Esquire Financial Holdings, Inc.

Esquire Financial Holdings, Inc. (the "Company") operates as a financial holding company, primarily through its wholly-owned subsidiary, Esquire Bank, National Association, a full-service commercial bank ¹. The Company focuses on serving the financial needs of the legal and small business communities on a national basis, while also catering to commercial and retail customers in the New York and Los Angeles metropolitan markets ¹. Its business model is anchored by its legal community focus, which generates low-cost core deposits and a diverse asset base, and its payment processing activities for small businesses nationally, which provide a stable source of fee income ¹.

The Company's core business model revolves around generating revenue through tailored banking products and solutions for the legal community and dynamic payment processing solutions for small business owners ¹. A significant portion of its revenue is derived from interest income on loans, particularly higher-yielding litigation-related commercial loans, which are supported by low-cost core operating and escrow deposits from law firms ¹. Noninterest income is primarily generated from its payment processing platform and administrative service payment (ASP) fee income ¹. The Company emphasizes a "branchless" national platform for its litigation and payment processing verticals, utilizing technology for customer acquisition and cash management ¹.

The Company's product and service lines are primarily divided into Litigation Market Commercial Banking and Payment Processing ¹. Litigation Market Commercial Banking offers specialized commercial loans to law firms, including Working Capital Lines of Credit (WC LOCs) totaling $782.2 million ⁴, Case Cost Lines of Credit totaling $209.5 million ⁵, and Term Loans totaling $186.7 million ⁶ as of December 31, 2025. These loans constituted 99.7% of the total Litigation-Related Loan portfolio and 67.0% of the overall loan portfolio ⁷. Consumer Litigation-Related Loans, consisting of post-settlement consumer loans, totaled $3.1 million ⁸, representing 0.3% of the total Litigation-Related Loan portfolio and 0.2% of the overall loan portfolio ⁹. The litigation community represented approximately 78% of the Company's 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 ¹.

The Payment Processing segment provides dynamic and flexible payment processing solutions to small business owners nationally ¹. For the year ended December 31, 2025, payment processing revenues were $20.2 million ¹⁰, which was 13.8% of the Company's total revenue ¹¹. At December 31, 2025, the platform served 93,000 small businesses ¹, processing $39.5 billion in card volume across 590 million transactions ¹². The Company operates this business primarily through a third-party or ISO (Independent Sales Organizations) business model, which is designed to mitigate risks associated with merchant losses ¹.

For the fiscal year ended December 31, 2025, Esquire Financial Holdings, Inc. reported net income of $50.8 million ¹³, or $5.87 per diluted share ¹⁴. Total assets were $2.37 billion ¹⁵, with loans held for investment at $1.76 billion ¹⁶ and total deposits at $2.06 billion ¹⁷. Stockholders' equity stood at $289.6 million ¹⁸. The Company achieved a net interest margin of 6.02% ¹⁹ and an efficiency ratio of 48.6% ²⁰. Cash and cash equivalents were $235.9 million ²¹. The allowance for credit losses was $24.0 million ²², and total nonperforming assets were $8.6 million ²³. The Company had no outstanding borrowings as of December 31, 2025 ¹.

Comparing the year ended December 31, 2025, to the year ended December 31, 2024, net income increased by $7.2 million, or 16.4% ²⁴. Net interest income grew by $21.6 million, or 21.6% ²⁵, to $121.5 million ²⁶. Average loan yields increased by 9 basis points to 7.91% ²⁷, while average loans expanded by $253.1 million, or 20.1% ²⁸, driven by litigation-related loan growth of $253.7 million, or 37.2% ²⁹. The cost of deposits, including noninterest-bearing demand deposits, increased by 8 basis points to 0.99% ³⁰. The provision for credit losses increased by $5.0 million to $9.7 million ³¹, primarily due to $6.6 million in net charge-offs ³², including a $3.3 million commercial loan charge-off and a $2.9 million multifamily loan charge-off ³³. Total noninterest income increased by $185 thousand, or 0.7% ³⁴, to $25.1 million ³⁵, while total noninterest expense increased by $10.4 million, or 17.1% ³⁶, to $71.2 million ³⁷.

During 2025, the Company opened a Los Angeles branch ¹. On March 11, 2026, the Company entered into a merger agreement with Signature Bancorporation, Inc., under which Signature shareholders will receive a fixed exchange ratio of 2.63 shares of Esquire common stock for each share of Signature common stock, equating to approximately $348.4 million in aggregate transaction value ¹. This transaction is subject to regulatory and shareholder approvals ¹. The Company also recognized a $432 thousand gain on certain equity investments for the year ended December 31, 2025 ³⁸.

Management has not issued formal revenue, margin, or EPS guidance for the upcoming period in this filing.

The Company intends to continue focusing its growth in Litigation-Related Loans, which include commercial loans to law firms and, to a lesser extent, consumer lending to attorneys and plaintiffs/claimants ¹. This strategy is supported by placing senior Business Development Officers (BDOs) in key national regions, expanding trade association affiliations, and increasing industry events ¹. Digital initiatives, such as the expansion of customer success stories on its YouTube channel, which surpassed three million views in 2025, also amplify these efforts ¹. The Company's unique products and services, coupled with its thought leadership digital marketing and business development team, are expected to drive commercial loan growth, strong loan yields, and low-cost core deposits ¹.

The payment processing market is also identified as a significant growth opportunity, with the Company offering focused and tailored products and services to small businesses nationally ¹. The payment industry grew at a compound annual rate of approximately 8% from 2021 to 2025, with payment volumes of $12.2 trillion ¹. The Company plans to continue expanding its payment processing business, leveraging its proprietary and industry-leading technology to ensure compliance, support multiple processing platforms, and manage daily risk across its merchant base ¹.

The Company aims to continue prudently managing growth in deposits, utilizing customer sweep programs for its mass tort and class action business banking programs ¹. Deposit growth is supported by robust commercial online cash management technology ¹. The Company's asset-liability management strategy is designed to control and mitigate exposure to interest rate risks, primarily by structuring its balance sheet in the ordinary course of business ¹. The Company does not typically enter into derivative contracts for interest rate risk management but may do so in the future ¹.

The Company continuously updates its systems to support operations and growth, which involves significant costs and risks associated with implementing new systems and integrating them with existing ones ¹. It also outsources some functions to third parties, including core systems processing, web hosting, and deposit processing ¹. The Company is dependent on third parties for processing and clearing and settlement services in its payment processing business ¹.

The Company's planned capital allocation includes maintaining an investment in FHLB stock based on its mortgage-related assets and an investment in Federal Reserve Bank of New York stock equal to six percent of its capital and surplus ¹. The Company had $455.5 million of available borrowing capacity with the FHLB and $48.1 million with the FRB discount window as of December 31, 2025 ¹. Additionally, it had $29.0 million in aggregate unsecured lines of credit with unaffiliated correspondent banks ¹. The Company's overall liquidity position, including cash, borrowing capacity, and available reciprocal client sweep balances, totaled $1.22 billion at December 31, 2025, representing 59.0% of total deposits ¹.

The Company's growth plan includes strategic acquisitions, such as the announced merger with Signature Bancorporation, Inc., which is expected to nearly double the size of the Company ¹. This merger involves the entry into geographic or business markets where the Company may have limited prior experience ¹.

The Company faces several material risks, including increased credit risk due to its intention to grow commercial loans, particularly Litigation-Related Loans, which constituted 70.8% of total loans at $1.25 billion ³⁹ as of December 31, 2025. A substantial portion of the loan portfolio, 27.3% or $489.9 million ⁴⁰, consists of multifamily and commercial real estate loans, which carry a higher degree of risk due to dependence on property operations and sensitivity to real estate market downturns ¹. Consumer loans, totaling $22.8 million ⁴¹ or 1.3% of the loan portfolio, also present risks due to borrower financial stability ¹. A significant concentration of loans and operations in New York, with 36.7% of the loan portfolio in the state and 27.8% in New York City ⁴², makes the business vulnerable to a downturn in the local economy, particularly the real estate market ¹. The allowance for credit losses, at 1.37% of total loans ⁴³ as of December 31, 2025, may not be sufficient to cover actual credit losses, and nonperforming assets totaled $8.6 million ⁴⁴ at the same date ¹. The Company's loan portfolio is unseasoned, with a weighted average age of 3.61 years ⁴⁵, making future performance difficult to predict ¹. Changes in New York City policy legislation or regulation, such as the New York Housing Stability and Tenant Protection Act of 2019, could adversely impact the multifamily loan portfolio ¹. The merger with Signature Bancorporation, Inc. and any future acquisitions could disrupt business operations, incur charges, assume substantial debt, or dilute existing shareholders ¹. A substantial portion of the business is dependent on the legal industry, and changes in this industry could adversely affect growth and profitability ¹. A lack of liquidity, potentially caused by the loss of deposit clients or substantial reduction of deposit balances, could force reliance on more expensive funding sources ¹. Approximately $685.1 million, or 33% ⁴⁶, of total Bank deposits were not FDIC insured as of December 31, 2025, excluding $11.8 million of the Company's deposits held by the Bank ⁴⁷, and management's estimates of FDIC insurance coverage for fiduciary accounts may underreport uninsured deposits ¹. Reputational risk, including negative public perceptions regarding technology security or compliance, could damage the brand ¹. The Company's equity method investment in a third-party sponsored variable interest entity, with a carrying amount of $9.0 million ⁴⁸ and a remaining life of 3.3 years ⁴⁹ as of December 31, 2025, exposes it to losses related to NFL consumer post-settlement loans due to extended duration and potential fraud ¹. Weak economic conditions, inflation, and the risks and challenges presented by Artificial Intelligence may adversely affect the business ¹. The Company's ten largest deposit clients account for 25.1% of total deposits ⁵⁰, posing a concentration risk ¹. Interest rate shifts may reduce net interest income, and operational risks such as fraud, data processing system failures, and reliance on third-party vendors could impair liquidity or disrupt business ¹. The Company operates in a highly competitive industry, facing competition from other financial institutions and financial services providers ¹. Risks related to its payment processing business include merchants or ISOs being unable to satisfy obligations, fraud, and changes in card network rules or fees ¹. As a bank holding company, the sources of funds available are limited, and the highly regulated environment, including compliance with the Bank Secrecy Act and fair lending laws, could adversely affect operations ¹. Changes in accounting standards and reliance on accounting estimates, models, and assumptions also present risks ¹.

Management's message to shareholders emphasizes the Company's foundation for success built on its nationwide branchless litigation and payment processing verticals, supported by senior managers, client service teams, and an inclusive corporate culture ¹. The future success is predicated on continuing to develop and embrace cutting-edge technology to leverage these verticals, differentiating the Company and acting as a catalyst for industry-leading growth and returns ¹. Management explicitly states that the Company's net income was $50.8 million ¹³ or $5.87 per diluted share ¹⁴ for the year ended December 31, 2025, with a net interest margin of 6.02% ¹⁹ and a low cost of funds of 0.99% ³⁰ on deposits. Strategic priorities include continued commitment to the litigation community and commercial customers through tailored, innovative solutions and a high-touch relationship model, underpinned by best-in-class digital technologies like its customer-centric CRM and proprietary content hub "Lawyer IQ" ¹. Furthermore, management intends to fuel expansion through bespoke CRM and AI-driven personalization for lead generation, supporting Business Development Officers (BDOs) in key geographic regions, and enhancing brand awareness initiatives ¹. The Company also plans to continue expanding its payment processing platform ¹.