Esquire Financial Holdings, Inc.

Esquire Financial Holdings, Inc. operates as a financial holding company through its wholly owned bank subsidiary, Esquire Bank, National Association, a full service commercial bank dedicated to serving the financial needs of the legal and small business communities on a national basis, as well as commercial and retail customers in the New York and Los Angeles metropolitan markets. U.S. tort actions alone are estimated to consume approximately 2.1% of U.S. GDP annually according to the U.S. Chamber of Commerce Institute for Legal Reform, with an estimated total addressable market of $529 billion for 2022. The payment industry grew at a compound annual rate of approximately 8% from 2021 to 2025 with payment volumes or TAM of $12.2 trillion according to company records on U.S. payment industry trends. The New York metropolitan area had a deposit market of $4.1 trillion and the county of Los Angeles, California had a deposit market of $516 billion, according to data sourced from S&P Global Market Intelligence.

Competition for Litigation-Related Loans is derived primarily from a small number of nationally-oriented financial companies that specialize in this market. The Bank is one of approximately 100 U.S. acquiring banks and faces competition from many larger institutions, including large commercial banks and third party processors, that operate in the payment processing business. The company believes it has a competitive advantage to continue to attract and retain ISOs and merchants when considering its history of successful operations, flexibility to settle through multiple payment processing platforms, superior customer relationship management, and an ability to tailor contractual arrangements to customers' needs. Esquire Bank can offer more competitive terms 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 company generates revenue through net interest income from its loan portfolio, particularly higher yielding litigation related commercial loans, and noninterest income primarily from payment processing activities and administrative service payment fee income. For the year ended December 31, 2025, noninterest income totaled $25.1 million, which represented 17% of total revenue. The company's low cost core deposits, totaling $2.06 billion at December 31, 2025, represent its primary funding source for loan growth, with a total cost of deposits of 0.99%. The litigation community represented approximately 78% of the deposit base at December 31, 2025, with $1.23 billion, or 60%, of total deposits in longer duration escrow or claimant trust settlement deposit accounts.

Commercial Litigation-Related Loans, which consist of working capital lines of credit, case cost lines of credit, term loans and other commercial Litigation-Related Loans, totaled $1.18 billion, or 99.7% of total Litigation-Related Loan portfolio and 67.0% of the loan portfolio at December 31, 2025. Working capital lines of credit totaled $782.2 million, case cost lines of credit totaled $209.5 million, and term loans totaled $186.7 million at December 31, 2025. Consumer Litigation-Related Loans, consisting of post-settlement consumer loans and structured settlement loans, totaled $3.1 million, or 0.3% of total Litigation-Related Loan portfolio and 0.2% of the loan portfolio. Total real estate loans, consisting of multifamily loans, commercial real estate loans and 1-4 family loans, totaled $489.9 million, or 27.9% of the loan portfolio, at December 31, 2025. Multifamily loans totaled $372.8 million, commercial real estate loans totaled $107.3 million, and 1-4 family loans totaled $9.8 million. Payment processing revenues were $20.2 million, which was 13.8% of total revenue for the year ended December 31, 2025, with 28 active ISOs servicing 93,000 merchants, processing $39.5 billion in card volume.

The company's payment processing platform has grown to 93,000 small businesses at December 31, 2025, generating 14% of revenue for the year ended December 31, 2025. The company processed approximately $40 billion in processing volume across 590 million transactions for the year ended December 31, 2025. The company had contractual arrangements with three payment processors or clearing agents, Global Payments, Repay and Fiserv. For the year ended December 31, 2025, the company received a blended rate of approximately five basis points for payment processing.

On March 11, 2026, the company entered into an Agreement and Plan of Merger with Signature Bancorporation, Inc., pursuant to which Esquire and Signature have agreed to combine their respective businesses. Under the terms of the merger agreement, shareholders of Signature will receive a fixed exchange ratio of 2.63 shares of Esquire common stock for each share of Signature common stock, subject to adjustment. The per share value equates to $260.48 for Signature shareholders based on the closing price of Esquire common stock on March 11, 2026, or approximately $348.4 million in aggregate transaction value. The exchange ratio is subject to an adjustment based on the disposition value of certain Signature Bank loans with a total par value of approximately $70 million. The adjusted exchange ratio at closing will be no higher than 2.80 and no lower than 2.50. The company opened a Los Angeles branch in 2025. The company had off-balance sheet sweep funds totaling approximately $736.6 million, of which approximately $449.0 million, or 61%, was available to be swept onto the Bank's balance sheet.

For the year ended December 31, 2025, net income was $50.8 million or $5.87 per diluted share, while return on average assets and equity were 2.43% and 19.41%, respectively. Net interest margin was 6.02%, primarily driven by growth in higher yielding litigation related commercial loans and a low cost of funds of 0.99% on deposits. Loans held for investment increased 26%, or $361.4 million, to $1.76 billion. Total assets, loans, deposits and stockholders' equity totaled $2.37 billion, $1.76 billion, $2.06 billion and $289.6 million, respectively. The efficiency ratio was 48.6%. Approximately 71% of loans are variable rate and tied to prime, with interest rate floors in place on 90% of the variable rate loan portfolio. Strong available liquidity of $1.12 billion with no outstanding borrowings.

The litigation market has been and will continue to be a significant growth opportunity for the company as it offers focused and tailored products and services to law firms nationally. U.S. tort actions alone are estimated to consume approximately 2.1% of U.S. GDP annually according to the U.S. Chamber of Commerce Institute for Legal Reform, with an estimated total addressable market of $529 billion for 2022. The company currently has lending clients in 33 states and its larger markets include California, the New York metro area and Texas. The company intends to continue to prudently manage growth in deposits, utilizing customer sweep programs for mass tort and class action business banking programs. The company opened a Los Angeles branch in 2025 and intends to deepen its BDO coverage in this and other strategic regions.

The payment processing market has been and will continue to be a growth opportunity for the company, as it offers focused and tailored products and services to small businesses nationally. The payment industry grew at a compound annual rate of approximately 8% from 2021 to 2025 with payment volumes or TAM of $12.2 trillion according to company records on U.S. payment industry trends. The company intends to continue to expand its payment processing business. The company's payment processing platform has grown to 93,000 small businesses at December 31, 2025, generating 14% of revenue for the year ended December 31, 2025.

The company's efficiency ratio was 48.6% for the year ended December 31, 2025, compared to 48.74% for 2024. The company's net interest margin was 6.02% for 2025, compared to 6.06% for 2024. The total cost of deposits was 0.99% for the year ended December 31, 2025, anchored by noninterest bearing demand deposits and litigation related escrow funds representing 28% and 60%, respectively, of total deposits.

The company employs 151 full time equivalent individuals at December 31, 2025. The company uses proprietary and industry leading technology to ensure card brand and regulatory compliance, support multiple processing platforms, manage daily risk across 93,000 small business merchants in all 50 states, and perform commercial treasury clearing services for approximately $40 billion in processing volume across 590 million transactions for the year ended December 31, 2025. The company has continued investment in an integrated CRM and loan platforms built on Salesforce and nCino.

The company had no outstanding borrowings as of December 31, 2025. The company had available borrowing capacity with the FHLB of $455.5 million, borrowing capacity with the FRB discount window of $48.1 million, and $29.0 million in aggregate unsecured lines of credit with unaffiliated correspondent banks. The company's board of directors approved a share repurchase program on January 9, 2019, authorizing the purchase of up to 300,000 shares of common stock with no expiration date. The company initiated a regular quarterly dividend on its common stock in 2022.

The company's ten largest bank depositors accounted for, in the aggregate, 25.1% of total deposits as of December 31, 2025. Approximately $685.1 million, or 33%, of total Bank deposits of $2.06 billion, were not FDIC insured. The company has approximately $1.23 billion 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.

The merger with Signature and any future acquisitions could disrupt the company's business and adversely affect results of operations, financial condition and cash flows. The company's New York City multifamily loan portfolio could be adversely impacted by changes in policy legislation or regulation. As of December 31, 2025, 36.7% of the loan portfolio was in New York and the loan portfolio had concentrations of 27.8% in New York City.

A substantial portion of the loan portfolio consists of multifamily real estate loans of $372.8 million ¹ and commercial real estate loans of $107.3 million ², which have a higher degree of risk than other types of loans. Commercial loans totaled $1.25 billion ³, or 70.8% of total loans, including $1.18 billion ⁴ of Commercial Litigation-Related Loans, which present unique credit risks as attorney or law firm revenues can be volatile depending on the timing of court decisions and settlements. The company's ten largest deposit clients account for 25.1% ⁵ of total deposits, and approximately $685.1 million ⁶, or 33%, of total Bank deposits were not FDIC insured. The company has approximately $1.23 billion ⁷ of law firm escrow deposits where management estimates of FDIC insurance coverage may understate the amount of uninsured deposits. The merger with Signature involves risks including potential dilution, as existing shareholders will receive a fixed exchange ratio of 2.63 shares ⁸ of Esquire common stock for each share of Signature common stock, with an aggregate transaction value of approximately $348.4 million ⁹.

Management's message emphasizes the company's unique and dynamic business model, which distinguishes it from other banks and non-bank financial services companies, as demonstrated by comparing performance metrics for the years ended 2025 and 2024. Management highlights that for the year ended December 31, 2025, net income was $50.8 million or $5.87 per diluted share, return on average assets and equity were 2.43% and 19.41%, respectively, net interest margin was 6.02%, and the efficiency ratio was 48.6%. The strategic priorities emphasized for the period ahead include continuing to focus on the litigation community and commercial customers through tailored, innovative solutions and a high-touch relationship model, expanding the payment processing platform, and utilizing bespoke CRM and AI-driven personalization as a catalyst for top-of-funnel lead generation. Management also notes the company remains committed to high-growth markets, having opened a Los Angeles branch in 2025 and intending to deepen BDO coverage in this and other strategic regions.