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Esquire Financial Holdings, Inc. Holdings, Financial Esquire

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Esquire Financial Holdings, Inc. Holdings, Financial Esquire ANNUAL REPORT ANNUAL Esquire Financial Holdings, Inc. Inc. FinancialEsquire Holdings, Esquire Financial Holdings, Inc. 2017 ANNUAL REPORT SHAREHOLDER Letter OUR FELLOW SHAREHOLDER, 2017 was a transformational year for top performing fintech institution in the on a national basis. We provide dynamic Esquire as we successfully completed our industry. Our Company is at a true inflec- and flexible merchant services solutions initial public offering (“IPO”) on the tion point for scalability and profitability to to small business owners, differentiat- NASDAQ, trading under our symbol achieve this goal. With excess capital as ing us from larger institutions. Our mer- “ESQ”. The IPO, coupled with the strong a foundation supported by a diverse list of chant services platform has grown to performance of our common stock to new institutional investors, we anticipate approximately 18,000 small businesses date, is a testament to our unique and continued earnings growth throughout generating $3.3 million in fee-based attractive business model in the market. 2018 driven by robust commercial, con- income for 2017 and representing $28 Our ongoing commitment to the litigation sumer and small business loan pipelines, million in core low cost deposits at year and small business (merchant) communi- as well as our merchant services and end. These small business customers ties on a national basis has been and other fee related income. represent a significant opportunity for continues to be the foundation for our future growth in fee income, core deposits Esquire’s strong loan growth and signifi- success. Through the combined efforts and enhanced lending opportunities. cant increase in fee income in 2017 of our Board of Directors, management demonstrate our focus and dedication to team and employees, we delivered out- The continued success of our unique standing financial results and record this unique business model. At Esquire, model anchored by our recent IPO has earnings in 2017. In the face of rising we remain true to our commitment to been the key component to delivering interest rates and an extremely competi- serve the litigation and small business outstanding financial results and record (1) tive banking landscape, we grew our communities nationally through a simple earnings in 2017. Adjusted net income adjusted net income(1) by 53%, driven by yet innovative approach to banking— increased 53% to $4.3 million or $0.69 impressive loan growth of 25% and a 34% listen to the customer’s needs and tailor per diluted common share. This was increase in fee income. We believe there products and services around those driven by a $70.4 million or 25% increase are three key paths to the Company’s needs. This model continues to set in loans to $349 million and a 34% continued success—our unique niche in Esquire apart from other institutions who increase in total fee income to $5.5 million. the legal and small business communities offer a “one product fits all” model. The Our net interest margin was an enviable nationally; a strong net interest margin litigation community is the foundation for 4.43%, driven by higher yielding commer- supported by stable low cost deposits; our impressive loan growth, increased cial and consumer loans and funded and a diversified revenue mix that includes loan yields, and low cost core deposits, with low cost core deposits. Our fee fee-based income. Our “branchless” low representing more than 70% of our deposit income represented 22% of total revenue, cost deposit model coupled with our base. This foundation is supported by a driven by merchant services and cus- unique revenue stream will continue to strong distribution network anchored by tomer related fees. Our diligent approach drive our efficiency ratio below industry our founders, board members, investors, to underwriting is evident in our strong standards, while future investments in trial bar associations, sales teams, senior asset quality with no non-performing technology and talent will allow us to management and current customer assets and an allowance for loan losses scale our model and support growth. base. We also remained steadfast in representing 1.22% of total loans. We Our goal is to transform Esquire into a growing our merchant services platform anticipate strong loan growth in 2018, (1) Excludes the impact of a $683 thousand revaluation of our net deferred tax asset as a result of the new federal tax legislation. Reported or GAAP net income was $3.6 million for the year ended 2017. 1 focusing on our attorney-based products future growth, hiring a seasoned Chief each member of the Board of Directors and services as well as our commercial Technology Officer and Chief Lending for their enduring service and stewardship real estate lending. Our pipeline of mer- Officer as well as additional staff in each throughout the years. We also want to chant opportunities also remains strong. area. We have launched various technol- thank our motivated and talented employ- Both loan and fee income opportunities ogy initiatives including, but not limited ees who embody the spirit and reputation should continue to enhance earnings in to, our Salesforce based management of our bank. 2018. As a foundation for future growth, information, sales and lending platform. Finally, on behalf of the Board of Directors, we successfully raised $26.3 million in The combination of our unique revenue management and our employees, we common stock (net proceeds) from our streams, low cost core deposits, lean want to thank our distinguished Share- IPO, increasing stockholders’ equity to infrastructure and current and future holders for their trust, confidence and $83.4 million, representing a consoli- technology initiatives should continue to investment in our Company. We thank dated equity to assets ratio of 15.63%. increase our returns, making Esquire a you for this distinct honor to lead an premier top performing fintech institution Our “branchless” low cost core deposits, exceptional Company. in the industry. representing our primary funding source for growth, totaled $448.5 million, a 21% With 2018 upon us, we remain focused increase from 2016, with an impressive on enhancing our strong brand recogni- cost of funds of 0.13% (including demand tion in the legal and small business com- deposits). These stable funds are primarily munities we serve nationally, maintaining driven by our commercial law firm custo- a strong net interest margin supported Dennis Shields mers’ operating and escrow deposits, by stable low cost deposits, and contin- Executive Chairman of the Board representing more than 70% of our total ually diversifying our revenue stream into deposit base. We continue to prudently stable fee-based income. With capital as manage growth in deposits, utilizing com- our foundation, we will continue to main- mercial customer sweep programs for our tain strong credit standards and invest in mass tort and class action business talent and infrastructure to support long banking. These programs remain strong term growth. We are optimistic about the Andrew C. Sagliocca President & Chief Executive Officer with off-balance sheet funds totaling bank’s future in the face of a variety of $478 million at December 31, 2017, gen- challenges that face the industry including, erating increases in customer related but not limited to: competitive market fees. These funds, coupled with the suc- forces from other institutions and finance cessful IPO, will continue to be a source companies; the current interest rate of funding for our future growth. environment; new and complex regula- tory requirements; and other factors In 2017, we had our grand opening of the including cybersecurity and terrorism new Corporate Headquarters in Jericho, that remain concerns for us. New York, consolidating all departments in one location to effectively and efficiently Despite these challenges, we believe in our service a growing customer base. We unique business model, the industries we re-engineered our Information Technology serve, our clients, our Board of Directors, and Lending Departments to support our and our employees. We want to thank 2 Esquire Financial Holdings, Inc. FORM 10-K (This page intentionally left blank) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2017 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38131 Esquire Financial Holdings, Inc. (Exact Name of Registrant as Specified in its Charter) Maryland 27-5107901 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 100 Jericho Quadrangle, Suite 100, Jericho, New York 11753 (Address of principal executive offices) (Zip code) (516) 535-2002 (Registrant’s telephone number including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of exchange on which registered Common Stock, $0.01 par value The NASDAQ Stock Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).
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