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What changed in Esquire Financial Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Esquire Financial Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+390 added−376 removedSource: 10-K (2024-03-29) vs 10-K (2023-03-27)

Top changes in Esquire Financial Holdings, Inc.'s 2023 10-K

390 paragraphs added · 376 removed · 318 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

155 edited+22 added−15 removed138 unchanged
Biggest changeOther Regulations Esquire Bank’s operations are also subject to federal laws applicable to credit transactions, such as: ● The Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; ● The Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for 1 – 4 family real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services; ● The Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● The Equal Credit Opportunity Act and other fair lending laws, prohibiting discrimination on the basis of race, religion, sex and other prohibited factors in extending credit; ● The Fair Credit Reporting Act, governing the use of credit reports on consumers and the provision of information to credit reporting agencies; ● Unfair or Deceptive Acts or Practices laws and regulations; ● The Coronavirus Aid, Relief and Economic Security Act; ● The Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and ● The rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws. 22 Table of Contents The operations of Esquire Bank are further subject to the: ● The Truth in Savings Act, which specifies disclosure requirements with respect to deposit accounts; ● The Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; ● The Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; and ● The Check Clearing for the 21 st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check.
Biggest changeOther Regulations Esquire Bank’s operations are also subject to federal laws applicable to credit transactions, such as: ● The Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; ● The Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for 1 – 4 family real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services; ● The Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; ● The Equal Credit Opportunity Act and other fair lending laws, prohibiting discrimination on the basis of race, religion, sex and other prohibited factors in extending credit; 22 Table of Contents ● The Fair Credit Reporting Act, governing the use of credit reports on consumers and the provision of information to credit reporting agencies; ● Unfair or Deceptive Acts or Practices laws and regulations; ● The Coronavirus Aid, Relief and Economic Security Act; ● The Fair Debt Collection Practices Act, governing the manner in which consumer debts may be collected; and ● The rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
While some overlap exists between the litigation market loan products offered by Esquire Bank and these companies (primarily lines of credit, case-cost and post-settlement commercial loans), there are a number of critical differences that we believe gives our Bank a competitive advantage including, but not limited to: ● Esquire Bank can offer more competitive terms (i.e.-rates) on loans compared to specialty finance companies because its cost of funds is much lower than the funding costs for these non-bank competitors; ● the non-bank companies are not able to offer commercial cash management services on deposit products (i.e.-commercial on-line banking, remote deposit capture technology), letters of credit, debit cards, or other business services; and 7 Table of Contents ● non-banks cannot offer products uniformly across the country because they are not national banks.
While some overlap exists between the litigation market loan products offered by 7 Table of Contents Esquire Bank and these companies (primarily lines of credit, case-cost and post-settlement commercial loans), there are a number of critical differences that we believe gives our Bank a competitive advantage including, but not limited to: ● Esquire Bank can offer more competitive terms (i.e. rates) on loans compared to specialty finance companies because its cost of funds is much lower than the funding costs for these non-bank competitors; ● the non-bank companies are not able to offer commercial cash management services on deposit products (i.e. commercial on-line banking, remote deposit capture technology), letters of credit, debit cards, or other business services; and ● non-banks cannot offer products uniformly across the country because they are not national banks.
Our Merchant Acquiring and Risk Policy establishes authorities and guidelines for the Bank to acquire payment processing arrangements with ISOs, agent banks, payment facilitators, direct merchants and through merchant portfolio acquisitions. 10 Table of Contents Such guidelines include initial and ongoing due diligence requirements and approval authorities.
Our Merchant Acquiring and Risk Policy establishes authorities and guidelines for the Bank to acquire payment processing 10 Table of Contents arrangements with ISOs, agent banks, payment facilitators, direct merchants and through merchant portfolio acquisitions. Such guidelines include initial and ongoing due diligence requirements and approval authorities.
These 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.
These 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.
These loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or 13 Table of Contents guarantor to repay principal and interest.
These loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project and the ability of the 13 Table of Contents borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest.
Capitalization Federal regulations require FDIC insured depository institutions, including national banks, to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets and a Tier 1 capital to total assets leverage ratio.
Capitalization Federal regulations require FDIC insured depository institutions, including national banks, to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio, a Tier 1 capital to risk-based assets ratio, a total capital to risk-based assets ratio and a Tier 1 capital to total assets leverage ratio.
Holding Company Regulation The Company, as a bank holding company, controlling Esquire Bank, is subject to regulation and supervision by the FRB under the BHCA. The Company is periodically examined by, required to submit reports to the FRB and is required to comply with the FRB’s rules and regulations.
Holding Company Regulation The Company, as a bank holding company controlling Esquire Bank, is subject to regulation and supervision by the FRB under the BHCA. The Company is periodically examined by and is required to submit reports to the FRB and is required to comply with the FRB’s rules and regulations.
The Dodd-Frank Act directed the FRB to issue consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to institutions themselves. The previously discussed final rule regarding regulatory capital requirements implemented the Dodd-Frank Act as to bank holding company capital standards.
The Dodd-Frank Act directed the FRB to issue consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to the depository institutions themselves. The previously discussed final rule regarding regulatory capital requirements implemented the Dodd-Frank Act as to bank holding company capital standards.
FRB policy is that a bank holding company should pay cash dividends only to the extent that the company’s net income for the past two years is sufficient to fund the dividends and the prospective rate of earnings retention is consistent with the company’s capital needs, asset quality and overall financial condition.
FRB policy is that a bank holding company should pay cash dividends only to the extent that the holding company’s net income for the past two years is sufficient to fund the dividends and the prospective rate of earnings retention is consistent with the holding company’s capital needs, asset quality and overall financial condition.
A bank holding company is required to give the FRB prior written notice of any repurchase or redemption of its outstanding equity securities if the gross consideration for repurchase or redemption, when combined with the net consideration paid for all such repurchases or redemptions during the preceding 12 months, will be equal to 10% or more of the company’s consolidated net worth.
A bank holding company is required to give the FRB prior written notice of any repurchase or redemption of its outstanding equity securities if the gross consideration for repurchase or redemption, when combined with the net consideration paid for all such repurchases or redemptions during the preceding 12 months, will be equal to 10% or more of the holding company’s consolidated net worth.
In evaluating such notices, the FRB takes into consideration such factors as the financial resources, competence, experience and integrity of the acquirer, the future prospects the bank holding company involved and its subsidiary bank and the competitive effects of the acquisition.
In evaluating such notices, the FRB takes into consideration such factors as the financial resources, competence, experience and integrity of the acquirer, the future prospects of the bank holding company involved and its subsidiary bank and the competitive effects of the acquisition.
We have built a customized and fully integrated customer relationship management (“CRM”) platform, integrated into our digital marketing cloud and our nCino loan platform (all built on Salesforce for excellence in client service and operational efficiency) and have begun to invest in artificial intelligence (“AI”) to facilitate precision marketing and client acquisition across both national verticals with an initial focus on the litigation vertical.
We have built a customized and fully integrated customer relationship management (“CRM”) platform, integrated into our digital marketing cloud and our nCino loan platform (all built on Salesforce for excellence in client service and operational efficiency) and invest in artificial intelligence (“AI”) to facilitate precision marketing and client acquisition across both national verticals with an initial focus on the litigation vertical.
In evaluating acquisition application, the FRB evaluates factors such as the financial condition, management resources and future prospects of the parties, the convenience and needs of the communities involved and competitive factors. In addition, bank holding companies may generally only engage in activities that are closely related to banking as determined by the FRB.
In evaluating an acquisition application, the FRB evaluates factors such as the financial condition, management resources and future prospects of the parties, the convenience and needs of the communities involved and competitive factors. In addition, bank holding companies may generally only engage in activities that are closely related to banking as determined by the FRB.
Federal Reserve System Under federal law and regulations, the Bank is required to maintain sufficient liquidity to ensure safe and sound banking practices. Regulation D, promulgated by the FRB, imposes reserve requirements on all depository institutions, including the Bank, which maintain transaction accounts or non-personal time deposits.
Federal Reserve System Under federal law and regulations, the Bank is required to maintain sufficient liquidity to ensure safe and sound banking practices. Regulation D, promulgated by the FRB, imposes reserve requirements on all depository institutions, including Esquire Bank, which maintain transaction accounts or non-personal time deposits.
Management understands the importance of concentration risk and continuously monitors to ensure that portfolio risk is balanced between such factors as loan type, industry, geography, collateral, structure, maturity and risk rating, among other things. Our Loan Policy establishes detailed concentration limits and sub limits by loan type and geography. Ongoing Credit Risk Management.
Management understands the importance of concentration risk and continuously monitors to ensure that portfolio risk is balanced between such factors as loan type, geography, collateral, structure, maturity and risk rating, among other things. Our Loan Policy establishes detailed concentration limits and sub limits by loan type and geography. Ongoing Credit Risk Management.
We strive to identify potential problem loans early in an effort to aggressively seek resolution of these situations before the loans create a loss, record any necessary charge-offs promptly and maintain adequate allowance levels for probable loan losses incurred in the loan portfolio.
We strive to identify potential problem loans early in an effort to aggressively seek resolution of these situations before the loans create a loss, record any necessary charge-offs promptly and maintain adequate allowance levels for probable credit losses incurred in the loan portfolio.
Section 23A limits the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to 10% of the bank’s capital stock and surplus. There is an aggregate limit of 20% of the bank’s capital stock and surplus for such transactions with all affiliates.
Section 23A limits the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to 10% of the bank’s capital stock and surplus. There is an aggregate limit of 20% of the bank’s capital stock and surplus for such covered transactions with all affiliates.
These loans are subject to a general security agreement evidenced by UCC-1 filing on all assets of the borrower, including but not limited to case inventory, accounts receivable, fixtures and deposits where applicable.
These loans are subject to a general security agreement evidenced by UCC-1 filing on all assets of the borrower, including but not limited to, the full case inventory, accounts receivable, fixtures and deposits where applicable.
Typically, these inventories of claims for injured consumers or claimants have a duration of 2-3 years, significantly longer than traditional accounts receivables or inventories of goods that can have a duration of 30-60 days or 120 days, respectively.
Typically, these inventories of claims for injured consumers or claimants have a duration of 2 to 3 years, significantly longer than traditional accounts receivables or inventories of goods that can have a duration of 30 to 60 days or 120 days, respectively.
Acquisition of Control of the Company. Under the Change in Bank Control Act, no person may acquire control of a bank holding company such as the Company unless the FRB has been prior written notice and has not issued a notice disapproving the proposed acquisition.
Acquisition of Control of the Company. Under the Change in Bank Control Act, no person may acquire control of a bank holding company such as the Company unless the FRB has been given prior written notice and has not issued a notice disapproving the proposed acquisition.
Esquire Bank is also subject to federal financial consumer protection and fair lending laws and regulations of the Consumer Financial Protection Bureau, though the OCC is responsible for examining and supervising the bank’s compliance with these laws.
Esquire Bank is also subject to federal financial consumer protection and fair lending laws and regulations of the Consumer Financial Protection Bureau, though the OCC is responsible for examining, supervising, and enforcing the Bank’s compliance with these laws.
In accordance with loans-to-one-borrower regulations, the Bank is generally limited to lending no more than 15% of its unimpaired capital and unimpaired surplus to any one borrower or borrowing entity.
In accordance with loans-to-one-borrower regulations, the Bank is generally limited to lending no more than 15% of its capital and surplus to any one borrower or borrowing entity.
The CRA requires the OCC to assess its record of meeting the credit needs of its community and to take that record into account in its evaluation of certain applications by Esquire Bank.
The CRA requires the OCC to assess Esquire Bank’s record of meeting the credit needs of its community and to take that record into account in its evaluation of certain applications by Esquire Bank.
The litigation market has been and will continue to be a significant growth opportunity for our Company as we offer focused and tailored products and services to law firms nationally. U.S. tort actions alone are estimated to consume 1.85%-2.13% of U.S. GDP annually according to the U.S.
Litigation Market Commercial Banking. The litigation market has been and will continue to be a significant growth opportunity for our Company as we offer focused and tailored products and services to law firms nationally. U.S. tort actions alone are estimated to consume 1.85%-2.13% of U.S. GDP annually according to the U.S.
We are a branchless digital first company with best-in-class technology to fuel future growth with industry leading client retention rates.
We are currently a branchless digital first company, with best-in-class technology to fuel future growth with industry leading client retention rates.
Moreover, the Federal Reserve staff is interpreting the capital regulations as requiring a bank holding company to secure Federal Reserve approval prior to redeeming or repurchasing any capital stock that is included in regulatory capital. The above FRB requirements may restrict a bank holding company’s ability to pay dividends to stockholders or engage in repurchases or redemptions of its shares.
Moreover, FRB staff is interpreting the capital regulations as requiring a bank holding company to secure FRB approval prior to redeeming or repurchasing any capital stock that is included in regulatory capital. As a bank holding company, the above FRB requirements may restrict the Company’s ability to pay dividends to stockholders or engage in repurchases or redemptions of its shares.
The majority of residential mortgages are originated internally, although we do purchase residential mortgages from time to time. Purchased loans are subject to all the asset quality and documentary precautions normally used when originating a loan. Construction Loans. Construction loans are originated on an opportunistic basis. At December 31, 2022, there were no construction loans.
The majority of residential mortgages are originated internally, although we do purchase residential mortgages from time to time. Purchased loans are subject to all the asset quality and documentary precautions normally used when originating a loan. Construction Loans. Construction loans are originated on an opportunistic basis. At December 31, 2023, there were no construction loans.
Additionally, we are required to maintain an investment in Federal Reserve Bank (“FRB”) of New York stock equal to six percent of our capital and surplus. While we have the authority under applicable law to invest in derivative instruments, we had no investments in derivative instruments at December 31, 2022.
Additionally, we are required to maintain an investment in Federal Reserve Bank (“FRB”) of New York stock equal to six percent of our capital and surplus. While we have the authority under applicable law to invest in derivative instruments, we had no investments in derivative instruments at December 31, 2023.
The Gramm-Leach-Bliley Act of 1999 authorizes a bank holding company that meets specified conditions, including depository institutions subsidiaries that are “well capitalized” and “well managed,” to opt to become a “financial holding company.” A “financial holding company” may engage in a broader array of financial activities than permitted a typical bank holding company.
The Gramm-Leach-Bliley Act of 1999 authorizes a bank holding company that meets specified conditions, including depository institutions subsidiaries that are “well capitalized” and “well managed,” to elect to become a “financial holding company.” A “financial holding company” may engage in a broader array of financial activities than permitted a typical bank holding company.
In connection with these loans, the Bank generally requires personal guarantees of key partners in most circumstances and, in certain circumstances an assignment of life insurance of partners, in accordance with our Board approved Lending Policy. 12 Table of Contents From time to time we will have the opportunity to provide financing to a law firm that through its existence or its partners’ professional work histories have demonstrated long-term success with large, complex, and profitable litigations.
In connection with these loans, the Bank generally requires personal guarantees of key partners in most circumstances and, in certain circumstances an assignment of life insurance of partners, in accordance with our Board approved Lending Policy. 12 Table of Contents From time to time we will have the opportunity to provide financing to a law firm that, through its existence or its partners’ professional work histories have demonstrated long-term success with large, complex, and profitable litigation matters.
Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
Transactions with Affiliates and Insiders Sections 23A and 23B of the Federal Reserve Act govern transactions between a national bank and its affiliates, which includes the Company. The FRB has adopted Regulation W, which implements and interprets Sections 23A and 23B, in part by codifying prior FRB interpretations.
Transactions with Affiliates and Loans to Insiders Sections 23A and 23B of the Federal Reserve Act govern transactions between a national bank and its affiliates, which includes the Company. The FRB has adopted Regulation W, which implements and interprets Sections 23A and 23B, in part by codifying prior FRB interpretations.
In addition to mitigating risk, the ISO business model allows the Bank to solicit merchants nationwide using numerous independent sales agents employed by our ISOs. Competition The bank and non-bank financial services industries in our markets and surrounding areas is highly competitive.
In addition to mitigating risk, the ISO business model allows the Bank to solicit merchants nationwide using numerous independent sales agents employed by our ISOs. Competition The bank and non-bank financial services industries in our markets and surrounding areas are highly competitive.
Commercial Loans. These loans are typically made on the basis of the borrower’s ability to make repayments from the cash flow of the borrower’s business and the collateral securing these loans which may fluctuate in value. Our commercial loans are originated based on the identified cash flow of the borrower and on the underlying collateral provided by the borrower.
Commercial Loans. These loans are typically made on the basis of the borrower’s ability to make repayments from the cash flow of the borrower’s business and the collateral securing these loans that may fluctuate in value. Our commercial loans are originated based on the identified cash flow of the borrower and on the underlying collateral provided by the borrower.
Community Reinvestment Act and Fair Lending Laws Under the CRA, Esquire Bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods.
Community Reinvestment Act and Fair Lending Laws Under the Community Reinvestment Act (“CRA”), Esquire Bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods.
As of December 31, 2022, we had contractual arrangements with three payment processors or clearing agents, TSYS, Repay and Fiserv, which are utilized by Esquire Bank and our ISOs to authorize, clear and settle card transactions.
As of December 31, 2023, we had contractual arrangements with three payment processors or clearing agents, TSYS, Repay and Fiserv, which are utilized by Esquire Bank and our ISOs to authorize, clear and settle card transactions.
We believe our unique and dynamic business model distinguishes us from other banks and non-bank financial services companies in the markets we operate as demonstrated by comparing our performance metrics for the years ended 2022 and 2021.
We believe our unique and dynamic business model distinguishes us from other banks and non-bank financial services companies in the markets we operate as demonstrated by comparing our performance metrics for the years ended 2023 and 2022.
Legislation enacted in 2018 required the federal banking agencies, including the Federal Reserve, to establish a “community bank leverage ratio” of between 8-10% of average total consolidated assets for qualifying institutions with less than $10 billion of assets.
Legislation enacted in 2018 required the federal banking agencies, including the FRB, to establish a “community bank leverage ratio” of between 8-10% of average total consolidated assets for qualifying institutions with less than $10 billion of assets.
Regulation O also requires that any loan to an insider or a related interest of an insider be approved in advance by a majority of the board of directors of the bank, with any interested director not participating in the voting, if the loan, when aggregated with any existing loans to that insider or the insider’s related interests, would exceed the lesser or $500,000 or 5% of the bank’s unimpaired capital and surplus.
Regulation O also requires that any loan to an insider or a related interest of an insider be approved in advance by a majority of the board of directors of the bank, with any interested director not participating in the voting, if the loan, when aggregated with any existing loans to that insider or the insider’s related interests, would exceed the greater of $25,000 or 5% of the bank’s unimpaired capital and surplus, or $500,000.
In November 2021, the federal bank regulatory agencies issued a final rule requiring banking organizations to notify their primary federal regulator as soon as possible and no later than 36 hours of determining that a “computer-security 21 Table of Contents incident” that rises to the level of a “notification incident,” as those terms are defined in the final rule, has occurred.
In November 2021, the federal bank regulatory agencies issued a final rule requiring banking organizations to notify their primary federal regulator as soon as possible and no later than 36 hours of determining that a “computer-security incident” that rises to the level of a “notification incident,” as those terms are defined in the final rule, has occurred.
Banks meeting the specified requirement and electing to follow the alternative framework would be deemed to comply with the regulatory capital requirements, including the risk-based requirements. The federal agencies final rule issued in 2019 set the community bank leverage ratio at 9%. The Bank has not elected to utilize this alternative framework as of December 31, 2022.
Banks meeting the specified requirements and electing to follow the alternative framework would be deemed to comply with the regulatory capital requirements, including the risk-based requirements. The federal agencies final rule issued in 2019 set the community bank leverage ratio at 9%. The Bank has not elected to utilize this alternative framework as of December 31, 2023.
In evaluating each potential loan relationship, we adhere to a disciplined underwriting evaluation process including but not limited to the following: ● understanding the customer’s financial condition and ability to repay the loan; ● verifying that the primary and secondary sources of repayment are adequate in relation to the amount and structure of the loan; ● observing appropriate loan to value guidelines for collateral secured loans; ● maintaining our targeted levels of diversification for the loan portfolio, both as to type of borrower and geographic location of collateral; ● ensuring that each loan is properly documented with perfected liens on collateral; and ● applying customized risk rating models tailored to our lending activities.
In evaluating each potential loan relationship, we adhere to a disciplined underwriting evaluation process including but not limited to the following: ● understanding the customer’s financial condition and ability to repay the loan, including DSCR and global DSCR; ● verifying that the primary and secondary sources of repayment are adequate in relation to the amount and structure of the loan; ● observing appropriate loan to value guidelines for collateral secured loans; ● maintaining our targeted levels of diversification for the loan portfolio, both as to type of borrower and geographic location of collateral; ● ensuring that each loan is properly documented with perfected liens on collateral; and ● applying risk rating criteria tailored to our lending activities.
The Bank participates in sweep programs to provide our customers FDIC insured deposit products and access to treasury secured money market funds. In order to participate in these programs, the Bank places, or sweeps, deposits to these programs where a portion of which may be utilized as a source of liquidity.
The Bank participates in sweep programs to provide our customers FDIC insured deposit products and access to treasury secured money market funds. In order to participate in these programs, the Bank places, or sweeps, deposits to 11 Table of Contents these programs where a portion of which may be utilized as a source of liquidity.
A subsidiary of a bank that is not also a depository institution or a “financial subsidiary” under federal law is not treated as an affiliate of the bank for the purposes of Sections 23A and 23B; however, the OCC has the discretion to treat subsidiaries of a bank as affiliates on a case-by-case basis.
A subsidiary of a bank that is not also a depository institution or a “financial subsidiary” under federal law is generally not treated as an affiliate of the bank for the purposes of Sections 23A and 23B and Regulation W; however, the OCC has the discretion to treat subsidiaries of a bank as affiliates on a case-by-case basis.
By way of amendments to the Bank Secrecy Act, Title III of the USA PATRIOT Act implemented measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies.
By way of amendments to the BSA, Title III of the USA PATRIOT Act implemented measures intended to encourage information sharing among bank regulatory agencies and law enforcement bodies.
We believe we have a stable core deposit base due primarily to the litigation market strategy as we strongly encourage and are successful in having law firm borrowers maintain their operating and escrow banking relationship with us. Our low cost of funds is due to our deposit composition consisting of approximately 98.4% in core deposit accounts at December 31, 2022.
We believe we have a stable core deposit base due primarily to the litigation market strategy as we strongly encourage and are successful in having law firm borrowers maintain their operating and escrow banking relationship with us. Our low cost of funds is due to our deposit composition consisting of approximately 99.4% in core deposit accounts at December 31, 2023.
The Dodd-Frank Act codified the source of strength policy. Under the prompt corrective action provisions of federal law, a bank holding company parent of an undercapitalized subsidiary bank is required to guarantee, within specified limits, the capital restoration plan that is required of an undercapitalized bank.
The Dodd-Frank Act codified the source of strength policy. 23 Table of Contents Under the prompt corrective action provisions of federal law, a bank holding company parent of an undercapitalized subsidiary bank is required to guarantee, within specified limits, the capital restoration plan that is required of an undercapitalized bank.
For example, the regulations specify that a bank’s CRA performance will be considered in its expansion (e.g., branching or merger) proposals and may be the basis for approving, denying or conditioning the approval of an application.
For example, 20 Table of Contents the regulations specify that a bank’s CRA performance will be considered in its expansion (e.g., branching or merger) proposals and may be the basis for approving, denying or conditioning the approval of an application.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: ● our ability to manage our operations under the current economic conditions nationally and in our market area; ● adverse changes in the financial industry, securities, credit and national local real estate markets (including real estate values); ● risks related to a high concentration of loans secured by real estate located in our market area; ● risks related to a high concentration of loans and deposits dependent upon the legal and “litigation” market; ● the impact of any potential strategic transactions; ● the continuing impact of the COVID-19 pandemic on our business and results of operation; ● our ability to enter new markets successfully and capitalize on growth opportunities; ● significant increases in our loan losses, including as a result of our inability to resolve classified and nonperforming assets or reduce risks associated with our loans, and management’s assumptions in determining the adequacy of the allowance for loan losses; ● interest rate fluctuations, which could have an adverse effect on our profitability; ● external economic and/or market factors, such as changes in monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System (“FRB”), inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits, which may have an adverse impact on our financial condition; ● continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are; 2 Table of Contents ● credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance for loan losses and provision for loan losses; ● our success in increasing our legal and “litigation” market lending; ● our ability to attract and maintain deposits and our success in introducing new financial products; ● losses suffered by merchants or Independent Sales Organizations (“ISOs”) with whom we do business; ● our ability to effectively manage risks related to our payment processing business; ● our ability to leverage the professional and personal relationships of our board members and advisory board members; ● changes in interest rates generally, including changes in the relative differences between short-term and long-term interest rates and in deposit interest rates, that may affect our net interest margin and funding sources; ● fluctuations in the demand for loans; ● technological changes that may be more difficult or expensive than expected; ● changes in consumer spending, borrowing and savings habits; ● declines in our payment processing income as a result of reduced demand, competition and changes in laws or government regulations or policies affecting financial institutions, which could result in, among other things, increased deposit insurance premiums and assessments, capital requirements, regulatory fees and compliance costs, particularly the new capital regulations, and the resources we have available to address such changes; ● changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board (“FASB”), the Securities and Exchange Commission or the Public Company Accounting Oversight Board; ● loan delinquencies and changes in the underlying cash flows of our borrowers; ● the impairment of our investment securities; ● our ability to control costs and expenses, particularly those associated with operating as a publicly traded company; ● the failure or security breaches of computer systems on which we depend; ● political instability; ● acts of war, terrorism, natural disasters or global market disruptions, including global pandemics; ● competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers, including retail businesses and technology companies; ● changes in our organization and management and our ability to retain or expand our management team and our board of directors, as necessary; 3 Table of Contents ● the costs and effects of legal, compliance and regulatory actions, changes and developments, including the initiation and resolution of legal proceedings, regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations and reviews; ● the ability of key third-party service providers to perform their obligations to us; and ● other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this Annual Report on Form 10-K.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: ● our ability to manage our operations under the current economic conditions nationally and in our market area; ● adverse changes in the financial industry, securities, credit and national local real estate markets (including real estate values); ● risks related to a high concentration of loans secured by real estate located in our market area; ● risks related to a high concentration of loans and deposits dependent upon the legal and “litigation” market; ● the impact of any potential strategic transactions; ● unexpected outflows of uninsured deposits could require us to sell investment securities at a loss; ● our ability to enter new markets successfully and capitalize on growth opportunities; ● significant increases in our credit losses, including as a result of our inability to resolve classified and nonperforming assets or reduce risks associated with our loans, and management’s assumptions in determining the adequacy of the allowance for credit losses; ● interest rate fluctuations, which could have an adverse effect on our profitability; ● external economic and/or market factors, such as changes in monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System (“FRB”), inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits, which may have an adverse impact on our financial condition; ● continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are; 2 Table of Contents ● credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance for credit losses and provision for credit losses; ● our success in increasing our legal and “litigation” market lending; ● our ability to attract and maintain deposits and our success in introducing new financial products; ● losses suffered by merchants or Independent Sales Organizations (“ISOs”) with whom we do business; ● our ability to effectively manage risks related to our payment processing business; ● changes in interest rates generally, including changes in the relative differences between short-term and long-term interest rates and in deposit interest rates, that may affect our net interest margin and funding sources; ● fluctuations in the demand for loans; ● technological changes that may be more difficult or expensive than expected; ● changes in consumer spending, borrowing and savings habits; ● declines in our payment processing income as a result of reduced demand, competition and changes in laws or government regulations or policies affecting financial institutions, which could result in, among other things, increased deposit insurance premiums and assessments, capital requirements, regulatory fees and compliance costs; ● changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board (“FASB”), the Securities and Exchange Commission or the Public Company Accounting Oversight Board; ● loan delinquencies and changes in the underlying cash flows of our borrowers; ● the impairment of our investment securities; ● our ability to control costs and expenses; ● the failure or security breaches of computer systems on which we depend; ● acts of war, terrorism, natural disasters, global market disruptions, including global pandemics or political instability; ● the effects of any federal government shutdown; ● competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers, including retail businesses and technology companies; ● changes in our organization and management and our ability to retain or expand our management team and our board of directors, as necessary; ● the costs and effects of legal, compliance and regulatory actions, changes and developments, including the initiation and resolution of legal proceedings, regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations and reviews; 3 Table of Contents ● the ability of key third-party service providers to perform their obligations to us; and ● other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this Annual Report on Form 10-K.
These factors (the unique industry, contingent collateral, longer durations of the law firms’ inventories, atypical revenue streams of the law firms and more) 5 Table of Contents coupled with the TAM create a unique and valuable opportunity for the Company with minimal incumbent competition.
These factors (the unique industry, contingent collateral, longer durations of the law firms’ inventories, atypical revenue streams of the law firms and more) coupled with the TAM create a unique and valuable opportunity for the Company with minimal incumbent competition.
Our unique products and services coupled with our thought-leadership digital marketing creates deep relationships within the litigation community, driving our commercial loan growth, strong loan yields, and low cost core deposits.
Our unique products and services coupled with our thought leadership digital marketing and business development team creates deep relationships within the litigation community, driving our commercial loan growth, strong loan yields, and low cost core deposits.
Esquire Financial Holdings, Inc. is a bank holding company, due to its control of Esquire Bank, and is therefore subject to the requirements of the BHC Act and regulation and supervision by the FRB. The Company files reports with and is subject to periodic examination by the FRB.
Esquire Financial Holdings, Inc. is a bank holding company, due to its control of Esquire Bank, and is therefore subject to the requirements of the BHCA and regulation and supervision by the FRB. The Company files reports with and is subject to periodic examination by the FRB.
With certain exceptions, such as education loans and certain 1 – 4 family mortgages a bank’s loans to its executive officers, may not exceed the greater of $25,000 or 2.5% of the bank’s unimpaired capital and unimpaired surplus, but in no event more than $100,000.
In addition, with certain exceptions, such as education loans and certain 1 – 4 family mortgages, a bank’s loans to its executive officers may not exceed the greater of $25,000 or 2.5% of the bank’s unimpaired capital and unimpaired surplus, and in no event may exceed $100,000.
Bank holding companies that meet certain criteria 23 Table of Contents may opt to become a financial holding company and thereby engage in a broader array of financial activities, which the Company has elected to do.
Bank holding companies that meet certain criteria may opt to become a financial holding company and thereby engage in a broader array of financial activities, which the Company has elected to do.
We have a senior product management team that has developed in excess of 28 active ISO relationships servicing approximately 76,000 merchants. The ISO model insulates the bank’s capital from merchant losses through merchant reserves, ISO reserves, ISO monthly residuals and ISO portfolio values.
We have a senior product management team that has developed in excess of 27 active ISO relationships servicing approximately 84,000 merchants. The ISO model insulates the bank’s capital from merchant losses through merchant reserves, ISO reserves, ISO monthly residuals and ISO portfolio values.
More importantly, since our commercial banking platform is focused on full service relationship banking, for every $1.00 we advance on these loans we receive on average $1.85 of low-cost (our cost of funds for the year ended December 31, 2022 is 15 basis points) core operating and escrow deposits from these law firms through our branchless platform, fueling and funding additional growth in our other asset classes.
More importantly, since our commercial banking platform is focused on full service relationship banking, for every $1.00 we advance on these loans we receive on average $1.75 of low-cost (our cost of funds for the year ended December 31, 2023 is 66 basis points) core operating and escrow deposits from these law firms through our branchless platform, fueling and funding additional growth in our other asset classes.
Therefore, these law firm escrow accounts carry FDIC insurance at the claimant settlement level, not at the deposit account level. Coupling these types of commercial relationships with our off-balance sheet commercial litigation funds of $432.1 million at December 31, 2022, makes this litigation vertical a highly desirable core low-cost funding platform fueling growth in other lending areas. Payment Processing.
Therefore, these law firm escrow accounts carry FDIC insurance at the claimant settlement level, not at the deposit account level. Coupling these types of commercial relationships with our off-balance sheet commercial litigation funds of $278.0 million at December 31, 2023, makes this litigation vertical a highly desirable core low-cost funding platform fueling growth in other lending areas. Payment Processing.
These digital technologies support our seamless communication to the communities we serve, provide best-in-class multimedia digital marketing capabilities, streamline our online functionality and associated application processes, and will support our industry leading performance metrics in the future.
These digital technologies support our business development team’s seamless communication to the communities we serve, provide best-in-class multimedia digital marketing capabilities, streamline our online functionality and associated application processes, and will continue to support our industry leading performance metrics in the future.
For the year ended December 31, 2022, we received a blended rate of approximately eight basis points for payment processing, compared to direct payment processing providers that may receive two to three times that rate for a portfolio with similar risk characteristics.
For the year ended December 31, 2023, we received a blended rate of approximately seven basis points for payment processing, compared to direct payment processing providers that may receive two to three times that rate for a portfolio with similar risk characteristics.
As of December 31, 2022, New York County’s $2.8 trillion deposit market was much larger than the $126 billion deposit market in Nassau County, according to data sourced from S&P Global Market Intelligence. We have established an extensive market for our payment processing business as an acquiring bank throughout the United States and its territories.
As of December 31, 2023, New York County’s $2.7 trillion deposit market was much larger than the $113 billion deposit market in Nassau County, according to data sourced from S&P Global Market Intelligence. We have established an extensive market for our payment processing business as an acquiring bank throughout the United States and its territories.
All of our debt securities are classified as available-for-sale or held-to-maturity and can be used to collateralize Federal Home Loan Bank of New York (“FHLB”) borrowings, FRB borrowings, or other borrowings. At December 31, 2022, our securities had a fair value of $187.6 million, and consisted of U.S. Government Agency collateralized mortgage obligations and mortgage-backed securities.
All of our debt securities are classified as available-for-sale or held-to-maturity and can be used to collateralize Federal Home Loan Bank of New York (“FHLB”) borrowings, FRB borrowings, or other borrowings. At December 31, 2023, our securities had a fair value of $191.2 million, and consisted of U.S. Government Agency collateralized mortgage obligations and mortgage-backed securities.
These loans are based on a borrowing base that was developed by us whereby a law firm’s case inventory is segmented into various stages and evaluated taking into account the firm’s operating performance and related debt service coverage.
These loans are based on a borrowing base that was developed by us whereby a law firm’s case inventory is segmented into various stages and evaluated taking into account the firm’s operating performance and related DSCR.
The Bank was well capitalized at December 31, 2022. Dividends Under federal law and applicable regulations, a national bank may generally declare a cash dividend, without approval from the OCC, in an amount equal to its year-to-date net income plus the prior two years’ net income that is still available for cash dividend.
The Bank was well capitalized under the prompt corrective action requirements at December 31, 2023. Dividends Under federal law and applicable regulations, a national bank may generally declare a cash dividend, without approval from the OCC, in an amount equal to its year-to-date net income plus the prior two years’ net income that is still available for cash dividend.
All such transactions are required to be on terms and conditions that are consistent with safe and sound banking practices and no transaction may involve the acquisition of any “low quality asset” from an affiliate.
All such covered transactions are required to be on terms and conditions that are consistent with safe and sound banking practices and may not involve the acquisition of any “low quality asset” from an affiliate.
Deposits are insured by the FDIC up to statutory limits. Our unique low cost core deposit model is primarily driven by escrow and operating accounts from law firms and other litigation settlements on a national basis, representing 71% of the $1.2 billion in total deposits at December 31, 2022.
Deposits are insured by the FDIC up to statutory limits. Our unique low cost core deposit model is primarily driven by escrow and operating accounts from law firms and other litigation settlements on a national basis, representing 76% of the $1.4 billion in total deposits at December 31, 2023.
As a Visa, MasterCard, American Express and 6 Table of Contents Discover member, we provide payment processing for small businesses located throughout the United States primarily through relationships with third party ISOs.
As a Visa, MasterCard, American Express and Discover member, we provide payment processing for small businesses located throughout the United States primarily through relationships with third party ISOs.
These types of asset based loans are limited to 35% of our total attorney related commercial loan portfolio as per our Board approved Lending Policy. Consumer Loans. Consumer loans primarily consist of our personal loans and, to a lesser extent, Consumer Litigation-Related Loans, which include post-settlement consumer loans.
These types of asset based loans are limited to 35% of our total litigation related commercial loan portfolio (based on total credit facility level) as per our Board approved Lending Policy. Consumer Loans. Consumer loans primarily consist of our personal loans and, to a lesser extent, Consumer Litigation-Related Loans, which include post-settlement consumer loans.
To qualify for this additional 10% the bank must perfect a security interest in the collateral and the collateral must have a market value at all times of at least 100% of the loan amount that exceeds the 15% general limit. At December 31, 2022, our regulatory limit on loans-to-one borrower was $23.0 million.
To qualify for this additional 10% the bank must perfect a security interest in the collateral and the collateral must have a market value at all times of at least 100% of the loan amount that exceeds the 15% general limit. At December 31, 2023, our regulatory limit on loans-to-one borrower was $29.6 million.
The payment processing (merchant acquiring) market has also been and will continue to be a significant growth opportunity for our company, as we offer focused and tailored products and services to small businesses nationally. The payment industry grew 9.7% from 2019 to 2021 with payment volumes or TAM of $9.5 trillion according to company records on U.S. payment industry trends.
The payment processing (merchant acquiring) market has also been and will continue to be a significant growth opportunity for our Company, as we offer focused and tailored products and services to small businesses nationally. The payment industry grew 8.7% from 2019 to 2022 with payment volumes or TAM of $10.3 trillion according to company records on U.S. payment industry trends.
Our deposit strategy primarily focuses on developing lending and other service orientated relationships with customers rather than competing with other institutions on rate. Our longer duration escrow or claimant trust settlement deposits represent accounts where the law firm is trustee for the claimant settlement funds and represent $564.0 million, or 46%, of total deposits.
Our deposit strategy primarily focuses on developing lending and other service orientated relationships with customers rather than competing with other institutions on rate. Our longer duration escrow or claimant trust settlement deposits represent accounts where the law firm is trustee for the claimant settlement funds and represent $684.2 million, or 49%, of total deposits.
Generally, such loans must be made on substantially the same terms as, and follow credit underwriting procedures that are no less stringent than, those that are prevailing at the time for comparable transactions with other persons and must not present more than a normal risk of collectability.
Generally, such loans must be made on substantially the same terms as, and follow credit underwriting procedures that are no less stringent than, those that are prevailing at the time for comparable transactions with other persons and must not involve more than a normal risk of repayment or present other unfavorable features.
Our extremely low historic delinquency rates and low charge-off rates clearly demonstrate our strong underwriting process and expertise in this vertical. Our longer duration escrow or claimant trust settlement deposits represent accounts where the law firm is trustee for the claimant settlement funds and represent $564.0 million, or 46%, of total deposits.
Our extremely low historic delinquency rates and low charge-off rates clearly demonstrate our strong underwriting process and expertise in this vertical. Our longer duration escrow or claimant trust settlement deposits represent accounts where the law firm is trustee for the claimant settlement funds and represent $684.2 million, or 49%, of total deposits.
As of December 31, 2022, our consumer Litigation-Related Loans, which consist of held for investment post-settlement consumer loans and structured settlement loans (“Consumer Litigation-Related Loans”), totaled $2.7 million, or 0.6% of our total Litigation-Related Loan portfolio and 0.3% of our loan portfolio. With respect to our Litigation-Related Loan portfolio, we seek out customers on a nationwide basis.
As of December 31, 2023, our consumer Litigation-Related Loans, which consist of held for investment post-settlement consumer loans and structured settlement loans (“Consumer Litigation-Related Loans”), totaled $2.4 million, or 0.4% of our total Litigation-Related Loan portfolio and 0.2% of our loan portfolio. With respect to our Litigation-Related Loan portfolio, we seek out customers on a nationwide basis.
Our low cost core deposits (total deposits, excluding time deposits), representing our primary funding source for loan growth, totaled $1.2 billion at December 31, 2022, a key driver of our total cost of deposits of 0.15%. These stable low cost funds are driven by our litigation related operating and escrow commercial deposits.
Our low cost core deposits (total deposits, excluding time deposits), representing our primary funding source for loan growth, totaled $1.4 billion at December 31, 2023, a key driver of our total cost of deposits of 0.66%. These stable low cost funds are driven by our litigation related operating and escrow commercial deposits.
Couple this with the fact that there are less than 85 acquiring financial institutions in the U.S. and this vertical clearly represents a significant growth opportunity for our company.
Couple this with the fact that there are less than 100 acquiring financial institutions in the U.S., this vertical represents a significant growth opportunity for our Company.
In approving a commercial or multifamily real estate loan, we consider and review a global cash flow analysis of the borrower and consider the net operating income of the property, the borrower’s expertise, credit history and profitability and the value of the underlying property.
In approving a commercial or multifamily real estate loan, we consider and review (i) a global cash flow analysis of the borrower, (ii) the net operating income of the property, (iii) the borrower’s expertise, credit history and profitability and (iv) the value of the underlying collateral property.
Among other things, the FRB has authority to restrict activities by a bank holding company that are deemed to pose a serious risk to the subsidiary bank. The FRB has historically imposed consolidated capital adequacy guidelines for bank holding structured similar, but not identical, to those of the OCC for national banks.
Among other things, the FRB has authority to restrict activities by a bank holding company that are deemed to pose a serious risk to its subsidiary banks. The FRB has historically imposed consolidated capital adequacy guidelines for bank holding companies structured similarly, but not identically, to those of the OCC for national banks.
A bank’s loans to its executive officers, directors, any owner of more than 10% of its stock (each, an “insider”) and certain entities affiliated with any such person (an insider’s “related interest”) are subject to the conditions and limitations 19 Table of Contents imposed by Section 22(h) of the Federal Reserve Act and the FRB’s Regulation O.
A bank’s loans to its and its affiliates’, executive officers, directors, any owner of more than 10% of its stock (each, an “insider”) and certain entities controlled by any such person (an insider’s “related interest”) are subject to the conditions and limitations imposed by Section 22(h) of the Federal Reserve Act and the FRB’s Regulation O.
As a member, we are required to own capital stock in the FHLB and are authorized to apply for advances on the security of such stock and certain of our whole first mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met.
As a member, we are required to own capital stock in the FHLB and are authorized to apply for advances on the security of such stock and certain of our multifamily loans and securities portfolio (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met.
Typically, at least three years of successful experience in plaintiff practice are required. Working capital lines of credit and case cost lines of credit are floating rate, prime-based loans. The proceeds of a Case Cost loan can only be used against case expenses.
Typically, at least three years of successful experience in plaintiff (or contingency fee) practice are required for a law firm. Working capital lines of credit and case cost lines of credit are floating rate, prime-based loans. The proceeds of a Case Cost loan can only be used against case expenses.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA decline in economic conditions generally and a prolonged negative impact on small to medium-sized businesses, in particular, due to the COVID-19 pandemic, could result in a material adverse effect on the Company’s business, financial condition, and results of operations and may heighten many of the known risks described herein and in other filings with the SEC. ​ Risks Related to Competitive Matters We operate in a highly competitive industry and face significant competition from other financial institutions and financial services providers, which may decrease our growth or profits.
Biggest changeIf our 34 Table of Contents risk management framework proves ineffective, we could suffer unexpected losses and our business and results of operations could be materially adversely affected. Risks Related to Competitive Matters We operate in a highly competitive industry and face significant competition from other financial institutions and financial services providers, which may decrease our growth or profits.
As a result of this lack of diversification in our loan portfolio, a downturn in the local economy generally and real estate market specifically could significantly reduce our profitability and growth and adversely affect our financial condition. If the allowance for loan losses is not sufficient to cover actual loan losses, earnings could decrease.
As a result of this lack of diversification in our loan portfolio, a downturn in the local economy generally and real estate market specifically could significantly reduce our profitability and growth and adversely affect our financial condition. If the allowance for credit losses is not sufficient to cover actual credit losses, earnings could decrease.
Any significant increase in our allowance for loan losses or loan charge-offs as required by these regulatory agencies could have a material adverse effect on our results of operations and financial condition. Bank regulators periodically review our allowance for loan losses and may require an increase to the provision for loan losses or further loan charge-offs.
Any significant increase in our allowance for credit losses or loan charge-offs as required by these regulatory agencies could have a material adverse effect on our results of operations and financial condition. Bank regulators periodically review our allowance for credit losses and may require an increase to the provision for credit losses or further loan charge-offs.
If our enterprise risk management framework is not effective at mitigating risk and loss to us, we could suffer unexpected losses and our results of operations could be materially adversely affected. Our enterprise risk management framework seeks to achieve an appropriate balance between risk and return, which is critical to optimizing stockholder value.
If our risk management framework is not effective at mitigating risk and loss to us, we could suffer unexpected losses and our results of operations could be materially adversely affected. Our risk management framework seeks to achieve an appropriate balance between risk and return, which is critical to optimizing stockholder value.
Nonperforming loans may increase and nonperforming or delinquent loans may adversely affect future performance. In addition, federal and state regulators periodically review the allowance for loan losses and may require an increase in the allowance for loan losses or recognize further loan charge-offs.
Nonperforming loans may increase and nonperforming or delinquent loans may adversely affect future performance. In addition, federal and state regulators periodically review the allowance for credit losses and may require an increase in the allowance for credit losses or recognize further loan charge-offs.
Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities may have a material adverse effect on our results of operations or financial condition.
Any increase in our allowance for credit losses or loan charge-offs as required by these regulatory authorities may have a material adverse effect on our results of operations or financial condition.
Although we have developed, and continue to invest in, systems and processes that are designed to detect and prevent security breaches and cyber-attacks and periodically test our security, a breach of 34 Table of Contents our systems, or those of our ISOs or processors, could result in losses to us or our customers; loss of business and/or customers; damage to our reputation; the incurrence of additional expenses (including the cost of notification to consumers, credit monitoring and forensics, and fees and fines imposed by the card networks); disruption to our business; our inability to grow our online services or other businesses; additional regulatory scrutiny or penalties; or our exposure to civil litigation and possible financial liability — any of which could have a material adverse effect on our business, financial condition and results of operations.
Although we have developed, and continue to invest in, systems and processes that are designed to detect and prevent security breaches and cyber-attacks and periodically test our security, a breach of our systems, or those of our ISOs or processors, could result in losses to us or our customers; loss of business and/or customers; damage to our reputation; the incurrence of additional expenses (including the cost of notification to consumers, credit monitoring and forensics, and fees and fines imposed by the card networks); disruption to our business; our inability to grow our online services or other businesses; additional regulatory scrutiny or penalties; or our exposure to civil litigation and possible financial liability — any of which could have a material adverse effect on our business, financial condition and results of operations.
If the processing of claims for the Fund’s loan portfolio continues to extend beyond our maturity for these loans due to the aforementioned fraud, revisions to qualifying physician requirements, effects of the pandemic, revised protocols due to “race-norming” claims, or the additional administrative processes, portfolio delinquencies, credit downgrades and further losses as the result of possible charge-offs of these loans could occur or increase in the future, which would negatively impact our investment.
If the processing of claims for the Fund’s loan portfolio continues to extend beyond our maturity for these loans due to the aforementioned fraud, revisions to qualifying physician requirements, revised protocols due to “race-norming” claims, or the additional administrative processes, portfolio delinquencies, credit downgrades and further losses as the result of possible charge-offs of these loans could occur or increase in the future, which would negatively impact our investment.
Anti-takeover provisions could negatively impact our shareholders. Certain provisions in the Company’s Articles of Incorporation and Bylaws, as well as federal banking laws, regulatory approval requirements, and Maryland law, could make it more difficult for a third party to acquire the Company, even if doing so would be perceived to be beneficial to the Company’s stockholders. ITEM 1B.
Anti-takeover provisions could negatively impact our shareholders. Certain provisions in the Company’s Articles of Incorporation and Bylaws, as well as federal banking laws, regulatory approval requirements, and Maryland law, could make it more difficult for a third party to acquire the Company, even if doing so would be perceived to be beneficial to the Company’s stockholders.
These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that 37 Table of Contents can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil monetary penalties against our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and place us into receivership or conservatorship.
These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil monetary penalties against our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and place us into receivership or conservatorship.
The bulk of these deferred tax assets consists of deferred loan loss deductions and deferred compensation deductions. The net deferred tax asset is measured by applying currently-enacted income tax rates to the accounting period during which the tax benefit is expected to be realized. Federal regulators periodically examine our business, and we may be required to remediate adverse examination findings.
The bulk of these deferred tax assets consists of deferred credit loss deductions and deferred compensation deductions. The net deferred tax asset is measured by applying currently-enacted income tax rates to the accounting period during which the tax benefit is expected to be realized. Federal regulators periodically examine our business, and we may be required to remediate adverse examination findings.
Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit our ability to recover on such loans. As we increase our purchases or originations of consumer loans, it may become necessary to increase our provision for loan losses in the event our losses on these loans increase, which would reduce our profits.
Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit our ability to recover on such loans. As we increase our purchases or originations of consumer loans, it may become necessary to increase our provision for credit losses in the event our losses on these loans increase, which would reduce our profits.
If the Company is required to materially increase its level of the ALLL for any reason, such increase could adversely affect its business, financial condition and results of operations. Our loan portfolio is unseasoned. With a growing and generally unseasoned loan portfolio, our credit risk may continue to increase and our future performance could be adversely affected.
If the Company is required to materially increase its level of the ACL for any reason, such increase could adversely affect its business, financial condition and results of operations. ​ Our loan portfolio is unseasoned. With a growing and generally unseasoned loan portfolio, our credit risk may continue to increase and our future performance could be adversely affected.
They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. Management considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy.
They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. Management considers the accounting policy relating to the allowance for credit losses to be a critical accounting policy.
In June 2016, the FASB issued an accounting standard update, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the current “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model.
In June 2016, the FASB issued an accounting standard update, “Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaced the current “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model.
If the U.S. economy weakens, our growth and profitability from our lending, deposit and investment operations could be constrained. Uncertainty about the federal fiscal policymaking process, the medium and long-term fiscal outlook of the federal government, and future tax rates is a concern for businesses, consumers and investors in the United States.
If the U.S. economy weakens, our growth and profitability from our lending, deposit and investment operations could be constrained. Uncertainty about the federal fiscal policymaking process, the medium and 30 Table of Contents long-term fiscal outlook of the federal government, and future tax rates is a concern for businesses, consumers and investors in the United States.
Some of these competitors may have a long history of successful operations nationally as 35 Table of Contents well as in our market area and greater ties to businesses or the legal community and more expansive banking relationships, as well as more established depositor bases, fewer regulatory constraints, and lower cost structures than we do.
Some of these competitors may have a long history of successful operations nationally as well as in our market area and greater ties to businesses or the legal community and more expansive banking relationships, as well as more established depositor bases, fewer regulatory constraints, and lower cost structures than we do.
Like most financial institutions, our earnings and cash flows depend to a great extent upon the level of our net interest income, or the difference between the interest income we earn on loans, investments and other interest earning assets, and the interest we 31 Table of Contents pay on interest bearing liabilities, such as deposits and borrowings.
Like most financial institutions, our earnings and cash flows depend to a great extent upon the level of our net interest income, or the difference between the interest income we earn on loans, investments and other interest earning assets, and the interest we pay on interest bearing liabilities, such as deposits and borrowings.
Furthermore, successful operation of our 38 Table of Contents payment processing business depends on the soundness of ISOs, third party processors, payment facilitators, clearing agents and others that we rely on to conduct our payment processing business. Any losses resulting from such third parties could adversely affect our business, financial condition and results of operations.
Furthermore, successful operation of our payment processing business depends on the soundness of ISOs, third party processors, payment facilitators, clearing agents and others that we rely on to conduct our payment processing business. Any losses resulting from such third parties could adversely affect our business, financial condition and results of operations.
It is possible, however, that a default on such obligations by one or more of our ISOs or merchants, could, individually or in the aggregate, have a material adverse effect on our business, financial condition and results of operations. Fraud by merchants or others could have a material adverse effect on our business and financial condition.
It is possible, however, that a default on such 35 Table of Contents obligations by one or more of our ISOs or merchants, could, individually or in the aggregate, have a material adverse effect on our business, financial condition and results of operations. Fraud by merchants or others could have a material adverse effect on our business and financial condition.
A failure to effectively measure and limit the credit risk associated with our loan portfolio could have an adverse effect on our business, financial condition, and results of operations. 27 Table of Contents Risks Related to our Business We have a limited operating history and have experienced significant growth, which makes it difficult to forecast our revenue and evaluate our business and future prospects.
A failure to effectively measure and limit the credit risk associated with our loan portfolio could have an adverse effect on our business, financial condition, and results of operations. 27 Table of Contents Risks Related to our Business We have recently experienced significant growth, which makes it difficult to forecast our revenue and evaluate our business and future prospects.
The effects of such policies upon our business, financial condition and results of operations cannot be predicted. We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
The effects of such policies upon our business, financial condition and results of operations cannot be predicted. 37 Table of Contents We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.
Due to the breadth of our client base and our geographical reach, developing and maintaining our operational systems and infrastructure is challenging, particularly as a result of rapidly evolving legal and regulatory requirements and technological shifts.
Due to the breadth of our client base and our geographical reach, developing and maintaining our operational systems and infrastructure is challenging, particularly as 33 Table of Contents a result of rapidly evolving legal and regulatory requirements and technological shifts.
Our business and operations, which primarily consist of lending money to customers in the form of loans, borrowing money from customers in the form of deposits and investing in securities, are sensitive to general business and economic 30 Table of Contents conditions in the United States.
Our business and operations, which primarily consist of lending money to customers in the form of loans, borrowing money from customers in the form of deposits and investing in securities, are sensitive to general business and economic conditions in the United States.
In the event that we are unable to perform all these tasks and meet these challenges effectively, including continuing to attract core deposits, our operations, and consequently our earnings, could be adversely impacted. Our ten largest deposit clients account for 19.3% of our total deposits.
In the event that we are unable to perform all these tasks and meet these challenges effectively, including continuing to attract core deposits, our operations, and consequently our earnings, could be adversely impacted. Our ten largest deposit clients account for 26.2% of our total deposits.
As of December 31, 2022, the carrying amount of our investment in the fund and our total exposure is $12.6 million. As a business operating in the financial services industry, our business and operations may be adversely affected in numerous and complex ways by weak economic conditions.
As of December 31, 2023, the carrying amount of our investment in the Fund and our total exposure is $10.6 million. As a business operating in the financial services industry, our business and operations may be adversely affected in numerous and complex ways by weak economic conditions.
The factors that could cause the Company’s stock price to decrease include, but are not limited to: (i) our past and future dividend practice; (ii) our financial condition, performance, creditworthiness and prospects; (iii) variations in our operating results or the quality of our assets; (iv) operating results that vary from the expectations of management, securities analysts and investors; (v) changes in expectations as to our future financial performance; (vi) changes in financial markets related to market valuations of financial industry companies; (vii) current or future financial institutional illiquidity and/or seizures by federal regulators; (viii) the operating and securities price performance of other companies that investors believe are comparable to us; (ix) future sales of our equity or equity-related securities; (x) the credit, mortgage and housing markets, the markets for securities relating to mortgages or housing, and developments with respect to financial institutions generally; and (xi) changes in global financial markets and global economies and general market conditions, such as interest or foreign exchange rates, inflation, recessionary conditions, stock, commodity or real estate valuations or volatility and other geopolitical, regulatory or judicial events. 39 Table of Contents The limited liquidity of our common stock may limit your ability to trade our shares and may impact the value of our common stock.
The factors that could cause the Company’s stock price to decrease include, but are not limited to: (i) our past and future dividend practice; (ii) our financial condition, performance, creditworthiness and prospects; (iii) variations in our operating results or the quality of our assets; (iv) operating results that vary from the expectations of management, securities analysts and investors; (v) changes in expectations as to our future financial performance; (vi) changes in financial markets related to market valuations of financial industry companies; (vii) current or future financial institutional illiquidity and/or seizures by federal regulators; (viii) the operating and securities price performance of other companies that investors believe are comparable to us; (ix) future sales of our equity or equity-related securities; (x) the credit, mortgage and housing markets, the markets for securities relating to mortgages or housing, and developments with respect to financial institutions generally; and (xi) changes in global financial markets and global economies and general market conditions, such as interest or foreign exchange rates, inflation, recessionary conditions, stock, commodity or real estate valuations or volatility and other geopolitical, regulatory or judicial events.
The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will take place at the time the financial asset is first entered into and periodically thereafter.
The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement takes place at the time the financial asset is first entered into and periodically thereafter.
Under the CECL model, the Company will be required to present certain financial assets carried at amortized cost, such as loans held for investment and HTM debt securities, at the net amount expected to be collected.
Under the CECL model, the Company is required to present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, at the net amount expected to be collected.
At December 31, 2022, the weighted average age of our loan portfolio was 2.78 years, however, the average customer relationship is of a longer term. We may not be able to adequately measure and limit the credit risk associated with our loan portfolio, which could adversely affect our profitability.
At December 31, 2023, the weighted average age of our loan portfolio was 3.06 years, however, the average customer relationship is of a longer term. We may not be able to adequately measure and limit the credit risk associated with our loan portfolio, which could adversely affect our profitability.
As of December 31, 2022, the Company had approximately $564.0 million of law firm escrow (or trust) deposits that were evaluated by management to identify an appropriate estimate of FDIC insurance coverage that passes through each deposit account to the beneficial owner of the funds held in the account.
As of December 31, 2023, the Company had approximately $684.2 million of law firm escrow (or trust) deposits that were evaluated by management to identify an appropriate estimate of FDIC insurance coverage that passes through each deposit account to the beneficial owner of the funds held in the account.
An increase in the required capital level would further limit our use of capital for other purposes. Risks Related to Laws and Regulation and Their Enforcement As a bank holding company, the sources of funds available to us are limited.
In addition, the card networks require certain capital requirements. An increase in the required capital level would further limit our use of capital for other purposes. Risks Related to Laws and Regulation and Their Enforcement As a bank holding company, the sources of funds available to us are limited.
In determining the amount of the allowance for loan losses, management reviews the loans and the loss and delinquency experience and evaluates economic conditions. At December 31, 2022, our allowance for loan losses as a percentage of total loans, net of unearned income, was 1.29%.
In determining the amount of the allowance for credit losses, management reviews the loans and the loss and delinquency experience and evaluates economic conditions. At December 31, 2023, our allowance for credit losses as a percentage of total loans, net of unearned income, was 1.38%.
This differs significantly from the “incurred loss” model required under current GAAP, which delays recognition until it is probable a loss has been incurred. The CECL model may create more volatility in the level of the ALLL.
This differs significantly from the “incurred loss” model previously required under current GAAP, which delays recognition until it is probable a loss has been incurred. The CECL model may create more volatility in the level of the allowance for credit losses (“ACL”).
As of December 31, 2022, approximately $310.4 million, or 25.3%, of our total Bank deposits of $1.2 billion, were not FDIC insured. This excludes $10.5 million of the Company’s deposits held by the Bank. We have traditionally obtained funds through deposits for use in lending and investment activities.
As of December 31, 2023, approximately $381.6 million, or 27.1%, of our total Bank deposits of $1.4 billion, were not FDIC insured. This excludes $5.5 million of the Company’s deposits held by the Bank. We have traditionally obtained funds through deposits for use in lending and investment activities.
Additionally, the continuing COVID-19 health crisis may also extend the duration of the Fund’s loan portfolio. Specifically, the uncertainty related to our borrowers’ (“claimants”) access to qualified testing, doctors, their attorneys and other administrative support, has introduced incremental duration risk which may further extend the settlement of claims and payoff of the NFL loans beyond the contractual maturity.
Specifically, the uncertainty related to our borrowers’ (“claimants”) access to qualified testing, doctors, their attorneys and other administrative support, has introduced incremental duration risk which may further extend the settlement of claims and payoff of the NFL loans beyond the contractual maturity.
Our failure to comply with these laws and regulations, even if the failure follows good faith effort or reflects a difference in interpretation, could subject us to restrictions on our business activities, fines and other penalties, any of which could adversely affect our results of operations, capital base and the price of our securities.
Compliance with these laws and regulations is difficult and costly, and changes to these laws and regulations often impose additional compliance costs. 36 Table of Contents Our failure to comply with these laws and regulations, even if the failure follows good faith effort or reflects a difference in interpretation, could subject us to restrictions on our business activities, fines and other penalties, any of which could adversely affect our results of operations, capital base and the price of our securities.
At December 31, 2022, our consumer held for investment loans totaled $16.6 million, or 1.7% of our total loan portfolio, of which $2.7 million, or 16.0%, were post-settlement consumer loans.
At December 31, 2023, our consumer held for investment loans totaled $14.5 million, or 1.2% of our total loan portfolio, of which $2.4 million, or 16.6%, were post-settlement consumer loans.
As of December 31, 2022, 50.8% of our loan portfolio was in New York and our loan portfolio had concentrations of 40.2% in New York City. If the local economy, and particularly the real estate market, declines, the rates of delinquencies, defaults, foreclosures, bankruptcies and losses in our loan portfolio would likely increase.
As of December 31, 2023, 35.5% of our loan portfolio was in New York and our loan portfolio had concentrations of 26.0% in New York City. If the local economy, and particularly the real estate market, declines, the rates of delinquencies, defaults, foreclosures, bankruptcies and losses in our loan portfolio would likely increase.
As a result of our limited operating history and recent accelerated growth, in particular in our payment processing business, our ability to forecast our future results of operations and plan for and model future growth is limited and subject to a number of uncertainties.
As a result of our recent accelerated growth, our ability to forecast our future results of operations and plan for and model future growth is limited and subject to a number of uncertainties.
We have only been in existence since 2006, and from 2016 through 2022, we experienced significant growth following our initial public offering, a capital raise and the conversion from a savings and loan holding company with a savings bank subsidiary to a bank holding company with a national bank subsidiary.
From 2016 through 2023, we experienced significant growth following our initial public offering, a capital raise and the conversion from a savings and loan holding company with a savings bank subsidiary to a bank holding company with a national bank subsidiary.
Employee errors could also subject us to financial claims for negligence. We maintain a system of internal controls and insurance coverage to mitigate against operational risks, including data processing system failures and errors and customer or employee fraud.
We maintain a system of internal controls and insurance coverage to mitigate against operational risks, including data processing system failures and errors and customer or employee fraud.
If assumptions prove to be incorrect, the allowance for loan losses may not cover probable incurred losses in the loan portfolio at the date of the financial statements. Significant additions to the allowance would materially decrease net income. We had $4 thousand in nonperforming loans at December 31, 2022.
If assumptions prove to be incorrect, the allowance for credit losses may not cover probable incurred losses in the loan portfolio at the date of the financial statements. Significant additions to the allowance would materially decrease net income. We had one nonperforming multifamily loan totaling $10.9 million at December 31, 2023.
As of December 31, 2022, our ten largest bank depositors accounted for, in the aggregate, 19.3% of our total deposits.
As of December 31, 2023, our ten largest bank depositors accounted for, in the aggregate, 26.2% of our total deposits.
It is possible that competitive pressures will result in us absorbing a portion of such increases in the future, which would increase our costs, reduce our profit margin and adversely affect our business and financial condition. In addition, the card networks require certain capital requirements.
From time to time, the card networks increase the fees that they charge to acquirers and we charge to our merchants. It is possible that competitive pressures will result in us absorbing a portion of such increases in the future, which would increase our costs, reduce our profit margin and adversely affect our business and financial condition.
We also face risk from the integration of new infrastructure platforms and/or new third party providers of such platforms into its existing businesses. A failure in our operational systems or infrastructure, or those of third parties, could impair our liquidity, disrupt our businesses, result in the unauthorized disclosure of confidential information, damage our reputation and cause financial losses.
A failure in our operational systems or infrastructure, or those of third parties, could impair our liquidity, disrupt our businesses, result in the unauthorized disclosure of confidential information, damage our reputation and cause financial losses.
If the services of any of our key personnel should become unavailable for any reason, we may not be able to identify and hire qualified persons on terms acceptable to us, which could have an adverse effect on our business, financial condition and results of operations.
If the services of any of our key personnel should become unavailable for any reason, we may not be able to identify and hire qualified persons on terms acceptable to us, which could have an adverse effect on our business, financial condition and results of operations. 32 Table of Contents We are subject to certain operational risks, including, but not limited to, customer or employee fraud and data processing system failures and errors.
Risks Related to Our Common Stock The Company’s stock price can be volatile. The Company’s stock price can fluctuate in response to a variety of factors, some of which are not under our control.
These could have a material adverse effect on our business, financial condition or results of operations. Risks Related to Our Common Stock The Company’s stock price can be volatile. The Company’s stock price can fluctuate in response to a variety of factors, some of which are not under our control.
Also, any sudden or prolonged market downturn in the United States or abroad, as a result of the above factors or otherwise could result in a decline in revenue and adversely affect our results of operations and financial condition, including capital and liquidity levels. 32 Table of Contents We rely heavily on our management team and our business could be adversely affected by the unexpected loss of one or more of our officers.
Also, any sudden or prolonged market downturn in the United States or abroad, as a result of the above factors or otherwise could result in a decline in revenue and adversely affect our results of operations and financial condition, including capital and liquidity levels.
However, as with any risk management framework, there are inherent limitations to our risk management strategies as there may exist, or develop in the future, risks that we have not appropriately anticipated or identified. If our risk management framework proves ineffective, we could suffer unexpected losses and our business and results of operations could be materially adversely affected.
However, as with any risk management framework, there are inherent limitations to our risk management strategies as there may exist, or develop in the future, risks that we have not appropriately anticipated or identified.
At December 31, 2022, we had $262.5 million of multifamily loans and $91.8 million of commercial real estate loans. Multifamily and commercial real estate loans represented 37.4% of our total loan portfolio at December 31, 2022.
At December 31, 2023, we had $348.2 million of multifamily loans and $89.5 million of commercial real estate loans. Multifamily and commercial real estate loans represented 36.2% of our total loan portfolio at December 31, 2023.
Because of the uncertainty of estimates involved in these matters, we may be required to do one or more of the following: significantly increase the allowance for loan losses or sustain loan losses that are significantly higher than the reserve provided. These could have a material adverse effect on our business, financial condition or results of operations.
Because of the uncertainty of estimates involved in these matters, we may be required to do one or more of the following: significantly increase the allowance for credit losses or 38 Table of Contents sustain credit losses that are significantly higher than the reserve provided.
Although our asset-liability management strategy is designed to control and mitigate exposure to the risks related to changes in market interest rates, those rates are affected by many factors outside of our control, including governmental monetary policies, inflation, deflation, recession, changes in unemployment, the money supply, international disorder and instability in domestic and foreign financial markets.
Although our asset-liability management strategy is designed to control and mitigate exposure to the risks related to changes in market interest rates, those rates are affected by many factors outside of our control, including governmental monetary policies, inflation, deflation, recession, changes in unemployment, the money supply, international disorder and instability in domestic and foreign financial markets. 31 Table of Contents Risks Related to Operations Inflation can have an adverse impact on our business and on our customers. ​ Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.
While the Company’s common stock is traded on the NASDAQ Capital Market, the trading volume has historically been less than that of larger financial services companies. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time.
A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time.
At December 31, 2022, the weighted average age of our loans was 5.55 years, 2.69 years, 1.45 years, 2.97 years and 1.02 years for our 1 – 4 family loans, multifamily loans, commercial real estate loans, commercial loans and consumer loans, respectively.
At December 31, 2023, the weighted average age of our loans was 6.62 years, 2.64 years, 2.33 years, 3.30 years and 1.07 years for our 1 – 4 family loans, multifamily loans, commercial real estate loans, commercial loans and consumer loans, respectively.
If these third-party service providers experience difficulties, fail to comply with banking regulations or terminate their services and we are unable to replace them with other service 33 Table of Contents providers, our operations could be interrupted.
If these third-party service providers experience difficulties, fail to comply with banking regulations or terminate their services and we are unable to replace them with other service providers, our operations could be interrupted. If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be adversely affected, perhaps materially.
Accordingly, our success depends in large part on the performance of our key officers, as well as on our ability to attract, motivate and retain highly qualified senior and middle management. Competition for employees is intense, and the process of identifying key personnel with the combination of skills and attributes required to execute our business plan may be lengthy.
Competition for employees is intense, and the process of identifying key personnel with the combination of skills and attributes required to execute our business plan may be lengthy.
At December 31, 2022, our commercial loans totaled $552.1 million, or 58.2% of our total loans, including $464.7 million of Commercial Litigation-Related Loans, which represented 84.2% of our commercial loans.
At December 31, 2023, our commercial loans totaled $737.9 million, or 61.1% of our total loans, including $612.5 million of Commercial Litigation-Related Loans, which represented 83.0% of our commercial loans.
Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customers or improper use of confidential information. It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases.
It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee errors could also subject us to financial claims for negligence.
The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates.
Risks Related to Market Interest Rates Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations. The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates.
If an interruption were to continue for a significant period of time, our business, financial condition and results of operations could be adversely affected, perhaps materially. Even if we are able to replace them, it may be at a higher cost to us, which could adversely affect our business, financial condition and results of operations.
Even if we are able to replace them, it may be at a higher cost to us, which could adversely affect our business, financial condition and results of operations. We also face risk from the integration of new infrastructure platforms and/or new third party providers of such platforms into its existing businesses.
We are led by a management team with substantial experience in the markets that we serve and the financial products that we offer. Our operating strategy focuses on providing products and services through long-term relationship managers.
We rely heavily on our management team and our business could be adversely affected by the unexpected loss of one or more of our officers. We are led by a management team with substantial experience in the markets that we serve and the financial products that we offer.
The FASB issued an accounting standard update that will result in a significant change in how the Company recognizes credit losses, which may have a material impact on its financial condition or results of operations.
The estimation of expected credit losses under current US GAAP may create volatility in earnings as compared to previous models which may have a material impact on its financial condition or results of operations.
We are subject to certain operational risks, including, but not limited to, customer or employee fraud and data processing system failures and errors. Employee errors and employee and customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation.
Employee errors and employee and customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customers or improper use of confidential information.
Removed
Risks Related to Market Interest Rates Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations. The FRB decreased benchmark interest rates significantly, to near zero, in response to the COVID-19 pandemic. The FRB has reversed its policy of near zero interest rates given its concerns over inflation.
Added
Our operating strategy focuses on providing products and services through long-term relationship managers. Accordingly, our success depends in large part on the performance of our key officers, as well as on our ability to attract, motivate and retain highly qualified senior and middle management.
Removed
Market interest rates have risen in response to the FRB’s rate increases. These policies can thus affect the activities and results of operations of financial institutions. The actions of the FRB influence the rates of interest that we charge on loans and that we pay on borrowings and interest-bearing deposits.
Added
The limited liquidity of our common stock may limit your ability to trade our shares and may impact the value of our common stock. While the Company’s common stock is traded on the NASDAQ Capital Market, the trading volume has historically been less than that of larger financial services companies.
Removed
Rates of interest can also affect the value of our on-balance sheet and off-balance sheet financial instruments. Thus, the increase in market interest rates may have an adverse effect on our net interest income and profitability. Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations.
Added
Our New York City multifamily loan portfolio could be adversely impacted by changes in legislation or regulation which, in turn, could have a material adverse effect on our financial condition and results of operations. ​ On June 14, 2019, the New York State legislature passed the New York Housing Stability and Tenant Protection Act of 2019.
Removed
Risks Related to Operations Inflation can have an adverse impact on our business and on our customers. ​ Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.
Added
This legislation represents the most extensive reform of New York State’s rent laws in several decades and generally limits a landlord’s ability to increase rents on rent regulated apartments and makes it more difficult to convert rent regulated apartments to market rate apartments.
Removed
Risks Related to the COVID-19 Pandemic ​ The ongoing COVID-19 pandemic and measures intended to prevent its spread could adversely affect the Company’s business activities, financial condition, and results of operations. ​ Global health concerns relating to the COVID-19 pandemic and related government actions taken to reduce the spread of the virus have affected the macroeconomic environment, both nationally and in the Company’s market area.
Added
As a result, the value of the collateral located in New York State securing the Company’s multifamily loans or the future net operating income of such properties could potentially become impaired which, in turn, could have a material adverse effect on our financial condition and results of operations. ​ ITEM 1B. Unresolved Staff Comments None. 39 Table of Contents
Removed
Federal and state agencies may pass measures to address the economic and social consequences of the pandemic that could impact the Company’s financial results and have a destabilizing effect on financial markets, key market indices, and overall economic activity.
Removed
Prolonged measures by public health or other governmental authorities encouraging or requiring significant restrictions on travel, assembly or other core business practices could harm the Bank’s business and that of its customers, in particular small to medium-sized business customers. Although the Company has business continuity plans and other safeguards in place, there is no assurance that they will be effective.
Removed
From time to time, the card networks 36 Table of Contents increase the fees that they charge to acquirers and we charge to our merchants.
Removed
Compliance with these laws and regulations is difficult and costly, and changes to these laws and regulations often impose additional compliance costs.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. Properties At December 31, 2022, we conducted business through our corporate headquarters and full service branch in Jericho, New York (Nassau County) and one administrative office in Boca Raton, Florida. All the current locations are leased properties. At December 31, 2022, the total net book value of our leasehold improvements, furniture, fixtures and equipment was approximately $2.7 million.
Biggest changeITEM 2. Properties At December 31, 2023, we conducted business through our corporate headquarters and full service branch in Jericho, New York (Nassau County) and one administrative office in Boca Raton, Florida. All the current locations are leased properties. At December 31, 2023, the total net book value of our leasehold improvements, furniture, fixtures and equipment was approximately $2.6 million.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAt December 31, 2022, we are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows. ITEM 4. Mine Safety Disclosures Not applicable. ​ 40 Table of Contents PART II
Biggest changeAt December 31, 2023, we are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows. ITEM 4. Mine Safety Disclosures Not applicable. ​ 41 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table summarizes information as of December 31, 2022 relating to equity compensation plans of the Company pursuant to which grants of options, restricted stock awards or other rights to acquire shares may be granted from time to time. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of securities ​ ​ Number of securities ​ ​ ​ ​ remaining available for ​ ​ to be issued upon ​ Weighted-average ​ future issuance under ​ ​ exercise of ​ exercise price of ​ equity compensation ​ ​ outstanding options, ​ outstanding options, ​ plans (excluding securities ​ ​ warrants and rights ​ warrants and rights ​ reflected in column (a)) Plan Category (a) (b) (c) Equity Compensation Plans Approved by Security Holders 633,984 ​ $ 18.61 164,565 Equity Compensation Plans Not Approved by Security Holders — ​ — — Total Equity Compensation Plans 633,984 ​ $ 18.61 164,565 ​ ​ On January 9, 2019, the Company’s board of directors approved a stock repurchase program which authorized the repurchase of up to 300,000 shares of the Company’s common stock, or approximately 4.0% of its outstanding shares.
Biggest changeThe following table summarizes information as of December 31, 2023 relating to equity compensation plans of the Company pursuant to which grants of options, restricted stock awards or other rights to acquire shares may be granted from time to time. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of securities ​ ​ Number of securities ​ ​ ​ ​ remaining available for ​ ​ to be issued upon ​ Weighted-average ​ future issuance under ​ ​ exercise of ​ exercise price of ​ equity compensation ​ ​ outstanding options, ​ outstanding options, ​ plans (excluding securities ​ ​ warrants and rights ​ warrants and rights ​ reflected in column (a)) Plan Category (a) (b) (c) Equity Compensation Plans Approved by Security Holders 639,519 ​ $ 20.76 24,744 Equity Compensation Plans Not Approved by Security Holders — ​ — — Total Equity Compensation Plans 639,519 ​ $ 20.76 24,744 ​ ​ 42 Table of Contents The following table presents information regarding purchase of our common stock during the quarter ended December 31, 2023 and the stock repurchase program approved by our Board of Directors. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period ​ Total number of shares purchased ​ ​ Average price paid per share ​ Total number of shares purchased as part of publicly announced plans or programs ​ Maximum number of shares that may yet be purchased under the plans or programs (1) October 1, 2023 through October 31, 2023 ​ — ​ $ — ​ — ​ 257,694 November 1, 2023 through November 30, 2023 ​ — ​ ​ — ​ — ​ 257,694 December 1, 2023 through December 31, 2023 ​ — ​ ​ — ​ — ​ 257,694 ​ (1) On January 9, 2019, the Company announced a share repurchase program, which authorized the purchase of up to 300,000 shares of common stock.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our shares of common stock are traded on the NASDAQ Capital Market under the symbol “ESQ”. The approximate number of holders of record of Esquire Financial Holding, Inc.’s common stock as of March 1, 2023 was 4,148.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our shares of common stock are traded on the NASDAQ Capital Market under the symbol “ESQ”. The approximate number of holders of record of Esquire Financial Holding, Inc.’s common stock as of March 1, 2024 was 4,670.
Removed
There is no expiration for the stock repurchase plan.
Added
There is no expiration date for the stock repurchase program. Participants in the Company’s stock-based incentive plans may have shares withheld to cover income taxes upon the vesting of restricted stock awards and may use a stock swap to exercise stock options.
Removed
As of December 31, 2022, 34,306 shares have been repurchased under the plan. 41 Table of Contents The following table presents information regarding purchase of our common stock during the quarter ended December 31, 2022 and the stock repurchase program approved by our Board of Directors. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period ​ Total number of shares purchased ​ ​ Average price paid per share ​ Total number of shares purchased as part of publicly announced plans or programs ​ Maximum number of shares that may yet be purchased under the plans or programs October 1, 2022 through October 31, 2022 ​ — ​ $ — ​ — ​ 265,694 November 1, 2022 through November 30, 2022 ​ — ​ ​ — ​ — ​ 265,694 December 1, 2022 through December 31, 2022 ​ — ​ ​ — ​ — ​ 265,694 ​ 42 Table of Contents ITEM 6. [Reserved] ​
Added
Shares withheld to cover income taxes upon the vesting of restricted stock awards and stock swaps to exercise stock options are repurchased pursuant to the terms of the applicable plan and not under the Company’s share repurchase program.
Added
Shares repurchased pursuant to these plans during the three months ended December 31, 2023 were as follows: ​ ​ ​ ​ ​ ​ ​ Period ​ Total number of shares purchased ​ ​ Average price paid per share October 1, 2023 through October 31, 2023 ​ — ​ $ — November 1, 2023 through November 30, 2023 ​ — ​ ​ — December 1, 2023 through December 31, 2023 ​ 18,923 ​ ​ 48.77 ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

94 edited+42 added−32 removed39 unchanged
Biggest changeAdditional information can be found in Note 1 of the Notes to the Consolidated Financial Statements. 43 Table of Contents Selected Financial Data The following information is derived in part from the consolidated financial statements of Esquire Financial Holdings, Inc. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended December 31, ​ ​ 2022 2021 2020 2019 2018 ​ ​ ​ (Dollars in thousands, except share and per share data) ​ Balance Sheet Data: ​ ​ ​ ​ ​ Total assets ​ $ 1,395,639 ​ $ 1,178,770 ​ $ 936,714 ​ $ 798,008 ​ $ 663,899 ​ Cash and cash equivalents ​ 164,122 ​ 149,156 ​ 65,185 ​ 61,806 ​ 30,562 ​ Securities available-for-sale, at fair value ​ 109,269 ​ 148,384 ​ 117,655 ​ 146,419 ​ 145,698 ​ Securities held-to-maturity, at cost ​ 78,377 ​ — ​ — ​ — ​ — ​ Loans, held for investment ​ 947,295 ​ 784,517 ​ 672,421 ​ 565,369 ​ 468,101 ​ Total deposits ​ 1,228,236 ​ 1,028,409 ​ 804,054 ​ 680,620 ​ 568,421 ​ Total stockholders’ equity ​ 158,158 ​ 143,735 ​ 126,076 ​ 111,062 ​ 92,774 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income Statement Data: ​ ​ ​ ​ ​ ​ Interest income ​ $ 60,993 ​ $ 44,531 ​ $ 38,630 ​ $ 36,659 ​ $ 28,951 ​ Interest expense ​ 1,647 ​ 828 ​ 1,190 ​ 2,548 ​ 1,212 ​ Net interest income ​ 59,346 ​ 43,703 ​ 37,440 ​ 34,111 ​ 27,739 ​ Provision for loan losses ​ 3,490 ​ 6,955 ​ 6,250 ​ 1,850 ​ 1,375 ​ Net interest income after provision for loan losses ​ 55,856 ​ 36,748 ​ 31,190 ​ 32,261 ​ 26,364 ​ Payment processing income ​ ​ 21,944 ​ ​ 20,856 ​ ​ 14,099 ​ ​ 10,976 ​ ​ 4,961 ​ Other noninterest income ​ ​ 2,981 ​ ​ 168 ​ ​ 548 ​ ​ 835 ​ ​ 2,894 ​ Total noninterest income ​ 24,925 ​ 21,024 ​ 14,647 ​ 11,811 ​ 7,855 ​ Employee compensation and benefits ​ ​ 25,774 ​ ​ 21,741 ​ ​ 16,873 ​ ​ 14,677 ​ ​ 13,039 ​ Other expenses ​ ​ 16,206 ​ ​ 13,323 ​ ​ 11,797 ​ ​ 10,257 ​ ​ 9,256 ​ Total noninterest expense ​ 41,980 ​ 35,064 ​ 28,670 ​ 24,934 ​ 22,295 ​ Net income before income taxes ​ 38,801 ​ 22,708 ​ 17,167 ​ 19,138 ​ 11,924 ​ Income tax expense ​ 10,283 ​ 4,783 ​ 4,549 ​ 4,995 ​ 3,190 ​ Net income ​ $ 28,518 ​ $ 17,925 ​ $ 12,618 ​ $ 14,143 ​ $ 8,734 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Per Share Data: ​ ​ ​ ​ ​ ​ Earnings per share: ​ ​ ​ ​ ​ ​ Basic ​ $ 3.73 ​ $ 2.40 ​ $ 1.70 ​ $ 1.91 ​ $ 1.18 ​ Diluted ​ ​ 3.47 ​ ​ 2.26 ​ ​ 1.65 ​ ​ 1.82 ​ ​ 1.13 ​ Book value per share (1) ​ ​ 19.30 ​ ​ 17.77 ​ ​ 16.18 ​ ​ 14.51 ​ ​ 12.32 ​ Tangible book value per share (2) ​ ​ 19.30 ​ ​ 17.77 ​ ​ 16.18 ​ ​ 14.51 ​ ​ 12.32 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selected Performance Ratios: ​ ​ ​ ​ ​ ​ Return on average assets ​ 2.31 % 1.77 % 1.45 % 1.93 % 1.45 % Return on average equity ​ 19.44 ​ 13.42 ​ 10.69 ​ 13.95 ​ 10.12 ​ Interest rate spread ​ 4.85 ​ 4.40 ​ 4.34 ​ 4.56 ​ 4.56 ​ Net interest margin ​ 4.99 ​ 4.49 ​ 4.47 ​ 4.86 ​ 4.73 ​ Efficiency ratio (3) ​ 49.82 ​ 54.17 ​ 55.04 ​ 54.30 ​ 59.34 ​ Loan to deposit ratio ​ ​ 77.13 ​ ​ 76.28 ​ ​ 83.63 ​ ​ 83.07 ​ ​ 82.35 ​ Average interest earning assets to average interest bearing liabilities ​ 201.47 ​ 215.72 ​ 191.12 ​ 181.71 ​ 182.23 ​ Average equity to average assets ​ 11.89 ​ 13.22 ​ 13.61 ​ 13.83 ​ 14.37 ​ ​ 44 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended December 31, ​ 2022 2021 2020 2019 2018 Asset Quality Ratios (Loans Held for Investment): ​ ​ Allowance for loan losses to total loans 1.29 % 1.16 % 1.70 % 1.24 % 1.20 % Allowance for loan losses to nonperforming loans (4) NM ​ NM ​ 495 % 474 % NM Net charge-offs (recoveries) to average outstanding loans 0.04 % 1.29 % 0.30 % 0.10 % 0.00 % Nonperforming loans to total loans (4) 0.00 % 0.0 % 0.34 % 0.26 % 0.00 % Nonperforming loans to total assets (4) 0.00 % 0.0 % 0.25 % 0.18 % 0.00 % Nonperforming assets to total assets (5) 0.00 % 0.0 % 0.25 % 0.18 % 0.00 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capital Ratios (Esquire Bank): Total capital to risk weighted assets 15.44 % 15.89 % 16.69 % 17.83 % 18.70 % Tier 1 capital to risk weighted assets 14.21 % 14.79 % 15.44 % 16.68 % 17.54 % Tier 1 common equity to risk weighted assets 14.21 % 14.79 % 15.44 % 16.68 % 17.54 % Tier 1 leverage capital ratio 10.98 % 11.46 % 12.51 % 13.50 % 13.26 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other: Number of offices 3 3 3 3 3 Number of full-time equivalent employees 115 110 99 86 74 (1) For purposes of computing book value per share, book value equals total common stockholders’ equity divided by total number of shares of common stock outstanding.
Biggest changeSelected Financial Data The following information is derived in part from the consolidated financial statements of Esquire Financial Holdings, Inc. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended December 31, ​ ​ 2023 2022 2021 2020 2019 ​ ​ ​ (Dollars in thousands, except share and per share data) ​ Balance Sheet Data: ​ ​ ​ ​ ​ Total assets ​ $ 1,616,876 ​ $ 1,395,639 ​ $ 1,178,770 ​ $ 936,714 ​ $ 798,008 ​ Cash and cash equivalents ​ 165,209 ​ 164,122 ​ 149,156 ​ 65,185 ​ 61,806 ​ Securities available-for-sale, at fair value ​ 122,107 ​ 109,269 ​ 148,384 ​ 117,655 ​ 146,419 ​ Securities held-to-maturity, at cost ​ 77,001 ​ 78,377 ​ — ​ — ​ — ​ Loans, held for investment ​ 1,207,413 ​ 947,295 ​ 784,517 ​ 672,421 ​ 565,369 ​ Total deposits ​ 1,407,299 ​ 1,228,236 ​ 1,028,409 ​ 804,054 ​ 680,620 ​ Total stockholders’ equity ​ 198,555 ​ 158,158 ​ 143,735 ​ 126,076 ​ 111,062 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income Statement Data: ​ ​ ​ ​ ​ ​ Interest income ​ $ 91,888 ​ $ 60,993 ​ $ 44,531 ​ $ 38,630 ​ $ 36,659 ​ Interest expense ​ 8,115 ​ 1,647 ​ 828 ​ 1,190 ​ 2,548 ​ Net interest income ​ 83,773 ​ 59,346 ​ 43,703 ​ 37,440 ​ 34,111 ​ Provision for credit losses ​ 4,525 ​ 3,490 ​ 6,955 ​ 6,250 ​ 1,850 ​ Net interest income after provision for credit losses ​ 79,248 ​ 55,856 ​ 36,748 ​ 31,190 ​ 32,261 ​ Payment processing income ​ ​ 22,316 ​ ​ 21,944 ​ ​ 20,856 ​ ​ 14,099 ​ ​ 10,976 ​ Other noninterest income ​ ​ 7,435 ​ ​ 2,981 ​ ​ 168 ​ ​ 548 ​ ​ 835 ​ Total noninterest income ​ 29,751 ​ 24,925 ​ 21,024 ​ 14,647 ​ 11,811 ​ Employee compensation and benefits ​ ​ 32,481 ​ ​ 25,774 ​ ​ 21,741 ​ ​ 16,873 ​ ​ 14,677 ​ Other expenses ​ ​ 20,636 ​ ​ 16,206 ​ ​ 13,323 ​ ​ 11,797 ​ ​ 10,257 ​ Total noninterest expense ​ 53,117 ​ 41,980 ​ 35,064 ​ 28,670 ​ 24,934 ​ Net income before income taxes ​ 55,882 ​ 38,801 ​ 22,708 ​ 17,167 ​ 19,138 ​ Income tax expense ​ 14,871 ​ 10,283 ​ 4,783 ​ 4,549 ​ 4,995 ​ Net income ​ $ 41,011 ​ $ 28,518 ​ $ 17,925 ​ $ 12,618 ​ $ 14,143 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Per Share Data: ​ ​ ​ ​ ​ ​ Earnings per share: ​ ​ ​ ​ ​ ​ Basic ​ $ 5.31 ​ $ 3.73 ​ $ 2.40 ​ $ 1.70 ​ $ 1.91 ​ Diluted ​ ​ 4.91 ​ ​ 3.47 ​ ​ 2.26 ​ ​ 1.65 ​ ​ 1.82 ​ Book value per share (1) ​ ​ 23.96 ​ ​ 19.30 ​ ​ 17.77 ​ ​ 16.18 ​ ​ 14.51 ​ Tangible book value per share (2) ​ ​ 23.96 ​ ​ 19.30 ​ ​ 17.77 ​ ​ 16.18 ​ ​ 14.51 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selected Performance Ratios: ​ ​ ​ ​ ​ ​ Return on average assets ​ 2.89 % 2.31 % 1.77 % 1.45 % 1.93 % Return on average equity ​ 23.20 ​ 19.44 ​ 13.42 ​ 10.69 ​ 13.95 ​ Interest rate spread ​ 5.57 ​ 4.85 ​ 4.40 ​ 4.34 ​ 4.56 ​ Net interest margin ​ 6.09 ​ 4.99 ​ 4.49 ​ 4.47 ​ 4.86 ​ Efficiency ratio (3) ​ 46.79 ​ 49.82 ​ 54.17 ​ 55.04 ​ 54.30 ​ Loan to deposit ratio ​ ​ 85.80 ​ ​ 77.13 ​ ​ 76.28 ​ ​ 83.63 ​ ​ 83.07 ​ Average interest earning assets to average interest bearing liabilities ​ 188.86 ​ 201.47 ​ 215.72 ​ 191.12 ​ 181.71 ​ Average equity to average assets ​ 12.44 ​ 11.89 ​ 13.22 ​ 13.61 ​ 13.83 ​ ​ 46 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended December 31, ​ 2023 2022 2021 2020 2019 Asset Quality Ratios (Loans Held for Investment): ​ ​ Allowance for credit losses to total loans 1.38 % 1.29 % 1.16 % 1.70 % 1.24 % Allowance for credit losses to nonperforming loans (4) 152 % NM ​ NM ​ 495 % 474 % Net charge-offs (recoveries) to average outstanding loans 0.04 % 0.04 % 1.29 % 0.30 % 0.10 % Nonperforming loans to total loans (4) 0.91 % 0.00 % 0.00 % 0.34 % 0.26 % Nonperforming loans to total assets (4) 0.68 % 0.00 % 0.00 % 0.25 % 0.18 % Nonperforming assets to total assets (5) 0.68 % 0.00 % 0.00 % 0.25 % 0.18 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Capital Ratios (Esquire Bank): Total capital to risk weighted assets 15.38 % 15.44 % 15.89 % 16.69 % 17.83 % Tier 1 capital to risk weighted assets 14.13 % 14.21 % 14.79 % 15.44 % 16.68 % Tier 1 common equity to risk weighted assets 14.13 % 14.21 % 14.79 % 15.44 % 16.68 % Tier 1 leverage capital ratio 12.07 % 10.98 % 11.46 % 12.51 % 13.50 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other: Number of offices 3 3 3 3 3 Number of full-time equivalent employees 140 115 110 99 86 (1) For purposes of computing book value per share, book value equals total common stockholders’ equity divided by total number of shares of common stock outstanding.
Noninterest income information is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ ​ ​ ​ December 31, ​ Change ​ ​ 2022 2021 Amount Percent ​ ​ (Dollars in thousands) ​ Payment processing fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment processing income ​ $ 21,101 ​ $ 20,040 ​ $ 1,061 ​ 5.3 % ACH income ​ ​ 843 ​ ​ 816 ​ ​ 27 ​ 3.3 ​ Total payment processing fees ​ ​ 21,944 ​ ​ 20,856 ​ ​ 1,088 ​ 5.2 ​ Customer related fees, service charges and other: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Administrative service income ​ ​ 2,534 ​ ​ 29 ​ ​ 2,505 ​ 8,637.9 ​ Gain (loss) on loans held for sale ​ ​ 88 ​ ​ (295) ​ ​ 383 ​ (129.8) ​ Other ​ ​ 359 ​ ​ 434 ​ ​ (75) ​ (17.3) ​ Total customer related fees, service charges and other ​ ​ 2,981 ​ ​ 168 ​ ​ 2,813 ​ 1,674.4 ​ Total noninterest income ​ $ 24,925 ​ $ 21,024 ​ $ 3,901 ​ 18.6 % ​ 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.
Noninterest income information is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ ​ ​ ​ ​ December 31, ​ Change ​ 2022 2021 Amount Percent ​ ​ (Dollars in thousands) Payment processing fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment processing income ​ $ 21,101 ​ $ 20,040 ​ $ 1,061 5.3 % ACH income ​ ​ 843 ​ ​ 816 ​ ​ 27 3.3 ​ Total payment processing fees ​ ​ 21,944 ​ ​ 20,856 ​ ​ 1,088 ​ 5.2 ​ Customer related fees, service charges and other: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Administrative service income ​ ​ 2,534 ​ ​ 29 ​ ​ 2,505 8,637.9 ​ Gain (loss) on loans held for sale ​ ​ 88 ​ ​ (295) ​ ​ 383 (129.8) ​ Other ​ ​ 359 ​ ​ 434 ​ ​ (75) (17.3) ​ Total customer related fees, service charges and other ​ ​ 2,981 ​ ​ 168 ​ ​ 2,813 1,674.4 ​ Total noninterest income ​ $ 24,925 ​ $ 21,024 ​ $ 3,901 18.6 % ​ 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.
Noninterest expense information is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ ​ ​ ​ December 31, ​ Change ​ ​ 2022 2021 Amount Percent ​ ​ (Dollars in thousands) ​ Noninterest expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Employee compensation and benefits ​ $ 25,774 ​ $ 21,741 ​ $ 4,033 ​ 18.6 % Occupancy and equipment ​ ​ 3,236 ​ ​ 2,808 ​ ​ 428 ​ 15.2 ​ Professional and consulting services ​ ​ 3,376 ​ ​ 2,922 ​ ​ 454 ​ 15.5 ​ FDIC and regulatory assessments ​ ​ 558 ​ ​ 447 ​ ​ 111 ​ 24.8 ​ Advertising and marketing ​ ​ 1,462 ​ ​ 1,174 ​ ​ 288 ​ 24.5 ​ Travel and business relations ​ ​ 566 ​ ​ 327 ​ ​ 239 ​ 73.1 ​ Data processing ​ ​ 4,222 ​ ​ 3,671 ​ ​ 551 ​ 15.0 ​ Other operating expenses ​ ​ 2,786 ​ ​ 1,974 ​ ​ 812 ​ 41.1 ​ Total noninterest expense ​ $ 41,980 ​ $ 35,064 ​ $ 6,916 ​ 19.7 % ​ 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.
Noninterest expense information is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change ​ 2022 2021 Amount Percent ​ ​ (Dollars in thousands) Noninterest expense: ​ ​ ​ ​ Employee compensation and benefits ​ $ 25,774 ​ $ 21,741 ​ $ 4,033 ​ 18.6 % Occupancy and equipment ​ 3,236 ​ ​ 2,808 ​ 428 ​ 15.2 ​ Professional and consulting services ​ 3,376 ​ ​ 2,922 ​ 454 ​ 15.5 ​ FDIC and regulatory assessments ​ 558 ​ ​ 447 ​ 111 ​ 24.8 ​ Advertising and marketing ​ 1,462 ​ ​ 1,174 ​ 288 ​ 24.5 ​ Travel and business relations ​ 566 ​ ​ 327 ​ 239 ​ 73.1 ​ Data processing ​ 4,222 ​ ​ 3,671 ​ 551 ​ 15.0 ​ Other operating expenses ​ 2,786 ​ ​ 1,974 ​ 812 ​ 41.1 ​ Total noninterest expense ​ $ 41,980 ​ $ 35,064 ​ $ 6,916 ​ 19.7 % ​ 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.
Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies, the litigation market and actions of regulatory authorities. Critical Accounting Policies A summary of our accounting policies is described in Note 1 to the Consolidated Financial Statements included in this annual report.
Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies, the litigation market and actions of regulatory authorities. Critical Accounting Estimates A summary of our accounting policies is described in Note 1 to the Consolidated Financial Statements included in this annual report.
Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations. Payment Processing Credit Risk From a payment processing perspective, we continuously evaluate credit exposure, primarily defined as merchant returns and chargebacks, by merchant industry type and category.
Any material increase in the allowance for credit losses may adversely affect our financial condition and results of operations. Payment Processing Credit Risk From a payment processing perspective, we continuously evaluate credit exposure, primarily defined as merchant returns and chargebacks, by merchant industry type and category.
Allowance for Loan Losses Please see “— Critical Accounting Policies — Allowance for Loan Losses” for additional discussion of our allowance policy. The allowance for loan losses is maintained at levels considered adequate by management to provide for probable loan losses inherent in the loan portfolio as of the Consolidated Statements of Financial Condition reporting dates.
Allowance for Credit Losses Please see “— Critical Accounting Policies — Allowance for Credit losses” for additional discussion of our allowance policy. The allowance for credit losses is maintained at levels considered adequate by management to provide for probable credit losses inherent in the loan portfolio as of the Consolidated Statements of Financial Condition reporting dates.
Furthermore, while we believe we have established our allowance for loan losses in conformity with generally accepted accounting principles in the United States of America, there can be no assurance that regulators, in reviewing our loan portfolio, will not require us to increase our allowance for loan losses.
Furthermore, while we believe we have established our allowance for credit losses in conformity with generally accepted accounting principles in the United States of America, there can be no assurance that regulators, in reviewing our loan portfolio, will not require us to increase our allowance for credit losses.
Management considers the accounting policy relating to the allowance for loan 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.
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 .
In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above.
In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for credit losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above.
The following table sets forth certain information at December 31, 2022 regarding the contractual maturity of our held for investment loan portfolio. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.
The following table sets forth certain information at December 31, 2023 regarding the contractual maturity of our held for investment loan portfolio. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.
Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and our results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.
Although we believe that we use the best information available to establish the allowance for credit losses, future adjustments to the allowance for credit losses may be necessary and our results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.
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. Noninterest Expense.
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.
Our results of operations depend primarily on our net interest income which is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for loan losses, noninterest income and noninterest expense.
Our results of operations depend primarily on our net interest income which is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for credit losses, noninterest income and noninterest expense.
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 53 Table of Contents owner of the funds held in the account.
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.
The following tables set forth the allowance for loan losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated.
Allocation of Allowance for Credit losses. The following tables set forth the allowance for credit losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated.
Management believes that the most critical accounting policies, which involve the most complex or subjective decisions or assessments, are as follows: Allowance for Loan Losses.
Management believes that the most critical accounting policies, which involve the most complex or subjective decisions or assessments, are as follows: Allowance for Credit Losses.
When property is acquired, it is initially recorded at the fair value less costs to sell at the date of foreclosure, establishing a new cost basis. Holding costs and declines in fair value after acquisition of the property result in charges against income. At December 31, 2022 and 2021, we have not had any foreclosed assets.
When property is acquired, it is initially recorded at the fair value less costs to sell at the date of foreclosure, establishing a new cost basis. Holding costs and declines in fair value after acquisition of the property result in charges against income. At December 31, 2023 and 2022, we did not have any foreclosed assets.
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, 2022, the aggregate amount of our uninsured certificates of deposit was $554 thousand.
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.
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. 58 Table of Contents Income Tax Expense.
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. Income Tax Expense.
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 $1.2 billion at December 31, 2022, or 98.4% of total deposits at that date.
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.
The following table presents our capital ratios as of the indicated dates for Esquire Bank. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For Capital Adequacy ​ ​ ​ ​ ​ Purposes ​ ​ ​ ​ ​ ​ Minimum Capital with ​ Actual ​ ​ “Well Capitalized” ​ Conservation Buffer ​ At December 31, 2022 Total Risk-based Capital Ratio ​ Bank 10.00 % 10.50 % 15.44 % ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 Risk-based Capital Ratio ​ Bank 8.00 % 8.50 % 14.21 % ​ ​ ​ ​ ​ ​ ​ ​ Common Equity Tier 1 Capital Ratio ​ Bank 6.50 % 7.00 % 14.21 % ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 Leverage Ratio ​ Bank 5.00 % 4.00 % 10.98 % ​ ​ 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.
At December 31, 2023, Esquire Bank was classified as well-capitalized. 64 Table of Contents The following table presents our capital ratios as of the indicated dates for Esquire Bank. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For Capital Adequacy ​ ​ ​ ​ ​ Purposes ​ ​ ​ ​ ​ ​ Minimum Capital with ​ Actual ​ ​ “Well Capitalized” ​ Conservation Buffer ​ At December 31, 2023 Total Risk-based Capital Ratio ​ Bank 10.00 % 10.50 % 15.38 % ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 Risk-based Capital Ratio ​ Bank 8.00 % 8.50 % 14.13 % ​ ​ ​ ​ ​ ​ ​ ​ Common Equity Tier 1 Capital Ratio ​ Bank 6.50 % 7.00 % 14.13 % ​ ​ ​ ​ ​ ​ ​ ​ Tier 1 Leverage Ratio ​ Bank 5.00 % 4.00 % 12.07 % ​ ​ 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.
The 2022 provision was general reserve driven considering loan growth and qualitative factors associated with the current uncertain economic environment. 57 Table of Contents Noninterest Income.
The 2022 provision was general reserve driven considering loan growth and qualitative factors associated with the current uncertain economic environment. Noninterest Income.
(3) See “Non-GAAP Financial Measure Reconciliation” below for the computation of the efficiency ratio. (4) Nonperforming loans include nonaccrual loans, loans past due 90 days and still accruing interest and loans modified under troubled debt restructurings. (5) Nonperforming assets include nonperforming loans, other real estate owned and other foreclosed assets.
(3) See “Non-GAAP Financial Measure Reconciliation” below for the computation of the efficiency ratio. (4) Nonperforming loans include nonaccrual loans, loans past due 90 days and still accruing interest and loans modified for borrowers experiencing financial difficulty. (5) Nonperforming assets include nonperforming loans, other real estate owned and other foreclosed assets.
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.
Interest earning cash and other interest income increased $2.6 million, to $4.2 million for the year ended December 31, 2023 from $1.6 million for the year ended December 31, 2022. This increase was attributable to a 313 basis point increase in yields driven by the movement in short-term interest rates.
This gap represents the difference between interest rate sensitive assets and interest rate sensitive liabilities. The Company attempts to structure its assets and liabilities and manages its gap to protect against substantial changes in interest rate scenarios, in order to minimize the potential effects of inflation. ​
The Company attempts to structure its assets and liabilities and manages its gap to protect against substantial changes in interest rate scenarios, in order to minimize the potential effects of inflation. ​
We also had a borrowing capacity with the FRB of New York discount window of $36.1 million. At December 31, 2022, we also had $67.5 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, 2022.
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.
The increase for the year ended December 31, 2022 was primarily due to net income of $28.5 million and amortization of share-based compensation of $2.4 million, partially offset by other comprehensive losses of $14.3 million and dividends declared to common stockholders of $2.3 million. ​ 54 Table of Contents Average Balance Sheets and Related Yields and Rates 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, 2022, 2021 and 2020.
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. ​ 55 Table of Contents Average Balance Sheets and Related Yields and Rates 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.
As of December 31, 2022, the Company had approximately $564.0 million of law firm escrow (or trust) deposits with the majority of these law firms also having commercial lending relationship with 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.
The following table sets forth the maturity of the uninsured certificates of deposit as of December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ At December 31, 2022 ​ ​ (In thousands) Maturing period: ​ ​ Three months or less ​ $ 290 Over three months through six months ​ — Over six months through twelve months ​ 264 Over twelve months ​ — Total ​ $ 554 ​ Borrowings At December 31, 2022, we had the ability to borrow a total of $149.4 million from the FHLB of New York.
The following table sets forth the maturity of the uninsured certificates of deposit as of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ (In thousands) Maturing period: ​ ​ Three months or less ​ $ — Over three months through six months ​ — Over six months through twelve months ​ 16 Over twelve months ​ 106 Total ​ $ 122 ​ Borrowings At December 31, 2023, we had the ability to borrow a total of $284.2 million from the FHLB of New York.
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.
The movement in short-term interest rates resulted in a 133 basis point increase in yields. 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.
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. Interest Expense.
Securities purchased under agreements to resell interest income increased $275 thousand, or 22.0%, to $1.5 million for the year ended December 31, 2023 from $1.3 million for the year ended December 31, 2022. The movement in short-term interest rates resulted in a 308 basis point increase in yields. Interest Expense.
At December 31, 2022, through pledging of our securities and certain loans, we had the ability to borrow a total of $149.4 million from the FHLB of New York and had a borrowing capacity with the FRB of New York discount window of $36.1 million.
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.
Our total assets were $1.4 billion at December 31, 2022, an increase of $216.9 million from $1.2 billion at December 31, 2021. The increase was primarily due to growth in our loan portfolio, securities held-to-maturity and cash offset by decreases in securities available-for-sale. Loan Portfolio Analysis.
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. Loan Portfolio Analysis.
The decline in fair value is attributable to changes in interest rates, not credit quality and because we do not have the intent to sell the securities and it is likely that we will not be required to sell the securities before their anticipated recovery, we do not consider the securities to be other-than-temporarily impaired at December 31, 2022 and 2021.
Due to the decline in fair value being attributable to changes in interest rates, not credit quality and because the Company does not have the intent to sell the securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider the securities to be impaired at December 31, 2023.
We also had Commercial Litigation-Related committed and uncommitted undrawn lines of credit totaling $22.8 million and $311.3 million, respectively, at December 31, 2022. Litigation-Related post-settlement consumer loans held for investment increased $202 thousand to $2.7 million as of December 31, 2022, from $2.5 million as of December 31, 2021. 47 Table of Contents Loan Maturity.
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. 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. Loan Maturity.
The allowance for loan losses is based on management’s assessment of various factors affecting the loan portfolio, including portfolio composition, delinquent and nonaccrual loans, national and local business conditions and loss experience and an overall evaluation of the quality of the underlying collateral. 49 Table of Contents The following table sets forth activity in our allowance for loan losses for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ 2022 ​ 2021 ​ 2020 ​ ​ (In thousands) Allowance at beginning of year ​ $ 9,076 ​ $ 11,402 ​ $ 6,989 Provision for loan losses ​ 3,490 ​ 6,955 ​ 6,250 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Charge-offs: ​ ​ ​ Multifamily ​ 178 ​ — ​ — Commercial real estate ​ — ​ — ​ — 1 – 4 family ​ — ​ — ​ — Construction ​ — ​ — ​ — Commercial ​ 64 ​ 111 ​ 2 Consumer ​ 150 ​ 9,170 ​ 1,835 Total charge-offs ​ 392 ​ 9,281 ​ 1,837 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Recoveries: ​ ​ ​ Multifamily ​ 17 ​ — ​ — Commercial real estate ​ — ​ — ​ — 1 – 4 family ​ — ​ — ​ — Construction ​ — ​ — ​ — Commercial ​ 32 ​ — ​ — Consumer ​ — ​ — ​ — Total recoveries ​ 49 ​ — ​ — Allowance at end of year ​ $ 12,223 ​ $ 9,076 ​ $ 11,402 ​ The following table presents average loans and loan loss experience for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ 2022 ​ ​ ​ ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Charge-offs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Charge-offs ​ ​ ​ ​ Average ​ ​ ​ Net ​ ​ ​ to Average ​ ​ ​ ​ ​ Average ​ ​ ​ Net ​ ​ ​ to Average ​ ​ ​ ​ Loans (1) ​ ​ ​ Charge-offs ​ ​ ​ Loans ​ ​ ​ ​ ​ Loans (1) ​ ​ ​ Charge-offs ​ ​ ​ Loans ​ ​ ​ (Dollars in thousands) ​ Multifamily ​ $ 260,291 ​ ​ $ 161 ​ ​ ​ 0.06 % ​ ​ ​ $ 208,363 ​ ​ $ — ​ ​ ​ — % Commercial real estate ​ 71,055 ​ ​ — ​ ​ ​ — ​ ​ ​ ​ 52,155 ​ ​ — ​ ​ ​ — ​ 1 – 4 family ​ ​ 32,532 ​ ​ ​ — ​ ​ ​ — ​ ​ ​ ​ ​ 44,733 ​ ​ ​ — ​ ​ ​ — ​ Construction ​ — ​ ​ — ​ ​ ​ — ​ ​ ​ ​ — ​ ​ — ​ ​ ​ — ​ Commercial ​ 470,373 ​ ​ 32 ​ ​ ​ 0.01 ​ ​ ​ ​ 384,501 ​ ​ 111 ​ ​ ​ 0.03 ​ Consumer ​ 10,851 ​ ​ 150 ​ ​ ​ 1.38 ​ ​ ​ ​ 28,698 ​ ​ 9,170 ​ ​ ​ 31.95 ​ Total ​ $ 845,102 ​ ​ $ 343 ​ ​ ​ 0.04 % ​ ​ ​ $ 718,450 ​ ​ $ 9,281 ​ ​ ​ 1.29 % ​ (1) Excludes net deferred loan fees and unearned premiums.
The allowance for credit losses is based on management’s assessment of various factors affecting the loan portfolio, including portfolio composition, delinquent and nonaccrual loans, national and local business conditions and loss experience and an overall evaluation of the quality of the underlying collateral. 51 Table of Contents The following table sets forth activity in our allowance for credit losses for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 ​ 2022 ​ 2021 ​ ​ (In thousands) Allowance at beginning of year ​ $ 12,223 ​ $ 9,076 ​ $ 11,402 Impact of CECL adoption ​ 283 ​ — ​ — Provision for credit losses ​ 4,525 ​ 3,490 ​ 6,955 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Charge-offs: ​ ​ ​ Multifamily ​ — ​ 178 ​ — Commercial real estate ​ — ​ — ​ — 1 – 4 family ​ — ​ — ​ — Commercial ​ 5 ​ 64 ​ 111 Consumer ​ 439 ​ 150 ​ 9,170 Total charge-offs ​ 444 ​ 392 ​ 9,281 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Recoveries: ​ ​ ​ Multifamily ​ — ​ 17 ​ — Commercial real estate ​ — ​ — ​ — 1 – 4 family ​ — ​ — ​ — Commercial ​ — ​ 32 ​ — Consumer ​ 44 ​ — ​ — Total recoveries ​ 44 ​ 49 ​ — Allowance at end of year ​ $ 16,631 ​ $ 12,223 ​ $ 9,076 ​ The following table presents average loans and credit loss experience for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 ​ ​ ​ ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Charge-offs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Charge-offs ​ ​ ​ ​ Average ​ ​ ​ Net ​ ​ ​ to Average ​ ​ ​ ​ ​ Average ​ ​ ​ Net ​ ​ ​ to Average ​ ​ ​ ​ Loans (1) ​ ​ ​ Charge-offs ​ ​ ​ Loans ​ ​ ​ ​ ​ Loans (1) ​ ​ ​ Charge-offs ​ ​ ​ Loans ​ ​ ​ (Dollars in thousands) ​ Multifamily ​ $ 304,848 ​ ​ $ — ​ ​ ​ — % ​ ​ ​ $ 260,291 ​ ​ $ 161 ​ ​ ​ 0.06 % Commercial real estate ​ 90,735 ​ ​ — ​ ​ ​ — ​ ​ ​ ​ 71,055 ​ ​ — ​ ​ ​ — ​ 1 – 4 family ​ ​ 22,109 ​ ​ ​ — ​ ​ ​ — ​ ​ ​ ​ ​ 32,532 ​ ​ ​ — ​ ​ ​ — ​ Commercial ​ 621,730 ​ ​ 5 ​ ​ ​ 0.00 ​ ​ ​ ​ 470,373 ​ ​ 32 ​ ​ ​ 0.01 ​ Consumer ​ 13,477 ​ ​ 395 ​ ​ ​ 2.93 ​ ​ ​ ​ 10,851 ​ ​ 150 ​ ​ ​ 1.38 ​ Total ​ $ 1,052,899 ​ ​ $ 400 ​ ​ ​ 0.04 % ​ ​ ​ $ 845,102 ​ ​ $ 343 ​ ​ ​ 0.04 % ​ (1) Excludes net deferred loan fees and unearned premiums.
Excess liquid assets are invested generally in interest earning deposits and short-and intermediate-term securities. 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, 2022 and 2021, cash and cash equivalents totaled $164.1 million and $149.2 million, respectively.
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.
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. Comparison of Operating Results for the Years Ended December 31, 2021 and 2020 General.
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. Management of Market Risk General.
As other companies may use different calculations for this measure, this presentation may not be comparable to other similarly titled measures by other companies. ​ 45 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ 2018 ​ ​ (Dollars in thousands) ​ Efficiency Ratio ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income $ 59,346 ​ $ 43,703 ​ $ 37,440 ​ $ 34,111 ​ $ 27,739 ​ Noninterest income ​ 24,925 ​ ​ 21,024 ​ ​ 14,647 ​ ​ 11,811 ​ ​ 7,855 ​ Recurring revenue $ 84,271 ​ $ 64,727 ​ $ 52,087 ​ $ 45,922 ​ $ 35,594 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total noninterest expense $ 41,980 ​ $ 35,064 ​ $ 28,670 ​ $ 24,934 ​ $ 22,295 ​ Less: nonrecurring compensation charge ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,173 ​ Recurring noninterest expense $ 41,980 ​ $ 35,064 ​ $ 28,670 ​ $ 24,934 ​ $ 21,122 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Efficiency ratio ​ 49.82 % ​ 54.17 % ​ 55.04 % ​ 54.30 % ​ 59.34 % ​ Discussion and Analysis of Financial Condition for the Years Ended December 31, 2022 and 2021 Assets .
As other companies may use different calculations for this measure, this presentation may not be comparable to other similarly titled measures by other companies. ​ 47 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ 2023 ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ ​ (Dollars in thousands) ​ Efficiency Ratio: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net interest income $ 83,773 ​ $ 59,346 ​ $ 43,703 ​ $ 37,440 ​ $ 34,111 ​ Noninterest income ​ 29,751 ​ ​ 24,925 ​ ​ 21,024 ​ ​ 14,647 ​ ​ 11,811 ​ Less net gain on equity investments ​ (4,013) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ Recurring revenue $ 109,511 ​ $ 84,271 ​ $ 64,727 ​ $ 52,087 ​ $ 45,922 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total noninterest expense $ 53,117 ​ $ 41,980 ​ $ 35,064 ​ $ 28,670 ​ $ 24,934 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Efficiency ratio ​ 48.5 % ​ 49.8 % ​ 54.2 % ​ 55.0 % ​ 54.3 % ​ Discussion and Analysis of Financial Condition for the Years Ended December 31, 2023 and 2022 Assets .
No tax-equivalent adjustments have been made as we have no tax exempt investments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ Average ​ ​ Average Average ​ ​ Average Average ​ ​ Average ​ ​ Balance ​ Interest ​ Yield/Cost ​ Balance ​ Interest ​ Yield/Cost ​ Balance ​ Interest ​ Yield/Cost ​ ​ ​ (Dollars in thousands) ​ INTEREST EARNING ASSETS ​ ​ ​ ​ ​ ​ ​ Loans held for investment ​ $ 844,393 ​ $ 54,007 6.40 % $ 717,680 ​ $ 41,545 5.79 % ​ $ 605,273 ​ $ 35,588 5.88 % Securities, includes restricted stock ​ 204,501 ​ 4,161 2.03 % 133,958 ​ 2,174 1.62 % ​ 126,166 ​ 2,556 2.03 % Securities purchased under agreements to resell ​ 49,273 ​ 1,251 2.54 % 51,008 ​ 619 1.21 % ​ 7,402 ​ 94 1.27 % Interest earning cash and other ​ 91,206 ​ 1,574 1.73 % 70,132 ​ 193 0.28 % ​ 99,069 ​ 392 0.40 % Total interest earning assets ​ 1,189,373 ​ 60,993 5.13 % 972,778 ​ 44,531 4.58 % ​ 837,910 ​ 38,630 4.61 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NONINTEREST EARNING ASSETS ​ 45,004 ​ ​ 37,941 ​ ​ ​ 30,028 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL AVERAGE ASSETS ​ $ 1,234,377 ​ ​ ​ ​ ​ $ 1,010,719 ​ ​ ​ ​ ​ ​ $ 867,938 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ INTEREST BEARING LIABILITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings, NOW, money market deposits ​ $ 572,498 ​ $ 1,488 0.26 % $ 439,718 ​ $ 746 0.17 % ​ $ 421,530 ​ $ 888 0.21 % Time deposits ​ 17,775 ​ 155 0.87 % 11,152 ​ 79 0.71 % ​ 16,785 ​ 297 1.77 % Total deposits ​ 590,273 ​ 1,643 0.28 % 450,870 ​ 825 0.18 % ​ 438,315 ​ 1,185 0.27 % Borrowings ​ 75 ​ 4 5.33 % 78 ​ 3 3.85 % ​ 113 ​ 5 4.42 % Total interest bearing liabilities ​ 590,348 ​ 1,647 0.28 % ​ 450,948 ​ 828 0.18 % ​ 438,428 ​ 1,190 0.27 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NONINTEREST BEARING LIABILITIES ​ ​ ​ ​ ​ ​ ​ ​ Demand deposits ​ 485,277 ​ ​ 415,662 ​ ​ ​ 301,359 ​ ​ Other liabilities ​ 12,043 ​ ​ 10,491 ​ ​ ​ 10,066 ​ ​ Total noninterest bearing liabilities ​ 497,320 ​ ​ 426,153 ​ ​ ​ 311,425 ​ ​ Stockholders' equity ​ 146,709 ​ ​ 133,618 ​ ​ ​ 118,085 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL AVG.
No tax-equivalent adjustments have been made as we have no tax exempt investments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ Average ​ ​ Average Average ​ ​ Average Average ​ ​ Average ​ ​ Balance ​ Interest ​ Yield/Cost ​ Balance ​ Interest ​ Yield/Cost ​ Balance ​ Interest ​ Yield/Cost ​ ​ ​ (Dollars in thousands) ​ INTEREST EARNING ASSETS ​ ​ ​ ​ ​ ​ ​ Loans held for investment ​ $ 1,051,903 ​ $ 81,188 7.72 % $ 844,393 ​ $ 54,007 6.40 % ​ $ 717,680 ​ $ 41,545 5.79 % Securities, includes restricted stock ​ 210,776 ​ 5,020 2.38 % 204,501 ​ 4,161 2.03 % ​ 133,958 ​ 2,174 1.62 % Securities purchased under agreements to resell ​ 27,142 ​ 1,526 5.62 % 49,273 ​ 1,251 2.54 % ​ 51,008 ​ 619 1.21 % Interest earning cash and other ​ 85,454 ​ 4,154 4.86 % 91,206 ​ 1,574 1.73 % ​ 70,132 ​ 193 0.28 % Total interest earning assets ​ 1,375,275 ​ 91,888 6.68 % 1,189,373 ​ 60,993 5.13 % ​ 972,778 ​ 44,531 4.58 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NONINTEREST EARNING ASSETS ​ 45,703 ​ ​ 45,004 ​ ​ ​ 37,941 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL AVERAGE ASSETS ​ $ 1,420,978 ​ ​ ​ ​ ​ $ 1,234,377 ​ ​ ​ ​ ​ ​ $ 1,010,719 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ INTEREST BEARING LIABILITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings, NOW, money market deposits ​ $ 715,004 ​ $ 7,635 1.07 % $ 572,498 ​ $ 1,488 0.26 % ​ $ 439,718 ​ $ 746 0.17 % Time deposits ​ 13,159 ​ 476 3.62 % 17,775 ​ 155 0.87 % ​ 11,152 ​ 79 0.71 % Total deposits ​ 728,163 ​ 8,111 1.11 % 590,273 ​ 1,643 0.28 % ​ 450,870 ​ 825 0.18 % Borrowings ​ 46 ​ 4 8.70 % 75 ​ 4 5.33 % ​ 78 ​ 3 3.85 % Total interest bearing liabilities ​ 728,209 ​ 8,115 1.11 % ​ 590,348 ​ 1,647 0.28 % ​ 450,948 ​ 828 0.18 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NONINTEREST BEARING LIABILITIES ​ ​ ​ ​ ​ ​ ​ ​ Demand deposits ​ 497,795 ​ ​ 485,277 ​ ​ ​ 415,662 ​ ​ Other liabilities ​ 18,210 ​ ​ 12,043 ​ ​ ​ 10,491 ​ ​ Total noninterest bearing liabilities ​ 516,005 ​ ​ 497,320 ​ ​ ​ 426,153 ​ ​ Stockholders' equity ​ 176,764 ​ ​ 146,709 ​ ​ ​ 133,618 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TOTAL AVG.
Loans rated substandard decreased $3.6 million to $721 thousand as of December 31, 2022, from $4.3 million at December 31, 2021. Our special mention and substandard loans as a percentage of loans was 1.4% and 0.1% as of December 31, 2022, respectively and 3.2% and 0.5% as of December 31, 2021, respectively.
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.
Net income increased $5.3 million or 42.1%, to $17.9 million for the year ended December 31, 2021 from $12.6 million for the year ended December 31, 2020. The increase resulted from a $6.4 million increase in noninterest income and a $6.3 million increase in net interest income, partially offset by an increase in noninterest expense of $6.4 million.
Net income increased $12.5 million, or 43.8%, to $41.0 million for the year ended December 31, 2023 from $28.5 million for the year ended December 31, 2022. The increase resulted from a $24.4 million increase in net interest income and a $4.8 million increase in noninterest income, partially offset by an increase in noninterest expense of $11.1 million.
Commercial real estate loans increased $43.2 million, or 89.0%, to $91.8 million at December 31, 2022 from $48.6 million at December 31, 2021. Multifamily loans increased $7.6 million, or 3.0%, to $262.5 million at December 31, 2022 from $254.9 million at December 31, 2021.
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.
Maturities are based on the final contractual payment dates and do not reflect the impact of prepayments or early redemptions that may occur.
The composition and maturities of the investment securities portfolio at December 31, 2023, are summarized in the following table. Maturities are based on the final contractual payment dates and do not reflect the impact of prepayments or early redemptions that may occur.
Instantaneous parallel rate shift scenarios are modeled and utilized to evaluate risk and establish exposure limits for acceptable changes in net interest margin.
We use an interest rate risk simulation model to test the interest rate sensitivity of net interest income and the balance sheet. Instantaneous parallel rate shift scenarios are modeled and utilized to evaluate risk and establish exposure limits for acceptable changes in net interest margin.
The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ ​ 2022 ​ 2021 ​ ​ ​ ​ Percent of Percent of ​ ​ Percent of Percent of ​ ​ ​ ​ ​ Allowance ​ Loans in ​ ​ ​ ​ Allowance ​ Loans in ​ ​ ​ ​ ​ ​ for Loan ​ Each ​ ​ ​ ​ for Loan ​ Each ​ ​ ​ Allowance ​ Losses to ​ Category ​ Allowance ​ Losses to ​ Category ​ ​ ​ for Loan ​ Total ​ to Total ​ for Loan ​ Total ​ to Total ​ ​ ​ Losses ​ Allowance ​ Loans ​ Losses ​ Allowance ​ Loans ​ ​ ​ (Dollars in thousands) Multifamily ​ $ 2,017 16.5 % 27.7 % $ 1,789 19.7 % 32.5 % Commercial real estate ​ 1,022 8.4 9.7 ​ 552 6.1 6.1 ​ 1 – 4 family ​ ​ 192 1.6 ​ 2.7 ​ ​ 285 3.2 ​ 5.2 ​ Construction ​ — — — ​ — — — ​ Commercial ​ ​ 8,645 70.7 ​ 58.2 ​ ​ 6,319 69.6 ​ 55.1 ​ Consumer ​ 347 2.8 1.7 ​ 131 1.4 1.1 ​ Total allocated allowance ​ $ 12,223 100.0 % 100.0 % $ 9,076 100.0 % 100.0 % ​ ​ Loans rated special mention decreased $11.1 million to $13.7 million as of December 31, 2022 from $24.8 million as of December 31, 2021, the balance was driven by our commercial, CRE, multifamily and consumer loan portfolios.
The 52 Table of Contents allowance for credit losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ 2023 ​ 2022 ​ ​ ​ ​ Percent of Percent of ​ ​ Percent of Percent of ​ ​ ​ ​ ​ Allowance ​ Loans in ​ ​ ​ ​ Allowance ​ Loans in ​ ​ ​ ​ ​ ​ for Credit ​ Each ​ ​ ​ ​ for Credit ​ Each ​ ​ ​ Allowance ​ Losses to ​ Category ​ Allowance ​ Losses to ​ Category ​ ​ ​ for Credit ​ Total ​ to Total ​ for Credit ​ Total ​ to Total ​ ​ ​ Losses ​ Allowance ​ Loans ​ Losses ​ Allowance ​ Loans ​ ​ ​ (Dollars in thousands) Multifamily ​ $ 3,236 19.5 % 28.8 % $ 2,017 16.5 % 27.7 % Commercial real estate ​ 823 4.9 7.4 ​ 1,022 8.4 9.7 ​ 1 – 4 family ​ ​ 58 0.3 ​ 1.5 ​ ​ 192 1.6 ​ 2.7 ​ Commercial ​ ​ 12,056 72.5 ​ 61.1 ​ ​ 8,645 70.7 ​ 58.2 ​ Consumer ​ 458 2.8 1.2 ​ 347 2.8 1.7 ​ Total allocated allowance ​ $ 16,631 100.0 % 100.0 % $ 12,223 100.0 % 100.0 % ​ ​ 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.
Banks have assets which are primarily monetary in nature and which tend to move with inflation. This is especially true for banks with a high percentage of rate sensitive interest-earning assets and interest-bearing liabilities. A bank can further reduce the impact of inflation with proper management of its rate sensitivity gap.
The impact of inflation, as it affects banks, differs substantially from the impact on non-financial institutions. Banks have assets which are primarily monetary in nature and which tend to move with inflation. This is especially true for banks with a high percentage of rate sensitive interest-earning assets and interest-bearing liabilities.
The following tables set forth the distribution of average deposits by account type at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ ​ 2022 ​ 2021 ​ ​ ​ Average ​ ​ ​ Average ​ Average ​ Average ​ Balance Percent Cost ​ Balance ​ Percent ​ Cost ​ ​ ​ (Dollars in thousands) ​ Demand (noninterest bearing) ​ $ 485,277 45.12 % 0.00 % ​ $ 415,662 47.97 % 0.00 % Savings, NOW and Money Market ​ 572,498 53.23 ​ 0.26 ​ ​ 439,718 50.74 ​ 0.17 ​ Time ​ 17,775 1.65 ​ 0.87 ​ ​ 11,152 1.29 ​ 0.71 ​ Total deposits ​ $ 1,075,550 100.00 % 0.15 % ​ $ 866,532 100.00 % 0.10 % ​ As of December 31, 2022, the aggregate amount of uninsured deposits (deposits in amounts greater than or equal to $250,000) 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.
Certificates of deposit totaled $7.8 million at December 31, 2023, or 0.6% of total deposits at that date. 54 Table of Contents The following tables set forth the distribution of average deposits by account type at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ 2023 ​ 2022 ​ ​ ​ Average ​ ​ ​ Average ​ Average ​ Average ​ Balance Percent Cost ​ Balance ​ Percent ​ Cost ​ ​ ​ (Dollars in thousands) ​ Demand (noninterest bearing) ​ $ 497,795 40.61 % 0.00 % ​ $ 485,277 45.12 % 0.00 % Savings, NOW and Money Market ​ 715,004 58.32 ​ 1.07 ​ ​ 572,498 53.23 ​ 0.26 ​ Time ​ 13,159 1.07 ​ 3.62 ​ ​ 17,775 1.65 ​ 0.87 ​ Total deposits ​ $ 1,225,958 100.00 % 0.66 % ​ $ 1,075,550 100.00 % 0.15 % ​ 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.
The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ ​ 2022 ​ 2021 ​ ​ Amount Percent Amount Percent ​ ​ (Dollars in thousands) Real estate: ​ ​ Multifamily ​ $ 262,489 27.7 % $ 254,852 32.5 % Commercial real estate ​ 91,837 9.7 ​ 48,589 6.1 ​ 1 – 4 family ​ ​ 25,565 2.7 ​ ​ 40,753 5.2 ​ Construction ​ — — ​ — — ​ Total real estate ​ 379,891 40.1 ​ 344,194 43.8 ​ Commercial ​ 552,082 58.2 ​ 432,108 55.1 ​ Consumer ​ 16,580 1.7 ​ 8,681 1.1 ​ Total loans held for investment ​ $ 948,553 100.0 % $ 784,983 100.0 % Deferred loan fees and unearned premiums, net ​ (1,258) ​ (466) ​ Allowance for loan losses ​ (12,223) ​ (9,076) ​ Loans held for investment, net ​ $ 935,072 ​ $ 775,441 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for sale, net (included in Other assets) ​ $ — ​ $ 14,100 ​ ​ ​ ​ The following table sets forth the composition of our held for investment Litigation-Related Loan portfolio by type of loan at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ December 31, 2021 ​ ​ Amount Percent Amount Percent ​ ​ (Dollars in thousands) Litigation-Related Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial Litigation-Related: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Working capital lines of credit ​ $ 254,960 ​ 54.5 % ​ $ 210,148 ​ 54.4 % Case cost lines of credit ​ ​ 130,290 ​ 27.9 ​ ​ ​ 127,859 ​ 33.1 ​ Term loans ​ ​ 79,425 ​ 17.0 ​ ​ ​ 45,415 ​ 11.8 ​ Total Commercial Litigation-Related ​ ​ 464,675 ​ 99.4 ​ ​ ​ 383,422 ​ 99.3 ​ Consumer Litigation-Related: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Post-settlement consumer loans ​ ​ 2,653 ​ 0.6 ​ ​ ​ 2,451 ​ 0.7 ​ Structured settlement loans ​ ​ 49 ​ — ​ ​ ​ 116 ​ — ​ Total Consumer Litigation-Related ​ ​ 2,702 ​ 0.6 ​ ​ ​ 2,567 ​ 0.7 ​ Total Litigation-Related Loans ​ $ 467,377 ​ 100.0 % ​ $ 385,989 ​ 100.0 % ​ At December 31, 2022, our Litigation-Related Loans, which include commercial and consumer lending to attorneys, law firms and plaintiffs/claimants, totaled $467.4 million, or 49.3% of our total loan portfolio, compared to $386.0 million at December 31, 2021.
The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ 2023 ​ 2022 ​ ​ Amount Percent Amount Percent ​ ​ (Dollars in thousands) Real estate: ​ ​ Multifamily ​ $ 348,241 28.8 % $ 262,489 27.7 % Commercial real estate ​ 89,498 7.4 ​ 91,837 9.7 ​ 1 – 4 family ​ ​ 17,937 1.5 ​ ​ 25,565 2.7 ​ Total real estate ​ 455,676 37.7 ​ 379,891 40.1 ​ Commercial ​ 737,914 61.1 ​ 552,082 58.2 ​ Consumer ​ 14,491 1.2 ​ 16,580 1.7 ​ Total loans held for investment ​ $ 1,208,081 100.0 % $ 948,553 100.0 % Deferred loan fees and unearned premiums, net ​ (668) ​ (1,258) ​ Allowance for credit losses ​ (16,631) ​ (12,223) ​ Loans held for investment, net ​ $ 1,190,782 ​ $ 935,072 ​ ​ ​ 48 Table of Contents The following table sets forth the composition of our held for investment Litigation-Related Loan portfolio by type of loan at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ 2023 ​ ​ 2022 ​ ​ Amount Percent Amount Percent ​ ​ (Dollars in thousands) Litigation-Related Loans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial Litigation-Related: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Working capital lines of credit ​ $ 373,338 ​ 60.7 % ​ $ 254,960 ​ 54.5 % Case cost lines of credit ​ ​ 152,165 ​ 24.8 ​ ​ ​ 130,290 ​ 27.9 ​ Term loans ​ ​ 86,954 ​ 14.1 ​ ​ ​ 79,425 ​ 17.0 ​ Total Commercial Litigation-Related ​ ​ 612,457 ​ 99.6 ​ ​ ​ 464,675 ​ 99.4 ​ Consumer Litigation-Related: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Post-settlement consumer loans ​ ​ 2,406 ​ 0.4 ​ ​ ​ 2,653 ​ 0.6 ​ Structured settlement loans ​ ​ 16 ​ — ​ ​ ​ 49 ​ — ​ Total Consumer Litigation-Related ​ ​ 2,422 ​ 0.4 ​ ​ ​ 2,702 ​ 0.6 ​ Total Litigation-Related Loans ​ $ 614,879 ​ 100.0 % ​ $ 467,377 ​ 100.0 % ​ 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.
Changes attributable to both volume and rate are allocated ratably between the volume and rate categories. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ December 31, ​ ​ 2022 vs. 2021 ​ Increase Total ​ ​ (Decrease) due to ​ Increase ​ ​ Volume Rate ​ (Decrease) ​ ​ (In thousands) Interest earned on: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for investment ​ $ 7,818 ​ $ 4,644 ​ $ 12,462 Securities, includes restricted stock ​ 1,341 ​ 646 ​ 1,987 Securities purchased under agreements to resell ​ (22) ​ 654 ​ 632 Interest earning cash and other ​ 74 ​ 1,307 ​ 1,381 Total interest income ​ 9,211 ​ 7,251 ​ 16,462 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest paid on: ​ ​ ​ Savings, NOW, money market deposits ​ 269 ​ 473 ​ 742 Time deposits ​ 55 ​ 21 ​ 76 Total deposits ​ 324 ​ 494 ​ 818 Borrowings ​ — ​ 1 ​ 1 Total interest expense ​ 324 ​ 495 ​ 819 Change in net interest income ​ $ 8,887 ​ $ 6,756 ​ $ 15,643 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ December 31, ​ ​ 2021 vs. 2020 ​ ​ Increase ​ ​ Total ​ ​ (Decrease) due to ​ ​ Increase ​ Volume Rate ​ (Decrease) ​ ​ (In thousands) Interest earned on: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for investment ​ $ 6,515 ​ $ (558) $ 5,957 Securities, includes restricted stock ​ 150 ​ ​ (532) ​ (382) Securities purchased under agreements to resell ​ 529 ​ ​ (4) ​ 525 Interest earning cash and other ​ (97) ​ ​ (102) ​ (199) Total interest income ​ 7,097 ​ ​ (1,196) ​ 5,901 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest paid on: ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings, NOW, money market deposits ​ 37 ​ ​ (179) ​ (142) Time deposits ​ (78) ​ ​ (140) ​ (218) Total deposits ​ (41) ​ ​ (319) ​ (360) Borrowings ​ (1) ​ ​ (1) ​ (2) Total interest expense ​ (42) ​ (320) (362) Change in net interest income ​ $ 7,139 ​ $ (876) $ 6,263 ​ ​ 56 Table of Contents Comparison of Operating Results for the Years Ended December 31, 2022 and 2021 General.
Changes attributable to both volume and rate are allocated ratably between the volume and rate categories. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ December 31, ​ 2023 vs. 2022 ​ Increase Total ​ (Decrease) due to ​ Increase ​ Volume Rate (Decrease) ​ (In thousands) Interest earned on: ​ ​ ​ ​ ​ ​ ​ ​ Loans held for investment ​ $ 16,455 ​ $ 10,726 ​ $ 27,181 Securities, includes restricted stock ​ 131 ​ 728 ​ 859 Securities purchased under agreements to resell ​ (746) ​ 1,021 ​ 275 Interest earning cash and other ​ (105) ​ 2,685 ​ 2,580 Total interest income ​ 15,735 ​ 15,160 ​ 30,895 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest paid on: ​ ​ ​ Savings, NOW, money market deposits ​ 591 ​ 5,556 ​ 6,147 Time deposits ​ (50) ​ 371 ​ 321 Total deposits ​ 541 ​ 5,927 ​ 6,468 Borrowings ​ (2) ​ 2 ​ — Total interest expense ​ 539 ​ 5,929 ​ 6,468 Change in net interest income ​ $ 15,196 ​ $ 9,231 ​ $ 24,427 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ December 31, ​ ​ 2022 vs. 2021 ​ ​ Increase ​ ​ Total ​ ​ (Decrease) due to ​ ​ Increase ​ Volume Rate ​ (Decrease) ​ ​ (In thousands) Interest earned on: ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans held for investment ​ $ 7,818 ​ $ 4,644 $ 12,462 Securities, includes restricted stock ​ 1,341 ​ ​ 646 ​ 1,987 Securities purchased under agreements to resell ​ (22) ​ ​ 654 ​ 632 Interest earning cash and other ​ 74 ​ ​ 1,307 ​ 1,381 Total interest income ​ 9,211 ​ ​ 7,251 ​ 16,462 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest paid on: ​ ​ ​ ​ ​ ​ ​ ​ ​ Savings, NOW, money market deposits ​ 269 ​ ​ 473 ​ 742 Time deposits ​ 55 ​ ​ 21 ​ 76 Total deposits ​ 324 ​ ​ 494 ​ 818 Borrowings ​ — ​ ​ 1 ​ 1 Total interest expense ​ 324 ​ 495 819 Change in net interest income ​ $ 8,887 ​ $ 6,756 $ 15,643 ​ ​ 57 Table of Contents Comparison of Operating Results for the Years Ended December 31, 2023 and 2022 General.
For troubled debt restructurings that subsequently default, we determine the amount of reserve in accordance with the accounting policy for the allowance for loan losses. 48 Table of Contents The following table sets forth information regarding our nonperforming assets at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2022 ​ 2021 ​ ​ ​ (Dollars in thousands) Nonaccrual loans: ​ ​ Multifamily ​ $ — ​ $ — ​ Commercial real estate ​ — ​ — ​ 1 – 4 family ​ ​ — ​ ​ — ​ Construction ​ — ​ — ​ Commercial ​ — ​ — ​ Consumer ​ 4 ​ 6 ​ Total nonaccrual loans ​ ​ 4 ​ ​ 6 ​ Other real estate owned ​ — ​ — ​ Loans past due 90 days and still accruing ​ — ​ — ​ Troubled debt restructurings ​ — ​ — ​ Total nonperforming assets ​ $ 4 ​ $ 6 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans held for investment (1) ​ $ 947,295 ​ $ 784,517 ​ Total assets ​ $ 1,395,639 ​ $ 1,178,770 ​ Allowance for loan losses ​ $ 12,223 ​ $ 9,076 ​ Total nonaccrual loans to total loans ​ 0.00 % 0.00 % Total nonperforming assets to total assets ​ 0.00 % 0.00 % Allowance for loan losses to nonaccrual loans ​ NM ​ NM ​ Allowance for loan losses to nonperforming loans ​ NM ​ NM ​ Allowance for loan losses to total loans at end of the period (1) ​ 1.29 % 1.16 % (1) Loans are presented before the allowance for loan losses and include net deferred loan fees and unearned premiums.
There were no loans on nonaccrual at December 31, 2022. 50 Table of Contents The following table sets forth information regarding our nonperforming assets at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 ​ 2022 ​ ​ ​ (Dollars in thousands) Nonaccrual loans: ​ ​ Multifamily ​ $ 10,940 ​ $ — ​ Commercial real estate ​ — ​ — ​ 1 – 4 family ​ ​ — ​ ​ — ​ Commercial ​ — ​ — ​ Consumer ​ — ​ 4 ​ Total nonaccrual loans ​ ​ 10,940 ​ ​ 4 ​ Other real estate owned ​ — ​ — ​ Loans past due 90 days and still accruing ​ 69 ​ — ​ Total nonperforming assets ​ $ 11,009 ​ $ 4 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total loans held for investment (1) ​ $ 1,207,413 ​ $ 947,295 ​ Total assets ​ $ 1,616,876 ​ $ 1,395,639 ​ Allowance for credit losses ​ $ 16,631 ​ $ 12,223 ​ Total nonaccrual loans to total loans ​ 0.91 % 0.00 % Total nonperforming assets to total assets ​ 0.68 % 0.00 % Allowance for credit losses to nonaccrual loans ​ 152 % NM ​ Allowance for credit losses to nonperforming loans ​ 152 % NM ​ Allowance for credit losses to total loans at end of the period (1) ​ 1.38 % 1.29 % (1) Loans are presented before the allowance for credit losses and include net deferred loan fees and unearned premiums.
Our net interest margin increased 2 basis points to 4.49% for the year ended December 31, 2021 from 4.47% for the year ended December 31, 2020.
Our net interest margin increased 110 basis points to 6.09% for the year ended December 31, 2023 from 4.99% for the year ended December 31, 2022.
While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. 62 Table of Contents We regularly review the need to adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest earning deposits and securities, and (4) the objectives of our asset/liability management program.
We regularly review the need to adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest earning deposits and securities, and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest earning deposits and short-and intermediate-term securities.
Currently, based on our assessments, we have not identified any elevated credit risk and our returns and chargeback ratios are within normal levels and commensurate to the merchant portfolio risk profile. 51 Table of Contents Debt Securities Portfolio At December 31, 2022 and 2021, 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.
Debt Securities Portfolio 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.
These administrative service fees are impacted by the volume of off-balance sheet funds, the duration of these funds and short-term interest rates. Noninterest Expense.
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. ​ 61 Table of Contents Noninterest Expense.
At December 31, 2022, loans were $947.3 million, or 67.9% of total assets, compared to $784.5 million, or 66.6% of total assets, at December 31, 2021. Commercial loans increased $120.0 million, or 27.8%, to $552.1 million at December 31, 2022 from $432.1 million at December 31, 2021.
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.
Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets. Net Interest Income Simulation. We use an interest rate risk simulation model to test the interest rate sensitivity of net interest income and the balance sheet.
We do not typically enter into derivative contracts for the purpose of managing interest rate risk, but we may do so in the future. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets. Net Interest Income Simulation.
As of December 31, 2021, the aggregate amount of uninsured deposits was $254.9 million, or 24.8%, of our total Bank deposits of $1.0 billion, excluding $662 thousand 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.
Interest earning cash and other interest income decreased $199 thousand, or 50.8%, to $193 thousand for the year ended December 31, 2021 from $392 thousand for the year ended December 31, 2020.
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.
Interest Income. Interest income increased $5.9 million or 15.3%, to $44.5 million for the year ended December 31, 2021 from $38.6 million for the year ended December 31, 2020 and was attributable to an increase in loan and reverse repurchase interest income offset by a decrease in interest income on securities and interest earning cash and other.
Interest income increased $30.9 million, or 50.7%, to $91.9 million for the year ended December 31, 2023 from $61.0 million for the year ended December 31, 2022 and was attributable to an increase in loan, securities, interest earning cash and other and reverse repurchase interest income.
We recorded income tax expense of $4.8 million for the year ended December 31, 2021, reflecting an effective tax rate of 21.1%, compared to $4.5 million, or an effective tax rate of 26.5%, for the year ended December 31, 2020.
Income Tax Expense. We recorded income tax expense of $14.9 million for the year ended December 31, 2023, reflecting an effective tax rate of 26.6%, compared to $10.3 million, or an effective tax rate of 26.5%, for the year ended December 31, 2022. Comparison of Operating Results for the Years Ended December 31, 2022 and 2021 General.
At December 31, 2022 and 2021, we did not have any accruing loans past due 90 days or greater. Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as foreclosed real estate until it is sold.
Loans 90 days or greater past due may remain on an accrual basis if adequately collateralized and in the process of collection. Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as foreclosed real estate until it is sold.
Data processing costs increased due to increased processing volume, primarily driven by our core banking platform, and additional costs related to our technology implementations.
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.
Stockholders’ Equity Total stockholders’ equity increased $14.4 million, or 10.0%, to $158.2 million at December 31, 2022, from $143.7 million at December 31, 2021.
Stockholders’ Equity 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.
These scenarios, known as rate shocks, simulate an instantaneous change in interest rates and use various assumptions, including, but not limited to, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment and replacement of asset and liability cash flows. ​ 61 Table of Contents The following table presents the estimated changes in net interest income of Esquire Bank, National Association, calculated on a bank-only basis, which would result from changes in market interest rates over twelve-month periods beginning December 31, 2022.
These scenarios, known as rate shocks, simulate an instantaneous change in interest rates and use various assumptions, including, but not limited to, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment and replacement of asset and liability cash flows.
LIABILITIES AND EQUITY ​ $ 1,234,377 ​ ​ $ 1,010,719 ​ ​ ​ $ 867,938 ​ ​ Net interest income ​ ​ $ 59,346 ​ ​ ​ $ 43,703 ​ ​ ​ ​ $ 37,440 ​ ​ Net interest spread ​ ​ ​ ​ ​ ​ ​ 4.85 % ​ ​ ​ ​ ​ ​ 4.40 % ​ ​ ​ ​ ​ ​ ​ 4.34 % Net interest margin ​ ​ 4.99 % ​ 4.49 % ​ ​ ​ 4.47 % ​ 55 Table of Contents The following table presents the dollar amount of changes in interest income and interest expense for major components of interest earning assets and interest bearing liabilities for the periods indicated.
LIABILITIES AND EQUITY ​ $ 1,420,978 ​ ​ $ 1,234,377 ​ ​ ​ $ 1,010,719 ​ ​ Net interest income ​ ​ $ 83,773 ​ ​ ​ $ 59,346 ​ ​ ​ ​ $ 43,703 ​ ​ Net interest spread ​ ​ ​ ​ ​ ​ ​ 5.57 % ​ ​ ​ ​ ​ ​ 4.85 % ​ ​ ​ ​ ​ ​ ​ 4.40 % Net interest margin ​ ​ 6.09 % ​ 4.99 % ​ ​ ​ 4.49 % Deposits (including nonint. demand deposits) ​ $ 1,225,958 ​ $ 8,111 ​ 0.66 % $ 1,075,550 ​ $ 1,643 ​ 0.15 % ​ $ 866,532 ​ $ 825 ​ 0.10 % ​ ​ 56 Table of Contents The following table presents the dollar amount of changes in interest income and interest expense for major components of interest earning assets and interest bearing liabilities for the periods indicated.
Securities interest income decreased $382 thousand, or 14.9%, to $2.2 million for the year ended December 31, 2021 from $2.6 million for the year ended December 31, 2020.
Securities interest income increased $859 thousand, or 20.6%, to $5.0 million for the year ended December 31, 2023 from $4.2 million for the year ended December 31, 2022.
At December 31, 2022 and 2021, Esquire Bank exceeded all applicable regulatory capital requirements, and was considered “well capitalized” under regulatory guidelines. We manage our capital to comply with our internal planning targets and regulatory capital standards administered by the OCC and review capital levels on a monthly basis. At December 31, 2022, Esquire Bank was classified as well-capitalized.
We manage our capital to comply with our internal planning targets and regulatory capital standards administered by the OCC and review capital levels on a monthly basis.
Net Interest Income. Net interest income increased $6.3 million, or 16.7%, to $43.7 million for the year ended December 31, 2021 from $37.4 million for the year ended December 31, 2020, due to a $5.9 million net increase in interest income and a $362 thousand decrease in interest expense.
Net Interest Income. Net interest income increased $24.4 million, or 41.2%, to $83.8 million for the year ended December 31, 2023 from $59.3 million for the year ended December 31, 2022, due to a $30.9 million increase in interest income, partially offset by a $6.5 million increase in interest expense.
These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.
These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair values.
The increase in net interest margin was due to a 9 basis point decrease in the cost of interest bearing deposits, offset by the decrease in interest earning asset yields of 3 basis points, primarily due to the historically low interest rate environment.
The increase in net interest margin was due to a 155 basis point increase in interest earning asset yields, offset by an increase in the cost of interest bearing liabilities of 83 basis points, primarily due to growth in higher yielding variable rate commercial loans and increases in short-term interest rates.
No tax-equivalent yield adjustments have been made as we have no tax free interest earning assets. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, 2022 ​ ​ ​ ​ ​ ​ ​ More Than One Year ​ More Than Five Years ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ One Year or Less ​ through Five Years ​ Through Ten Years ​ More Than Ten Years ​ Total ​ ​ ​ Weighted ​ ​ Weighted ​ ​ Weighted ​ ​ Weighted ​ ​ Weighted ​ ​ Amortized ​ Average ​ Amortized ​ Average ​ Amortized ​ Average ​ Amortized ​ Average ​ Amortized ​ Average ​ ​ Cost ​ Yield ​ Cost ​ Yield ​ Cost ​ Yield ​ Cost ​ Yield ​ Cost ​ Yield ​ ​ (Dollars in thousands) Securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage backed securities-agency ​ $ — — % $ — — % $ 6,425 2.88 % $ 105,020 1.63 % $ 111,445 1.71 % Collateralized mortgage obligations-agency ​ — — ​ — — ​ 2,211 2.27 ​ 16,464 1.91 ​ 18,675 1.95 ​ Total securities available-for-sale ​ $ — — % $ — — % $ 8,636 2.73 % $ 121,484 1.67 % $ 130,120 1.74 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities held-to-maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Collateralized mortgage obligations-agency ​ $ — — % $ — — % $ — — % $ 78,377 2.88 % $ 78,377 2.88 % Total securities held-to-maturity ​ $ — — % $ — — % $ — — % $ 78,377 2.88 % $ 78,377 2.88 % ​ Deposits Total deposits increased $199.8 million, or 19.4%, to $1.2 billion at December 31, 2022 from $1.0 billion at December 31, 2021.
No tax-equivalent yield adjustments have been made as we have no tax free interest earning assets. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ ​ ​ ​ More Than One Year ​ More Than Five Years ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ One Year or Less ​ through Five Years ​ Through Ten Years ​ More Than Ten Years ​ Total ​ ​ ​ Weighted ​ ​ Weighted ​ ​ Weighted ​ ​ Weighted ​ ​ Weighted ​ ​ Amortized ​ Average ​ Amortized ​ Average ​ Amortized ​ Average ​ Amortized ​ Average ​ Amortized ​ Average ​ ​ Cost ​ Yield ​ Cost ​ Yield ​ Cost ​ Yield ​ Cost ​ Yield ​ Cost ​ Yield ​ ​ (Dollars in thousands) Securities available-for-sale: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Mortgage backed securities-agency ​ $ — — % $ 4,591 3.07 % $ 3,137 2.04 % $ 99,668 1.84 % $ 107,396 1.90 % Collateralized mortgage obligations-agency ​ — — ​ — — ​ 1,964 2.41 ​ 31,002 4.14 ​ 32,966 4.04 ​ Total securities available-for-sale ​ $ — — % $ 4,591 3.07 % $ 5,101 2.18 % $ 130,670 2.39 % $ 140,362 2.40 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities held-to-maturity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Collateralized mortgage obligations-agency ​ $ — — % $ — — % $ — — % $ 77,001 3.07 % $ 77,001 3.07 % Total securities held-to-maturity ​ $ — — % $ — — % $ — — % $ 77,001 3.07 % $ 77,001 3.07 % ​ Deposits 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.
The following table presents the estimated changes in EVE of Esquire Bank, National Association, calculated on a bank-only basis, that would result from changes in market interest rates as of December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2022 Changes in ​ Economic ​ ​ ​ Interest Rates ​ Value of ​ ​ ​ (Basis Points) Equity ​ Change ​ ​ (Dollars in thousands) 400 ​ $ 317,313 ​ $ 37,676 300 ​ ​ 309,190 ​ ​ 29,553 200 ​ ​ 300,493 ​ ​ 20,856 100 ​ ​ 290,852 ​ ​ 11,215 0 ​ ​ 279,637 ​ ​ — -100 ​ ​ 265,449 ​ ​ (14,188) -200 ​ ​ 242,430 ​ ​ (37,207) ​ Many assumptions are used to calculate the impact of interest rate fluctuations.
The following table presents the estimated changes in EVE of Esquire Bank, National Association, calculated on a bank-only basis, that would result from changes in market interest rates as of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 Changes in ​ Economic ​ ​ ​ Interest Rates ​ Value of ​ ​ ​ (Basis Points) Equity ​ Change ​ ​ (Dollars in thousands) 300 ​ $ 336,844 ​ $ 39,064 200 ​ ​ 325,955 ​ ​ 28,175 100 ​ ​ 313,415 ​ ​ 15,635 0 ​ ​ 297,780 ​ ​ — -100 ​ ​ 279,279 ​ ​ (18,501) -200 ​ ​ 258,384 ​ ​ (39,396) -300 ​ ​ 233,221 ​ ​ (64,559) ​ 63 Table of Contents Many assumptions are used to calculate the impact of interest rate fluctuations.
Noninterest income information is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ ​ ​ ​ December 31, ​ Change ​ 2021 2020 Amount Percent ​ ​ (Dollars in thousands) Payment processing fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment processing income ​ $ 20,040 ​ $ 13,403 ​ $ 6,637 49.5 % ACH income ​ ​ 816 ​ ​ 696 ​ ​ 120 17.2 ​ Customer related fees and service charges: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Administrative service income ​ ​ 29 ​ ​ 183 ​ ​ (154) (84.2) ​ Other ​ ​ 434 ​ ​ 365 ​ ​ 69 18.9 ​ Loss on loans held for sale ​ ​ (295) ​ ​ — ​ ​ (295) NA ​ Total noninterest income ​ $ 21,024 ​ $ 14,647 ​ $ 6,377 43.5 % ​ Payment processing income increased due to the expansion of our sales channels through ISOs, merchants and additional fee allocation arrangements, with annual volumes increasing 59.4% to $23.7 billion for 2021 compared to $14.8 billion for 2020.
Noninterest income information is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ ​ ​ ​ ​ December 31, ​ Change ​ ​ 2023 2022 Amount Percent ​ ​ (Dollars in thousands) ​ Payment processing fees: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment processing income ​ $ 21,450 ​ $ 21,101 ​ $ 349 ​ 1.7 % ACH income ​ ​ 866 ​ ​ 843 ​ ​ 23 ​ 2.7 ​ Total payment processing fees ​ ​ 22,316 ​ ​ 21,944 ​ ​ 372 ​ 1.7 ​ Customer related fees, service charges and other: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Administrative service income ​ ​ 2,467 ​ ​ 2,534 ​ ​ (67) ​ (2.6) ​ Net gain on equity investments ​ ​ 4,013 ​ ​ — ​ ​ 4,013 ​ NA ​ Gain on loans held for sale ​ ​ — ​ ​ 88 ​ ​ (88) ​ (100.0) ​ Other ​ ​ 955 ​ ​ 359 ​ ​ 596 ​ 166.0 ​ Total customer related fees, service charges and other ​ ​ 7,435 ​ ​ 2,981 ​ ​ 4,454 ​ 149.4 ​ Total noninterest income ​ $ 29,751 ​ $ 24,925 ​ $ 4,826 ​ 19.4 % ​ Payment processing income increased due to the expansion of our sales channels through ISOs, merchants and additional fee allocation arrangements, with annual volumes increasing 17.8% to $33.0 billion for 2023 compared to $28.0 billion for 2022.
The allowance for loan losses as a percentage of loans was 1.29% and 1.16% as of December 31, 2022 and 2021, 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.
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.
We have also assessed the level and adequacy of our ISO and merchant reserves held on deposit at Esquire Bank.
We have also assessed the level and adequacy of our ISO and merchant reserves held on deposit at Esquire Bank. Currently, based on our assessments, we have not identified any elevated credit risk and our returns and chargeback ratios are within normal levels and commensurate to the merchant portfolio risk profile.
Loan interest income increased $6.0 million, or 16.7%, to $41.5 million for the year ended December 31, 2021 from $35.6 million for the year ended December 31, 2020.
Loan interest income increased $27.2 million, or 50.3%, to $81.2 million for the year ended December 31, 2023 from $54.0 million for the year ended December 31, 2022.
Nonperforming Assets Nonperforming assets include loans that are 90 or more days past due or on nonaccrual status, including troubled debt restructurings on nonaccrual status, and real estate and other loan collateral acquired through foreclosure and repossession. Loans 90 days or greater past due may remain on an accrual basis if adequately collateralized and in the process of collection.
Additionally, 80.2% of our commercial loans have interest rate floor protection as of December 31, 2023. Nonperforming Assets Nonperforming assets include loans that are 90 or more days past due or on nonaccrual status, including real estate and other loan collateral acquired through foreclosure and repossession.
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”. The CARES Act and implementing rules temporarily reduced the community bank 63 Table of Contents leverage ratio to 8%, to be gradually increased back to 9% by 2022.
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. Effects of Inflation.
Occupancy and equipment costs increased primarily due to amortization of our investments in internally developed software to support our new digital platforms, precautionary office cleaning costs related to COVID-19 and additional office space to support our continued growth. Income Tax Expense.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. Quantitative and Qualitative Disclosures About Market Risk The quantitative and qualitative disclosures about market risk are included under the section of this Annual Report entitled “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Management of Market Risk.” ​ ​ 64 Table of Contents
Biggest changeITEM 7A. Quantitative and Qualitative Disclosures About Market Risk The quantitative and qualitative disclosures about market risk are included under the section of this Annual Report entitled “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Management of Market Risk.” ​ ​ 65 Table of Contents

Other ESQ 10-K year-over-year comparisons