Esquire Financial Holdings, Inc.
For the period ended Dec 31, 2024. Filed Mar 17, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 17, 2025
ESQ$129.15+1.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-29.
0001558370-24-004363
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-17.
0001558370-25-003114
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 123 previous paragraphs and 125 current paragraphs.
82 unchanged; 30 reworded; 11 added; 3 removed; 8 previous and 2 current paragraphs rearranged.
Tables are not compared: 31 previous and 31 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
The Company’s foundation for success has been our nationwide branchless litigation and payment processing verticals supported by our forward-thinking senior managers, outstanding client service teams, and inclusive corporate culture. The future of our success will be the ability to continue developing and embracing cutting-edge technology to significantly leverage these verticals, differentiating us from other technology enabled financial firms and creating the catalyst for industry leading growth and returns.
Current report
In early 2024, management elected to temper multifamily and commercial real estate loan growth in response to the economic environment and has ratably purchased short duration agency mortgage backed securities with commensurate risk adjusted yields, enhancing our liquidity, asset composition, and flexibility in the future while improving the securities to total assets ratio to 16.6% as of December 31, 2024 as compared to 12.5% as of December 31, 2023.
Current report
Our deposit strategy primarily focuses on developing full service branchless commercial banking relationships nationally with our clients through commercial lending facilities, payment processing, and other unique commercial cash management services in our two national verticals, rather than competing with other institutions on rate. As of December 31, 2024, the aggregate amount of uninsured deposits (deposits in amounts greater than or equal to $250,000) was $463.9 million, or 28.2%, of our total Bank deposits of $1.64 billion, excluding $12.4 million of the Company’s deposits held by the Bank. 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. At December 31, 2024, our off-balance sheet sweeps funds totaled $554.4 million, of which $424.2 million, or 76.5%, was able to be swept on balance sheet as reciprocal client relationship money market deposits. Our deposit growth and off-balance sheet funds demonstrate our highly efficient branchless and technology enabled deposit platforms.
Current report
Net Interest Income. Net interest income increased $16.2 million, or 19.3%, to $99.9 million for the year ended December 31, 2024 from $83.8 million for the year ended December 31, 2023, due to a $21.5 million increase in interest income, partially offset by a $5.3 million increase in interest expense.
Current report
Interest Income. Interest income increased $21.5 million, or 23.4%, to $113.4 million for the year ended December 31, 2024 from $91.9 million for the year ended December 31, 2023 and was attributable to an increase in loan, securities, interest earning cash and other. In early 2024, management elected to temper multifamily and commercial real estate loan growth in response to the economic environment and has ratably purchased short duration agency mortgage backed securities with commensurate risk adjusted yields, enhancing our liquidity while improving the securities to total assets ratio to 17%.
Current report
Loan interest income increased $17.3 million, or 21.3%, to $98.5 million for the year ended December 31, 2024 from $81.2 million for the year ended December 31, 2023. This increase was attributable to a $207.0 million, or 19.7%, increase in the average loan balance primarily due to growth in our higher yielding national litigation lending platform and, to a lesser extent, our regional multifamily loan portfolio as we tempered multifamily production as a matter of strategy in 2024, and a 10 basis point increase in loan yields to 7.82%. Our commercial loan platform drove a $15.1 million increase in interest income, of which $16.1 million was due to higher average loan balances, offset by a $933 thousand decrease due to a yield decrease of 15 basis points, driving a portfolio yield of 9.72%. Additionally, our multifamily platform contributed $3.1 million to the increase in interest income, of which, $1.8 million was due to increased volume and $1.2 million was due to a 38 basis point increase in yields, driving a portfolio yield of 4.29%. Approximately 66% of our loan portfolio is comprised of variable rate commercial loans tied to prime that were positively impacted by increases in short-term interest rates.
Current report
Securities interest income increased $3.6 million, or 72.0%, to $8.6 million for the year ended December 31, 2024 from $5.0 million for the year ended December 31, 2023. This increase was attributable to an 87 basis point increase in yields, driven by our investing strategy of deploying excess cash flow into short duration agency mortgage-backed securities while tempering our real estate lending, as well as a $54.9 million, or 26.1%, increase in average securities balances. The increase in securities income was comprised of a $2.1 million increase as a result of the increases in average rate and a $1.5 million increase due to increases in average balance.
Current report
Securities purchased under agreements to resell interest income decreased $1.5 million, or 100.0%, to $0 for the year ended December 31, 2024 from $1.5 million for the year ended December 31, 2023. In the third quarter of 2023, management elected to close out its reverse repurchase agreements and reinvest these funds into higher yielding commercial loans.
Current report
Interest Expense. Interest expense increased $5.3 million, or 65.7%, to $13.4 million for the year ended December 31, 2024 from $8.1 million for the year ended December 31, 2023, primarily attributable to increases in average rate (primarily IOLTA) comprising $3.4 million of the increase and the remaining increase of $2.0 million (primarily IOLTA) attributable to average deposit balances. Average interest bearing deposit balances (primarily IOLTA) increased $230.0 million, or 31.6%, to $958.2 million, when compared to December 31, 2023. Our deposit cost-of-funds, excluding demand deposits, increased 29 basis points for the year ended December 31, 2024 as compared to the year ended December 31, 2023, due to increases in short-term interest rates as well as management proactively increasing rates on IOLTA accounts in the various states we operate.
Current report
Payment processing income was $20.9 million in 2024, a $1.4 million decrease when compared to 2023, primarily due to 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 $3.3 billion, or 10.0%, to $36.3 billion and transactions decreased 9.0 million, or 1.5%, to 603.7 million transactions, respectively, for the year ended December 31, 2024, as compared to the same period in 2023. We continue to focus on the expansion of sales channels through ISOs, prudently managing risk while focusing on new merchant originations, increasing overall volumes as well as risk profiles, and expanding our technology and other resources in this vertical. The Company utilizes proprietary and industry leading customized technology to ensure card brand and regulatory compliance, supports multiple processing platforms, manages daily risk across 88,000 small business merchants in all 50 states, and performed commercial treasury clearing services for $36.3 billion in volume across 603.7 million transactions in 2024. Administrative service income increased $271 thousand, or 11.0%, to $2.7 million for the year ended December 31, 2024. Off-balance sheet sweep funds totaled $554.4 million at December 31, 2024, demonstrating the continued strength of our branchless core business model. Other income increased $327 thousand, or 34.2%, to $1.3 million primarily due to loan and other banking related fees. Net gain on equity investments decreased $4.0 million due to a nonrecurring gain on our Litify fintech investment in the first quarter of 2023. In 2023, Litify, Inc. (“Litify”) was reorganized into a partnership and an unrelated third party acquired a majority ownership in the reorganized entity. As an equity holder and party to the reorganization and sale transaction, a majority of the Company’s partnership interests were exchanged for cash and undiscounted noncash consideration of approximately $5.3 million. As a result, the Company recognized a gain on its investment of $4.0 million in 2023. In 2024, the Company received cash consideration resulting in a realized gain on its Litify investment of approximately $500 thousand, offset by an equity method loss of approximately $500 thousand recognized on its investment in a third party sponsored NFL consumer post settlement loan fund.
Current report
Employee compensation and benefits costs increased due to the full year’s impact of key hires (throughout 2023) to support future growth and excellence in client service as well as the impact of year end salary increases, bonuses, incentive pay to BDOs, and stock-based compensation increases. During 2024, we experienced the full year impact of our 2023 key hires including, but not limited to, our regional senior BDOs, sales support, lending underwriting/lending support, and risk management staffing initiatives. Advertising and marketing costs increased as we continued to advance our digital marketing platform across our commercial litigation platform nationally, expand our thought leadership in this national vertical, and directly support our regional BDOs with targeted ABM campaigns. Data processing costs increased due to increases in core banking processing volumes and additional costs related to enhanced risk management systems and other technology implementations. Occupancy and equipment costs increased due to amortization of internally developed software to support our digital marketing and risk management platforms and additional office space to support growth. Professional services costs decreased primarily due to our 2023 hiring initiatives noted above and related costs associated with the executive search firm utilized. Our investment in current resources has and will continue to support our future growth.
Removed paragraphs (3)
Previous report
Net Interest Income. Net interest income increased $15.6 million, or 35.8%, to $59.3 million for the year ended December 31, 2022 from $43.7 million for the year ended December 31, 2021, due to a $16.5 million increase in interest income, partially offset by a $819 thousand increase in interest expense.
Previous report
Securities interest income increased $2.0 million, or 91.4%, to $4.2 million for the year ended December 31, 2022 from $2.2 million for the year ended December 31, 2021. This increase was attributable to a 41 basis point increase in yields, driven by opportunistic investment of excess liquidity into the securities portfolio, as well as a $70.5 million, or 52.7%, increase in average securities balances at a higher rate.
Previous report
Employee compensation and benefits costs increased due to increases in staff and officer level employees to support growth, continued investment in digital platforms and related sales/marketing divisions, and the impact of salary, bonus and stock-based compensation increases. Consulting service costs decreased, partially offsetting the increase in employee compensation and benefits as previously contracted consultants were hired, primarily in our technology development and digital marketing departments. Professional services costs increased due to continued business development and administration primarily related to our CECL implementation and the NFL consumer loan transaction. Data processing costs increased 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 primarily due to amortization of our investments in internally developed software to support our new digital platform and additional office space to support our continued growth. Advertising and marketing costs increased as we continued to grow our digital marketing platform and expand our thought leadership in our national verticals. Hiring related costs increased as we continue to invest in our future. Travel and business relations costs increased as we continued to re-engage in our traditional high touch marketing and sales efforts on a national basis to complement our digital marketing efforts.
Reworded paragraphs (30)
Previous wording
Allowance for Credit Losses. Management considers the accounting policy relating to the allowance for credit losses to be a critical accounting policy given the inherent subjectivity and uncertainty in estimating the levels of the allowance required to cover credit losses in the portfolio and the material effect that such judgments can have on the results of operations*.*See Note 1 “Business and Summary of Significant Accounting Policies” for discussion of our allowance for credit losses policy.
Current wording
Allowance for Credit Losses on Loans Held for Investment. Management considers the accounting policy relating to the allowance for credit losses on loans held for investment to be a critical accounting policy given the inherent subjectivity and uncertainty in estimating the levels of the allowance required to cover credit losses in the portfolio and the material effect that such judgments can have on the results of operations*.*See Note 1 “Business and Summary of Significant Accounting Policies” for discussion of our allowance for credit losses on loans held for investment policy.
Previous wording
On January 1, 2023, we adopted the CECL Standard. The Company is required under the CECL Standard to estimate and record lifetime credit losses expected to be incurred on such financial instruments over the entire contractual term at the time they are recorded in the financial statements, such as with the funding or purchasing of a loan, or a commitment to lend unless the commitment is unconditionally cancellable. Because this allowance methodology follows a forward-looking lifetime expected loss approach, it is not necessary for a loss event to have been incurred before a credit loss is recognized. The estimation process in determining an appropriate level for the allowance for credit losses requires consideration of past events, current conditions, and reasonable and supportable forecasts, and involves a significant degree of management judgment. The Company determines the allowance for credit losses using methods it believes are appropriate given the characteristics of each loan portfolio and applies these methods consistently over time.
Current wording
On January 1, 2023, we adopted the CECL Standard. The Company is required under the CECL Standard to estimate and record lifetime credit losses expected to be incurred on such financial instruments over the entire contractual term at the time they are recorded in the financial statements, such as with the funding or purchasing of a loan, or a commitment to lend unless the commitment is unconditionally cancellable. Because this allowance methodology follows a forward-looking lifetime expected loss approach, it is not necessary for a loss event to have been incurred before a credit loss is recognized. The estimation process in determining an appropriate level for the allowance for credit losses requires consideration of past events, current conditions, and reasonable and supportable forecasts, and involves a significant degree
Previous wording
The Company employs a static pool methodology for all loan segments. In a static pool approach, statistical information about a pool of loans originated during a specified period is tracked over its life (including losses, delinquencies, and prepayments). In general, this methodology operates by calculating a rate representing the current
Current wording
The Company employs a static pool methodology for all loan segments. In a static pool approach, statistical information about a pool of loans originated during a specified period is tracked over its life (including losses, delinquencies, and prepayments). In general, this methodology operates by calculating a rate representing the current balance expected to not be collected for each pool. This loss rate is then applied against the current portfolio loans with similar characteristics of those established in the pool.
Previous wording
Future changes to the allowance for credit losses may be necessary based on changes in economic, market, or other conditions. Changes to estimates could result in a material change in the allowance for credit losses and charges to
Current wording
Future changes to the allowance for credit losses may be necessary based on changes in economic, market, or other conditions. Changes to estimates could result in a material change in the allowance for credit losses and charges to provision for credit losses would materially decrease the Company’s net income. The Company’s loan portfolio may experience significant credit losses, which could have a material adverse effect on our operating results.
Previous wording
Assets. Our total assets were $1.6 billion at December 31, 2023, an increase of $221.2 million from $1.4 billion at December 31, 2022. The increase was primarily due to growth in our loan portfolio and securities available-for-sale, offset by decreases in reverse repurchase agreements.
Current wording
Assets. Our total assets were $1.89 billion at December 31, 2024, an increase of $275.6 million from $1.62 billion at December 31, 2023. The increase was primarily due to growth in our loan portfolio and securities available-for-sale, offset by decreases in cash and cash equivalents.
Previous wording
Loan Portfolio Analysis. At December 31, 2023, loans were $1.2 billion, or 74.7% of total assets, compared to $947.3 million, or 67.9% of total assets, at December 31, 2022. Commercial loans increased $185.8 million, or 33.7%, to $737.9 million at December 31, 2023 from $552.1 million at December 31, 2022. Commercial real estate loans decreased $2.3 million, or 2.5%, to $89.5 million at December 31, 2023 from $91.8 million at December 31, 2022. Multifamily loans increased $85.8 million, or 32.7%, to $348.2 million at December 31, 2023 from $262.5 million at December 31, 2022. Consumer loans decreased $2.1 million or 12.6%, to $14.5 million at December 31, 2023 from $16.6 million at December 31, 2022. 1 – 4 family loans decreased $7.6 million, or 29.8%, to $17.9 million at December 31, 2023 from $25.6 million at December 31, 2022.
Current wording
Loan Portfolio Analysis. At December 31, 2024, loans were $1.40 billion, or 73.8% of total assets, compared to $1.21 billion, or 74.7% of total assets, at December 31, 2023. Our higher yielding commercial loans increased $182.7 million, or 24.8%, to $920.6 million at December 31, 2024 from $737.9 million at December 31, 2023 where commercial litigation related loan growth was $223.4 million, or 36.5%, to $835.8 million in 2024. Multifamily loans increased $6.9 million, or 2.0%, to $355.2 million at December 31, 2024 from $348.2 million at December 31, 2023. Consumer loans increased $4.8 million or 33.5%, to $19.3 million at December 31, 2024 from $14.5 million at December 31, 2023. Commercial real estate loans decreased $2.5 million, or 2.7%, to $87.0 million at December 31, 2024 from $89.5 million at December 31, 2023. 1 – 4 family loans decreased $3.3 million, or 18.2%, to $14.7 million at December 31, 2024 from $17.9 million at December 31, 2023.
Previous wording
At December 31, 2023, our Litigation-Related Loans, which include commercial and consumer lending to attorneys, law firms and plaintiffs/claimants, totaled $614.9 million, or 50.9% of our total loan portfolio, compared to $467.4 million at December 31, 2022. We also had Commercial Litigation-Related committed and uncommitted undrawn lines of credit totaling $69.3 million and $416.8 million, respectively, at December 31, 2023.
Current wording
At December 31, 2024, our Litigation-Related Loans, which include commercial and consumer lending to attorneys, law firms and plaintiffs/claimants, totaled $838.6 million, or 60.0% of our total loan portfolio, compared to $614.9 million at December 31, 2023. We also had Commercial Litigation-Related committed and uncommitted undrawn lines of credit totaling $85.0 million and $580.3 million, respectively, at December 31, 2024.
Previous wording
Litigation-Related post-settlement consumer loans held for investment decreased $280 thousand to $2.4 million as of December 31, 2023, from $2.7 million as of December 31, 2022.
Current wording
Litigation-Related post-settlement consumer loans increased $310 thousand to $2.7 million as of December 31, 2024, from $2.4 million as of December 31, 2023.
Previous wording
At December 31, 2023, substantially all of our $737.9 million commercial loans are variable rate and tied to prime, comprising approximately 61% of our loan portfolio. Additionally, 80.2% of our commercial loans have interest rate floor protection as of December 31, 2023.
Current wording
At December 31, 2024, substantially all of our $920.6 million commercial loans are variable rate and tied to prime, comprising approximately 66% of our loan portfolio. Additionally, approximately 90% of our commercial loans have interest rate floor protection as of December 31, 2024.
Previous wording
At December 31, 2023, we had one multifamily loan classified as substandard and placed on nonaccrual totaling $10.9 million, primarily due to the property owners decisions resulting in excessive vacancy in an area where the average vacancy is minimal. Management recently had these properties appraised and noted that no specific reserve was necessary. There were no loans on nonaccrual at December 31, 2022.
Current wording
At December 31, 2024 and 2023, we had one multifamily loan classified as substandard and placed on nonaccrual totaling $10.9 million, primarily due to the property owners decisions resulting in excessive vacancy in an area where the average vacancy is minimal. Management recently had these properties appraised and noted that no specific reserve was necessary.
Previous wording
Loans rated special mention decreased $9.7 million to $4.0 million as of December 31, 2023 from $13.7 million as of December 31, 2022, due primarily to performance improvements and repayments of commercial loans. Loans rated substandard increased $10.2 million to $10.9 million as of December 31, 2023, from $721 thousand at December 31, 2022, driven by one nonaccrual multifamily loan. Our special mention and substandard loans as a percentage of loans was 0.3% and 0.9% as of December 31, 2023, respectively, and 1.4% and 0.1% as of December 31, 2022, respectively. The allowance for credit losses as a percentage of loans was 1.38% and 1.29% as of December 31, 2023 and 2022, respectively. The increase in the allowance as a percentage of loans was general reserve driven considering loan growth and the qualitative factors associated with the current uncertain economic environment including, but not limited to, its potential impact on the New York metro commercial real estate market.
Current wording
Loans rated special mention totaled $4.0 million as of December 31, 2024, comparable to the same period in 2023. Loans rated substandard totaled $10.9 million as of December 31, 2024, comparable to the same period in 2023, driven by one nonaccrual multifamily loan. Our special mention and substandard loans as a percentage of loans was 0.3% and 0.8% as of December 31, 2024, respectively, and 0.3% and 0.9% as of December 31, 2023, respectively. The allowance for credit losses as a percentage of loans was 1.50% and 1.38% as of December 31, 2024 and 2023, respectively. The increase in the allowance as a percentage of loans was general reserve driven considering loan growth and the qualitative factors associated with the current uncertain economic environment including, but not limited to, its potential impact on the New York metro commercial real estate market.
Previous wording
At December 31, 2023 and 2022, all debt securities available-for-sale were carried at fair value and we had no investments in a single company or entity, other than government and government agency securities, which had an aggregate book value in excess of 10% of our equity. Securities available-for-sale totaled $122.1 million at December 31, 2023, as compared to $109.3 million at December 31, 2022. Securities held-to-maturity totaled $77.0 million at December 31, 2023, as compared to $78.4 million at December 31, 2022.
Current wording
At December 31, 2024 and 2023, all debt securities available-for-sale were carried at fair value and we had no investments in a single company or entity, other than government and government agency securities, which had an aggregate book value in excess of 10% of our equity. Securities available-for-sale totaled $241.7 million at December 31, 2024, as compared to $122.1 million at December 31, 2023, as management deployed excess liquidity into securities. Securities held-to-maturity totaled $68.7 million at December 31, 2024, as compared to $77.0 million at December 31, 2023, due to paydowns and portfolio amortization.
Previous wording
Total deposits increased $179.1 million, or 14.6%, to $1.4 billion at December 31, 2023 from $1.2 billion at December 31, 2022. We continue to focus on the acquisition and expansion of core deposit relationships, which we define as all deposits except for certificates of deposit. Core deposits totaled $1.4 billion at December 31, 2023, or 99.4% of total deposits at that date. Certificates of deposit totaled $7.8 million at December 31, 2023, or 0.6% of total deposits at that date.
Current wording
Total deposits increased $234.9 million, or 16.7%, to $1.64 billion at December 31, 2024 from $1.41 billion at December 31, 2023. We continue to focus on the acquisition and expansion of core deposit relationships, which we define as all deposits except for certificates of deposit. Core deposits totaled $1.63 billion at December 31, 2024, or 99.1% of total deposits at that date. Certificates of deposit totaled $14.1 million at December 31, 2024, or 0.9% of total deposits at that date.
Previous wording
As of December 31, 2023, the aggregate amount of uninsured deposits (deposits in amounts greater than or equal to $250,000) was $381.6 million, or 27.1%, of our total Bank deposits of $1.4 billion, excluding $5.5 million of the Company’s deposits held by the Bank. As of December 31, 2022, the aggregate amount of uninsured deposits was $310.4 million, or 25.3%, of our total Bank deposits of $1.2 billion, excluding $10.5 million of the Company’s deposits held by the Bank. As of December 31, 2023, the Company had approximately $684.2 million of law firm escrow (or trust) deposits with the majority of these law firms also having a commercial lending relationship with the Bank. Law firm escrow accounts, as well as other fiduciary deposit accounts, are for the benefit of the law firm’s customers (or claimants) and are titled in a manner to ensure that the maximum amount of FDIC insurance coverage passes through the account to the beneficial owner of the funds held in the account. Therefore, these law firm escrow accounts carry FDIC insurance at the claimant settlement level, not at the deposit account level. The FDIC insured and uninsured deposited balances reflect management’s determination of settlement claims deposited as of period end. In addition, as of December 31, 2023, the aggregate amount of our uninsured certificates of deposit was $122 thousand. We have no deposits that are uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance. The following table sets forth the maturity of the uninsured certificates of deposit as of December 31, 2023.
Current wording
As of December 31, 2023, the aggregate amount of uninsured deposits was $381.6 million, or 27.1%, of our total Bank deposits of $1.41 billion, excluding $5.5 million of the Company’s deposits held by the Bank. As of December 31, 2024, the Company had approximately $979.0 million of law firm escrow (or trust) deposits with the majority of these law firms also having a commercial lending relationship with the Bank. Law firm escrow accounts, as well as other fiduciary deposit accounts, are for the benefit of the law firm’s customers (or claimants) and are titled in a manner to ensure that the maximum amount of FDIC insurance coverage passes through the account to the beneficial owner of the funds held in the account. Therefore, these law firm escrow accounts carry FDIC insurance at the claimant settlement level, not at the deposit account level. The FDIC insured and uninsured deposited balances reflect management’s determination of settlement claims deposited as of period end. In addition, as of December 31, 2024, the aggregate amount of our uninsured certificates of deposit was $6.8 million. We have no deposits that are uninsured for any reason other than being in excess of the maximum amount for federal deposit insurance. The following table sets forth the maturity of the uninsured certificates of deposit as of December 31, 2024.
Previous wording
At December 31, 2023, we had the ability to borrow a total of $284.2 million from the FHLB of New York. We also had a borrowing capacity with the FRB of New York discount window of $58.0 million. At December 31, 2023, we also had $17.5 million in aggregate unsecured lines of credit with unaffiliated correspondent banks. No amounts were outstanding on any of the aforementioned lines as of December 31, 2023.
Current wording
At December 31, 2024, we had the ability to borrow a total of $431.7 million from the FHLB of New York. We also had a borrowing capacity with the FRB of New York discount window of $51.4 million. At December 31, 2024, we also had $17.5 million in aggregate unsecured lines of credit with unaffiliated correspondent banks. No amounts were outstanding on any of the aforementioned lines as of December 31, 2024 and December 31, 2023.
Previous wording
Total stockholders’ equity increased $40.4 million, or 25.5%, to $198.6 million at December 31, 2023, from $158.2 million at December 31, 2022. The increase for the year ended December 31, 2023 was primarily due to net income of $41.0 million, amortization of share-based compensation of $3.2 million, and other comprehensive income of $1.9 million, partially offset by dividends declared to common stockholders of $3.9 million.
Current wording
Total stockholders’ equity increased $38.5 million, or 19.4%, to $237.1 million at December 31, 2024, from $198.6 million at December 31, 2023. The increase for the year ended December 31, 2024 was primarily due to net income of $43.7 million and amortization of share-based compensation of $3.8 million, partially offset by dividends declared to common stockholders of $5.0 million, shares received related to tax withholding of $3.4 million, and other comprehensive loss of $1.1 million.
Previous wording
The following tables present average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the years ended December 31, 2023, 2022 and 2021. The average balances are daily averages and, for loans, include both performing and nonperforming balances. Interest income on loans includes the effects of discount accretion and net deferred loan origination costs accounted for as yield adjustments. No tax-equivalent adjustments have been made as we have no tax exempt investments.
Current wording
The following tables present average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the years ended December 31, 2024, 2023 and 2022. The average balances are daily averages and, for loans, include both performing and nonperforming balances. Interest income on loans includes the effects of net premium amortization and net deferred loan origination fees accounted for as yield adjustments. No tax-equivalent adjustments have been made as we have no tax exempt investments.
Previous wording
General. Net income increased $10.6 million or 59.1%, to $28.5 million for the year ended December 31, 2022 from $17.9 million for the year ended December 31, 2021. The increase resulted from a $15.6 million increase in net interest income and a $3.9 million increase in noninterest income, partially offset by an increase in noninterest expense of $6.9 million.
Current wording
General. Net income increased $2.6 million, or 6.5%, to $43.7 million for the year ended December 31, 2024 from $41.0 million for the year ended December 31, 2023. The increase resulted from a $16.2 million increase in net interest income, partially offset by an increase in noninterest expense of $7.7 million and a decrease in noninterest income of $4.9 million.
Previous wording
Our net interest margin increased 50 basis points to 4.99% for the year ended December 31, 2022 from 4.49% for the year ended December 31, 2021. The increase in net interest margin was due to a 55 basis point increase in interest earning asset yields, offset by an increase in the cost of interest bearing liabilities of 10 basis points, primarily due to growth in higher yielding variable rate commercial loans and increases in short-term interest rates. Growth was partially funded by a $69.6 million, or 16.7%, increase in average noninterest bearing demand deposits to $485.3 million for the year ended December 31, 2022 from $415.7 million for the year ended December 31, 2021.
Current wording
Our net interest margin decreased 3 basis points to 6.06% for the year ended December 31, 2024 from 6.09% for the year ended December 31, 2023. Our net interest margin was positively impacted by growth in higher yielding variable rate commercial loans and growth in lower-cost escrow or IOLTA deposits nationally. Interest earning asset yields increased 20 basis points, primarily due to growth in higher yielding variable rate commercials loans and the cost of interest bearing liabilities increased 29 basis points, due to increases in short-term interest rates as well as management proactively increasing rates on IOLTA accounts in certain states where we operate. Interest earning asset growth was primarily funded by a $200.1 million, or 33.7%, increase in average IOLTA deposits to $793.7 million for the year ended December 31, 2024 from $593.6 million for the year ended December 31, 2023.
Previous wording
Interest earning cash and other interest income increased $1.4 million, to $1.6 million for the year ended December 31, 2022 from $193 thousand for the year ended December 31, 2021. This increase was attributable to a 145 basis point increase in yields driven by the movement in short-term interest rates.
Current wording
Interest earning cash and other interest income increased $2.1 million, to $6.3 million for the year ended December 31, 2024 from $4.2 million for the year ended December 31, 2023. This increase was attributable to a 21 basis point increase in yields driven by the movement in short-term interest rates.
Previous wording
Provision for Loan Losses. Our provision for loan losses was $3.5 million for the year ended December 31, 2022 compared to $7.0 million for the year ended December 31, 2021. This decrease was due to the charge recognized in 2021 on our legacy NFL consumer post settlement loan portfolio. The 2022 provision was general reserve driven considering loan growth and qualitative factors associated with the current uncertain economic environment.
Current wording
Provision for Credit losses. Our provision for credit losses was $4.7 million for the year ended December 31, 2024 compared to $4.5 million for the year ended December 31, 2023. This increase 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 commercial real estate market.
Previous wording
Income Tax Expense. We recorded income tax expense of $10.3 million for the year ended December 31, 2022, reflecting an effective tax rate of 26.5%, compared to $4.8 million, or an effective tax rate of 21.1%, for the year ended December 31, 2021. The increase represents a return to a historically normalized tax rate as certain discrete tax benefits related to share-based compensation were recognized in the fourth quarter of 2021, driving a decrease in the 2021 tax rate.
Current wording
Income Tax Expense. We recorded income tax expense of $15.6 million for the year ended December 31, 2024, reflecting an effective tax rate of 26.4%, compared to $14.9 million, or an effective tax rate of 26.6%, for the year ended December 31, 2023.
Previous wording
Provision for Credit losses. Our provision for credit losses was $4.5 million for the year ended December 31, 2023 compared to $3.5 million for the year ended December 31, 2022. This increase was general reserve driven considering
Current wording
Provision for Credit losses. Our provision for credit losses was $4.5 million for the year ended December 31, 2023 compared to $3.5 million for the year ended December 31, 2022. This increase was general reserve driven considering loan growth and qualitative factors associated with the current uncertain economic environment including, but not limited to, its potential impact on the New York metro commercial real estate market.
Previous wording
Employee compensation and benefits costs increased due to increases in employees to support growth as well as the impact of year end salary, bonus and stock-based compensation increases. We have made a significant investment in people in almost all areas of our Company to support future growth, client-centric relationship banking, and overall compliance and risk management across all verticals. Professional services costs increased with $1.0 million representing
Current wording
Employee compensation and benefits costs increased due to increases in employees to support growth as well as the impact of year end salary, bonus and stock-based compensation increases. We have made a significant investment in people in almost all areas of our Company to support future growth, client-centric relationship banking, and overall compliance and risk management across all verticals. Professional services costs increased with $1.0 million representing costs associated with the retention of a global executive search firm to expand our regional national sales capabilities (senior Business Development Officers (“BDOs”)), senior commercial underwriting, and senior payment processing risk management.** **The remaining increase in professional services costs was primarily due to incremental increases in
Previous wording
costs associated with the retention of a global executive search firm to expand our regional national sales capabilities (senior Business Development Officers (“BDOs”)), senior commercial underwriting, and senior payment processing risk management.** **The remaining increase in professional services costs was primarily due to incremental increases in insurance, legal, accounting, risk management, and compliance costs. Data processing costs increased due to increased processing volume, primarily driven by our core banking platform, and additional costs related to our technology implementations. Travel and business relations costs increased as a result of our high touch marketing and sales efforts which complement our digital marketing efforts and additional travel related to our newly hired regional BDOs. Advertising and marketing costs increased as we continued to grow our brand and expand our thought leadership through digital marketing efforts in our national verticals and support our new regional BDOs. Occupancy and equipment costs increased due to amortization of our investments in internally developed software to support our digital platform and additional office space to support our growth.
Current wording
insurance, legal, accounting, risk management, and compliance costs. Data processing costs increased due to increased processing volume, primarily driven by our core banking platform, and additional costs related to our technology implementations. Travel and business relations costs increased as a result of our high touch marketing and sales efforts which complement our digital marketing efforts and additional travel related to our newly hired regional BDOs. Advertising and marketing costs increased as we continued to grow our brand and expand our thought leadership through digital marketing efforts in our national verticals and support our new regional BDOs. Occupancy and equipment costs increased due to amortization of our investments in internally developed software to support our digital platform and additional office space to support our growth.
Previous wording
Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At December 31, 2023 and 2022, cash and cash equivalents totaled $165.2 million and $164.1 million, respectively.
Current wording
Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At December 31, 2024 and 2023, cash and cash equivalents totaled $126.3 million and $165.2 million, respectively.
Previous wording
At December 31, 2023, through pledging of our securities and certain loans, we had the ability to borrow a total of $284.2 million from the FHLB of New York and had a borrowing capacity with the FRB of New York discount window of $58.0 million. At December 31, 2023, we also had $17.5 million in aggregated unsecured lines of credit with unaffiliated correspondent banks. No amounts were outstanding on any of the aforementioned lines as of December 31, 2023.
Current wording
At December 31, 2024, through pledging of our securities and certain loans, we had the ability to borrow a total of $431.7 million from the FHLB of New York and $54.9 million from the FRB of New York discount window. At December 31, 2024, we also had $17.5 million in aggregated unsecured lines of credit with unaffiliated correspondent banks. No amounts were outstanding on any of the aforementioned lines as of December 31, 2024.
Previous wording
At December 31, 2023, our off-balance sheet sweeps funds totaled $278.0 million, of which, $132.9 million was able to be swept back onto our balance sheet.
Current wording
At December 31, 2024, our off-balance sheet sweeps funds totaled $554.4 million, of which $424.2 million, or 76.5%, was able to be swept on balance sheet as reciprocal client relationship deposits.
Previous wording
Our overall liquidity position (cash, borrowing capacity, and available reciprocal client sweep balances) totaled $657.8 million at December 31, 2023, or 47% of total deposits, creating a highly liquid and unlevered balance sheet
Current wording
Our overall liquidity position (cash, borrowing capacity, and available reciprocal client sweep balances) totaled $1.05 billion at December 31, 2024, or 64.0% of total deposits, creating a highly liquid and unlevered balance sheet
Previous wording
Effective January 1, 2020, the federal banking agencies adopted a rule to establish for institutions with assets of less than $10 billion that meet other specified criteria a “community bank leverage ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) of 9% that such institutions may elect to utilize in lieu of the generally applicable leverage and risk-based capital requirements noted above. A “qualifying community bank” with capital exceeding 9% will be considered compliant with all applicable regulatory capital and leverage requirements, including the requirement to be “well capitalized”. For the current period, Esquire Bank has elected to continue to utilize the generally applicable leverage and risk based requirements and not apply the community bank leverage ratio.
Current wording
capital to average total consolidated assets) of 9% that such institutions may elect to utilize in lieu of the generally applicable leverage and risk-based capital requirements noted above. A “qualifying community bank” with capital exceeding 9% will be considered compliant with all applicable regulatory capital and leverage requirements, including the requirement to be “well capitalized”. For the current period, Esquire Bank has elected to continue to utilize the generally applicable leverage and risk based requirements and not apply the community bank leverage ratio.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
of management judgment. The Company determines the allowance for credit losses using methods it believes are appropriate given the characteristics of each loan portfolio and applies these methods consistently over time.
Current report — wording carried from elsewhere
Effective January 1, 2020, the federal banking agencies adopted a rule to establish for institutions with assets of less than $10 billion that meet other specified criteria a “community bank leverage ratio” (the ratio of a bank’s tangible equity
Rearranged previous paragraphs (8)
Previous report — wording carried elsewhere
balance expected to not be collected for each pool. This loss rate is then applied against the current portfolio loans with similar characteristics of those established in the pool.
Previous report — wording carried elsewhere
provision for credit losses would materially decrease the Company’s net income. The Company’s loan portfolio may experience significant credit losses, which could have a material adverse effect on our operating results.
Previous report — wording carried elsewhere
loan growth and qualitative factors associated with the current uncertain economic environment including, but not limited to, its potential impact on the New York metro commercial real estate market.
Previous report — wording carried elsewhere
Interest Income. Interest income increased $16.5 million, or 37.0%, to $61.0 million for the year ended December 31, 2022 from $44.5 million for the year ended December 31, 2021 and was attributable to an increase in loan, securities, interest earning cash and other and reverse repurchase interest income.
Previous report — wording carried elsewhere
Loan interest income increased $12.5 million, or 30.0%, to $54.0 million for the year ended December 31, 2022 from $41.5 million for the year ended December 31, 2021. This increase was attributable to a $137.8 million, or 23.2%, increase in the average loan balance of our commercial and multifamily loan portfolios as well as a 61 basis point increase in loan yields, driven primarily by our higher yielding variable rate commercial loans (tied to prime) and increases in short-term interest rates.
Previous report — wording carried elsewhere
Securities purchased under agreements to resell interest income increased $632 thousand to $1.3 million for the year ended December 31, 2022 from $619 thousand for the year ended December 31, 2021. The movement in short-term interest rates resulted in a 133 basis point increase in yields.
Previous report — wording carried elsewhere
Interest Expense. Interest expense increased $819 thousand, or 98.9%, to $1.6 million for the year ended December 31, 2022 from $828 thousand for the year ended December 31, 2021, as expense was impacted by both increases in the volume and rate on interest bearing deposits. Interest bearing deposit rates increased a modest 10 basis points to 0.28% for the year ended December 31, 2022 from 0.18% for the year ended December 31, 2021. Our average balance of interest bearing deposits increased $139.4 million, or 30.9%, to $590.3 million for the year ended December 31, 2022 from $450.9 million for the year ended December 31, 2021 attributable primarily to litigation related escrow deposit growth.
Previous report — wording carried elsewhere
Payment processing income increased due to the expansion of our sales channels through ISOs, merchants and additional fee allocation arrangements, with annual volumes increasing 18.1% to $28.0 billion for 2022 compared to $23.7 billion for 2021. Customer related fees and service charges increased due to increases in administrative service income which was positively impacted by movements in short-term interest rates. These administrative service fees are impacted by the volume of off-balance sheet funds, the duration of these funds and short-term interest rates.