held for investment at amortized cost to held for sale (“HFS”) at the lower of cost or market. We believe that these non-GAAP financial measures provide information that is important to investors and that is useful in understanding our financial position, results and ratios. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures. As other companies may use different calculations for this measure, this presentation may not be comparable to other similarly titled measures by other companies. |
| Succeeding Boldly Listed as ESQ Contact Information: Eric S. Bader Executive Vice President & Chief Operating Officer 516-535-2002 eric.bader@esqbank.com |
