Esquire Financial Holdings, Inc. · NASDAQ:ESQ
Esquire Financial — Q3 2023 Earnings Presentation
30 slides from Esquire Financial's earnings presentation, Oct 23, 2023
Slide 1: 3Q 2023 Investor Presentation
Ensuring our Clients and Our Institution Succeed Boldly Listed as ESQ Esquire Financial Holdings, Inc. (Financial Holding Company for Esquire Bank, N.A.) 3Q 2023 Investor Presentation Exhibit 99.2
Slide 2: Forward Looking Disclosure
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, ar
Slide 3: Our Mission
Ensuring that our Company and clients succeed boldly with innovative solution-based products and technology, driving client success through relationship banking Our Mission
Slide 4: Decades of expertise in the national litigation market Asset sensitive model anchored
Decades of expertise in the national litigation market Asset sensitive model anchored by law firm loans yielding approx. 9.5% Branchless and tech enabled core deposit platform funded at 0.69% Driving loan and deposit growth with a CAGR in excess of 20% since 2015 Expertise in sales, risk,
Slide 5: Strong Growth Driven by Unique National Verticals
Strong Growth Driven by Unique National Verticals How Esquire Succeeds Boldly Key Highlights Strong growth in higher yielding variable rate commercial loans on a national basis Stable low-cost branchless and tech enabled deposit model Equity to Assets of 12.52% (Adjusted(1) 11.98%) Common Eq
Slide 6: Industry Leading Net Interest Margin
Stable low-cost branchless deposit model Strong commercial deposits franchise nationally DDA and escrow-based NOW accounts represent 37% and 51% of total deposits at September 30, 2023, respectively Higher yielding variable rate commercial loans anchored by our national litigation portfolio
Slide 7: Strong Revenue Growth
Strong Revenue Growth ($ in thousands) at September 30, 2023 How Esquire Succeeds Boldly 7 Key Highlights Strong asset sensitive net interest margin Stable payment processing fee income as short-term interest rates increase Growing ASP fee income derived from off-balance sheet funds management
Slide 8: Financial Highlights
Financial Highlights How Esquire Succeeds Boldly Key Highlights Industry leading returns from our unique and tech enabled national business models Stable payment processing fee income – fee income totaled 23% of revenue for the quarter ended September 30, 2023 Branchless low-cost deposits with
Slide 9: Financial Highlights, cont'd
Financial Highlights, cont’d How Esquire Succeeds Boldly 9 at September 30, 2023 *EPS – Earnings Per Share (1) The adjusted results excluded a nonrecurring pretax $4.0 million gain on equity investment. See non-GAAP reconciliation provided in the appendix
Slide 10: Loan Portfolio Diversification with Focused Growth
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 in the NY metro market How Esquire Succeeds Boldly 10 at Septemb
Slide 11: Loan Portfolio Diversification with Focused Growth
Substantially all of our $662 million commercial loans are variable rate and tied to prime, comprising approximately 60% of our loan portfolio Asset sensitive – estimated sensitivity of projected annualized net interest income (“NII”) up 100 and 200 basis point rate scenarios increases projected
Slide 12: Solid Credit Metrics, Asset Quality and ACL Coverage
Solid Credit Metrics, Asset Quality and ACL Coverage How Esquire Succeeds Boldly 12 at September 30, 2023 Note – All asset quality metrics are based on our loans held for investment portfolio (1) NFL consumer loan portfolio - $9.0 million charge-off.
Slide 13: Deposit Composition and Growth
*Note: Excludes sweeps totaling $457 million Deposit Composition and Growth 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 73% and 12% of total deposits a
Slide 14: Why Esquire is Set to Succeed Boldly
Significant national markets primed for disruption: $443 billion & 100,000+ firms in the litigation vertical and $9.5 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
Slide 15: National Markets Litigation & Payment Processing Verticals
National Markets Litigation & Payment Processing Verticals Supported by Investment in Technology
Slide 16: Commercial Litigation (Law Firm) Loans
Commercial Litigation (Law Firm) Loans Full annual underwriting: 3 years financials and tax returns (business and personal) Full contingent case inventory valuation process & collateral assignment Diversity across law firm inventories and collateral Personal guarantees Average LTV of less
Slide 17: Payment Processing – Current ISO Model
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
Slide 18: Strong Growth in Stable Noninterest Income
Currently servicing approximately 83,000 merchants across 50 states Fee income, primarily payment processing fees, represents 23% of total revenue for the quarter ended September 30, 2023 How Esquire Succeeds Boldly *Payment processing CAGR is 46% 18 Strong Growth in Stable Noninterest Income at
Slide 19: Protecting Our Company with Strong Payment Processing Reserves
How Esquire Succeeds Boldly Key Highlights Strong and stable DDA reserves Protecting capital from merchant chargebacks and returns 19 Protecting Our Company with Strong Payment Processing Reserves at September 30, 2023
Slide 20: Technology Driving Bold Success
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 enr
Slide 21: Succeeding Boldly
Succeeding Boldly Listed as ESQ Contact Information: Eric S. Bader Executive Vice President & Chief Operating Officer 516-535-2002 eric.bader@esqbank.com
Slide 22: Appendix
Commercial Real Estate Loans, U.S. Litigation & Payment Markets, Non-GAAP Reconciliation Appendix
Slide 23: Esquire's Bold Opportunities
Esquire’s Bold Opportunities New York City properties total $1.3 trillion in Market Value.* A Significant Growth Opportunity Thoughtful in our property and borrower selection process Minimal historical losses Average debt-service coverage (“DSCR”) exceeding 1.5x Average loan-to-value (“LTV”)
Slide 24: The Esquire Competitive Advantage: U.S. Litigation Market
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 e
Slide 25: Digitally Transforming The Business of Law
25 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 Ter
Slide 26: Payment Volume Trends – A Significant Growth Opportunity
The payments industry grew nearly 25% from 2020 to 2021 to an estimated total payment volume of $9.5 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
Slide 27: Non-GAAP Financial Measure Reconciliation
Appendix (all dollars in thousands except per share data) 27 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 n
Slide 28: Non-GAAP Financial Measure Reconciliation (Cont'd)
Appendix (all dollars in thousands) 28 Non-GAAP Financial Measure Reconciliation (Cont’d) The following table presents a reconciliation of efficiency ratio (non-GAAP) and adjusted efficiency ratio (non-GAAP). (1) The reported efficiency ratio is a non-GAAP measure calculated by dividing GAAP noninte
Slide 29: Non-GAAP Financial Measure Reconciliation (Cont'd)
Appendix (all dollars in thousands) 29 Non-GAAP Financial Measure Reconciliation (Cont’d) The following table presents the adjusted tangible common equity to tangible assets calculation (non-GAAP): September 30, 2023 Total assets - GAAP $ 1,482,412 Less: intangible assets — Tangible assets ("TA") -
Slide 30: Non-GAAP Financial Measure Reconciliation (Cont'd)
Appendix (all dollars in thousands) 30 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 inta
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