Esquire Financial Holdings Inc (ESQ, Financial) announced its Q3 2023 operating results on October 23, 2023. The financial holding company reported a net income of $9.8 million, or $1.17 per diluted share, compared to $7.7 million, or $0.94 per diluted share for the same period in 2022. This represents a substantial increase in earnings, reflecting the company's strong performance.
Financial Performance Highlights
ESQ's net interest income for Q3 2023 increased by 39.7% to $21.7 million, driven by growth in average interest earning assets totaling $200.7 million, or 16.8%, to $1.4 billion. The company's net interest margin was positively impacted by growth in higher yielding variable rate commercial loans and increases in short-term interest rates, leading to a 101 basis point increase to 6.19% when compared to the same period in 2022.
Noninterest income also saw an increase, rising to $6.5 million for Q3 2023 compared to $6.4 million in the same period for 2022. This was largely due to a $163 thousand increase in payment processing income, which totaled $5.6 million for the third quarter of 2023.
Loan Portfolio and Deposit Growth
ESQ reported a significant increase in its average loans for the quarter, which rose by 27.6% to $1.1 billion when compared to Q3 2022. This was primarily due to growth in the company's national commercial lending platform and, to a lesser extent, its regional real estate loan portfolio. The company's loan-to-deposit ratio was 86.8% as its low-cost deposit base increased by $95.1 million, or 8.0%, primarily due to growth in its longer duration escrow deposit banking relationships.
Outlook and Commentary
Chairman of the Board, Tony Coelho, expressed his satisfaction with the company's performance, stating,
Being named a top performing financial institution by the investment banking community during 2023 is a testament to our dedicated management team, valued employees, and client-centric business model that continuously builds long-term stakeholder value."Andrew C. Sagliocca, Vice Chairman, CEO, and President, also emphasized the company's commitment to investing in resources and maintaining a focus on excellence in client service and risk management.
Despite the strong performance, ESQ anticipates potential challenges ahead. The company expects continued increases in its cost-of-funds due to the current short-term interest rate environment, which may negatively impact its net interest margin in future quarters. Furthermore, the uncertain economic environment and its potential impact on the New York metro commercial real estate market are also factors to consider.
