Esquire Financial Holdings, Inc 10-Q for FY2022 Q1

Esquire Financial Holdings, Inc. (ESQ)

10-Q 2022-05-13 For: 2022-03-31

Added on April 10, 2026

About this 10-Q

Esquire Financial Holdings, Inc filed this 10-Q on May 13, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net income: $5.34M; up 28.0% from net income of $4.17M a year earlier
Diluted EPS: $0.66; up 24.5% from $0.53 a year earlier

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Maryland		27-5107901
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

100 Jericho Quadrangle, Suite 100, Jericho, New York		11753
(Address of Principal Executive Offices)		(Zip Code)


Large accelerated filer ◻		Accelerated filer ◻
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☒

		Page
PART I. FINANCIAL INFORMATION		3

Item 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Statements of Financial Condition	3

	Condensed Consolidated Statements of Income	4

	Condensed Consolidated Statements of Comprehensive (Loss) Income	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity	6

	Condensed Consolidated Statements of Cash Flows	7

	Notes to Interim Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION		37

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults Upon Senior Securities	37

Item 4.	Mine Safety Disclosures	37

Item 5.	Other Information	37

Item 6.	Exhibits	38

	SIGNATURES	39


	March 31,		December 31,
	2022		2021
ASSETS
Cash and cash equivalents	$	148,940	$	149,156
Securities purchased under agreements to resell, at cost		48,143		50,271
Securities available-for-sale, at fair value		134,161		148,384
Securities held-to-maturity (fair value $44,926 at March 31, 2022)		47,544		—
Securities, restricted, at cost		2,680		2,680

Loans held for investment		817,997		784,517
Less: allowance for loan losses		(9,491)		(9,076)
Loans, net of allowance		808,506		775,441
Premises and equipment, net		3,163		3,334
Accrued interest receivable		4,343		4,197
Other assets		45,349		45,307
Total assets	$	1,242,829	$	1,178,770

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand	$	488,960	$	409,350
Savings, NOW and money market		581,721		599,747
Time		19,239		19,312
Total deposits		1,089,920		1,028,409

Accrued expenses and other liabilities		9,524		6,626
Total liabilities	$	1,099,444	$	1,035,035

Commitments and contingencies		—		—

Stockholders’ equity:
Preferred stock, par value $0.01; authorized 2,000,000 shares; none issued		—		—
Common stock, par value $0.01; authorized 15,000,000 shares; 8,112,402 and 8,123,152 shares issued, respectively; and 8,076,320 and 8,088,846 shares outstanding, respectively		81		81
Additional paid-in capital		94,172		93,611
Retained earnings		56,802		51,460
Accumulated other comprehensive loss		(7,044)		(850)
Treasury stock at cost, 36,082 and 34,306 shares, respectively		(626)		(567)
Total stockholders’ equity		143,385		143,735
Total liabilities and stockholders’ equity	$	1,242,829	$	1,178,770


	For the Three Months
	Ended March 31,
	2022		2021
Interest income:
Loans	$	11,020	$	9,579
Securities		815		468
Securities purchased under agreements to resell		132		161
Interest earning deposits and other		57		40
Total interest income		12,024		10,248

Interest expense:
Savings, NOW and money market deposits		218		174
Time deposits		19		20
Borrowings		1		1
Total interest expense		238		195

Net interest income		11,786		10,053
Provision for loan losses		640		1,800
Net interest income after provision for loan losses		11,146		8,253

Noninterest income:
Payment processing fees		5,316		5,370
Customer related fees, service charges and other		186		94
Total noninterest income		5,502		5,464

Noninterest expense:
Employee compensation and benefits		6,134		4,996
Occupancy and equipment		751		699
Professional and consulting services		611		775
FDIC and regulatory assessments		123		98
Advertising and marketing		225		332
Travel and business relations		90		39
Data processing		1,008		851
Other operating expenses		438		398
Total noninterest expense		9,380		8,188

Net income before income taxes		7,268		5,529
Income tax expense		1,926		1,355

Net income	$	5,342	$	4,174

Earnings per share
Basic	$	0.70	$	0.56
Diluted	$	0.66	$	0.53


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


												Accumulated
								Additional				other				Total
	Preferred	Common		Preferred		Common		paid-in		Retained		comprehensive		Treasury		stockholders'
	shares	shares		stock		stock		capital		earnings		loss		stock		equity
Balance at January 1, 2022	—	8,088,846	$	—	$	81	$	93,611	$	51,460	$	(850)	$	(567)	$	143,735
Net income	—	—		—		—		—		5,342		—		—		5,342
Other comprehensive loss	—	—		—		—		—		—		(6,194)		—		(6,194)
Restricted stock award forfeitures	—	(10,750)		—		—		—		—		—		—		—
Stock compensation expense	—	—		—		—		561		—		—		—		561
Vested restricted stock awards settlement	—	(1,776)		—		—		—		—		—		(59)		(59)
Balance at March 31, 2022	—	8,076,320	$	—	$	81	$	94,172	$	56,802	$	(7,044)	$	(626)	$	143,385

												Accumulated
								Additional				other				Total
	Preferred	Common		Preferred		Common		paid-in		Retained		comprehensive		Treasury		stockholders'
	shares	shares		stock		stock		capital		earnings		income (loss)		stock		equity
Balance at January 1, 2021	—	7,793,482	$	—	$	78	$	91,622	$	33,535	$	1,408	$	(567)	$	126,076
Net income	—	—		—		—		—		4,174		—		—		4,174
Other comprehensive loss	—	—		—		—		—		—		(1,485)		—		(1,485)
Exercise of stock options, net of repurchases (40,468 shares)	—	36,333		—		1		9		—		—		—		10
Stock compensation expense	—	—		—		—		491		—		—		—		491
Balance at March 31, 2021	—	7,829,815	$	—	$	79	$	92,122	$	37,709	$	(77)	$	(567)	$	129,266


	For the Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net income	$	5,342	$	4,174
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		640		1,800
Depreciation		182		154
Stock compensation expense		561		491
Gain on loans held for sale		(90)		—
Net amortization (accretion):
Securities		124		254
Loans		(239)		(181)
Right of use asset		119		115
Software		301		257
Changes in other assets and liabilities:
Accrued interest receivable		(146)		(308)
Other assets		3,196		3,756
Operating lease liability		(142)		(132)
Accrued expenses and other liabilities		1,297		2,903
Net cash provided by operating activities		11,145		13,283

Cash flows from investing activities:
Net change in loans		(34,316)		(30,284)
Net change in securities purchased under agreements to resell		2,128		1,225
Purchases of securities available-for-sale		—		(33,617)
Purchases of securities held-to-maturity		(47,544)		—
Principal repayments on securities available-for-sale		7,316		17,346
Purchases of premises and equipment		(11)		(83)
Development of capitalized software		(386)		(779)
Net cash used in investing activities		(72,813)		(46,192)

Cash flows from financing activities:
Net increase in deposits		61,511		55,607
Exercise of stock options		—		10
Tax withholding payments for vested equity awards		(59)		—
Net cash provided by financing activities		61,452		55,617

(Decrease) increase in cash and cash equivalents		(216)		22,708

Cash and cash equivalents at beginning of the period		149,156		65,185

Cash and cash equivalents at end of the period	$	148,940	$	87,893

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	238	$	195
Taxes		342		275
Noncash transactions:
Transfer from loans held for investment to held for sale		850		—
Securities purchased but not yet settled		1,743		—


	March 31, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

	(In thousands)
Securities available-for-sale:
Mortgage-backed securities – agency	$	120,157	$	107	$	(8,774)	$	111,490
Collateralized mortgage obligations (CMOs) – agency		23,720		4		(1,053)		22,671
Total available-for-sale	$	143,877	$	111	$	(9,827)	$	134,161

			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value

	(In thousands)
Securities held-to-maturity:
Collateralized mortgage obligations (CMOs) – agency	$	47,544	$	—	$	(2,618)	$	44,926
Total held-to-maturity	$	47,544	$	—	$	(2,618)	$	44,926

	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

	(In thousands)
Securities available-for-sale:
Mortgage-backed securities – agency	$	122,258	$	673	$	(2,050)	$	120,881
Collateralized mortgage obligations (CMOs) – agency		27,316		237		(50)		27,503
Total available-for-sale	$	149,574	$	910	$	(2,100)	$	148,384


	March 31, 2022
	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

	(In thousands)
Securities available-for-sale:
Mortgage-backed securities – agency	$	63,981	$	(4,256)	$	39,448	$	(4,518)	$	103,429	$	(8,774)
CMOs – agency		19,562		(981)		1,037		(72)		20,599		(1,053)
Total temporarily impaired securities	$	83,543	$	(5,237)	$	40,485	$	(4,590)	$	124,028	$	(9,827)

	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrecognized Losses		Fair Value		Gross Unrecognized Losses		Fair Value		Gross Unrecognized Losses

	(In thousands)
Securities held-to-maturity:
CMOs – agency	$	44,926	$	(2,618)	$	—	$	—	$	44,926	$	(2,618)
Total temporarily impaired securities	$	44,926	$	(2,618)	$	—	$	—	$	44,926	$	(2,618)

	December 31, 2021
	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

	(In thousands)
Securities available-for-sale:
Mortgage-backed securities - agency	$	101,235	$	(1,813)	$	4,503	$	(237)	$	105,738	$	(2,050)
CMOs - Agency		7,416		(50)		—		—		7,416		(50)
Total temporarily impaired securities	$	108,651	$	(1,863)	$	4,503	$	(237)	$	113,154	$	(2,100)


	At March 31,		At December 31,
	2022		2021

	(In thousands)
Real estate:
1 – 4 family	$	33,468	$	40,753
Multifamily		262,465		254,852
Commercial real estate		62,447		48,589
Construction		—		—
Total real estate		358,380		344,194
Commercial		451,930		432,108
Consumer		8,281		8,681
Total loans held for investment	$	818,591	$	784,983
Deferred loan fees and unearned premiums, net		(594)		(466)
Allowance for loan losses		(9,491)		(9,076)
Loans held for investment, net	$	808,506	$	775,441



							Commercial
	1‑4 Family		Commercial		Multifamily		Real Estate		Construction		Consumer		Total

	(In thousands)
March 31, 2022
Allowance for loan losses:
Beginning balance	$	285	$	6,319	$	1,789	$	552	$	—	$	131	$	9,076
Provision (credit) for loan losses		(54)		254		253		136		—		51		640
Recoveries		—		2		—		—		—		—		2
Loans charged-off		—		—		(178)		—		—		(49)		(227)
Total ending allowance balance	$	231	$	6,575	$	1,864	$	688	$	—	$	133	$	9,491

March 31, 2021
Allowance for loan losses:
Beginning balance	$	342	$	5,003	$	1,278	$	597	$	—	$	4,182	$	11,402
Provision (credit) for loan losses		(23)		753		247		16		—		807		1,800
Recoveries		—		—		—		—		—		—		—
Loans charged-off		—		—		—		—		—		(21)		(21)
Total ending allowance balance	$	319	$	5,756	$	1,525	$	613	$	—	$	4,968	$	13,181


									Total Past
	30-59		60-89		Greater than				Due &
	Days		Days		90 Days		Nonaccrual		Nonaccrual		Loans Not
	Past Due		Past Due		Past Due		Loans		Loans		Past Due		Total

	(In thousands)
March 31, 2022
1 – 4 family	$	—	$	—	$	—	$	—	$	—	$	33,468	$	33,468
Commercial		111		64		—		—		175		451,755		451,930
Multifamily		—		—		—		—		—		262,465		262,465
Commercial real estate		—		—		—		—		—		62,447		62,447
Construction		—		—		—		—		—		—		—
Consumer		44		7		—		7		58		8,223		8,281
Total	$	155	$	71	$	—	$	7	$	233	$	818,358	$	818,591


	Pass		Special Mention		Substandard		Doubtful

	(In thousands)
March 31, 2022
1 – 4 family	$	30,453	$	3,015	$	—	$	—
Commercial		426,081		22,624		3,225		—
Multifamily		261,744		—		721		—
Commercial real estate		58,629		3,818		—		—
Construction		—		—		—		—
Consumer		8,281		—		—		—
Total	$	785,188	$	29,457	$	3,946	$	—


				Weighted
		Weighted		Average
		Average		Remaining
		Exercise		Contractual
	Options	Price		Life (Years)
March 31, 2022
Outstanding at beginning of year	649,600	$	16.66
Granted	—		—
Exercised	—		—
Forfeited	(6,334)		25.68
Expired	—		—
Outstanding at period end	643,266	$	16.57	5.27
Vested or expected to vest	643,266	$	16.57	5.27
Exercisable at period end	532,364	$	14.43	4.44


		Weighted Average
		Grant Date
	Shares	Fair Value
March 31, 2022
Outstanding at beginning of year	482,750	$	24.59
Granted	—		—
Vested	(20,497)		19.25
Forfeited	(10,750)		24.32
Outstanding at period end	451,503	$	24.84


		Operating Lease
		Liabilities
		(In thousands)
2022	$	480
2023		636
2024		652
2025		668
2026		627
Thereafter		—
Total operating lease payments	$	3,063
Less: interest		217
Present value of operating lease liabilities	$	2,846


	As of March 31,
	2022			2021
Weighted-average remaining lease term		4.65	years		5.59	years
Weighted-average discount rate		3.07	%		3.04	%


	For the Three Months Ended
	March 31,
	2022		2021

	(In thousands)
Intrinsic value of options exercised	$	—	$	861
Cash received from option exercises		—		10
Excess tax benefit from option exercises		—		164


	Fair Value Measurements Using
	Quoted Prices In Active Markets For Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)

	(In thousands)
March 31, 2022
Assets
Available-for-sale securities
Mortgage-backed securities – agency	$	—	$	111,490	$	—
CMOs – agency		—		22,671		—
Total	$	—	$	134,161	$	—

December 31, 2021
Assets
Available-for-sale securities
Mortgage-backed securities – agency	$	—	$	120,881	$	—
CMOs – agency		—		27,503		—
Total	$	—	$	148,384	$	—


	Fair Value Measurement at March 31, 2022, Using:
	Carrying
	Value		(Level 1)		(Level 2)		(Level 3)		Total

	(In thousands)
Financial Assets:
Cash and cash equivalents	$	148,940	$	1,100	$	147,840	$	—	$	148,940
Securities purchased under agreements to resell, at cost		48,143		—		—		48,143		48,143
Securities, held-to-maturity		47,544		—		44,926		—		44,926
Securities, restricted, at cost		2,680		N/A		N/A		N/A		N/A
Loans held for investment, net		808,506		—		—		801,863		801,863
Accrued interest receivable		4,343		—		278		3,972		4,250

Financial Liabilities:
Time deposits		19,239		—		19,178		—		19,178
Demand and other deposits		1,070,681		1,070,681		—		—		1,070,681
Secured borrowings		48		—		48		—		48
Accrued interest payable		—		—		—		—		—


	Fair Value Measurement at December 31, 2021, Using:
	Carrying
	Value		(Level 1)		(Level 2)		(Level 3)		Total

	(In thousands)
Financial Assets:
Cash and cash equivalents	$	149,156	$	2,202	$	146,954	$	—	$	149,156
Securities purchased under agreements to resell, at cost		50,271		—		—		50,271		50,271
Securities, restricted, at cost		2,680		N/A		N/A		N/A		N/A
Loans held for investment, net		775,441		—		—		774,114		774,114
Accrued interest receivable		4,197		—		252		3,945		4,197

Financial Liabilities:
Time deposits		19,312		—		19,330		—		19,330
Demand and other deposits		1,009,097		1,009,097		—		—		1,009,097
Secured borrowings		48		—		48		—		48
Accrued interest payable		—		—		—		—		—


	Three Months Ended
	March 31,
	2022		2021

	(In thousands)
Unrealized (Losses) Gains on Available-for-Sale Securities
Beginning balance	$	(850)	$	1,408
Other comprehensive loss before reclassifications, net of tax		(6,194)		(1,485)
Amounts reclassified from accumulated other comprehensive income		—		—
Net current period other comprehensive loss		(6,194)		(1,485)
Ending balance	$	(7,044)	$	(77)


	March 31, 2022				December 31, 2021
	Amount		Percent		Amount		Percent

	(Dollars in thousands)
Litigation-Related Loans
Commercial Litigation-Related:
Working capital lines of credit	$	207,700	52.6	%	$	210,148	54.4	%
Case cost lines of credit		131,803	33.3			127,859	33.1
Term loans		53,208	13.5			45,415	11.8
Total Commercial Litigation-Related		392,711	99.4			383,422	99.3
Consumer Litigation-Related:
Post-settlement consumer loans		2,460	0.6			2,451	0.7
Structured settlement loans		92	0.0			116	0.0
Total Consumer Litigation-Related		2,552	0.6			2,567	0.7
Total Litigation-Related Loans	$	395,263	100.0	%	$	385,989	100.0	%


	For the Three Months Ended
	March 31,
	2022 vs. 2021
	Increase				Total
	(Decrease) due to				Increase
	Volume		Rate		(Decrease)

	(In thousands)
Interest earned on:
Loans held for investment	$	1,405	$	36	$	1,441
Securities, includes restricted stock		268		79		347
Securities purchased under agreements to resell		(6)		(23)		(29)
Interest earning cash and other		12		5		17
Total interest income		1,679		97		1,776

Interest paid on:
Savings, NOW, Money Markets		38		6		44
Time deposits		10		(11)		(1)
Total deposits		48		(5)		43
Borrowings		—		—		—
Total interest expense		48		(5)		43
Change in net interest income	$	1,631	$	102	$	1,733


	For the Three Months Ended
	March 31,				Change
	2022		2021		Amount		Percent

	(Dollars in thousands)
Payment processing fees
Payment processing income	$	5,100	$	5,167	$	(67)	(1.3)	%
ACH income		216		203		13	6.4
Customer related fees and service charges
Administrative service income		9		18		(9)	(50.0)
Other		87		76		11	14.5
Unrealized gain on loans held for sale		90		—		90	NA
Total noninterest income	$	5,502	$	5,464	$	38	0.7	%


	At March 31,
	2022
	Estimated
Changes in	12-Months
Interest Rates	Net Interest
(Basis Points)	Income			Change

	(Dollars in thousands)
400	$	76,148	$	20,776
300		70,550		15,178
200		64,937		9,565
100		59,782		4,410
0		55,372		—
-100		52,793		(2,579)
-200		50,814		(4,558)


			For Capital Adequacy
			Purposes
			Minimum Capital with		Actual
	“Well Capitalized”		Conservation Buffer		At March 31, 2022
Total Risk-based Capital Ratio
Bank	10.00	%	10.50	%	15.63	%

Tier 1 Risk-based Capital Ratio
Bank	8.00	%	8.50	%	14.55	%

Common Equity Tier 1 Capital Ratio
Bank	6.50	%	7.00	%	14.55	%

Tier 1 Leverage Ratio
Bank	5.00	%	4.00	%	11.55	%


Period	Total number of shares purchased		Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs (2)
January 1, 2022 through January 31, 2022	1,776 ⁽¹⁾	$	33.44	—	265,694
February 1, 2022 through February 28, 2022	—		—	—	265,694
March 1, 2022 through March 31, 2022	—		—	—	265,694


Exhibit
Number		Description

3.1		Articles of Incorporation of Esquire Financial Holdings, Inc. (1)

3.2		Amended and Restated Bylaws of Esquire Financial Holdings, Inc. (2)

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Written Statement of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.0		The following materials for the quarter ended March 31, 2022, formatted in XBRL (Extensible Business Reporting Language): (i) Balance Sheets, (ii) Statements of Income, (iii) Statements of Comprehensive Income, (iv) Statements of Cash Flows, and (v) Notes to Financial Statements.

101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Label Linkbase Document

101.PRE		XBRL Taxonomy Presentation Linkbase Document

104		Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.


	ESQUIRE FINANCIAL HOLDINGS, INC.

Date: May 13, 2022	/s/ Andrew C. Sagliocca
	Andrew C. Sagliocca
	President and Chief Executive Officer

Date: May 13, 2022	/s/ Michael Lacapria
	Michael Lacapria
	Senior Vice President and Chief Financial Officer