Esquire Financial Holdings, Inc. (ESQ) Earnings Call Transcript & Summary

Good morning, everybody. This is Andrew Sagliocca, and welcome -- good morning. Welcome to the Annual Meeting of Stockholders of Esquire Financial, Inc. The annual meeting will please come to order. I'm the Chief Executive and President of Esquire Financial and Esquire Bank. I'll serve as the Chairman of the annual meeting. I want to thank everybody for taking time from their busy schedule to join us this morning. And as you are all probably aware of, due to the public health concerns and the pandemic, we've decided to hold the annual meeting slightly later than usual, as most companies have also. On behalf of the directors and officers of the bank, we hope you and your families are well, healthy and safe. I'd like to introduce Eric Bader. Eric's our Chief Operating Officer, EVP and Treasurer, and also Corporate Secretary. Eric will be the Secretary of the annual meeting and handle most of the meeting's protocol. For those of you who have questions, there'll be time during the meeting when I give you an update on our performance for 2019 to address those questions. If you could please, since the meeting is virtual, introduce yourself and say where you are and then ask the question, that would be wonderful. The Board has appointed [ Colin Deikmann, Joe Simon ] to act as Inspector of Election at the annual meeting and any adjournments at account and examine all voting. The Inspector's report will be attached to the minutes of the annual meeting. We have delivered to the Inspector a list of stockholders of the company entitled to vote at the annual meeting as of the close of business, April 21, 2020, the record date. At this point, I'm going to hand the meeting over to Eric, and I will give you an update when Eric's done on the financial performance of the company and also see if there's any questions. So Eric?

Great. Thank you, Andrew. Good morning, everybody. Thank you for joining us this morning. The records of the company show that there were 7,669,440 shares of common stock issued outstanding and entitled to vote at this meeting, of which 3,834,721 represent a majority. We have previously received confirmation that the Notice of Annual Meeting and proxy cards were mailed to each stockholder of record as of the close of business on the record date. I have previously delivered to the Inspector, the list of stockholders and all proxies that have been received. A majority of the total outstanding shares entitled to be voted at the annual meeting are present in person or by proxy. The Inspector is making an adept count and will submit a formal report on the number of shares present or represented during the course of the annual meeting. A quorum is declared present, subject to the confirmation of the fact by the Inspector in his report. The business to be acted upon at the annual meeting, as stated in the Notice of Annual Meeting, is to consider and act upon, one, the election of 3 Directors to serve for a term of 3 years and the election of one Director to serve for a term of 2 years; and two, the ratification of the appointment of Crowe LLP as our independent registered public accounting firm for the year ending December 31, 2020. Because no stockholder proposals were properly filed with the company secretary in advance of this meeting as provided by the bylaws, the business of this meeting is limited to the foregoing 2 matters in accordance with the bylaws. The proxy solicited by the Board of Directors can be tallied at onetime, even though each proxy contains 2 different matters for consideration. Similarly, the ballots that any stockholder present seems to cast here may be handled the same way. Accordingly, we intend to proceed to discuss each matter separately. And when the discussion of one item is finished, we will move on to the next item. At the conclusion of the discussion of the 2 items, we will take the vote on all items. We will then have a report on the operations of the company. There'll be an opportunity for questions and comments of a general nature after the discussion and voting on the 2 matters, and the operations report has concluded. We will consider the proposals in the order presented in the Notice of Annual Meeting. Ballots are available from the Secretary, that's me, for the foregoing proposals. If you have already voted by proxy, you need not vote in person at the annual meeting. Does anyone need a ballot to vote at this meeting? The polls are now open. At the conclusion of the discussion and voting on all matters, I will announce the closing of the polls. The first item of business to be voted upon is the election of Russ Herman, Robert Mitzman and Kevin Waterhouse as Directors of the company, each to serve 3-year terms, and the election of Marc Grossman as a Director of the company to serve as a Director for a 2-year term, all as described in the proxy statement. All nominees are currently members of the Board of Directors. Certain biographical information regarding the 4 nominees is included in the proxy materials, and all nominees are prepared to serve if elected. Are there any questions regarding the election of Directors? Okay. The final item of business to be voted upon is the proposal to ratify the appointment of Crowe LLP as our independent registered public accounting firm for the year ending December 31, 2020. Are there any questions regarding the ratification of the appointment of Crowe LLP? Okay. This concludes the discussion on all matters. Is there anyone present who did not vote by proxy or wishes to vote by ballot? Is there anyone present who would like to turn in his or her ballot? Please raise your hand -- that doesn't work. I will read for collections. So hopefully, everybody has voted online. I'm going to turn it back to Andrew for a quick update on the company.

All right. If there's no further ballots of proxy, I declare the polls closed. All ballots of proxy are now in the custody of the Inspector of Election, and I'll give you an update on the firm's performance. It was an excellent year for Esquire. We were named as a top-performing bank in 2019. Raymond James named us the #1 community bank in the country, voted as public companies. And Piper Sandler, in 2019, named us on their all-star list and top ideas. In general, our excess capital and strong liquidity are the foundations for our growth, earnings and solid credit quality. Strong results were experienced in '19. Our net income increased 62% or $1.82 per share, with returns of $1.93 and $13.95 on assets and equity, respectively. Our net interest margin was $486 million. Our net interest income increased 23%. Merchant services fee income grew 121% and represents 27% of total revenue. And we had a very solid efficiency ratio at 54%, highlighted by our branchless national platform and our investment in technology for the future. We have a very unique business model, very unique culture, it's client-centric focused, and we always make our clients a top priority. Due to this high level of service, we experienced very modest levels of client attrition, and our clients represent the best referral source for future clients. We're very forward-looking also in strategic, so we are looking out and investing in technology to enhance the business model and growth. And in the latter part of 2020, we'll launch our new customer-facing technology suite, including our new brand messaging, website, online customer functionality, including IT applications and digital marketing clouds and a proprietary CRM platform. So we've spent a lot of time on that over the past year or so. And our goal, even in lieu of the pandemic, is to launch that new platform in the latter part of this year. As far as the current pandemic and economic crisis goes, our first goal is to protect our employees and their families to service our customers' needs, and to continue to ensure the bank is run in a safe and sound manner. As part of the Board and management strategy, our annual capital and strategic plan protocols, including stress testing, even for a small bank like ours, coupled with strong historical earnings, have really allowed us to keep a very strong capital foundation. We've also participated in the Paycheck Protection Program, PPP, as everybody likes to call it, for our customers. We got that up and running in under a week for our customers, and 100% of our customers who applied for PPP loans received them. So it was a great win for the bank and a win for the customers and customer service. Along those lines, due to the pandemic, too, we also granted payment deferrals to approximately 50 of our existing customers for a total of about $65 million. Based on our prudent underwriting standards, our average loan-to-value on those 50 customers was approximately 60% and our average debt service coverage ratio on those customers was 138. Very strong debt service, very strong loan-to-value on those payment deferral customers. We're grateful and proud to support our investors. We're very grateful to our Board, our management team, our employees and our business partners. Without the support of those various groups, our business model would not be a success. And we want to thank you for the support, commitment and continued relationships. And myself and Eric and our Chairman, Tony Coelho, would also like to thank you for the opportunity to lead what we believe is a very exceptional company. That's my update on the financials. I'll see if anyone has any questions for myself. All right. I'll try one more time. If anyone has any questions, please just identify yourself and where you're from, and we'll gladly answer them. If not, we're going to move on to finalize the shareholder meeting. Okay. Eric, I'll turn it back over to you.

All right. Thank you, Andrew. The Inspector has completed his count, and I will now read the certificate and report of the Inspector of Election. The report confirms that a quorum is and has been in attendance at the annual meeting for all purposes. The report also shows that, one, each Director nominee received the affirmative vote of at least 76.08% of the shares voted; and two, 99.49% of the shares voted were cast for the ratification of the appointment of Crowe LLP as the company's independent registered public accounting firm for the year ending December 31, 2020. Accordingly, each Director nominee has been elected as a Director of the company, and the proposal to ratify the appointment of Crowe LLP has been approved. The certificate and report of Inspector of Election has been accepted and approved and will be attached to the minutes of the annual meeting. There's been no further business to come before the annual meeting. Unless anybody has any questions, we can make a motion to adjourn the meeting.

I make a motion.

I second.

All in favor?

Aye.

Okay. Great. The meeting is closed. Once again, we want to thank everybody for coming to the meeting virtually. We appreciate everybody's support, and we're happy to be here, as Andrew said, leading and running this company for you. Thank you, guys, very much, and stay safe.

Thank you.