Esquire Financial Holdings, Inc. ($ESQ)

Thank you for standing by, and welcome to the Annual Meeting of Esquire Financial Holdings, Inc. [Operator Instructions] [Technical Difficulty] And I would now like to turn the meeting over to Mr. Andrew Sagliocca, CEO and President. You may begin.

Kate, this is Andrew Sagliocca. Can you hear me clearly?

Yes.

Okay because you were breaking up on my line. I want to welcome everybody to the Annual Stockholders Meeting for Esquire Financial Holdings. The annual meeting will please come to order. My name is Andrew Sagliocca. I'm the Vice Chairman, Chief Executive Officer and President of Esquire Financial Holdings and Esquire Bank. I will serve as Chairman of the Annual Meeting. I want to thank everybody for taking time from their busy schedules to be with us today, and we really appreciate it. I want to introduce Gary Lax, SVP, Chief Legal Officer and Corporate Secretary of the company, who will be Secretary of the Annual Meeting. Also in the boardroom with me is Eric Bader, our EVP and COO; and Michael Lacapria, our SVP and CFO. For those who have questions, there will be a time during the meeting to address your questions as they relate to the relevant matters. The Board of Directors has appointed Eric Bader, EVP and COO of the company to act as the Inspector of Elections at the annual meeting and any adjournments and to count and examine all votes. The inspector's report will be attached to the minutes of the annual meeting. I have delivered to the inspector a list of stockholders of the company entitled to vote at the annual meeting, arranged in alphabetical order as of the close of business on March 26, 2026, the record date for the vote. I'm going to turn the next several sections over to Gary Lax and I will jump back in when it's time to update you on the performance of the company over '25 and the first quarter of '26. Gary?

Thank you, Andrew. The records of the company show that there were 8,637,034 shares of common stock issued outstanding and entitled to vote at this annual meeting, of which 4,318,518 represents a majority. We have previously received confirmation that the notice of annual meeting, the proxy statement and a proxy card 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 vote at the annual meeting are present in person or by proxy. The inspector is making an exact 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 confirmation of that 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 1 director to serve for a term of 2 years and the election of 3 directors to serve for a term of 3 years each; two, the ratification of the appointment of Crowe LLP as our independent registered public accounting firm for the year ending December 31, 2026; and three, an advisory vote on executive compensation. Because no stockholder proposals were properly filed with the company's Secretary in advance of this annual meeting as provided in the bylaws, the business of this meeting is limited to the foregoing 3 matters in accordance with the bylaws. The proxies solicited by the Board of Directors can be tallied at one time, even though each proxy contains 3 different matters for consideration. Similarly, the ballots that any stockholder present seeks to cast here can 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 to the next item. At the conclusion of the discussion of the 3 items, we will take a vote on all items. We will then have a report of the operations of the company. There will be an opportunity for questions and comments of a general nature after the discussion and voting as to the 3 matters and the operations reported has concluded. We will consider the proposal in the order presented in the notice of the annual meeting. The polls are now open. At the conclusion of the discussion on voting of all matters, I will announce the closing of the polls. The first item of business to be voted upon is the election of Todd Deutsch to serve for a 2-year term and the election of Raymond Kelly, Robert Mitzman and Kevin Waterhouse to serve for a 3-year term as well as directors of the company as described in the proxy statement. All nominees are currently members of the Board of Directors. So 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. Second item of business to be voted upon is a proposal to ratify the appointment of Crowe LLP as our independent registered public accounting firm for the year ended December 31, 2026. Are there any questions regarding the ratification of the appointment of Crowe LLP? Okay. The final item of business to be voted upon is the proposal to approve an advisory vote on executive compensation. Are there any questions regarding the proposal to approve an advisory vote on executive compensation? Okay. This concludes all discussion on all matters. If there -- I declare the polls closed. All ballots and proxies are now in the custody of the Inspector of Election, and I turn it back over to Mr. Sagliocca.

Thank you Gary. I'd like to now take a few minutes to give you a report on the operations of the company. In '25, Esquire has remained very steadfast and focused on creating long-term stakeholder value, shareholder value, client value, employee value. All stakeholders across the board. On a daily basis, were very, very focused on client service, making sure we look at our commercial relationships holistically and an unwavering obligation in excellence at execution by our valued managers and employees. Performance for '25 at a high level. We ended '25 with $2.4 billion in assets and just shy of $300 million in equity. Profitability over the year was exceptional. Net income increased almost 17% to $50 million or $5.87 per diluted share. And our returns on assets and equity were 2.43% and 19.4%. Coupled with that, our compounded annual growth rate over 5 years for EPS has been 27%. We believe that our yields -- our premium yields and risk-adjusted yields, and we've maintained a fairly consistent margin over the past 3 years, north of 6% -- our cost of funds, again, we believe is an industry-leading cost of funds at 1% on our $2 billion plus of deposits, anchored by our national litigation platform, which represents about 80% of those deposits. Growth was robust. Loans increased 26% to $1.7 billion, almost $1.8 billion, and our compounded annual growth rate for loans over the past 5 years was about 19%. Associated with the growth and the margin is strong revenue growth and diversification. So revenue grew 17% in '25. And we also have a mix of revenue between the margin and fee income, and that mix on the fee income side is anchored by our national payments platform or merchant acquiring platform. And fee income in total is just shy of about 20% of total revenue even in the current year. Coupled with those financial metrics, there's a few other things to point out. We continue to increase our quarterly dividend annually. It's up [ by 20% ] that's the fifth year in a row. We opened our flagship branch in L.A., California to support our clients and our future growth. We commenced and started to make an investment in our new 50,000 square foot headquarters within the same complex as we are currently, but twice the space or pretty close to twice the space to support growth and state-of-the-art technology that we use and we will continue to use. And in the past year, we added Raymond Kelly to the Board of Directors, who brings extensive banking experience over the past 40 years in the industry as a banker and outside the industry in public accounting over half his career or more. Some of the accolades that we've received in the past year, coupled with the performance, I'll name a few. Esquire was named the Piper Sandler's 2025 Bank & Thrift Sm-All Stars. We were included in the KBW Bank Honor Roll. We were awarded by Raymond James, the Community Bankers Cup, and we were recognized by S&P Global as a Best-Performing Community Bank and one of the best performing banks on deposit growth. Coupled with all of that, as most all of you are aware, we announced in early '26, the merger and acquisition of Signature out of Chicago. Signature is a premier commercial banking franchise in the Metro Chicago area and Midwest. The combined company on a pro forma basis would have just shy of $5 billion in assets. We're excited about joining our national verticals with their commercial banking focused vertical in the Midwest. We're excited to have them join. And when I say that, I mean their Board -- select Board members that are joining our Board, their executives, their senior managers and all their employees. The deal, as we announced in March, is not necessarily reliant on cost savings. We've only estimated about 5% cost savings for the full year, which would be the second year, the year after the acquisition. So the deal is highly accretive to both earnings and tangible book value with minimal cost savings. Importantly or most importantly, the merger brings together 2 highly profitable and high-performing and high-growth institutions that ironically were started around the same time frame. As I look to the first quarter, more of the same good news. I'll give you a few highlights. In the first quarter, adjusted net income and earnings per share were about $14 million and $1.58 per share. That's adjusted for merger charges and the retirement of certain Board members and the related accelerated amortization on their restricted stock. Adjusted return on assets and equity were just shy of 2.40% and just shy of 19%. The margin has hung in at 6.04%. Loan growth was about 13%. Typically, our first quarter is a lower growth quarter due to paydowns of draws that happened in the fourth quarter, and we also had strong corresponding deposit growth. So in summary, the first quarter was akin and similar to the performance in '25. That's my financial update. I'll hand it back off to Gary at this point, unless anyone has any questions on that update. Kate, I'll turn it over to you first.

At this time, there are no phone questions.

Okay. Great. So we'll move it back to Gary.

Okay. The inspector has completed his count, and I will now read the certificate and report of the Inspector of Elections. The report confirms that a quorum is and has been in attendance at the annual meeting for all purposes. The report also shows, first, each director nominee received an affirmative vote of at least 78.22% of the shares voted. Second, 97.99% 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 ended December 31, 2026; and third, 97.19% of the shares voted were cast for approval of the executive compensation. Accordingly, each director has been elected as a director of the company. The proposal to ratify the appointment of Crowe LLP has been approved, and the advisory vote on executive compensation has been approved. The certificate and the report of the Inspector of Election has been accepted and approved and will be attached to the minutes of the annual meeting. There being no further business to come before the annual meeting, a motion to adjourn is in order.

I make a motion.

I second.

Those in favor, say aye.

Aye.

Those oppose, say no. The motion is carried and the annual meeting is adjourned. Thank you, everyone, for coming to this year's annual meeting and for your continued support.

Thank you everybody.

Once again, that does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.