Continued Strong Growth and Asset Sensitive Balance Sheet Well Positioned for Rising Rates 

JERICHO, N.Y., April 25, 2022 /PRNewswire/ — 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 first quarter of 2022. Significant achievements during the quarter include:

  • Net income of $5.3 million, or $0.66 per diluted share, as compared to $6.7 million, or $0.83 per diluted share on a linked quarter basis. Net income for the fourth quarter of 2021 included a tax benefit of approximately $1.2 million, or $0.14 per diluted share, related to the exercise of certain stock options.
  • Returns on average assets and equity of 1.92% and 15.06%, respectively, as compared to 1.81% and 13.30% for the comparable prior year period.
  • Industry leading net interest margin of 4.43% anchored by variable rate commercial loans and low-cost core deposits. Approximately 54% of our loan portfolio is variable rate and tied to prime, positively impacting earnings as short-term interest rates increase.
  • Our loan portfolio increased $33.5 million, or 17% annualized, to $818.0 million on a linked quarter basis, as we continued to focus our efforts and resources on higher yielding variable rate commercial loans anchored by our national litigation portfolio. Excluding the final repayments of our Paycheck Protection Program (“PPP”) loans in the quarter, annualized loan growth was approximately 20%.
  • Continued solid credit metrics, asset quality and reserve coverage ratios with minimal nonperforming loans and a reserve for loan losses to total loans of 1.16%.
  • On April 1, 2022, the Company finalized the sale of its legacy NFL consumer post settlement loan portfolio to a third party sponsored entity (or “Fund”) in exchange for a nonvoting economic interest in the Fund valued at $13.5 million.
  • Deposits increased $61.5 million on a linked quarter basis, or 24% annualized, to $1.1 billion supported by our stable low-cost core deposits with a cost-of-funds of 0.10%. Demand deposits and escrow-based NOW accounts represented 45% and 34% of total deposits, respectively, and were a direct result of our highly efficient branchless and technology-enabled deposit platforms. Off-balance sheet sweep funds totaled $618.0 million at quarter end, representing additional sources of funding for future growth.
  • Continued stable payment processing fee income totaling $5.3 million across 68,000 small business clients nationally. Our technology enabled payments platform facilitated the processing of $6.2 billion in payment volume across 117.8 million transactions for our clients.  Fee income represents 32% of total revenue.
  • For the fourth consecutive year, the Company was named a top performing institution by Raymond James (Top Performing Community Banks in the US for 2021).
  • Esquire Bank remains well above the bank regulatory “Well Capitalized” standards.

“Esquire’s industry leading performance metrics once again placed us among the top performing financial services companies in the country,” stated Tony Coelho, Chairman of the Board of Directors. “Our vision is to create a client-centric and technology-focused institution for our national verticals that is disruptive and valuable to these markets. We plan to continue to serve these markets, our shareholders, and team members with value creation beyond our financial sector peer group.”

“We believe our Company is ripe for growth in two expansive national markets primed for disruption,” stated Andrew C. Sagliocca, Chief Executive Officer and President. “There is tremendous potential in both the litigation and payment markets primarily due to the limited number of players and fragmented and inefficient approach to coupling financing, payment processing, and technology. We believe Esquire will be a leader in all three categories in both industries.”

First Quarter Earnings

Net income for the quarter ended March 31, 2022 was $5.3 million, or $0.66 per diluted share, compared to $4.2 million, or $0.53 per diluted share for the same period in 2021. Returns on average assets and equity for the current quarter were 1.92% and 15.06%, respectively, compared to 1.81% and 13.30% for the same period of 2021.

Net interest income for the first quarter of 2022 increased $1.7 million, or 17.2%, to $11.8 million, due to growth in average interest earning assets totaling $173.8 million, or 19.2%, to $1.1 billion when compared to the same period in 2021. Our net interest margin decreased slightly to 4.43% for the first quarter of 2022, supported by the origination of higher yielding commercial loans primarily funded with low-cost core deposits. Average loans in the quarter increased $99.0 million, or 14.6%, to $776.5 million when compared to the first quarter of 2021, fueled by growth in our commercial and multifamily loan portfolios. Excluding the effects of our PPP and NFL portfolios, average loan growth was approximately 24% when comparing the current quarter with the comparable prior period.  Our loan-to-deposit ratio was 75.1% as our low cost deposit base increased $230.3 million, or 26.8%, fueled by demand and escrow deposits. 

The provision for loan losses was $640 thousand for the first quarter of 2022, a $1.2 million decrease from the same period in 2021. The decrease in the provision relates to the reduced pandemic related uncertainty and the reclassification of the NFL loan portfolio to loans held for sale in the third quarter 2021. As of March 31, 2022, Esquire had nonperforming loans held for investment of $7 thousand and an allowance to loans ratio of 1.16%.

Noninterest income was $5.5 million for the first quarter of 2022, consistent with the first quarter of 2021, driven by our payment processing platform. Payment processing volumes and transactions for the credit and debit card processing platform increased $1.3 billion, or 25.5%, to $6.2 billion and 23.2 million, or 24.5%, to 117.8 million transactions, respectively, for the quarter ended March 31, 2022, as compared to the same period in 2021. These increases were driven by expansion of our sales channels through ISOs, increased number of merchants, volume increases, the reopening of the economy post pandemic and were facilitated by our focus on technology and other resources in the payments vertical. We use proprietary and industry leading technology to ensure card brand and regulatory compliance, support multiple processing platforms, manage daily risk across 68,000 small business merchants in all 50 states, and perform commercial treasury clearing services for approximately $6.2 billion in processing volume across 117.8 million transactions. During the current quarter, our payment processing fee income stabilized as higher margin e-commerce volumes decreased, primarily due to the reopening of the economy as pandemic restrictions continued to ease nationally.

Noninterest expense increased $1.2 million, or 14.6%, to $9.4 million for the first quarter of 2022, as compared to the same period in 2021. This increase was primarily driven by increases in employee compensation and benefits, data processing, occupancy and equipment, and travel and business relations, offset by a decrease in professional and consulting services. Employee compensation and benefits costs increased $1.1 million, or 22.8%, due to increases in staff and officer level employees to support our growth, investment in digital platforms and related sales/marketing divisions, and the impact of salary, bonus and stock-based compensation increases.  Due to the effects of inflation on the overall economy and consumer prices, we pro-actively increased our employees’ base salary at year-end in excess of industry and national averages to support employee retention.  Professional and consulting service costs decreased $164 thousand, or 21.2%, partially offsetting the increase in employee compensation and benefits as previously contracted consultants were hired, primarily in our technology development and digital marketing departments. Data processing costs increased $157 thousand, or 18.4%, 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 $52 thousand, or 7.4%, 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. Travel and business relations costs increased $51 thousand as we re-engaged in our traditional high touch marketing and sales efforts to complement our digital marketing efforts.

The Company’s efficiency ratio was 54.3% for the three months ended March 31, 2022, as compared to 52.8% in 2021. The increase in the efficiency ratio was attributable to the investments in our digital platforms and related sales/marketing division and other resources as we continue to invest in our future, reaching more prospective clients nationally within our litigation and payment processing verticals.

The effective tax rate was 26.5% for the first quarter of 2022, as compared to 24.5% for the same period in 2021. The tax rate in the first quarter 2021 was impacted by certain discrete tax benefits related to share-based compensation.

Asset Quality

Nonperforming loans held for investment, totaling $7 thousand, consisted of several nonaccrual consumer loans. As of March 31, 2022, the allowance for loan losses was $9.5 million, or 1.16% of total loans, as compared to $13.2 million, or 1.88% of total loans at March 31, 2021. The decrease in the allowance as a percent of loans was primarily due to 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 during the third quarter of 2021.  On April 1, 2022, the Company finalized the sale of its legacy NFL consumer post settlement loan portfolio to a Fund in exchange for a nonvoting economic interest in the Fund valued at $13.5 million.

Balance Sheet

At March 31, 2022, total assets were $1.2 billion, reflecting a $244.5 million, or 24.5% increase from March 31, 2021. This increase was attributable to loans held for investment increasing $115.1 million, or 16.4%, to $818.0 million, driven by commercial and multifamily loans, funded with low-cost deposits. Excluding the effects of the NFL reclassification (third quarter of 2021) totaling $25.9 million and net payoffs of our PPP loans totaling $31.7 million, our loan growth was $172.2 million, or 26.6%, when comparing March 31, 2022 to 2021. Our higher yielding commercial loans grew 31% during this same period. Our sales pipeline remains robust, driven by our current and future digital marketing and technology development plans as well as our employees that will support our future growth. Commencing in the first quarter of 2022, we invested a portion of our excess liquidity in held-to-maturity securities, totaling $47.5 million at March 31, 2022. Our available-for-sale securities portfolio increased $2.6 million, or 1.9%, to $134.2 million as compared to March 31, 2021.

The following table provides information regarding the composition of our loan portfolio for the periods presented:






















At March 31, 



At December 31, 



At March 31, 




2022



2021



2021




(Dollars in thousands)


Real estate:



















     Multifamily


$

262,465


32.06

%


$

254,852


32.46

%


$

192,325


27.32

%

     Commercial real estate



62,447


7.63




48,589


6.19




54,458


7.74


     1 – 4 family



33,468


4.09




40,753


5.19




45,356


6.44


     Total real estate



358,380


43.78




344,194


43.84




292,139


41.50


Commercial



451,930


55.21




427,859


54.51




344,957


49.00


PPP







4,249


0.54




31,709


4.50


Consumer



8,281


1.01




8,681


1.11




9,246


1.31


NFL Consumer











25,945


3.69


     Total loans held for investment


$

818,591


100.00

%


$

784,983


100.00

%


$

703,996


100.00

%




















Loans held for sale, net (included in
Other assets)


$

15,040





$

14,100





$




Total deposits were $1.1 billion as of March 31, 2022, a $230.3 million, or 26.8%, increase from March 31, 2021. This was primarily due to a $141.5 million, or 32.2%, increase in Savings, NOW and Money Market deposits to $581.7 million, an $80.5 million, or 19.7%, increase in noninterest bearing demand deposits to $489.0 million, and an $8.2 million increase in time deposits to $19.2 million. The increase in deposits was primarily driven by commercial and escrow low-cost and noninterest bearing deposits from our litigation and small business platforms. Off-balance sheet sweep funds totaled $618.0 million at quarter end, representing additional sources of funding for future growth. Our deposit growth and off-balance sheet funds continue to demonstrate our highly efficient branchless and technology-enabled deposit platforms.

Stockholders’ equity increased $14.1 million to $143.4 million as of March 31, 2022, compared to March 31, 2021, primarily due to net income and amortization of share-based compensation, partially offset by an increase in other comprehensive losses of $6.2 million to $7.0 million when comparing the current quarter-end to year-end. This increase reflects the current unrealized losses on our available-for-sale agency MBS portfolio that was negatively impacted by recent increases in short-term market interest rates. Esquire Bank remains well above bank regulatory “Well Capitalized” standards.

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; if the economy worsens, 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; 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
[email protected]

ESQUIRE FINANCIAL HOLDINGS, INC.


Condensed Consolidated Statement of Condition (unaudited)


(dollars in thousands except per share data)















March 31, 


December 31, 


March 31, 




2022


2021


2021


ASSETS











Cash and cash equivalents


$

148,940


$

149,156


$

87,893


Securities purchased under agreements to resell, at cost



48,143



50,271



50,501


Securities available-for-sale, at fair value



134,161



148,384



131,595


Securities held-to-maturity, at cost



47,544






Securities, restricted at cost



2,680



2,680



2,694


Loans, held for investment



817,997



784,517



702,865


Less: allowance for loan losses



(9,491)



(9,076)



(13,181)


     Loans, net of allowance



808,506



775,441



689,684


Premises and equipment, net



3,163



3,334



2,946


Other assets



49,692



49,504



32,969


Total Assets


$

1,242,829


$

1,178,770


$

998,282













LIABILITIES AND STOCKHOLDERS’ EQUITY











Demand deposits


$

488,960


$

409,350


$

408,411


Savings, NOW and money market deposits



581,721



599,747



440,192


Certificates of deposit



19,239



19,312



11,058


     Total deposits



1,089,920



1,028,409



859,661


Other liabilities



9,524



6,626



9,355


     Total liabilities



1,099,444



1,035,035



869,016


Total stockholders’ equity



143,385



143,735



129,266


Total Liabilities and Stockholders’ Equity


$

1,242,829


$

1,178,770


$

998,282













Selected Financial Data











Common shares outstanding



8,076,320



8,088,846



7,829,815


Book value per share


$

17.75


$

17.77


$

16.51


Equity to assets



11.54

%


12.19

%


12.95

%












Capital Ratios (1)











Tier 1 leverage ratio



11.55

%


11.46

%


12.46

%

Common equity tier 1 capital ratio



14.55

%


14.79

%


15.48

%

Tier 1 capital ratio



14.55

%


14.79

%


15.48

%

Total capital ratio



15.63

%


15.89

%


16.74

%












Asset Quality – Loans Held for Investment











Nonperforming loans 


$

7


$

6


$

2,992


Allowance for loan losses to total loans



1.16

%


1.16

%


1.88

%

Nonperforming loans to total loans



0.00

%


0.00

%


0.43

%

Nonperforming assets to total assets



0.00

%


0.00

%


0.30

%

Allowance to nonperforming loans



NM



NM



441

%


(1) Regulatory capital ratios presented on bank-only basis.

NM – Not meaningful

ESQUIRE FINANCIAL HOLDINGS, INC.

Condensed Consolidated Income Statement (unaudited)

(dollars in thousands except per share data)














Three months ended




March 31, 


December 31, 


March 31, 




2022


2021


2021


Interest income


$

12,024


$

11,930


$

10,248


Interest expense



238



231



195


     Net interest income



11,786



11,699



10,053


Provision for loan losses



640



555



1,800


     Net interest income after provision for loan losses



11,146



11,144



8,253













Noninterest income:











Payment processing fees



5,316



4,908



5,370


Other noninterest income



186



259



94


     Total noninterest income



5,502



5,167



5,464













Noninterest expense:











Employee compensation and benefits



6,134



5,552



4,996


Other expenses



3,246



3,197



3,192


     Total noninterest expense



9,380



8,749



8,188


Income before income taxes



7,268



7,562



5,529


Income taxes



1,926



832



1,355


     Net income


$

5,342


$

6,730


$

4,174













Earnings Per Share











Basic


$

0.70


$

0.89


$

0.56


Diluted


$

0.66


$

0.83


$

0.53


Basic – adjusted (1)


$

0.70


$

0.74


$

0.56


Diluted – adjusted (1)


$

0.66


$

0.69


$

0.53













Selected Financial Data











Return on average assets



1.92

%


2.44

%


1.81

%

Return on average equity



15.06

%


19.19

%


13.30

%

Adjusted return on average assets (1)



1.92

%


2.02

%


1.81

%

Adjusted return on average equity (1)



15.06

%


15.85

%


13.30

%

Net interest margin



4.43

%


4.48

%


4.50

%

Efficiency ratio (2)



54.3

%


51.9

%


52.8

%

________________________

(1)

Adjusted to exclude a discrete income tax benefit of $1.2 million related to share-based compensation recognized in the fourth quarter 2021. See non-GAAP
reconciliation provided elsewhere herein.

(2)

Efficiency ratio represents noninterest expenses divided by the sum of net interest income plus noninterest income.

ESQUIRE FINANCIAL HOLDINGS, INC.

Condensed Consolidated Average Balance Sheets and Average Yield/Cost (unaudited)

(dollars in thousands)





















For the Three Months Ended March 31, 




2022


2021




Average





Average


Average





Average




Balance


Interest


Yield/Cost


Balance


Interest


Yield/Cost


INTEREST EARNING ASSETS


















Loans, held for investment


$

776,521


$

11,020


5.76

%

$

677,531


$

9,579


5.73

%

Securities, includes restricted stock



181,328



815


1.82

%


119,829



468


1.58

%

Securities purchased under agreements to resell



49,612



132


1.08

%


51,446



161


1.27

%

Interest earning cash and other



72,456



57


0.32

%


57,284



40


0.28

%

Total interest earning assets



1,079,917



12,024


4.52

%


906,090



10,248


4.59

%



















NONINTEREST EARNING ASSETS



50,832








30,843

























TOTAL AVERAGE ASSETS


$

1,130,749







$

936,933

























INTEREST BEARING LIABILITIES




































Savings, NOW, Money Market deposits


$

489,245


$

218


0.18

%

$

402,776


$

174


0.18

%

Time deposits



19,242



19


0.40

%


11,189



20


0.72

%

Total interest bearing deposits



508,487



237


0.19

%


413,965



194


0.19

%

Borrowings



50



1


8.11

%


50



1


8.11

%

Total interest bearing liabilities



508,537



238


0.19

%


414,015



195


0.19

%



















NONINTEREST BEARING LIABILITIES


















Demand deposits



469,938








386,826







Other liabilities



8,414








8,779







Total noninterest bearing liabilities



478,352








395,605







Stockholders’ equity



143,860








127,313

























TOTAL AVG. LIABILITIES AND EQUITY


$

1,130,749







$

936,933







Net interest income





$

11,786







$

10,053




Net interest spread








4.33

%







4.40

%

Net interest margin








4.43

%







4.50

%

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 equity and adjusted earnings
per share, excludes a discrete income tax benefit related to share-based compensation, specifically, voluntary stock option exercises.


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



March 31,


December 31,


March 31,



2022


2021


2021


Net income – GAAP

$

5,342


$

6,730


$

4,174


Less: tax benefit on share-based compensation




1,172




Adjusted net income

$

5,342


$

5,558


$

4,174












Return on average assets – GAAP


1.92

%


2.44

%


1.81

%

Adjusted return on average assets


1.92

%


2.02

%


1.81

%











Return on average equity – GAAP


15.06

%


19.19

%


13.30

%

Adjusted return on average equity


15.06

%


15.85

%


13.30

%











Basic earnings per share – GAAP

$

0.70


$

0.89


$

0.56


Adjusted basic earnings per share

$

0.70


$

0.74


$

0.56












Diluted earnings per share – GAAP

$

0.66


$

0.83


$

0.53


Adjusted diluted earnings per share

$

0.66


$

0.69


$

0.53


SOURCE Esquire Financial Holdings, Inc.

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