Esquire Financial Holdings, Inc. · NASDAQ:ESQ
Esquire Financial — Q1 2023 Earnings Presentation
30 slides from Esquire Financial's earnings presentation, April 2023
Slide 1: Ensuring our Clients and Our Institution
Ensuring our Clients and Our Institution Esquire Financial Holdings, Inc. (Financial Holding Company for Esquire Bank, N.A.) 1Q 2023 Investor Presentation Listed as ESQ
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
Our Mission Ensuring that our Company and clients succeed boldly with innovative solution-based products and technology, driving client success through relationship banking
Slide 4: Nationwide Branchless Tech Enabled Litigation & Payment Processing Verticals
How Our Clients Nationwide Branchless Tech Enabled Litigation & Payment Processing Verticals Litigation Vertical Payment Processing Vertical Commercial Banking Nationally (Merchant Services) Decades of expertise in the national litigation market Small Business Banking Nationally Asset sensitive mode
Slide 5: Strong Growth Driven by Unique National Verticals
How Esquire Strong Growth Driven by Unique National Verticals at March 31, 2023 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 11.77% (Adjusted(1) 11.38%) Common Equity T
Slide 6: Industry Leading Net Interest Margin
How Esquire Industry Leading Net Interest Margin Stable low-cost branchless deposit model Strong commercial deposits franchise nationally DDA and escrow-based NOW accounts represent 43% and 43% of total deposits at March 31, 2023, respectively Higher yielding variable rate commercial loans anchored
Slide 7: Strong Revenue Growth
How Esquire Strong Revenue Growth ($ in thousands) at March 31, 2023 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 7
Slide 8: Financial Highlights
How Esquire Financial Highlights at March 31, 2023 Key Highlights Industry leading returns from our unique and tech enabled national business models Stable payment processing fee income – fee income totaled 24% of adjusted(1) revenue for the quarter ended March 31, 2023 Branchless low-cost deposits
Slide 9: Financial Highlights, cont'd
How Esquire Financial Highlights, cont’d at March 31, 2023 (1) The adjusted results excluded a nonrecurring pretax $4.0 million gain on equity investment. See non-GAAP reconciliation provided in the appendix 9 *EPS – Earnings Per Share
Slide 10: Loan Portfolio Diversification with Focused Growth
How Esquire Loan Portfolio Diversification with Focused Growth at March 31, 2023 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 10
Slide 11: Loan Portfolio Diversification with Focused Growth
How Esquire Loan Portfolio Diversification with Focused Growth Substantially all of our $566 million commercial loans are variable rate and tied to prime, comprising approximately 59% of our loan portfolio Asset sensitive – estimated sensitivity of projected annualized net interest income (“NII”) up
Slide 12: Solid Credit Metrics, Asset Quality and ACL Coverage
How Esquire Solid Credit Metrics, Asset Quality and ACL Coverage at March 31, 2023 12 (1) NFL consumer loan portfolio - $9.0 million charge-off. Note – All asset quality metrics are based on our loans held for investment portfolio
Slide 13: Deposit Composition and Growth
How Esquire Deposit Composition and Growth DDA and NOW (escrow funds) deposits total 86% of total deposits, representing stable funding sources in various interest rate scenarios Litigation and payment processing deposits represent 71% and 12% of total deposits at March 31, 2023, respectively Uninsu
Slide 14: Key Takeaways: Why Esquire is Set to Grow
Key Takeaways Why Esquire is Set to Significant national markets primed Tremendous untapped potential: for disruption: $443 billion & Esquire’s current market share is a 100,000+ firms in the litigation fraction of both national verticals that vertical and $9.5 trillion and are primed for disruption
Slide 15: Litigation & Payment Processing Verticals Supported by Investment in Technology
National Markets Litigation & Payment Processing Verticals Supported by Investment in Technology
Slide 16: Commercial Litigation (Law Firm) Loans
How Esquire 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 les
Slide 17: Payment Processing – Current ISO Model
How Esquire Payment Processing – Current ISO Model What is an ISO? ISO Responsibilities Bank Responsibilities Merchant Vertical and Technology Robust Policies Focus Tech Enabled Card Brand and Sales Agent Model Regulatory Compliance Performs Initial Underwriting Support Multiple Processing Systems B
Slide 18: Strong Growth in Stable Noninterest Income
How Esquire Strong Growth in Stable Noninterest Income at March 31, 2023 Currently servicing approximately 78,000 merchants across 50 states Fee income, primarily payment processing fees, represents 24% of total adjusted(1) revenue for the quarter ended March 31, 2023 *Payment processing CAGR is 46%
Slide 19: Protecting Our Company with Strong Payment Processing Reserves
How Esquire Protecting Our Company with Strong Payment Processing Reserves at March 31, 2023 Key Highlights Strong and stable DDA reserves Protecting capital from merchant chargebacks and returns 19
Slide 20: Technology Driving Client Centric Technology: A Key Driver for Future Growth
Technology Driving Client Centric Technology A Key Driver for Future Growth AI to facilitate precision marketing and exponential customer acquisition across Artificial Intelligence* all verticals Website analytics, data enrichment and Website thought leadership content marketing Marketing Marketing
Slide 21: Contact Information
Contact Information: Eric S. Bader Executive Vice President & Chief Operating Officer 516-535-2002 eric.bader@esqbank.com Listed as ESQ
Slide 22: Appendix
Appendix Commercial Real Estate Loans, U.S. Litigation & Payment Markets, Non-GAAP Reconciliation
Slide 23: Esquire's New York City properties total $1.3 trillion in Market Value
Esquire’s New York City properties total $1.3 trillion in Market Value.* A Significant Growth Opportunity Thoughtful in our property and borrower selection process Minimal historical losses Average debt-service coverage (“DSCR”) of approximately 1.5x Average loan-to-value (“LTV”) of approximately 55
Slide 24: U.S. Litigation Market: A Significant Growth Opportunity
Esquire’s U.S. Litigation Market Key Highlights A Significant Growth Opportunity $443 billion* Total Addressable Market U.S. Tort actions are estimated to consume 1.85-2.13% of U.S. GDP* annually or $443 billion* (“TAM”) in litigation vertical Esquire does not compete with non-bank finance companies
Slide 25: Aligning Law Firm Case Inventory Lifecycle to Customer Retention
Digitally Transforming The Business of Law Aligning Law Firm Case Inventory Lifecycle to Customer Retention Client Receive Case Settlement/ Disbursement Incident Intake Management Verdict $ 1-3 Years (+) Products Technology Case Cost Loans Esquire Insight – Case Management Technology Working Capital
Slide 26: Payment Volume Trends – A Significant Growth Opportunity
Esquire’s Payment Volume Trends – A Significant Growth Opportunity at December 31, 2021 ($ in billions) The payments industry grew nearly 25% from 2020 to 2021 to an estimated total payment volume of $9.5 trillion 2019-2021: +9.7% CAGR Sources: Company Financial Records, Note: PayPal figures represe
Slide 27: Non-GAAP Financial Measure Reconciliation
Appendix Non-GAAP Financial Measure Reconciliation (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-
Slide 28: Non-GAAP Financial Measure Reconciliation (Cont'd)
Appendix Non-GAAP Financial Measure Reconciliation (Cont’d) (all dollars in thousands) The following table presents a reconciliation of efficiency ratio (non-GAAP) and adjusted efficiency ratio (non-GAAP). Three Months Ended March 31, December 31, March 31, 2023 2022 2022 Efficiency ratio – non-GAAP
Slide 29: Non-GAAP Financial Measure Reconciliation (Cont'd)
Appendix Non-GAAP Financial Measure Reconciliation (Cont’d) (all dollars in thousands) The following table presents the adjusted tangible common equity to tangible assets calculation (non-GAAP): March 31, 2023 Total assets - GAAP $ 1,450,824 Less: intangible assets — Tangible assets ("TA") - non-GAA
Slide 30: Non-GAAP Financial Measure Reconciliation (Cont'd)
Appendix Non-GAAP Financial Measure Reconciliation (Cont’d) (all dollars in thousands) The following table presents the common equity tier 1 capital ratio and the adjusted common equity tier 1 capital ratio: March 31, 2023 Common equity tier 1 ("CET1") capital - Bank $ 150,327 Less: unrealized losse
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