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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): July 25, 2024
Esquire Financial Holdings, Inc.
(Exact name of the registrant as specified in its charter)
Maryland |
001-38131 |
27-5107901 |
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(State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(IRS Employer Identification No.) |
100 Jericho Quadrangle, Suite 100 |
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Jericho, New York |
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11753 |
(Address of principal executive offices) |
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(Zip Code) |
(516) 535-2002
(Registrant’s telephone number)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2. below):
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, $0.01 par value |
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ESQ |
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The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02Results of Operations and Financial Condition.
On July 25, 2024, 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 June 30, 2024. 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 7.01Regulation 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 9.01Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. |
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Description |
99.1 |
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99.2 |
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Written presentation to be distributed and made available to investors and posted |
104 |
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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.
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ESQUIRE FINANCIAL HOLDINGS, INC. |
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Dated: July 25, 2024 |
By:/s/ Andrew C. Sagliocca |
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Andrew C. Sagliocca |
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Vice Chairman, Chief Executive Officer and President |
Exhibit 99.1
ESQUIRE FINANCIAL HOLDINGS, INC.
REPORTS SECOND QUARTER 2024 RESULTS
National Litigation Platform Continues to Drive Strong Growth and Industry Leading Returns
Jericho, NY – July 25, 2024 – Esquire Financial Holdings, Inc. (NASDAQ: ESQ) (the “Company”), the financial holding company for Esquire Bank, National Association (“Esquire Bank” or the “Bank”), (collectively “Esquire”) today announced its operating results for the second quarter and year to date of 2024.
“In 2024, our focus on creating long-term stakeholder value continued as growth in low-cost core deposits from our national litigation platform was invested in higher yielding variable rate commercial loans and short-term agency mortgage-backed securities at the current peak in interest rates. As part of our ALCO process, management proactively increased the investment portfolio to approximately 15% of total assets (as compared to 12.5% at year-end), while simultaneously moderating multifamily and commercial real estate growth in 2024 due to the current economic and interest rate environment,” stated Andrew C. Sagliocca, Vice Chairman, CEO, and President. “As a result of these actions, interest earning assets, excluding cash and cash equivalents, increased $65.4 million, or 18% annualized, on a linked quarter basis and $104.5 million, or 15% annualized, from year-end 2023 while our net interest margin increased to 6.19% for the current quarter.”
Significant achievements and key performance metrics during the current quarter and year to date of 2024 include:
| ● | On a linked quarter basis, net income increased $429 thousand or 4.3% to $10.5 million, or $1.25 per diluted share, as compared to $10.1 million, or $1.20 per diluted share. Net income increased $1.4 million or 15.1% from $9.1 million in the second quarter 2023, or $1.10 per diluted share. |
| ● | Consistent industry leading returns on average assets and equity of 2.58% and 20.16% for the current quarter, respectively, as compared to 2.59% and 20.14% on a linked quarter basis despite our continued investment in current resources for future growth. These returns were fueled by the continued expansion of our total revenue base to $30.6 million in the current quarter, led by a strong net interest margin of 6.19% (fueled by low-cost core deposit growth) as well as stable fee-based income. |
| ● | Total loan growth on a linked quarter basis was $32.8 million, or 11% annualized, totaling $1.26 billion and was driven by a $32.3 million or a 17% annualized increase in higher yielding variable rate commercial loans nationally. These commercial loans, primarily to law firms, have and will continue to create additional opportunities for continued core deposit growth (noninterest bearing operating or DDA and escrow or IOLTA accounts) through our full commercial relationship banking programs and our branchless commercial cash management platform. |
| ● | Interest earning asset growth, excluding cash and cash equivalents, was $65.4 million, or 18% annualized, on a linked quarter basis and totaled $1.51 billion. In 2024, management elected to temper multifamily and commercial real estate loan growth in response to the current economic environment and instead purchase agency mortgage-backed securities with commensurate risk adjusted yields, improving our liquidity ratios as well as increasing the securities to total assets ratio to approximately 15%. |
| ● | Solid credit metrics, asset quality, and reserve coverage ratios with a 1.47% allowance for credit losses to loans ratio and nonperforming loan to total assets ratio of 0.64%, represented by one multifamily loan totaling $10.9 million. We have no exposure to commercial office space, no construction loans, and only $15.0 million in performing loans to the hospitality industry. |
| ● | Continued deposit growth totaling $52.8 million, or 15% annualized, on a linked quarter basis to $1.49 billion, comprised of core low-cost commercial relationship deposits with a cost-of-funds of 0.87% (including demand deposits). Off-balance sheet sweep funds totaled $408.0 million at quarter end, with approximately 67% available for additional on-balance sheet liquidity, while the associated administrative service payments (“ASP”) fee income totaled $620 thousand for the current quarter. Additional available liquidity totaled approximately $653 million (secured FHLB and FRB borrowing capacity plus available on-balance sheet sweep liquidity), excluding cash and unsecured borrowing capacity. |
1
| ● | Stable and consistent fee income totaling $6.3 million or 21% of total revenue, led by our payment processing platform with 83,000 small business clients nationally. Our technology enabled payments platform facilitated the processing of $9.3 billion in credit and debit card payment volume across 155.6 million transactions for our clients in the current quarter. |
| ● | Strong efficiency ratio of 49.8% notwithstanding our investments in resources to support future growth and excellence in client service. |
| ● | Launched our redesigned website (integrated with our marketing cloud, CRM platform, and Lawyer IQ platform) including the integration of AI driven sales content to improve current user engagement and prospective client acquisition. |
| ● | Strong capital foundation with common equity tier 1 (“CET1”) and tangible common equity to tangible asset(1) (“TCE/TA”) ratios of 14.89% and 12.67%, respectively. Including the after-tax unrealized losses on both the available-for-sale and held-to-maturity securities portfolios of $14.2 million and $6.0 million, respectively, the adjusted(1) CET1 and adjusted(1) TCE/TA ratios were 13.41% and 12.32%, respectively. Esquire Bank remains well above the bank regulatory “Well Capitalized” standards. |
“Our industry leading performance, strong balance sheet management, and proven growth trends will continue to create value for all stakeholders beyond our financial sector peers,” stated Tony Coelho, Chairman of the Board. “We will continue to remain steadfast in our vision – to build a client-centric and tech-focused company that is disruptive to the national markets we serve while generating best-in-class performance and returns.”
“Our current balance sheet management strategy to increase short duration agency mortgage-backed securities rather than originate multifamily and commercial real estate loans only impacts the composition of our interest earning assets and does not change our views for growth and earnings in 2024,” stated Andrew C. Sagliocca. “At the same time, we believe these decisions enhance our Company’s liquidity position, asset composition, and flexibility in the future as inflation slows and the Federal Reserve moderates its views on short-term rates in the near future.”
| (1) | See non-GAAP reconciliation provided at the end of this news release. |
2
Second Quarter Earnings
Net income for the quarter ended June 30, 2024 was $10.5 million, or $1.25 per diluted share, compared to $9.1 million, or $1.10 per diluted share for the same period in 2023. Returns on average assets and equity for the current quarter were 2.58% and 20.16%, respectively, compared to 2.65% and 21.03% for the same period of 2023.
Net interest income for the second quarter of 2024 increased $4.2 million, or 21.1%, to $24.3 million, due to growth in average interest earning assets (funded with low-cost core deposits) totaling $243.4 million, or 18.2%, to $1.58 billion as well as a 17 basis point increase in our net interest margin to 6.19% when compared to the same period in 2023. Our net interest margin was positively impacted by growth in higher yielding variable rate commercial loans and low-cost litigation-based deposits. Average loan yield increased 12 basis points to 7.85% while average loans increased $247.2 million, or 24.9%, to $1.24 billion, primarily due to growth in our national commercial lending platform and, to a lesser extent, growth in our regional multifamily loan portfolio during 2023. Loan interest income increased $5.1 million, or 26.5%, to $24.2 million with the increase in average loan balances (primarily commercial) comprising $4.9 million of the increase and $191 thousand representing increases in average rate. Our loan-to-deposit ratio was 84.8% as our low-cost deposit base increased $227.9 million, or 18.1%, primarily due to growth in our longer duration escrow or IOLTA (interest on lawyer trust accounts) deposit banking relationships. Our deposit cost-of-funds, excluding demand deposits, increased 21 basis points in the current quarter when compared to 2023 due to increases in short-term interest rates as well as management proactively increasing rates on IOLTA accounts in the various states where we operate. Deposit expense increased $1.1 million to $3.1 million for the quarter with increases in average rate (primarily IOLTA) comprising $756 thousand and an increase of $340 thousand (primarily IOLTA) attributable to average deposit balances. Average securities in the quarter increased $45.1 million to $253.3 million and yields increased 92 basis points to 3.21% due to our previously noted balance sheet or ALCO strategy. The movement in short-term interest rates increased yields and interest income on our interest earning cash balances.
The provision for credit losses was $1.0 million for the second quarter of 2024, a $325 thousand decrease from the second quarter 2023 provision. As of June 30, 2024, our allowance to loans ratio was 1.47% as compared to 1.34% as of June 30, 2023. The increase in the allowance as a percentage of loans was general reserve driven considering loan growth and qualitative factors associated with the current short-term interest rate environment as well as the current uncertain economic environment including, but not limited to, its potential impact on the New York metro multifamily and commercial real estate market.
Noninterest income totaled $6.3 million for the second quarter of 2024 as compared to $6.7 million in the same period for 2023. Payment processing income was $5.3 million for the second quarter of 2024, a $442 thousand decrease from the same period in 2023, primarily due to the anticipated ISO attrition and changes in our overall merchant risk profile. Payment processing volumes for the credit and debit card processing platform increased $810 million, or 9.6%, to $9.3 billion and transactions decreased 1.2 million, or 0.8%, to 155.6 million, for the current quarter, as compared to the same period in 2023. We continue to focus on the expansion of sales channels through ISOs, prudently managing risk while increasing the number of merchants, growing volumes, and expanding our technology and other resources in the payments vertical. The Company utilizes proprietary and industry leading technology to ensure card brand and regulatory compliance, supports multiple processing platforms, manages daily risk across 83,000 small business merchants in all 50 states, and performs commercial treasury clearing services. ASP fee income decreased $119 thousand to $620 thousand for the second quarter of 2024. ASP fee income is directly impacted by the average balances of off-balance sheet sweep funds as well as current short-term market interest rates. Other noninterest income increased $141 thousand to $333 thousand when compared to the comparable prior year quarter primarily due to increases in client loan fees.
Noninterest expense increased $2.3 million, or 17.4%, to $15.2 million for the second quarter of 2024, as compared to the same period in 2023. This increase was primarily due to increases in employee compensation and benefits, advertising and marketing, data processing, and occupancy and equipment, partially offset by decreases in professional services costs. Employee compensation and benefits costs increased $1.7 million, or 22.1%, due to increases in employees to support growth and excellence in client service as well as the impact of year end salary, bonus and stock-based compensation increases. Our overall staffing levels increased by eight employees, or 6%, year-over-year to 141 full-time equivalents as we expanded our sales, lending, and risk management areas. Advertising and marketing costs increased $561 thousand as we continued to grow our digital marketing platform, expand our thought leadership in our national verticals, and support our regional BDOs recently hired in 2023. Data processing costs increased $473 thousand 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 $321 thousand due to amortization of our investments in internally developed software to support our digital platform and additional office space to support our growth. Professional services costs decreased $758 thousand due to the costs in 2023 associated with our executive search firm. Our investments in current resources (people, technology, and digital marketing) will continue to support our long-term growth goals.
The Company’s efficiency ratio was 49.8% for the three months ended June 30, 2024, as compared to 48.4% in 2023 reflecting our current investment in resources to support future growth. Our strong efficiency ratio is a result of our continued revenue growth driven by our core national platforms that have (and will continue to) benefit from our investments in technology, digital marketing, employees, and other branchless infrastructure that support our industry leading returns.
The effective tax rate was 27.0% for the second quarter of 2024, consistent with the second quarter of 2023.
3
Year to Date Earnings
Net income for the six months ended June 30, 2024 was $20.5 million, or $2.45 per diluted share, compared to $21.3 million, or $2.57 per diluted share for the same period in 2023. Returns on average assets and equity for the six months ended June 30, 2024 were 2.59% and 20.15%, respectively, compared to 3.15% and 25.55% for the same period of 2023. Excluding the pretax gain of $4.0 million ($3.0 million after-tax or $0.36 per diluted share) on the partial sale of our Litify fintech investment in the first quarter of 2023, adjusted(1) net income, diluted earnings per share, return on average assets, and return on average common equity for the six months ended June 30, 2023 was $18.4 million, $2.21, 2.72% and 22.02%, respectively.
Net interest income for the six months ended June 30, 2024 increased $7.8 million, or 19.8%, to $47.2 million, due to growth in average interest earning assets (funded with low-cost core deposits) totaling $230.6 million, or 17.5%, to $1.55 billion as well as an 11 basis point increase in our net interest margin to 6.13% when compared to the same period in 2023. Our net interest margin was positively impacted by growth in higher yielding variable rate commercial loans and low-cost litigation-based deposits. The average yield on loans increased 20 basis points to 7.82%, primarily driven by growth in higher yielding variable rate commercial loans. Average loans for the six months ended June 30, 2024 increased $251.8 million, or 25.9%, to $1.22 billion, primarily due to growth in our national commercial lending platform and, to a lesser extent, growth in our regional multifamily loan portfolio during 2023. Loan interest income increased $10.9 million, or 29.5%, to $47.6 million with the increases in average loan balances (primarily commercial) comprising $10.1 million of the increase and $732 thousand representing increases in average rate. Our deposit cost-of-funds, excluding demand deposits, increased 51 basis points for the six months ended June 30, 2024 when compared to the same period in 2023 due to increases in short-term interest rates as well as management proactively increasing rates on IOLTA accounts in the various states where we operate. Deposit expense increased $3.2 million to $6.3 million for the six months ended June 30, 2024 with increases in average rate (primarily IOLTA and to a lesser extent relationship money market deposits) comprising $2.2 million of the increase and the remaining increase of $1.1 million (primarily IOLTA and to a lesser extent relationship money market deposits) attributable to average deposit balances. Average securities for the six months ended June 30, 2024 increased $31.2 million to $239.8 million and yields increased 77 basis points to 3.04% due to our previously noted balance sheet or ALCO strategy. The movement in short-term interest rates increased yields and interest income on our interest earning cash balances.
The provision for credit losses was $2.0 million for the six months ended June 30, 2024, a $175 thousand increase from the same period in 2023. The increase in the allowance as a percentage of loans was general reserve driven considering loan growth and qualitative factors associated with the current short-term interest rate environment as well as the current uncertain economic environment including, but not limited to, its potential impact on the New York metro multifamily and commercial real estate market.
Noninterest income totaled $12.7 million for the six months ended June 30, 2024 as compared to $17.0 million in the same period for 2023. Excluding the $4.0 million gain on our Litify fintech investment, adjusted(1) noninterest income in the six months ended June 30, 2023 was $12.9 million. Payment processing income was $10.6 million for the six months ended June 30, 2024, a $659 thousand decrease from the same period in 2023, primarily due to the anticipated ISO attrition and changes in our overall merchant risk profile. Payment processing volumes and transactions for the credit and debit card processing platform increased $1.7 billion, or 10.8%, to $17.9 billion and 6.4 million, or 2.1%, to 306.1 million transactions, respectively, for the six months ended June 30, 2024, as compared to the same period in 2023. These increases were due to the expansion of sales channels through ISOs, an increased number of merchants, volume increases, and were facilitated by our focus on technology and other resources in the payments vertical. ASP fee income increased $98 thousand to $1.4 million for the six months ended June 30, 2024 as compared to the same period in 2023. Other noninterest income increased $295 thousand to $680 thousand for the six months ended June 30, 2024 when compared to the same period in 2023, primarily due to increases in client loan related fees.
Noninterest expense increased $4.3 million, or 17.1%, to $29.8 million for the six months ended June 30, 2024, as compared to the same period in 2023. This increase was primarily due to increases in employee compensation and benefits, advertising and marketing, data processing, and occupancy and equipment, partially offset by decreases in professional services costs. Employee compensation and benefits costs increased $3.4 million, or 22.2%, due to increases in employees to support growth and excellence in client service as well as the impact of year end salary, bonus and stock-based compensation increases. In 2024, we experienced the full year impact of our 2023 key hires including, but not limited to, our regional senior BDOs, sales support, lending/lending support, and risk management staffing initiatives. Advertising and marketing costs increased $1.0 million as we continued to grow our digital marketing platform, expand our thought leadership in our national verticals, and support our regional BDOs. Data processing costs increased $851 thousand 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 $419 thousand due to amortization of our investments in internally developed software to support our digital platform and additional office space to support our growth. Professional services costs decreased $1.4 million due to the hiring costs associated with our executive search firm in 2023. Our investment in current resources (people, technology, and digital marketing) will continue to support our long-term growth goals.
| (1) | See non-GAAP reconciliation provided at the end of this news release. |
4
The Company’s efficiency ratio was 49.8% for the six months ended June 30, 2024, as compared to 45.2% for the same period in 2023. The adjusted(1) efficiency ratio was 48.7% for the six months ended June 30, 2023, excluding the aforementioned $4.0 million pre-tax gain. Our strong efficiency ratio is a result of our continued revenue growth driven by our core national platforms. These platforms have benefited from our investments in technology, digital marketing, employees, and other branchless infrastructure that support our industry leading returns.
The effective tax rate was 26.8% for the six months ended June 30, 2024, compared to 26.7% for the same period in 2023.
Asset Quality
At June 30, 2024, we had one nonperforming loan totaling $10.9 million and no exposure to commercial office space nor construction loans and only $15.0 million in performing loans to the hospitality industry. The allowance for credit losses was $18.5 million, or 1.47% of total loans, as compared to $14.2 million, or 1.34% of total loans at June 30, 2023. The ratio of nonperforming loans to total loans and total assets was 0.87% and 0.64%, respectively. The allowance for credit losses to nonperforming loans was 169%. The increase in the allowance as a percentage of loans was general reserve driven considering loan growth and qualitative factors associated with the current short-term interest rate environment as well as the current uncertain economic environment including, but not limited to, its potential impact on the New York metro multifamily and commercial real estate market.
Due to increases in short-term interest rates associated with the current inflationary environment since 2022, management enhanced its ongoing credit risk management including risk management of its commercial real estate loan portfolio. The following is a brief summary of our ongoing risk management for our multifamily and CRE portfolios as of June 30, 2024:
| ● | The multifamily portfolio, excluding one nonperforming loan, totaling $341.2 million, has a current weighted average DSCR and an original LTV (defined as unpaid principal balance as of June 30, 2024 divided by appraised value at origination) of approximately 1.66 and 54%, respectively, and the CRE portfolio, totaling $88.4 million, has a current weighted average DSCR and an original LTV of approximately 1.53 and 59%, respectively. |
| ● | Multifamily loans maturing in less than one year totaled $47.0 million and had a current weighted average DSCR and an original LTV of approximately 1.42 and 55%, respectively. CRE loans maturing in less than one year totaled $2.2 million and had a current weighted average DSCR and an original LTV of approximately 3.54 and 47%, respectively. |
| ● | Multifamily loans maturing in one to two years totaled $50.3 million and had a current weighted average DSCR and an original LTV of approximately 1.38 and 66%, respectively. CRE loans maturing in one to two years totaled $2.2 million and had a current weighted average DSCR and an original LTV of approximately 1.49 and 61%, respectively. |
| (1) | See non-GAAP reconciliation provided at the end of this news release. |
5
Balance Sheet
At June 30, 2024, total assets were $1.72 billion, reflecting a $265.2 million, or 18.3% increase from June 30, 2023. This increase was primarily attributable to growth in loans totaling $205.3 million, or 19.4%, to $1.26 billion. Our higher yielding variable rate commercial loans increased $151.7 million, or 23.9%, during this same period. Our commercial relationship banking sales pipeline remains robust, anchored by our national platforms and supported by our competitive advantages in data, analytics and digital marketing. This coupled with our regional BDOs and related support staff will continue to drive growth across our national commercial platform. Our available-for-sale securities portfolio increased $73.1 million to $176.8 million as compared to June 30, 2023, as management opportunistically deployed excess liquidity into securities as part of our previously mentioned balance sheet management or ALCO process at current market rates. Our held-to-maturity securities portfolio totaled $73.1 million, a decrease of $7.8 million, or 9.7%, as the portfolio paid down. In the third quarter of 2023, management elected to close out its reverse repurchase agreements and reinvest these funds into higher yielding commercial loans.
The following table provides information regarding the composition of our loan portfolio for the periods presented:
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June 30, |
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December 31, |
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June 30, |
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2024 |
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2023 |
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2023 |
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(Dollars in thousands) |
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|||||||||||||||
Real estate: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Multifamily |
|
$ |
352,097 |
|
27.9 |
% |
|
$ |
348,241 |
|
28.8 |
% |
|
$ |
298,718 |
|
28.3 |
% |
Commercial real estate |
|
|
88,376 |
|
7.0 |
|
|
|
89,498 |
|
7.4 |
|
|
|
91,057 |
|
8.6 |
|
1 – 4 family |
|
|
15,336 |
|
1.2 |
|
|
|
17,937 |
|
1.5 |
|
|
|
21,606 |
|
2.0 |
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Total real estate |
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|
455,809 |
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36.1 |
|
|
|
455,676 |
|
37.7 |
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|
|
411,381 |
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38.9 |
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Commercial: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Litigation related |
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668,676 |
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53.0 |
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|
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612,457 |
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50.7 |
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|
|
526,076 |
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49.8 |
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Other |
|
|
117,917 |
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9.4 |
|
|
|
125,457 |
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10.4 |
|
|
|
108,814 |
|
10.3 |
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Total commercial |
|
|
786,593 |
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62.4 |
|
|
|
737,914 |
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61.1 |
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|
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634,890 |
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60.1 |
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Consumer |
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|
19,010 |
|
1.5 |
|
|
|
14,491 |
|
1.2 |
|
|
|
10,500 |
|
1.0 |
|
Total loans held for investment |
|
$ |
1,261,412 |
|
100.0 |
% |
|
$ |
1,208,081 |
|
100.0 |
% |
|
$ |
1,056,771 |
|
100.0 |
% |
Deferred loan fees and unearned premiums, net |
|
|
(350) |
|
|
|
|
|
(668) |
|
|
|
|
|
(989) |
|
|
|
Loans, held for investment |
|
$ |
1,261,062 |
|
|
|
|
$ |
1,207,413 |
|
|
|
|
$ |
1,055,782 |
|
|
|
Total deposits were $1.49 billion as of June 30, 2024, a $227.9 million, or 18.1%, increase from June 30, 2023. This was primarily due to a $262.4 million, or 36.0%, increase in Savings, NOW and Money Market deposits, driven primarily by our IOLTA and other escrow deposits and, to a lesser extent, our commercial relationship money market deposits (primarily our mass tort/class action funds), offset by a $25.9 million, or 5.1%, decrease in demand deposits. Our deposit strategy primarily focuses on developing full service commercial banking relationships with our clients through lending facilities, payment processing, and other unique commercial cash management services in our two national verticals, rather than competing with other institutions on rate. Our longer duration IOLTA, escrow and claimant trust settlement deposits represent $813.6 million, or 54.7%, of total deposits. As of June 30, 2024, uninsured deposits were $455.7 million, or 31%, of our total deposits of $1.49 billion, excluding $11.1 million of affiliate deposits held by the Bank. Approximately 80% of our uninsured deposits represent clients with full relationship banking (loans, payment processing, and other service-oriented relationships) including, but not limited to, law firm operating accounts, law firm IOLTA/escrow accounts, merchant reserves, ISO reserves, ACH processing, and custodial accounts.
Due to the nature of our larger mass tort and class action settlements related to the litigation vertical, we participate in FDIC insured sweep programs as well as treasury secured money market funds. As of June 30, 2024, off-balance sheet sweep funds totaled approximately $408.0 million, of which approximately $273.6 million, or 67.1%, was available to be swept onto our balance sheet as reciprocal client relationship deposits. Our deposit growth and off-balance sheet funds continue to demonstrate our highly efficient branchless and technology enabled deposit platforms.
At June 30, 2024, we had the ability to borrow, on a secured basis, up to $324.8 million from the FHLB of New York and $54.4 million from the FRB of New York discount window. No borrowing amounts were outstanding during the second quarter of 2024. Historically, we have not leveraged our balance sheet to generate earnings and have always utilized core client deposits to fund our asset growth and related earnings.
Stockholders’ equity increased $38.5 million to $217.4 million as of June 30, 2024, when compared to June 30, 2023, primarily from increases in retained earnings.
Esquire Bank remains well above bank regulatory “Well Capitalized” standards.
6
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 clients 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” within the meaning of the Private Securities Litigation Reform Act of 1995 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,” “aim,” “would,” “annualized” and “outlook,” or similar terminology. 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
7
ESQUIRE FINANCIAL HOLDINGS, INC.
Consolidated Statement of Condition (unaudited)
(dollars in thousands except per share data)
|
|
June 30, |
|
December 31, |
|
June 30, |
|
|||
|
|
2024 |
|
2023 |
|
2023 |
|
|||
ASSETS |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
152,733 |
|
$ |
165,209 |
|
$ |
106,199 |
|
Securities purchased under agreements to resell, at cost |
|
|
— |
|
|
— |
|
|
49,505 |
|
Securities available-for-sale, at fair value |
|
|
176,814 |
|
|
122,107 |
|
|
103,681 |
|
Securities held-to-maturity, at cost |
|
|
73,062 |
|
|
77,001 |
|
|
80,883 |
|
Securities, restricted at cost |
|
|
3,034 |
|
|
2,928 |
|
|
2,928 |
|
Loans, held for investment |
|
|
1,261,062 |
|
|
1,207,413 |
|
|
1,055,782 |
|
Less: allowance for credit losses |
|
|
(18,521) |
|
|
(16,631) |
|
|
(14,179) |
|
Loans, net of allowance |
|
|
1,242,541 |
|
|
1,190,782 |
|
|
1,041,603 |
|
Premises and equipment, net |
|
|
2,809 |
|
|
2,602 |
|
|
2,501 |
|
Other assets |
|
|
64,721 |
|
|
56,247 |
|
|
63,254 |
|
Total Assets |
|
$ |
1,715,714 |
|
$ |
1,616,876 |
|
$ |
1,450,554 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
$ |
482,988 |
|
$ |
473,274 |
|
$ |
508,916 |
|
Savings, NOW and money market deposits |
|
|
991,953 |
|
|
926,264 |
|
|
729,586 |
|
Certificates of deposit |
|
|
11,952 |
|
|
7,761 |
|
|
20,482 |
|
Total deposits |
|
|
1,486,893 |
|
|
1,407,299 |
|
|
1,258,984 |
|
Other liabilities |
|
|
11,410 |
|
|
11,022 |
|
|
12,664 |
|
Total liabilities |
|
|
1,498,303 |
|
|
1,418,321 |
|
|
1,271,648 |
|
Total stockholders' equity |
|
|
217,411 |
|
|
198,555 |
|
|
178,906 |
|
Total Liabilities and Stockholders' Equity |
|
$ |
1,715,714 |
|
$ |
1,616,876 |
|
$ |
1,450,554 |
|
|
|
|
|
|
|
|
|
|
|
|
Selected Financial Data |
|
|
|
|
|
|
|
|
|
|
Common shares outstanding |
|
|
8,292,948 |
|
|
8,287,848 |
|
|
8,192,379 |
|
Book value per share |
|
$ |
26.22 |
|
$ |
23.96 |
|
$ |
21.84 |
|
Equity to assets |
|
|
12.67 |
% |
|
12.28 |
% |
|
12.33 |
% |
|
|
|
|
|
|
|
|
|
|
|
Capital Ratios (1) |
|
|
|
|
|
|
|
|
|
|
Tier 1 leverage ratio |
|
|
12.53 |
% |
|
12.07 |
% |
|
11.72 |
% |
Common equity tier 1 capital ratio |
|
|
14.89 |
|
|
14.13 |
|
|
14.27 |
|
Tier 1 capital ratio |
|
|
14.89 |
|
|
14.13 |
|
|
14.27 |
|
Total capital ratio |
|
|
16.14 |
|
|
15.38 |
|
|
15.52 |
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality |
|
|
|
|
|
|
|
|
|
|
Nonperforming loans |
|
$ |
10,940 |
|
$ |
10,940 |
|
$ |
4 |
|
Allowance for credit losses to total loans |
|
|
1.47 |
% |
|
1.38 |
% |
|
1.34 |
% |
Nonperforming loans to total loans |
|
|
0.87 |
|
|
0.91 |
|
|
0.00 |
|
Nonperforming assets to total assets |
|
|
0.64 |
|
|
0.68 |
|
|
0.00 |
|
Allowance to nonperforming loans |
|
|
169 |
|
|
152 |
|
|
NM |
|
| (1) | Regulatory capital ratios presented on bank-only basis. The Bank has no recorded intangible assets on the Statement of Financial Condition, and accordingly, tangible common equity is equal to common equity. |
NM – Not meaningful
8
ESQUIRE FINANCIAL HOLDINGS, INC.
Consolidated Income Statement (unaudited)
(dollars in thousands except per share data)
|
|
Three Months Ended |
|
Six Months Ended |
|
|||||||||||
|
|
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
|||||||
|
|
2024 |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|||||
Interest income |
|
$ |
27,385 |
|
$ |
26,073 |
|
$ |
22,055 |
|
$ |
53,458 |
|
$ |
42,420 |
|
Interest expense |
|
|
3,063 |
|
|
3,210 |
|
|
1,966 |
|
|
6,273 |
|
|
3,042 |
|
Net interest income |
|
|
24,322 |
|
|
22,863 |
|
|
20,089 |
|
|
47,185 |
|
|
39,378 |
|
Provision for credit losses |
|
|
1,000 |
|
|
1,000 |
|
|
1,325 |
|
|
2,000 |
|
|
1,825 |
|
Net interest income after provision for credit losses |
|
|
23,322 |
|
|
21,863 |
|
|
18,764 |
|
|
45,185 |
|
|
37,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment processing fees |
|
|
5,322 |
|
|
5,296 |
|
|
5,764 |
|
|
10,618 |
|
|
11,277 |
|
Gain on equity investments |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,027 |
|
Other noninterest income |
|
|
953 |
|
|
1,093 |
|
|
931 |
|
|
2,046 |
|
|
1,653 |
|
Total noninterest income |
|
|
6,275 |
|
|
6,389 |
|
|
6,695 |
|
|
12,664 |
|
|
16,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
9,525 |
|
|
9,161 |
|
|
7,803 |
|
|
18,686 |
|
|
15,287 |
|
Other expenses |
|
|
5,707 |
|
|
5,407 |
|
|
5,173 |
|
|
11,114 |
|
|
10,170 |
|
Total noninterest expense |
|
|
15,232 |
|
|
14,568 |
|
|
12,976 |
|
|
29,800 |
|
|
25,457 |
|
Income before income taxes |
|
|
14,365 |
|
|
13,684 |
|
|
12,483 |
|
|
28,049 |
|
|
29,053 |
|
Income taxes |
|
|
3,878 |
|
|
3,626 |
|
|
3,370 |
|
|
7,504 |
|
|
7,761 |
|
Net income |
|
$ |
10,487 |
|
$ |
10,058 |
|
$ |
9,113 |
|
$ |
20,545 |
|
$ |
21,292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.34 |
|
$ |
1.29 |
|
$ |
1.18 |
|
$ |
2.64 |
|
$ |
2.76 |
|
Diluted |
|
|
1.25 |
|
|
1.20 |
|
|
1.10 |
|
|
2.45 |
|
|
2.57 |
|
Basic - adjusted (1) |
|
|
1.34 |
|
|
1.29 |
|
|
1.18 |
|
|
2.64 |
|
|
2.38 |
|
Diluted - adjusted (1) |
|
|
1.25 |
|
|
1.20 |
|
|
1.10 |
|
|
2.45 |
|
|
2.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Financial Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets |
|
|
2.58 |
% |
|
2.59 |
% |
|
2.65 |
% |
|
2.59 |
% |
|
3.15 |
% |
Return on average equity |
|
|
20.16 |
|
|
20.14 |
|
|
21.03 |
|
|
20.15 |
|
|
25.55 |
|
Adjusted return on average assets (1) |
|
|
2.58 |
|
|
2.59 |
|
|
2.65 |
|
|
2.59 |
|
|
2.72 |
|
Adjusted return on average equity (1) |
|
|
20.16 |
|
|
20.14 |
|
|
21.03 |
|
|
20.15 |
|
|
22.02 |
|
Net interest margin |
|
|
6.19 |
|
|
6.06 |
|
|
6.02 |
|
|
6.13 |
|
|
6.02 |
|
Efficiency ratio (1) |
|
|
49.8 |
|
|
49.8 |
|
|
48.4 |
|
|
49.8 |
|
|
45.2 |
|
Adjusted efficiency ratio (1) |
|
|
49.8 |
|
|
49.8 |
|
|
48.4 |
|
|
49.8 |
|
|
48.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid per common share |
|
$ |
0.150 |
|
$ |
0.150 |
|
$ |
0.125 |
|
$ |
0.300 |
|
$ |
0.225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic shares |
|
|
7,798,441 |
|
|
7,786,887 |
|
|
7,708,350 |
|
|
7,792,664 |
|
|
7,708,546 |
|
Weighted average diluted shares |
|
|
8,402,750 |
|
|
8,401,752 |
|
|
8,299,704 |
|
|
8,402,119 |
|
|
8,301,149 |
|
| (1) | See non-GAAP reconciliation provided elsewhere herein. |
9
ESQUIRE FINANCIAL HOLDINGS, INC.
Consolidated Average Balance Sheets and Average Yield/Cost (unaudited)
(dollars in thousands)
|
|
Three Months Ended |
|
||||||||||||||||||||||
|
|
June 30, |
|
March 31, |
|
June 30, |
|
||||||||||||||||||
|
|
2024 |
|
2024 |
|
2023 |
|
||||||||||||||||||
|
|
Average |
|
|
|
|
Average |
|
Average |
|
|
|
|
Average |
|
Average |
|
|
|
|
Average |
|
|||
|
|
Balance |
|
Interest |
|
Yield/Cost |
|
Balance |
|
Interest |
|
Yield/Cost |
|
Balance |
|
Interest |
|
Yield/Cost |
|
||||||
INTEREST EARNING ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, held for investment |
|
$ |
1,240,599 |
|
$ |
24,216 |
|
7.85 |
% |
$ |
1,208,429 |
|
$ |
23,389 |
|
7.78 |
% |
$ |
993,353 |
|
$ |
19,137 |
|
7.73 |
% |
Securities, includes restricted stock |
|
|
253,328 |
|
|
2,023 |
|
3.21 |
% |
|
226,175 |
|
|
1,605 |
|
2.85 |
% |
|
208,211 |
|
|
1,189 |
|
2.29 |
% |
Securities purchased under agreements to resell |
|
|
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
|
49,963 |
|
|
715 |
|
5.74 |
% |
Interest earning cash and other |
|
|
87,025 |
|
|
1,146 |
|
5.30 |
% |
|
81,740 |
|
|
1,079 |
|
5.31 |
% |
|
85,991 |
|
|
1,014 |
|
4.73 |
% |
Total interest earning assets |
|
|
1,580,952 |
|
|
27,385 |
|
6.97 |
% |
|
1,516,344 |
|
|
26,073 |
|
6.92 |
% |
|
1,337,518 |
|
|
22,055 |
|
6.61 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST EARNING ASSETS |
|
|
50,688 |
|
|
|
|
|
|
|
48,602 |
|
|
|
|
|
|
|
44,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL AVERAGE ASSETS |
|
$ |
1,631,640 |
|
|
|
|
|
|
$ |
1,564,946 |
|
|
|
|
|
|
$ |
1,381,522 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST BEARING LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, Money Market deposits |
|
$ |
899,419 |
|
$ |
2,932 |
|
1.31 |
% |
$ |
860,159 |
|
$ |
3,098 |
|
1.45 |
% |
$ |
673,154 |
|
$ |
1,809 |
|
1.08 |
% |
Time deposits |
|
|
11,702 |
|
|
130 |
|
4.47 |
% |
|
11,041 |
|
|
111 |
|
4.04 |
% |
|
16,234 |
|
|
156 |
|
3.85 |
% |
Total interest bearing deposits |
|
|
911,121 |
|
|
3,062 |
|
1.35 |
% |
|
871,200 |
|
|
3,209 |
|
1.48 |
% |
|
689,388 |
|
|
1,965 |
|
1.14 |
% |
Borrowings |
|
|
44 |
|
|
1 |
|
9.14 |
% |
|
45 |
|
|
1 |
|
8.94 |
% |
|
46 |
|
|
1 |
|
8.72 |
% |
Total interest bearing liabilities |
|
|
911,165 |
|
|
3,063 |
|
1.35 |
% |
|
871,245 |
|
|
3,210 |
|
1.48 |
% |
|
689,434 |
|
|
1,966 |
|
1.14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST BEARING LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
|
499,348 |
|
|
|
|
|
|
|
477,020 |
|
|
|
|
|
|
|
500,058 |
|
|
|
|
|
|
Other liabilities |
|
|
11,894 |
|
|
|
|
|
|
|
15,787 |
|
|
|
|
|
|
|
18,231 |
|
|
|
|
|
|
Total noninterest bearing liabilities |
|
|
511,242 |
|
|
|
|
|
|
|
492,807 |
|
|
|
|
|
|
|
518,289 |
|
|
|
|
|
|
Stockholders' equity |
|
|
209,233 |
|
|
|
|
|
|
|
200,894 |
|
|
|
|
|
|
|
173,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL AVG. LIABILITIES AND EQUITY |
|
$ |
1,631,640 |
|
|
|
|
|
|
$ |
1,564,946 |
|
|
|
|
|
|
$ |
1,381,522 |
|
|
|
|
|
|
Net interest income |
|
|
|
|
$ |
24,322 |
|
|
|
|
|
|
$ |
22,863 |
|
|
|
|
|
|
$ |
20,089 |
|
|
|
Net interest spread |
|
|
|
|
|
|
|
5.62 |
% |
|
|
|
|
|
|
5.44 |
% |
|
|
|
|
|
|
5.47 |
% |
Net interest margin |
|
|
|
|
|
|
|
6.19 |
% |
|
|
|
|
|
|
6.06 |
% |
|
|
|
|
|
|
6.02 |
% |
Deposits (including noninterest bearing demand deposits) |
|
$ |
1,410,469 |
|
$ |
3,062 |
|
0.87 |
% |
$ |
1,348,220 |
|
$ |
3,209 |
|
0.96 |
% |
$ |
1,189,446 |
|
$ |
1,965 |
|
0.66 |
% |
10
ESQUIRE FINANCIAL HOLDINGS, INC.
Consolidated Average Balance Sheets and Average Yield/Cost (unaudited)
(dollars in thousands)
|
|
Six Months Ended June 30, |
|
||||||||||||||
|
|
2024 |
|
2023 |
|
||||||||||||
|
|
Average |
|
|
|
|
Average |
|
Average |
|
|
|
|
Average |
|
||
|
|
Balance |
|
Interest |
|
Yield/Cost |
|
Balance |
|
Interest |
|
Yield/Cost |
|
||||
INTEREST EARNING ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, held for investment |
|
$ |
1,224,513 |
|
$ |
47,605 |
|
7.82 |
% |
$ |
972,753 |
|
$ |
36,752 |
|
7.62 |
% |
Securities, includes restricted stock |
|
|
239,752 |
|
|
3,628 |
|
3.04 |
% |
|
208,513 |
|
|
2,343 |
|
2.27 |
% |
Securities purchased under agreements to resell |
|
|
— |
|
|
— |
|
— |
|
|
49,686 |
|
|
1,368 |
|
5.55 |
% |
Interest earning cash and other |
|
|
84,382 |
|
|
2,225 |
|
5.30 |
% |
|
87,094 |
|
|
1,957 |
|
4.53 |
% |
Total interest earning assets |
|
|
1,548,647 |
|
|
53,458 |
|
6.94 |
% |
|
1,318,046 |
|
|
42,420 |
|
6.49 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST EARNING ASSETS |
|
|
49,646 |
|
|
|
|
|
|
|
44,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL AVERAGE ASSETS |
|
$ |
1,598,293 |
|
|
|
|
|
|
$ |
1,362,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST BEARING LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings, NOW, Money Market deposits |
|
$ |
879,789 |
|
$ |
6,030 |
|
1.38 |
% |
$ |
660,737 |
|
$ |
2,821 |
|
0.86 |
% |
Time deposits |
|
|
11,372 |
|
|
241 |
|
4.26 |
% |
|
12,848 |
|
|
219 |
|
3.44 |
% |
Total interest bearing deposits |
|
|
891,161 |
|
|
6,271 |
|
1.42 |
% |
|
673,585 |
|
|
3,040 |
|
0.91 |
% |
Borrowings |
|
|
45 |
|
|
2 |
|
8.94 |
% |
|
46 |
|
|
2 |
|
8.77 |
% |
Total interest bearing liabilities |
|
|
891,206 |
|
|
6,273 |
|
1.42 |
% |
|
673,631 |
|
|
3,042 |
|
0.91 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST BEARING LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
|
488,184 |
|
|
|
|
|
|
|
502,399 |
|
|
|
|
|
|
Other liabilities |
|
|
13,840 |
|
|
|
|
|
|
|
18,065 |
|
|
|
|
|
|
Total noninterest bearing liabilities |
|
|
502,024 |
|
|
|
|
|
|
|
520,464 |
|
|
|
|
|
|
Stockholders' equity |
|
|
205,063 |
|
|
|
|
|
|
|
168,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL AVG. LIABILITIES AND EQUITY |
|
$ |
1,598,293 |
|
|
|
|
|
|
$ |
1,362,140 |
|
|
|
|
|
|
Net interest income |
|
|
|
|
$ |
47,185 |
|
|
|
|
|
|
$ |
39,378 |
|
|
|
Net interest spread |
|
|
|
|
|
|
|
5.52 |
% |
|
|
|
|
|
|
5.58 |
% |
Net interest margin |
|
|
|
|
|
|
|
6.13 |
% |
|
|
|
|
|
|
6.02 |
% |
Deposits (including noninterest bearing demand deposits) |
|
$ |
1,379,345 |
|
$ |
6,271 |
|
0.91 |
% |
$ |
1,175,984 |
|
$ |
3,040 |
|
0.52 |
% |
11
ESQUIRE FINANCIAL HOLDINGS, INC.
Consolidated Non-GAAP Financial Measure Reconciliation (unaudited)
(all dollars in thousands except per share data)
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.
Adjusted net income, which is used to compute adjusted return on average assets, adjusted return on average equity and adjusted earnings per share, excludes the impact of the recognized gain, net of tax, on the Company’s equity investments.
|
Three Months Ended |
|
Six Months Ended |
|
|||||||||||
|
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
|||||||
|
2024 |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|||||
Net income – GAAP |
$ |
10,487 |
|
$ |
10,058 |
|
$ |
9,113 |
|
$ |
20,545 |
|
$ |
21,292 |
|
Less: gain on equity investments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,027) |
|
Add: income tax impact |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,087 |
|
Adjusted net income |
$ |
10,487 |
|
$ |
10,058 |
|
$ |
9,113 |
|
$ |
20,545 |
|
$ |
18,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets – GAAP |
|
2.58 |
% |
|
2.59 |
% |
|
2.65 |
% |
|
2.59 |
% |
|
3.15 |
% |
Adjusted return on average assets |
|
2.58 |
% |
|
2.59 |
% |
|
2.65 |
% |
|
2.59 |
% |
|
2.72 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average equity – GAAP |
|
20.16 |
% |
|
20.14 |
% |
|
21.03 |
% |
|
20.15 |
% |
|
25.55 |
% |
Adjusted return on average equity |
|
20.16 |
% |
|
20.14 |
% |
|
21.03 |
% |
|
20.15 |
% |
|
22.02 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share – GAAP |
$ |
1.34 |
|
$ |
1.29 |
|
$ |
1.18 |
|
$ |
2.64 |
|
$ |
2.76 |
|
Adjusted basic earnings per share |
$ |
1.34 |
|
$ |
1.29 |
|
$ |
1.18 |
|
$ |
2.64 |
|
$ |
2.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share – GAAP |
$ |
1.25 |
|
$ |
1.20 |
|
$ |
1.10 |
|
$ |
2.45 |
|
$ |
2.57 |
|
Adjusted diluted earnings per share |
$ |
1.25 |
|
$ |
1.20 |
|
$ |
1.10 |
|
$ |
2.45 |
|
$ |
2.21 |
|
The following table presents a reconciliation of efficiency ratio (non-GAAP) and adjusted efficiency ratio (non-GAAP).
|
Three Months Ended |
|
Six Months Ended |
|
|||||||||||
|
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
|||||||
|
2024 |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
|||||
Efficiency ratio – non-GAAP(1) |
|
49.8 |
% |
|
49.8 |
% |
|
48.4 |
% |
|
49.8 |
% |
|
45.2 |
% |
Noninterest expense – GAAP |
$ |
15,232 |
|
$ |
14,568 |
|
$ |
12,976 |
|
$ |
29,800 |
|
$ |
25,457 |
|
Net interest income – GAAP |
|
24,322 |
|
|
22,863 |
|
|
20,089 |
|
|
47,185 |
|
|
39,378 |
|
Noninterest income – GAAP |
|
6,275 |
|
|
6,389 |
|
|
6,695 |
|
|
12,664 |
|
|
16,957 |
|
Less: gain on equity investments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,027) |
|
Adjusted noninterest income – non-GAAP |
$ |
6,275 |
|
$ |
6,389 |
|
$ |
6,695 |
|
$ |
12,664 |
|
$ |
12,930 |
|
Adjusted efficiency ratio – non-GAAP(2) |
|
49.8 |
% |
|
49.8 |
% |
|
48.4 |
% |
|
49.8 |
% |
|
48.7 |
% |
| (1) | The reported efficiency ratio is a non-GAAP measure calculated by dividing GAAP noninterest expense by the sum of GAAP net interest income and GAAP noninterest income. |
| (2) | The adjusted efficiency ratio is a non-GAAP measure calculated by dividing GAAP noninterest expense by the sum of GAAP net interest income and adjusted noninterest income. |
12
The following table presents the adjusted tangible common equity to tangible assets calculation (non-GAAP):
|
June 30, |
|
|
|
2024 |
|
|
Total assets - GAAP |
$ |
1,715,714 |
|
Less: intangible assets |
|
— |
|
Tangible assets ("TA") - non-GAAP |
|
1,715,714 |
|
|
|
|
|
Total stockholders' equity - GAAP |
$ |
217,411 |
|
Less: intangible assets |
|
— |
|
Less: preferred stock |
|
— |
|
Tangible common equity ("TCE") - non-GAAP |
|
217,411 |
|
Add: unrecognized losses on securities held-to-maturity, net of tax |
|
(6,006) |
|
Adjusted TCE - non-GAAP |
$ |
211,405 |
|
|
|
|
|
Stockholders' equity to assets - GAAP |
|
12.67 |
% |
TCE to TA - non-GAAP |
|
12.67 |
% |
Adjusted TCE to TA - non-GAAP |
|
12.32 |
% |
The following table presents the common equity tier 1 capital ratio and the adjusted common equity tier 1 capital ratio:
|
June 30, |
|
|
|
2024 |
|
|
Common equity tier 1 ("CET1") capital - Bank |
$ |
203,293 |
|
Add: unrealized losses on securities available-for-sale , net of tax |
|
(14,241) |
|
Add: unrecognized losses on securities held-to-maturity, net of tax |
|
(6,006) |
|
Adjusted CET1 capital - Bank |
$ |
183,046 |
|
|
|
|
|
Total risk-weighted assets - Bank |
$ |
1,365,132 |
|
|
|
|
|
CET1 capital ratio(1) |
|
14.89 |
% |
Adjusted CET1 capital ratio(1) |
|
13.41 |
% |
| (1) | Regulatory capital ratios presented on bank-only basis. The Bank has no recorded intangible assets on the Statement of Financial Condition, and accordingly, tangible common equity is equal to common equity. |
13
|
Ensuring our Clients and Our Institution Succeed Boldly Listed as ESQ Esquire Financial Holdings, Inc. (Financial Holding Company for Esquire Bank, N.A.) 2Q 2024 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,” “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”). 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. 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 |
|
Decades of expertise in the national litigation market Asset sensitive model anchored by law firm loans yielding approx. 10% Branchless and tech enabled core deposit platform funded at 0.87% Driving loan and deposit growth with a 5 Year CAGR in excess of 20% since 2019 Decades of expertise in sales, risk, and compliance management Independent Sales Organization (“ISO”) model with approximately 83,000 merchants nationally Total fee income represents 21% of total revenue Strong growth and stable fee income with a 5 Year CAGR of 22% since 2019 ROA and ROTCE of 2.58% and 20.16%, respectively Industry leading NIM of 6.19% Diversified revenue stream with strong NIM and stable fee income Strong efficiency ratio of 49.8% while investing in resources (people, IT, and marketing) for future growth A digital-first disruptor bank with best-in-class technology fueling future growth and industry leading client retention rates Account-based digital marketing (“ABM”) from our CRM to power prospective client engagements nationally Leveraged artificial intelligence (“AI”), advanced data analytics, and personalization features to deliver real-time thought leadership content Nationwide Branchless Tech Enabled Litigation & Payment Processing Verticals Generating Industry Leading Returns Litigation Vertical Commercial Banking Nationally Industry Leading Returns Fueled by Branchless and Tech Enabled National Verticals Payment Processing Vertical (Merchant Services) Small Business Banking Nationally Technology – the Future A Catalyst for Strong Growth 3 How Our Clients Succeed Boldly |
|
Strong Growth Driven by Unique National Verticals How Esquire Succeeds Boldly Key Highlights Strong growth in higher yielding variable rate commercial loans nationally Stable low-cost branchless and tech enabled deposit model Equity to Assets of 12.67% (Adjusted(1) 12.32%) Common Equity Tier 1 of 14.89% (Adjusted(1) 13.41%) 4 at June 30, 2024 (1) See non-GAAP reconciliation provided in the appendix. |
|
Stable low-cost branchless funding model with a strong commercial deposit franchise nationally DDA and escrow-based NOW accounts represent 33% and 55% of total deposits at June 30, 2024, respectively Higher yielding variable rate commercial loans anchored by our national litigation portfolio Asset sensitive balance sheet with approximately 90% of our variable rate commercial loans having one-year interest rate floors at their origination or renewal dates How Esquire Succeeds Boldly 5 Industry Leading Net Interest Margin |
|
Strong Revenue Growth ($ in thousands) at June 30, 2024 How Esquire Succeeds Boldly 6 Key Highlights Strong asset sensitive net interest margin Stable payment processing fee income Growing ASP fee income derived from off-balance sheet funds management |
|
Financial Highlights How Esquire Succeeds Boldly Key Highlights Industry leading returns Named to the KBW 2024 Bank Honor Roll Named to the Piper Sandler 2023 Bank & Thrift Small Market-All Stars Raymond James’ Top Performing Community Bank (2018-2023) Book value per share and equity to assets are $26.22 and 12.67% at June 30, 2024, respectively 7 at June 30, 2024 (1) The adjusted results exclude a nonrecurring pretax $4.0 million net gain on equity investments. See non-GAAP reconciliation provided in the appendix. |
|
Loan Portfolio Diversification with Focused Growth Focused growth in higher yielding variable rate commercial loans with strong credit metrics on a national basis Selective multifamily loan growth with strong historical performance, DSCRs, and LTVs in the NY metro market How Esquire Succeeds Boldly 8 at June 30, 2024 |
|
Substantially all of our $787 million in commercial loans are variable rate and tied to prime comprising approximately 62% of our loan portfolio Approximately 90% of our commercial loan portfolio was originated (or renewed annually) with interest rate floors in place Asset sensitive – estimated sensitivity of projected annualized net interest income (“NII”) down 100 and 200 basis point rate scenarios decreases projected NII by 4.5% and 9.2%, respectively at March 31, 2024 Loan Portfolio Diversification with Focused Growth How Esquire Succeeds Boldly 9 |
|
Commercial Litigation (Law Firm) Loans Full annual underwriting including, but not limited to: 3 years financials and tax returns (business and personal) Full contingent case inventory valuation process & collateral assignment or UCC-1 Personal guarantees for the majority of loans, including personal background checks Diversity across law firm inventories and collateral Average loan-to-collateral fee value or LTV of less than 13% Strong average DSCR (on average > 3.0x) Average draws against committed and uncommitted line-of-credit (“LOC”) and case disbursement loans of approximately 50% Weighted average interest rate of approximately 10% Funded with low-cost contingent law firm litigation deposits Litigation deposits to litigation loan facilities drawn is approximately 168% How Esquire Succeeds Boldly 10 |
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Esquire’s Bold Opportunities New York Metro Area Real Estate A Reliable Asset Class & Liquidity Source Selective in our property and borrower selection process Strong generational owners/operators with high quality net worth Minimal historical losses No office nor construction loan exposure Average current DSCR exceeding 1.6x Average original LTV of approximately 55% Rent regulated, free market, and mixed (both rent regulated and free market) represent approximately one -third each of the $352 million multifamily loan portfolio CRE exposure is 199% of Esquire Bank’s regulatory Tier 1 capital plus the allowance for credit losses (“ACL”). CRE exposure is 177% of consolidated EFHI regulatory Tier 1 capital plus the ACL. Pledged Multifamily and Residential loan portfolio provides liquidity totaling $149.7 million through the Federal Home Loan Bank of NY (“FHLB”) program as of June 30, 2024 11 |
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Multifamily & CRE Maturities at June 30, 2024 Multifamily loans totaling $97.4 million mature over the next two years with $19.3 million, or 20%, having an LTV in excess of 70% Other CRE loans totaling $4.4 million mature over the next two years with no loans in excess of 70% LTV How Esquire Succeeds Boldly 12 |
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Solid Credit Metrics, Asset Quality and ACL Coverage How Esquire Succeeds Boldly at June 30, 2024 Note – All asset quality metrics are based on our loans held for investment portfolio (1) NFL consumer loan portfolio - $9.0 million charge-off. 13 |
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Deposit Composition and Growth Our tech enabled deposit platform utilizes our corporate cash management suite of services, creating a highly efficient branchless platform Our overall liquidity position (cash, borrowing capacity, and available reciprocal client sweep balances) totaled $823 million, or 55% of total deposits, creating a highly liquid and unlevered balance sheet How Esquire Succeeds Boldly 14 |
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*Note: Excludes sweeps totaling $408 million Deposit Composition Details DDA and NOW (escrow funds) deposits total 88% of total deposits, representing stable funding sources in various interest rate scenarios Litigation and payment processing deposits represent 76% and 10% of total deposits at June 30, 2024, respectively Uninsured deposits (excluding $11.1 million of affiliate deposits) totaled $456 million, or 31%, of total deposits with approximately 80% representing clients with full relationship banking including, but not limited to, law firm operating accounts, certain balances of escrow accounts, merchant reserves, ISO reserves, ACH processing, and custodial accounts Off-balance sheet sweep funds totaled $408 million at June 30, 2024, with $274 million, or 67%, available for additional on-balance sheet liquidity How Esquire Succeeds Boldly 15 |
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Currently servicing approximately 83,000 merchants across 50 states in our payment processing (merchant acquiring) vertical Fee income, primarily payment processing fees, represents 21% of total revenue for the year ended June 30, 2024 How Esquire Succeeds Boldly Strong Growth in Stable Noninterest Income at June 30, 2024 16 |
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How Esquire Succeeds Boldly Key Highlights Strong and stable DDA reserves Protecting capital from merchant chargebacks and returns 17 Protecting Our Company with Strong Payment Processing Reserves at June 30, 2024 |
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Significant national markets primed for disruption: $443 billion & 100,000+ firms in the litigation vertical and $10.3 trillion and 10+ million merchants 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 that are primed for disruption by our client-centric & tech-focused institution We are thought leaders in the litigation vertical and provide C-suite access for ISO flexibility in the payment processing vertical Differentiated and positioned for growth: With industry leading tailored products and state-of-the-art technology geared towards effective client acquisition 18 |
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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 * Deployment of AI technologies applicable only to sales and marketing processes and not used as a decisioning tool for loan underwriting processes. 19 Online Banking |
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Succeeding Boldly Listed as ESQ Contact Information: Eric S. Bader Executive Vice President & Chief Operating Officer 516-535-2002 eric.bader@esqbank.com |
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Appendix & Supplemental Disclosure National Markets – Litigation & Payment Processing Verticals & Non-GAAP Reconciliation |
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The Esquire Competitive Advantage Esquire’s Bold Opportunities U.S. Litigation Market A Significant Growth Opportunity U.S. Tort actions are estimated to consume 1.85-2.13% of U.S. GDP* annually or $443 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 22 Key Highlights $443 billion* Total Addressable Market (“TAM”) in litigation vertical Esquire is a tailored, differentiated brand and thought leader in the litigation market *US Chamber of Commerce Institute for Legal Reform – “Tort Costs in America – An Empirical Analysis of Costs and Compensation of U.S. Tort System”. Published in November 2022. |
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23 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 Loans Firm and Partner Acquisition Loans Term Loans to Finance Case Acquisition & Growth Escrow Banking and 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 Platform and Content 23 |
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Payment Processing – Current 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 Tech Enabled 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 Commercial Treasury Function for Merchant Clearing and ISO Cash Management Maintaining and Monitor ISO and Merchant Reserves (DDA) 24 |
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The payments industry CAGR was 12% from 2019 to 2022 to an estimated total payment volume of $10.3 trillion Esquire’s Bold Opportunities Payment Volume Trends – A Significant Growth Opportunity Sources: Company Financial Records, Note: PayPal figures represent PayPal’s estimated U.S.percent share of “Total Payment Volume” (TPV).PayPal volume includes volume from a bank account, a PayPal account balance, a PayPalCredit account, a credit or debit card or other stored value products such as coupons and gift cards. Assuch, some of this volume may be included in other networks aswell. PayPal’s classification in the payments industry ecosystem is varied/debated as it performs functions attributed to a payment network, an issuer, acquirer, etc., and its financial reporting does not directly align with other payment network reporting structures and methods. Discover volume includes Discover Network and PulseNetwork transactions. 25 at December 31, 2022 ($ in billions) |
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Appendix (all dollars in thousands except per share data) 26 Non-GAAP Financial Measure Reconciliation 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. Adjusted net income, which is used to compute adjusted return on average assets, adjusted return on average equity and adjusted earnings per share, excludes the impact of the net recognized gain, net of tax, on the Company’s equity investments. Year Ended December 31, 2023 Net income – GAAP $ 41,011 Less: net gain on equity investments (4,013) Add: income tax impact 1,083 Adjusted net income $ 38,081 Return on average assets – GAAP 2.89 % Adjusted return on average assets 2.68 % Return on average equity – GAAP 23.20 % Adjusted return on average equity 21.54 % Basic earnings per share – GAAP $ 5.31 Adjusted basic earnings per share $ 4.94 Diluted earnings per share – GAAP $ 4.91 Adjusted diluted earnings per share $ 4.56 |
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Appendix (all dollars in thousands) 27 Non-GAAP Financial Measure Reconciliation (Cont’d) The following table presents the adjusted tangible common equity to tangible assets calculation (non-GAAP): June 30, 2024 Total assets - GAAP $ 1,715,714 Less: intangible assets — Tangible assets ("TA") - non-GAAP 1,715,714 Total stockholders' equity - GAAP $ 217,411 Less: intangible assets — Less: preferred stock — Tangible common equity ("TCE") - non-GAAP 217,411 Add: unrecognized losses on securities held-to-maturity, net of tax (6,006) Adjusted TCE - non-GAAP $ 211,405 Stockholders' equity to assets - GAAP 12.67 % TCE to TA - non-GAAP 12.67 % Adjusted TCE to TA - non-GAAP 12.32 % |
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Appendix (all dollars in thousands) 28 Non-GAAP Financial Measure Reconciliation (Cont’d) The following table presents the common equity tier 1 capital ratio and the adjusted common equity tier 1 capital ratio: (1) Regulatory capital ratios presented on bank-only basis. The Bank has no recorded intangible assets on the Statement of Financial Condition, and accordingly, tangible common equity is equal to common equity. June 30, 2024 Common equity tier 1 ("CET1") capital - Bank $ 203,293 Add: unrealized losses on securities available-for-sale , net of tax (14,241) Add: unrecognized losses on securities held-to-maturity, net of tax (6,006) Adjusted CET1 capital - Bank $ 183,046 Total risk-weighted assets - Bank $ 1,365,132 CET1 capital ratio(1) 14.89 % Adjusted CET1 capital ratio(1) 13.41 % |
