noodls browser compatibility check

The security settings of your browser are blocking the execution of scripts.

To use noodls, javascript support must be enabled. Please change your browser's security settings to enable javascript.

If you have changed your browser's security settings, you can click here.

related announcements

Company News

Financial Services

Esquire Financial Holdings Inc.

11/09/2026 | Press release | Distributed by Public on 11/09/2026 14:46

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

General

Management's discussion and analysis of financial condition at September 30, 2026 and December 31, 2025 and results of operations for the three and nine months ended September 30, 2026 and 2025 is intended to assist in understanding the financial condition and results of operations of Esquire Financial Holdings, Inc. The information contained in this section should be read in conjunction with the unaudited Consolidated Financial Statements and the notes thereto appearing in Part I, Item 1, of this quarterly report on Form 10-Q and the audited Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.

Cautionary Note Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements, which can be identified by the use of words such as "may," "might," "should," "could," "predict," "potential," "believe," "expect," "attribute," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "goal," "target," "aim," "would," "annualized" and "outlook," or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements include, but are not limited to:

●

statements of our goals, intentions and expectations;

●

statements regarding our business plans, prospects, growth and operating strategies;

●

statements regarding the quality of our loan and investment portfolios; and

●

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this quarterly report.

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, national and 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;

●

the imposition of tariffs or other domestic or international governmental policies impacting the value of the products of our borrowers;

●

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, 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;

●

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 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 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 or reduction in force;

●

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;

●

the possibility that the anticipated benefits of the Merger will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where we do business;

●

the possibility that we may be unable to achieve expected synergies and operating efficiencies in the Merger within the expected timeframes or at all and to successfully integrate Signature's operations with our operations, and that such integration may be more difficult, time consuming or costly than expected;

●

revenues following the Merger may be lower than expected;

●

the ability of key third-party service providers to perform their obligations to us; and

●

other economic, competitive, governmental, legal, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this Quarterly Report on Form 10-Q.

The foregoing factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included in our Annual Report on Form 10-K for the year ended December 31, 2025, as supplemented by subsequent Quarterly Reports on Form 10-Q. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to time, and it is not possible for us to predict those events or how they may affect us. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Signature Merger

The September 30, 2026 financial position includes the acquired Signature assets and assumed liabilities. Results for the three and nine months ended September 30, 2026 include Signature's operations from August 1, 2026 through September 30, 2026. The corresponding 2025 periods do not include Signature's assets and assumed liabilities. Accordingly, changes in balances and operating results reflect both the Merger and changes in the existing business and are not directly comparable without considering the Merger.

Critical Accounting Estimates

A summary of our significant accounting policies is described in Note 1 to the Consolidated Financial Statements included in our Annual Report. Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting estimates are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Management believes that the most critical accounting estimates, which involve the most complex or subjective decisions or assessments, are as follows:

Fair Value of Acquired Loans. In connection with the Signature Merger on August 1, 2026, the Company estimated the merger-date fair values of acquired loans with the assistance of a third-party valuation specialist. Management considers this valuation to be a critical accounting estimate because it involves significant judgment regarding expected future cash flows and market participant assumptions.

Estimated fair values were determined using discounted cash flow analyses incorporating assumptions regarding expected credit losses, prepayments, the timing of collections and discount rates. Discount rates reflected market participant return requirements, including funding costs, capital requirements, servicing costs, liquidity premiums and other applicable risk adjustments. Purchased credit-deteriorated loans were evaluated separately, incorporating assessments of expected collectability, collateral coverage, recovery timing and other loan-specific risk factors.

Different assumptions could materially affect the estimated fair values, resulting goodwill and subsequent recognition of interest income. Higher discount rates or greater expected credit losses would generally reduce estimated fair values. For valuations that remain provisional, adjustments may be recorded during the measurement period as additional information about facts and circumstances existing at the merger-date becomes available. See Note 2, "Business Combination", in the accompanying unaudited Consolidated Interim Financial Statements for additional information.

Allowance for Credit Losses on Loans Held for Investment. Management considers the accounting estimate relating to the allowance for credit losses on loans held for investment to be a critical accounting estimate 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. See Note 1 "Basis of Presentation and Summary of Significant Accounting Policies" in the accompanying unaudited Consolidated Interim Financial Statements for discussion of our allowance for credit losses on loans held for investment policy.

The Company is required under the CECL Standard to estimate and record lifetime credit losses expected to be incurred on such financial instruments over the entire contractual term at the time they are recorded in the financial statements, such as with the funding or purchasing of a loan, or a commitment to lend unless the commitment is unconditionally cancellable. Because this allowance methodology follows a forward-looking lifetime expected loss approach, it is not necessary for a loss event to have been incurred before a credit loss is recognized. The estimation process in determining an appropriate level for the allowance for credit losses requires consideration of past events, current conditions, and reasonable and supportable forecasts, and involves a significant degree of management judgment. The Company determines the allowance for credit losses using methods it believes are appropriate given the characteristics of each loan portfolio and applies these methods consistently over time.

The Company uses a Discounted Cash Flow methodology to calculate the quantitative component of expected credit losses for originated loans evaluated collectively. Effective August 1, 2026, the Company transitioned its legacy loan portfolio from a Weighted Average Remaining Maturity methodology to the Discounted Cash Flow methodology following the Signature Merger and management's reassessment of the estimation methodology appropriate for that portfolio. The model projects loan-level contractual principal and interest cash flows over the contractual term and incorporates expected prepayments or curtailments, forecasted probabilities of default, loss-given-default assumptions, recovery timing and other relevant assumptions. For originated loans, expected cash flows are discounted at the financial asset's effective interest rate. For variable-rate loans, the Company applies its approved and consistently applied

methodology for determining the effective interest rate and projecting contractual cash flows. The quantitative allowance equals the amount by which the amortized cost basis exceeds the present value of cash flows expected to be collected.

For acquired PSLs evaluated collectively, the Company uses a non-discounted expected cash flow methodology. Loan-level projections incorporate contractual repayment terms, expected prepayments or curtailments, probabilities of default, loss-given-default assumptions and reasonable and supportable economic forecasts. Expected losses are calculated by applying credit-loss assumptions to projected principal exposure without discounting. Acquired PCD loans are evaluated individually using borrower-specific expected collections and recovery information. Net deferred fees and costs, purchase premiums and discounts, and other components of amortized cost are incorporated in accordance with the Company's documented model configuration and accounting elections.

Model inputs are based on peer group historical default and loss information derived from FFIEC Call Report data for banks with comparable asset size and loan portfolio characteristics. Probabilities of default are developed from regression models that relate peer default rates to macroeconomic variables, principally the unemployment rate and gross domestic product, using Federal Open Market Committee forecasts. Loss given default is based on peer loss experience. The model projects loan-level contractual cash flows adjusted for prepayment and curtailment assumptions derived from industry benchmark data, probabilities of default, loss given default, and recovery timing of 24 months from charge-off (six months for consumer loans), and discounts expected cash flows at each loan's effective interest rate. Management evaluates the relevance and reliability of historical periods, peer groups, probability-of-default assumptions, loss-given-default assumptions, prepayment or curtailment speeds, recovery timing and other inputs at least annually.

In accordance with the CECL Standard, the Company estimates expected credit losses over the contractual term of a loan, adjusted for expected prepayments. The contractual term of a loan excludes expected extensions, renewals, and modifications unless there is a borrower-held extension or renewal option that is not unconditionally cancelable by the Company. In developing the estimate of expected credit losses, the Company reflects information about past events, current conditions, and reasonable and supportable forecasts. This information includes what is reasonably available without undue cost and effort and may include information sourced internally, externally, or a combination of both.

The Company incorporates current conditions and reasonable and supportable forecasts into its quantitative allowance methodologies for the period over which management can develop or obtain supportable projections. Forecasts may affect expected default timing, loss severity, prepayments, recoveries and other cash flow assumptions. The Company applies a four-quarter reasonable and supportable forecast period using Federal Open Market Committee forecasts of the unemployment rate and gross domestic product, followed by a four-quarter straight-line reversion to historical loss information. The forecast horizon, reversion period, reversion method, economic variables and scenario selection are documented and reviewed at least annually.

Management may adjust the quantitative allowance estimates for current conditions, portfolio risks and forecast considerations that are not fully reflected in the model. Qualitative factors are evaluated by portfolio segment and address changes in lending policies and procedures; national and local economic conditions; changes in the nature, volume and terms of loans; the experience and depth of lending management and staff; trends in delinquencies, risk-rating migration and adversely classified loans; the quality of the loan review system; underlying collateral values; concentrations of credit; and other external factors. The Company also applies a separate commercial and industrial concentration adjustment for unusually large borrower exposures. Qualitative adjustments may be positive or negative and are supported by documented evidence, a defined measurement approach and management approval. Management evaluates each adjustment for overlap with quantitative model inputs to prevent the same risk from being captured more than once. Qualitative adjustments are reviewed at each reporting date and removed or revised when the underlying risk is reflected in the quantitative model or is no longer present.

The Company measures the allowance for credit losses on a collective basis by pooling loans according to similar risk characteristics. When a loan is deemed to no longer share risk characteristics similar to others in the portfolio, the Company evaluates such loans on an individual basis. Management may consider changes to a borrower's circumstances

impacting cash collections, delinquency and non-accrual status, probability of default, industry, or other facts and circumstances when determining whether a loan shares risk characteristics with other loans in a pool.

For a loan that does not share risk characteristics with other loans in a pool and is not collateral dependent, expected credit loss is measured based on the discounted value of the expected future cash flows and the amortized cost of the loan. If an entity determines that foreclosure of the collateral is probable, the CECL Standard requires the entity to measure expected credit losses of collateral dependent loans based on the difference between the current fair value of the collateral, less estimated costs to sell, if applicable, and the amortized cost basis of the financial asset. As of September 30, 2026, there was one collateral dependent multifamily loan secured by real estate totaling $4.4 million, one collateral dependent commercial loan secured by business assets totaling $711 thousand that was individually analyzed, with no associated specific reserve on the Consolidated Statements of Financial Condition. Loans acquired in the Signature Merger that were individually evaluated totaled $3.5 million, including PCD loans of $2.4 million, and had no associated allowance at September 30, 2026. The PCD loans are not collateral dependent and are measured using borrower-specific expected collections. The allowance on these loans at the merger-date was charged off in conjunction with the Merger.

When applying this critical accounting estimate, management's inputs and estimates of the timing and amounts of future losses are subject to significant judgment as these projected cash flows rely upon factors that depend on current or expected future conditions. Management expects there to be differences between actual and estimated results.

Future changes to the allowance for credit losses may be necessary based on changes in economic, market, or other conditions. Changes to estimates could result in a material change in the allowance for credit losses and charges to provision for credit losses would materially decrease the Company's net income. The Company's loan portfolio may experience significant credit losses, which could have a material adverse effect on our operating results.

Change in Allowance Methodology

During the quarter ended September 30, 2026, the Company changed the methodology used to estimate the allowance for credit losses on its legacy loan portfolio from a static pool Weighted Average Remaining Maturity methodology to a Discounted Cash Flow methodology, effective August 1, 2026. The change was made in conjunction with the Company's Merger with Signature and management's reassessment of the estimation methodology appropriate for the company on a prospective basis.

The DCF methodology replaced the Company's historical loss rates used under the WARM methodology with peer-group historical default and loss information, and introduced the probability-of-default regression models, loss-given-default, prepayment and curtailment, and recovery timing assumptions described above. Management determined that DCF better reflects the contractual cash-flow characteristics of the legacy portfolio and future new loans that will be originated by the Company.

Purchased seasoned loan pools from the Signature Merger are closed pools. Loans originated after August 1, 2026 are evaluated in the DCF pools. The acquired pools are evaluated using a non-discounted expected cash flow methodology that uses the same assumptions as the DCF methodology but does not discount expected cash flows. Acquired loans were recorded at fair value, which includes a purchase discount. A discounted methodology would require an effective interest rate that equates each loan's expected cash flows to its purchase price. Measuring on the unpaid principal balance is consistent with how the merger-date allowance was determined under the gross-up approach. It also keeps the remaining noncredit discount, which is recognized in interest income, separate from the allowance.

The change does not indicate that the former methodology was inappropriate when previously applied. Management concluded that the change reflects new information and changing risk characteristics of the loan portfolio resulting from the Signature Merger rather than a correction of an error or a change in accounting principle. The change was accounted for prospectively as a change in accounting estimate beginning August 1, 2026. Prior-period amounts were not restated or presented on a pro forma basis for this change in accounting estimate. The change resulted in no material impact to the allowance for credit losses and the related provision for credit losses in the current period.

During 2026, the composition of the Company's loan portfolio was impacted by the Signature Merger. The acquired portfolio expanded the Company's exposure across commercial and industrial, commercial real estate, multifamily, construction, residential and consumer lending segments. Management considered the characteristics of both legacy loans and acquired Signature loans when estimating expected credit losses and determining the allowance for credit losses at September 30, 2026.

Overview

We are a financial holding company headquartered in Jericho, New York and registered under the Bank Holding Company Act of 1956, as amended. Through our wholly owned bank subsidiary, Esquire Bank, National Association ("Esquire Bank" or the "Bank"), we are a full service commercial bank, with five branch offices in Jericho, NY, Los Angeles, CA, and Chicago, IL, as well as an administrative office in Boca Raton, Florida. The Bank is dedicated to serving the financial needs of the litigation industry and small businesses nationally, as well as commercial and retail customers in the New York, Chicago, and Los Angeles metropolitan areas. The Bank offers tailored financial and payment processing solutions to the litigation community and their clients as well as dynamic and flexible payment processing solutions to small business owners. We also offer traditional banking products for businesses and consumers in our local market areas (a subset of the New York, Los Angeles and Chicago metropolitan markets).

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. Noninterest income currently consists primarily of payment processing fees, administrative service payment ("ASP") fee income and customer related fees and charges. Noninterest expense currently consists primarily of employee compensation and benefits, data processing costs, occupancy and equipment costs and professional and consulting services. 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.

The Company's foundation for success has been our nationwide branch-lite litigation and payment processing verticals supported by our forward-thinking senior managers, outstanding client service teams, and inclusive corporate culture. The future of our success will be the ability to continue developing and embracing cutting-edge technology to significantly leverage these verticals, differentiating us from other technology enabled financial firms and creating the catalyst for industry leading growth and returns.

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 approximately 2.1% of U.S. GDP annually according to the U.S. Chamber of Commerce Institute for Legal Reform ("Tort Costs in America - An Empirical Analysis of Costs and Compensation of U.S. Tort System") published in November 2024 with an estimated total addressable market ("TAM") of $529 billion for 2022. We do not compete directly with non-bank finance companies, the primary funders in this market, and believe there are various and significant barriers to entry including, but not limited to, our clear industry track record for decades, extensive in-house experience, established relationships with respected firms nationally, and unique products tailored to commercial law firms' needs and wants.

We currently have lending clients in 33 states and our larger markets include California, New York and Texas. Our success is tied to our unique ability to couple traditional commercial underwriting with non-traditional asset-based underwriting. Our team understands law firms' contingent case inventory valuation process (as well as traditional hourly billing firms). 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. 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. This unique risk profile translates into a blended 8.81% variable rate asset yield on these commercial loans for the quarter ended September 30, 2026. 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 $1.58 of low-cost core operating and escrow deposits from these law firms through our branch-lite

platform, fueling and funding additional growth in our other asset classes. We believe our extremely low historic delinquency rates and low charge-off rates clearly demonstrate our strong underwriting process and expertise in the litigation 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 $1.56 billion, or 39%, of total deposits at September 30, 2026. 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. 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 ("OBS") commercial litigation funds of $775.5 million at September 30, 2026, makes this litigation vertical a highly desirable core low-cost funding platform fueling bank-wide growth.

Midwest Middle Market Commercial Banking. We are well positioned and maintain long-standing relationships to provide core banking services in the Chicago metropolitan and greater Midwest market, which includes a large, diverse base of privately held companies, family-owned businesses, entrepreneurs, and professional service firms that are underserved by large national and regional banks that are more transaction-oriented and less relationship-focused, as well as smaller community banks that provide an opportunity for us to differentiate through our commercial banking expertise, talent and product depth. In addition to deposit and treasury management services, lending products provided include revolving lines of credit, borrowing base facilities, term loans, equipment financing, acquisition financing and other customized business credit solutions.

Payment Processing. The payment processing (merchant acquiring) market will continue to be a growth opportunity for our company, as we offer focused and tailored products and services to small businesses nationally. The payment industry grew approximately 8% on a compound annual growth rate from 2021 to 2025 with payment volumes or TAM of $12.2 trillion according to company records on U.S. payment industry trends. Couple this with the fact that there are less than 100 acquiring financial institutions in the U.S., this vertical represents a growth opportunity for our Company. We believe there are various and significant barriers to entry to this market including, but not limited to, our industry track record, extensive in-house experience, strong relationships with non-bank acquirers, and our unique approach to servicing these small business merchants and their respective verticals. We use proprietary and industry leading/customized technology to ensure card brand and regulatory compliance, to support multiple processing platforms, to manage daily risk across approximately 94,000 small business merchants in all 50 states, and to perform commercial treasury clearing services for approximately $11 billion in volume across 152 million in transactions in the quarter ended September 30, 2026.

Proprietary Technology. We are a digital-first organization utilizing highly specialized, proprietary technology to drive growth and maintain industry-leading client retention. Built upon a foundation of safety and soundness, our core banking platforms are uniquely customized to align with our clients in the legal industry. This specialized focus ensures our clients have access to tailored banking solutions that foster relationship building and long-term brand loyalty. Furthermore, our continued investment in an integrated CRM and loan platforms - built on Salesforce and nCino - enables superior client service and precision marketing on a national scale.

The success of our national litigation and payment processing verticals coupled with our focus on financial technology has led to industry leading performance. The addition of our Midwest commercial banking platform strengthens our growth potential by adding an established franchise with experienced bankers / business development officers ("BDOs") with established relationships in the nation's fourth largest market for contingent fee plaintiff law firms. Coupling our performance with strong balance sheet management including, but not limited to, loan portfolio diversification, an asset sensitive balance sheet with approximately 62% of our loans being variable rate and tied to prime (with interest rate floors in place on 75% of our variable rate loan portfolio), solid credit metrics, a stable low cost deposit base, and strong available liquidity of $1.63 billion, positions our Company for future growth and success.

Comparison of Financial Condition at September 30, 2026 and December 31, 2025

Assets. Our total assets were $4.81 billion at September 30, 2026, an increase of $2.44 billion, or 103.1%, from $2.37 billion at December 31, 2025, due to $1.90 billion from the Signature Merger, organic growth in loans held for investment of $285.9 million, or 16.3%, and organic increases in cash and cash equivalents of $130.8 million, or 55.5%.

Loan Portfolio Analysis. At September 30, 2026, loans, net of deferred fees and unearned premiums, were $3.43 billion, or 86.1% of total deposits, compared to $1.76 billion, or 85.2% of total deposits, at December 31, 2025. The growth in loans was primarily attributable to $1.38 billion from the Merger with Signature as well as organic growth of $285.9 million driven by net production in commercial loans and to a lesser extent, multifamily and commercial real estate loans. Commercial loans increased $888.9 million, or 71.4%, to $2.13 billion at September 30, 2026 from $1.25 billion at December 31, 2025. Commercial loan growth was primarily driven by $667.6 million in acquired loans from the Merger, as well as $221.3 million, or 17.8%, of organic growth. Commercial Litigation-Related loan growth, all of which was organic, totaled $276.1 million, or 23.4%, to $1.45 billion at September 30, 2026 from $1.18 billion at December 31, 2025. Commercial real estate loans increased $426.8 million, or 397.8%, to $534.1 million at September 30, 2026 from $107.3 million at December 31, 2025. Commercial real estate loan growth was primarily driven by $405.9 million in acquired loans from the Merger, as well as $20.9 million, or 19.4%, of organic growth. Multifamily loans increased $82.8 million, or 22.2%, to $455.6 million at September 30, 2026 from $372.8 million at December 31, 2025. Multifamily loan growth was primarily driven by $42.8 million in acquired loans from the Merger, as well as $39.9 million, or 10.7%, of organic growth. Consumer loans increased $136.9 million, or 601.6%, to $159.7 million at September 30, 2026 from $22.8 million at December 31, 2025. Consumer loan growth was primarily driven by $110.9 million in acquired loans from the Merger, as well as $26.1 million, or 114.5%, of organic growth. Construction loans totaled $99.3 million at September 30, 2026 and there were no construction loans at December 31, 2025. Construction loan growth was entirely driven by acquired loans from the Merger. 1-4 family loans increased $32.3 million, or 328.1%, to $42.1 million at September 30, 2026 from $9.8 million at December 31, 2025, primarily driven by the Merger.

Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated:


		September 30,					December 31,
		2026					2025
		Amount			Percent		Amount			Percent

		(Dollars in thousands)
Real estate:
Multifamily		$	455,550		13.3	%	$	372,800		21.2	%
Commercial real estate			534,084		15.6			107,293		6.1
1 - 4 family			42,101		1.2			9,835		0.6
Construction			99,286		2.9			-		-
Total real estate			1,131,021		33.0			489,928		27.9
Commercial			2,134,484		62.4			1,245,555		70.8
Consumer			159,698		4.6			22,762		1.3
Total loans held for investment		$	3,425,203		100.0	%	$	1,758,245		100.0	%
Deferred origination costs, net of fees			334					182
Allowance for credit losses			(44,677)					(24,022)
Loans held for investment, net		$	3,380,860				$	1,734,405

The following table sets forth the composition of our held for investment Litigation-Related Loan portfolio by type of loan at the dates indicated:


		September 30,						December 31,
		2026						2025
		Amount			Percent			Amount			Percent

		(Dollars in thousands)
Litigation-Related Loans:
Commercial Litigation-Related:
Working capital lines of credit		$	931,492		63.9	%		$	782,182		66.2	%
Case cost lines of credit			275,210		18.9				209,469		17.7
Term loans			247,748		17.0				186,674		15.8
Total Commercial Litigation-Related			1,454,450		99.8				1,178,325		99.7
Consumer Litigation-Related:
Post-settlement consumer loans			3,233		0.2				3,130		0.3
Total Consumer Litigation-Related			3,233		0.2				3,130		0.3
Total Litigation-Related Loans		$	1,457,683		100.0	%		$	1,181,455		100.0	%

At September 30, 2026, our Litigation-Related loans, which include commercial and consumer lending to attorneys, law firms and plaintiffs/claimants, totaled $1.46 billion, or 42.6% of our total loan portfolio, compared to $1.18 billion, or 67.2% of our total loan portfolio at December 31, 2025. The decrease in Litigation-Related loans as a percentage of our total loan portfolio at September 30, 2026 when compared to December 31, 2025, was driven by the merger with Signature. We also had Commercial Litigation-Related committed and uncommitted undrawn lines of credit totaling $99.6 million and $1.01 billion, respectively, at September 30, 2026 compared to $106.9 million and $797.5 million, respectively, at December 31, 2025.

Litigation-Related post-settlement consumer loans increased $103 thousand to $3.2 million as of September 30, 2026, from $3.1 million as of December 31, 2025.

Debt Securities Portfolio. Securities available-for-sale increased $212.2 million, or 86.1%, to $458.7 million at September 30, 2026 from $246.5 million at December 31, 2025, due to net purchases of $276.7 million primarily as a result of the Signature Merger, offset by portfolio amortization of $51.0 million and increases in unrealized losses of $16.4 million. Concurrent with the Merger, the Company sold $340.0 million of securities available-for-sale, net of paydowns, acquired from Signature and reinvested the proceeds into higher yielding securities that align with the Company's current portfolio. Securities held-to-maturity decreased $6.2 million, or 10.3%, to $54.0 million at September 30, 2026 from $60.2 million at December 31, 2025, driven by portfolio amortization.

Funding. Total deposits increased $1.91 billion, or 92.8% to $3.98 billion at September 30, 2026 from $2.06 billion at December 31, 2025, primarily as a result of the Signature Merger which contributed $1.65 billion as well as organic growth totaling $263.8 million, or 12.8%, with the NOW/interest on lawyer trust accounts ("IOLTA") and money market categories totaling $154.2 million and $222.7 million, respectively, offset by noninterest bearing demand decreasing $93.9 million. We remain focused on building full-service commercial banking relationships through lending, payment processing and tailored treasury management solutions, with deposit growth driven primarily by our client relationships rather than rate competition. The Merger with Signature strengthens this strategy by adding an established, relationship-focused commercial banking franchise with a diversified, low-cost core deposit base in the Chicago and Midwest markets. The Merger broadened our funding sources, reduced our reliance on litigation-related deposits and enhanced our capacity to support continued growth across our national platforms. Core deposits, which we define as total deposits excluding time deposits, totaled $3.91 billion at September 30, 2026, or 98.4% of total deposits, compared to $2.06 billion or 99.7% of total deposits at December 31, 2025. Litigation and payment processing deposits represent $2.29 billion, or 57.6%, of total deposits at September 30, 2026.

Our deposit strategy focuses on building full-service commercial banking relationships through lending, payment processing and tailored treasury management solutions, with deposit growth driven primarily by our client relationships rather than rate competition. Our longer duration IOLTA, escrow and settlement deposits represent $1.56 billion, or 39.3%,

of total deposits. As of September 30, 2026, uninsured deposits were $1.67 billion, or 42.1%, of our total deposits, excluding $24.1 million of the Company's deposits held at the Bank. Approximately 50% of our uninsured deposits represent clients with full commercial relationship banking with us including, but not limited to, commercial loans, payment processing, and various commercial service-oriented relationships including law firm operating accounts, law firm IOLTA/escrow accounts, merchant reserves, ISO reserves, ACH processing, and custodial accounts.

Due to the nature of our larger mass tort and class action settlements related to the litigation vertical, we participate in FDIC insured sweep programs as well as treasury secured money market funds. As of September 30, 2026, OBS sweep funds totaled approximately $775.5 million, of which approximately $255.4 million, or 32.9%, was available to be swept onto our balance sheet as reciprocal client relationship deposits. Our core low-cost deposit growth and off-balance sheet client funds continue to clearly demonstrate our highly efficient, full service commercial relationships and tech-enabled cash management platform on a national basis.

At September 30, 2026, we had the ability to borrow, on a secured basis, up to $823.2 million from the Federal Home Loan Bank of New York and $42.0 million from the Federal Reserve Bank of New York discount window. At September 30, 2026, we also had $39.0 million in aggregate unsecured lines of credit with unaffiliated correspondent banks. At September 30, 2026 we had a $2.2 million outstanding borrowing with the FHLB of Chicago and $7.0 million of subordinated debt assumed as a result of the Merger. Historically, we have not leveraged our balance sheet to generate earnings and have always utilized core client deposits to fund our asset growth and related earnings.

Stockholders' Equity. Total stockholders' equity increased $497.0 million to $786.6 million at September 30, 2026, from $289.6 million at December 31, 2025, primarily due to equity consideration of $466.1 million as a result of the Signature Merger, as well as net income of $42.7 million, and amortization of share-based compensation of $5.5 million, partially offset by dividends declared to common stockholders of $5.9 million and other comprehensive loss of $12.2 million, as unrealized losses on our securities available-for-sale increased due to fluctuations in short-term market interest rates.

Asset Quality. Nonperforming assets totaled $9.6 million as of September 30, 2026, and consisted of five nonperforming loans totaling $8.6 million and one property acquired in the Signature Merger in OREO totaling $1.0 million. Nonperforming assets totaled $8.6 million as of December 31, 2025 and consisted entirely of nonperforming loans. Nonperforming loans at September 30, 2026 included two legacy Esquire loans totaling $5.1 million, and three acquired Signature nonperforming loans totaling $3.5 million. These loans were individually evaluated based on borrower-specific credit information and expected recoveries and their carrying amount is deemed collectible. In the second quarter, we placed a multifamily loan on nonaccrual totaling $4.4 million, net of a $1.6 million charge-off.

In the first quarter, we foreclosed on the property securing a nonaccrual multifamily loan (totaling $7.8 million), recorded it as OREO, recorded a charge-off totaling $3.2 million (consisting of principal and certain costs to perfect its lien), and sold the OREO to an unrelated third party.

The allowance for credit losses was $44.7 million, or 1.30% of total loans, as of September 30, 2026, as compared to $24.0 million, or 1.37% of total loans at December 31, 2025. The increase in the allowance for credit losses primarily related to the Merger with Signature, and to a lesser extent, organic loan growth. Based on management's evaluation of current credit risk in our loan portfolio, the Signature Merger, increases in the general reserves considering loan growth, loan composition, and the current uncertain economic and short-term interest rate environment, management believes the allowance for credit losses is adequate at September 30, 2026.

At September 30, 2026, there were $22.5 million in special mention loans and $8.6 million in substandard loans, compared to $12.3 million and $8.6 million, special mention and substandard loans, respectively, as of December 31, 2025. The $10.2 million increase in special mention balances relates to acquired loans as a result of the Merger. Substandard loans remained flat as the above mentioned substandard multifamily loan totaling $7.8 million at December 31, 2025 was charged-off and sold in the first quarter, offset by the above mentioned $4.4 million multifamily loan in the second quarter of 2026 in addition to $3.5 million of acquired nonperforming loans. The ratio of nonperforming loans to total loans and total assets was 0.25% and 0.18%, respectively, as of September 30, 2026, as compared to 0.49% and

0.36%, respectively, as of December 31, 2025. The allowance for credit losses to nonperforming loans was 520% as of September 30, 2026, as compared to 280% as of December 31, 2025.

Average Balance Sheets and Rate/Volume Analysis

The following tables present average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for periods indicated. The average balances are daily averages and, for loans, include both performing and nonperforming balances. Interest income on loans includes the effects of net premium amortization and net deferred loan origination fees accounted for as yield adjustments. No tax-equivalent yield adjustments have been made as we have no tax exempt investments.


		Three Months Ended September 30,
		2026								2025
		Average						Average		Average						Average
		Balance			Interest			Yield/Cost		Balance			Interest			Yield/Cost

								(Dollars in thousands)
INTEREST EARNING ASSETS
Loans, held for investment		$	2,892,413		$	55,207		7.57	%	$	1,532,484		$	30,839		7.98	%
Securities, includes restricted stock			479,845			4,884		4.04	%		337,705			3,244		3.81	%
Interest earning cash and other			328,772			3,047		3.68	%		189,418			2,048		4.29	%
Total interest earning assets			3,701,030			63,138		6.77	%		2,059,607			36,131		6.96	%

NONINTEREST EARNING ASSETS			299,758								74,791

TOTAL AVERAGE ASSETS		$	4,000,788							$	2,134,398

INTEREST BEARING LIABILITIES

Savings, NOW, Money Market deposits		$	2,327,225		$	9,132		1.56	%	$	1,275,061		$	4,739		1.47	%
Time deposits			45,239			417		3.66	%		6,092			52		3.39	%
Total interest bearing deposits			2,372,464			9,549		1.60	%		1,281,153			4,791		1.48	%
Borrowings			6,134			83		5.37	%		42			1		9.45	%
Total interest bearing liabilities			2,378,598			9,632		1.61	%		1,281,195			4,792		1.48	%

NONINTEREST BEARING LIABILITIES
Demand deposits			966,305								568,107
Other liabilities			31,474								17,341
Total noninterest bearing liabilities			997,779								585,448
Stockholders' equity			624,411								267,755

TOTAL AVG. LIABILITIES AND EQUITY		$	4,000,788							$	2,134,398
Net interest income					$	53,506							$	31,339
Net interest spread								5.16	%							5.48	%
Net interest margin								5.74	%							6.04	%
Deposits (including nonint. demand deposits)		$	3,338,769		$	9,549		1.13	%	$	1,849,260		$	4,791		1.03	%


		Nine Months Ended September 30,
		2026								2025
		Average						Average		Average						Average
		Balance			Interest			Yield/Cost		Balance			Interest			Yield/Cost

		(Dollars in thousands)
INTEREST EARNING ASSETS
Loans, held for investment		$	2,184,198		$	125,922		7.71	%	$	1,463,667		$	86,411		7.89	%
Securities, includes restricted stock			379,554			11,108		3.91	%		332,872			9,413		3.78	%
Interest earning cash and other			237,249			6,442		3.63	%		165,824			5,356		4.32	%
Total interest earning assets			2,801,001			143,472		6.85	%		1,962,363			101,180		6.89	%

NONINTEREST EARNING ASSETS			152,358								68,370

TOTAL AVERAGE ASSETS		$	2,953,359							$	2,030,733

INTEREST BEARING LIABILITIES

Savings, NOW, Money Market deposits		$	1,789,012		$	19,591		1.46	%	$	1,196,256		$	12,748		1.42	%
Time deposits			20,070			534		3.56	%		7,628			227		3.98	%
Total interest bearing deposits			1,809,082			20,125		1.49	%		1,203,884			12,975		1.44	%
Borrowings			2,204			89		5.40	%		42			3		9.55	%
Total interest bearing liabilities			1,811,286			20,214		1.49	%		1,203,926			12,978		1.44	%

NONINTEREST BEARING LIABILITIES
Demand deposits			709,641								555,235
Other liabilities			23,229								16,796
Total noninterest bearing liabilities			732,870								572,031
Stockholders' equity			409,203								254,776

TOTAL AVG. LIABILITIES AND EQUITY		$	2,953,359							$	2,030,733
Net interest income					$	123,258							$	88,202
Net interest spread								5.36	%							5.45	%
Net interest margin								5.88	%							6.01	%
Deposits (including nonint. demand deposits)		$	2,518,723		$	20,125		1.07	%	$	1,759,119		$	12,975		0.99	%

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. The table distinguishes between: (1) changes attributable to volume (changes in volume multiplied by the prior period's rate); (2) changes attributable to rate (change in rate multiplied by the prior year's volume); and (3) total increase (decrease) (the sum of the previous columns). Changes attributable to both volume and rate are allocated ratably between the volume and rate categories.


		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2026 vs. 2025								2026 vs. 2025
		Increase					Total			Increase						Total
		(Decrease) due to					Increase			(Decrease) due to						Increase
		Volume		Rate			(Decrease)			Volume			Rate			(Decrease)

		(In thousands)
Interest earned on:
Loans held for investment		$	26,250	$	(1,883)		$	24,367		$	41,585		$	(2,075)		$	39,510
Securities, includes restricted stock			1,390		251			1,641			1,357			339			1,696
Interest earning cash and other			1,325		(326)			999			2,039			(953)			1,086
Total interest income			28,965		(1,958)			27,007			44,981			(2,689)			42,292

Interest paid on:
Savings, NOW, money market deposits			4,004		389			4,393			6,483			360			6,843
Time deposits			355		10			365			333			(26)			307
Total deposits			4,359		399			4,758			6,816			334			7,150
Borrowings			82		-			82			87			(1)			86
Total interest expense			4,441		399			4,840			6,903			333			7,236
Change in net interest income		$	24,524	$	(2,357)		$	22,167		$	38,078		$	(3,022)		$	35,056

Comparison of Operating Results for the Three Months Ended September 30, 2026 and 2025

General. Net income increased $3.4 million, or 24.4%, to $17.5 million for the three months ended September 30, 2026 from $14.1 million for the three months ended September 30, 2025. The increase resulted from a $22.2 million increase in net interest income, partially offset by a $17.6 million increase in noninterest expense, and a $2.7 million increase in income tax expense.

Net Interest Income. Net interest income increased $22.2 million, or 70.7%, to $53.5 million for the three months ended September 30, 2026 from $31.3 million for the three months ended September 30, 2025, due to a $27.0 million increase in interest income, partially offset by a $4.8 million increase in interest expense.

Our net interest margin decreased 30 basis points to 5.74%, primarily due to the impact of the Signature Merger. The resilience of our combined net interest margin reflects the strength of both the legacy Esquire franchise and the Signature acquired net interest earning assets at fair value, driving industry leading returns. Our net interest margin was positively impacted by approximately 6 basis points in the current quarter as the acquired interest-earning assets and interest-bearing liabilities of Signature, at fair value, impacted the combined net interest margin for two out of the three months in the current quarter. Average loan yields decreased 41 basis points to 7.57%, primarily due to the composition of the acquired loans in the Merger. Average loans increased $1.36 billion (approximately $903.9 million related to the Signature Merger), or 88.7%, to $2.89 billion, with the remaining organic growth led by our litigation-related loans totaling $420.0 million, or 44.2%, to $1.37 billion in the current quarter. Average securities increased $142.1 million, or 42.1%, to $479.8 million with yields increasing 23 basis points to 4.04% with both increases related to the Signature Merger. Average deposits increased $1.49 billion ($1.08 billion related to the Signature Merger), or 80.6%, to $3.34 billion. We continue to generate core organic deposit growth led by our litigation-related (both IOLTA/NOW and money market) growth totaling $398.5 million, or 31.8%. Our cost of deposits, including noninterest bearing demand deposits, increased 10 basis points to 1.13%, primarily due to the Signature Merger.

Interest Income. Interest income increased $27.0 million, or 74.7%, to $63.1 million for the three months ended September 30, 2026 from $36.1 million for the three months ended September 30, 2025 and was attributable to increases in income on loans, securities and interest earning cash.

Loan interest income increased $24.4 million, or 79.0%, to $55.2 million for the three months ended September 30, 2026 from $30.8 million for the three months ended September 30, 2025. This increase was attributable to a $1.36 billion, or 88.7%, increase in the average loan balance primarily due to $903.9 million related to the Signature Merger, with the remaining organic growth led by our litigation-related loans totaling $420.0 million, or 44.2%, to $1.37 billion. The increase in loan interest income was driven by an increase of $26.3 million related to growth in average loan volumes, led by Merger and litigation-related commercial loan growth, offset by $1.9 million due to a decrease in average loan rates. Overall, the commercial loan portfolio average balance increased $818.9 million to $1.85 billion, driving average commercial loan yields to 8.38% for the three months ended September 30, 2026.

Securities interest income increased $1.6 million, or 50.6%, to $4.9 million in the current quarter with a $1.4 million increase attributable to average volume increases, as well as an increase of $251 thousand attributable to increases in average rate, with both increases related to the Signature Merger. Average securities increased $142.1 million, or 42.1%, to $479.8 million, as a result of the Merger, with a securities to assets ratio of 11% at September 30, 2026.

Income on interest earning cash increased $1.0 million to $3.0 million for the three months ended September 30, 2026 with a $1.3 million increase attributable to average volume increases (funded with core deposits), offset by a $326 thousand decrease due to decreases in short-term rates. Average interest earning cash balances increased $139.4 million, or 73.6%, to $328.8 million, primarily as a result of the Merger.

Interest Expense. Interest expense increased $4.8 million, or 101.0%, to $9.6 million for the three months ended September 30, 2026 from $4.8 million for the three months ended September 30, 2025, with $4.4 million attributable to increases in average deposit balances (primarily related to the Merger and commercial money market and litigation related escrow or IOLTA), as well as an increase of $399 thousand attributable to decreases in rate (primarily money market). Average deposits increased $1.49 billion ($1.08 billion related to the Signature Merger), or 80.6%, to $3.34 billion. We continue to generate core organic deposit growth led by our litigation-related (both IOLTA/NOW and money market) growth totaling $398.5 million, or 31.8%.

Provision for Credit Losses. Our provision for credit losses was $1.8 million for the three months ended September 30, 2026, an increase of $50 thousand from the provision for the three months ended September 30, 2025. As of September 30, 2026, our allowance to loans ratio was 1.30%, as compared to 1.37% in the prior year quarter. Based on management's evaluation of current credit risk in our loan portfolio, including the acquired loans from the Signature Merger, management believes the allowance for credit losses is adequate at September 30, 2026.

Noninterest Income. Noninterest income information is as follows:


		Three Months Ended
		September 30,						Change
		2026			2025			Amount			Percent

		(Dollars in thousands)
Payment processing fees:
Payment processing income		$	5,258		$	4,900		$	358		7.3	%
ACH income			186			169			17		10.1
Total payment processing fees			5,444			5,069			375		7.4
Customer related fees, service charges and other:
Administrative service income			1,052			731			321		43.9
Other			1,389			433			956		220.8
Total customer related fees, service charges and other			2,441			1,164			1,277		109.7
Total noninterest income		$	7,885		$	6,233		$	1,652		26.5	%

Total payment processing fees were $5.4 million for the quarter ended September 30, 2026, an increase of $375 thousand compared to the prior year quarter, as fee income growth has been muted in the legacy Esquire payment processing platform, primarily due to changes in our overall merchant risk profile and merchant composition. Payment processing volumes for the legacy Esquire credit and debit card processing platform increased $416.0 million, or 4.1%, to $10.5 billion while transaction volume totaled 152.2 million for the current quarter. We continue to focus on the expansion of merchant sales channels through our current and future ISOs, new merchant originations, active management of our merchant risk profiles, potential commercial clients in the Chicago and Midwest markets from our Signature Merger, and by expanding our technology and other resources in the payment vertical. The Company utilizes proprietary and industry leading/customized technology to ensure card brand and regulatory compliance, to support multiple processing platforms, to manage daily risk across 94,000 small business merchants in all 50 states, and to perform commercial treasury clearing services for $10.5 billion in volume across 152.2 million transactions in the current quarter. ASP fees totaled $1.1 million, an increase of $321 thousand from the prior year quarter, and are directly impacted by the average balance of OBS sweep funds as well as current short-term market interest rates. Other customer related fees and services charges totaling $1.4

million are primarily related to fee income generated by Signature's existing banking platform and related commercial client base.

Noninterest Expense. Noninterest expense information is as follows:


		Three Months Ended
		September 30,						Change
		2026			2025			Amount			Percent

		(Dollars in thousands)
Noninterest expense:
Employee compensation and benefits		$	15,958		$	10,852		$	5,106		47.1	%
Occupancy and equipment			1,568			1,153			415		36.0
Professional and consulting services			1,316			1,471			(155)		(10.5)
FDIC and regulatory assessments			491			284			207		72.9
Advertising and marketing			1,164			974			190		19.5
Travel and business relations			475			488			(13)		(2.7)
Data processing			2,899			2,272			627		27.6
Merger expenses			8,887			210			8,677		4,131.9
Amortization of core deposit intangible			1,827			-			1,827		NA
Other operating expenses			1,382			656			726		110.7
Total noninterest expense		$	35,967		$	18,360		$	17,607		95.9	%

Noninterest expense increased primarily due to the Signature Merger, including two months of its operating expenses totaling $5.1 million following the August 1, 2026 closing, $8.9 million of merger expenses, and $1.8 million of core deposit intangible amortization. Employee compensation and benefits costs increased $5.1 million (primarily related to the Signature Merger), or 47.1%, to $16.0 million, reflecting the addition of Signature's personnel and continued investment in our employees across all departments as well as technology to primarily support our national litigation franchise. Other noninterest expenses increased $2.0 million (primarily related to the Signature Merger) to $9.3 million, reflecting the expanded operating footprint and infrastructure of the combined company, together with ongoing investment in business development, client service and risk management.

Income Tax Expense. We recorded income tax expense of $6.1 million for the three months ended September 30, 2026, reflecting an effective tax rate of 26.0%, compared to $3.4 million, or 19.5%, for the three months ended September 30, 2025. The increase was primarily due to certain incremental discrete tax benefits related to share-based compensation in the prior year quarter.

Comparison of Operating Results for the Nine months Ended September 30, 2026 and 2025

General. Net income increased $5.3 million, or 14.2%, to $42.7 million for the nine months ended September 30, 2026 from $37.4 million for the nine months ended September 30, 2025. The increase resulted from a $35.1 million increase in net interest income, partially offset by a $25.6 million increase in noninterest expense, and a $5.3 million increase in income tax expense.

Net Interest Income. Net interest income increased $35.1 million, or 39.7%, to $123.3 million for the nine months ended September 30, 2026 from $88.2 million for the nine months ended September 30, 2025, due to a $42.3 million increase in interest income, partially offset by a $7.2 million increase in interest expense.

Our net interest margin decreased 13 basis points to 5.88%, primarily from the impact of the Signature Merger. Average loan yields decreased 18 basis points to 7.71%, primarily due to the composition of the acquired loans in the Merger, while average loans increased $720.5 million ($304.6 million related to the Signature Merger), or 49.2%, to $2.18 billion, with average legacy litigation-related loan growth totaling $393.7 million, or 44.4%. Average securities increased $46.7 million to $379.6 million with yields increasing 13 basis points to 3.91%, with both increases related to the Signature Merger. Average deposits increased $759.6 million ($363.0 million related to the Signature Merger), or 43.2%, to $2.52 billion. We continue to generate core organic deposit growth, led by our litigation-related (both IOLTA/NOW and money market) growth totaling $368.4 million, or 31.3%. Our cost of deposits, including noninterest bearing demand deposits, increased 8 basis points to 1.07% primarily due to the Signature Merger.

Interest Income. Interest income increased $42.3 million, or 41.8%, to $143.5 million for the nine months ended September 30, 2026 from $101.2 million for the nine months ended September 30, 2025, and was attributable to increases in income on loans, securities and interest earning cash.

Loan interest income increased $39.5 million, or 45.7%, to $125.9 million for the nine months ended September 30, 2026 from $86.4 million for the nine months ended September 30, 2025. This increase was attributable to a $720.5 million, or 49.2%, increase in the average loan balance primarily due to $304.6 million related to the Signature Merger, with the remaining organic growth led by our litigation-related loans totaling $393.7 million, or 44.3%, to $1.28 billion. The increase in loan interest income was driven by an increase of $41.6 million related to growth in average loan volumes, led by Merger and litigation-related commercial loan growth, offset by $2.1 million due to a decrease in average loan rates. Overall, the commercial loan portfolio average balance increased $500.8 million to $1.48 billion, driving average commercial loan yields to 8.72% for the nine months ended September 30, 2026.

Securities interest income increased $1.7 million, or 18.0%, to $11.1 million for the nine months ended September 30, 2026, with a $1.4 million increase attributable to average volume increases, as well as an increase of $339 thousand attributable to increases in average rate, with both increases related to the Signature Merger. Average securities increased $46.7 million, or 14.0%, to $379.6 million, as a result of the Merger.

Income on interest earning cash increased $1.1 million to $6.4 million for the nine months ended September 30, 2026 with a $2.0 million increase attributable to average volume increases (funded with core deposits), offset by a $953 thousand decrease due to decreases in short-term rates. Average interest earning cash balances increased $71.4 million, or 43.0%, to $237.2 million, primarily as a result of the Merger.

Interest Expense. Interest expense increased $7.2 million, or 55.8%, to $20.2 million for the nine months ended September 30, 2026 from $13.0 million for the nine months ended September 30, 2025, with $6.9 million attributable to increases in average deposit balances (primarily related to the Merger and commercial money market and litigation related escrow or IOLTA), as well as an increase of $334 thousand attributable to decreases in rate (primarily money market). Average deposits increased $759.6 million ($363.0 million related to the Signature Merger), or 43.2%, to $2.52 billion. We continue to generate core organic deposit growth led by our litigation-related (both IOLTA/NOW and money market) growth totaling $368.4 million, or 31.3%.

Provision for Credit Losses. Our provision for credit losses was $7.4 million for the nine months ended September 30, 2026, an increase of $625 thousand from the provision for the nine months ended September 30, 2025. As of September

30, 2026, our allowance to loans ratio was 1.30%. Based on management's evaluation of current credit risk in our loan portfolio, management believes the allowance for credit losses is adequate at September 30, 2026.

Noninterest Income. Noninterest income information is as follows:


		Nine Months Ended
		September 30,						Change
		2026			2025			Amount			Percent

		(Dollars in thousands)
Payment processing fees:
Payment processing income		$	15,178		$	14,600		$	578		4.0	%
ACH income			535			488			47		9.6
Total payment processing fees			15,713			15,088			625		4.1
Customer related fees, service charges and other:
Administrative service income			3,281			2,254			1,027		45.6
Gain on equity investment			-			432			(432)		(100.0)
Other			1,729			1,187			542		45.7
Total customer related fees, service charges and other			5,010			3,873			1,137		29.4
Total noninterest income		$	20,723		$	18,961		$	1,762		9.3	%

Total payment processing fees were $15.7 million for the nine months ended September 30, 2026, an increase of $625 thousand compared to 2025, as growth in the legacy Esquire payment processing income has been muted, primarily due to changes in our overall merchant risk profile and merchant composition. Payment processing volumes for the legacy Esquire credit and debit card processing platform increased $1.3 billion, or 4.3%, to $30.8 billion while transaction volume totaled 442.1 million for the current nine months. ASP fees totaled $3.3 million, an increase of $1.0 million from the same period in 2025, a direct result of the average balance of OBS sweep funds. In 2025, we recognized a $432 thousand gain on the sale of a fintech investment.

Noninterest Expense. Noninterest expense information is as follows:


		Nine Months Ended
		September 30,						Change
		2026			2025			Amount			Percent

		(Dollars in thousands)
Noninterest expense:
Employee compensation and benefits		$	40,784		$	31,133		$	9,651		31.0	%
Occupancy and equipment			4,168			3,453			715		20.7
Professional and consulting services			3,327			4,026			(699)		(17.4)
FDIC and regulatory assessments			1,121			847			274		32.3
Advertising and marketing			3,166			2,636			530		20.1
Travel and business relations			1,052			1,097			(45)		(4.1)
Data processing			7,671			6,252			1,419		22.7
Merger Expenses			11,229			210			11,019		5,247.1
Amortization of core deposit intangible			1,827			-			1,827		NA
Other operating expenses			3,384			2,516			868		34.5
Total noninterest expense		$	77,729		$	52,170		$	25,559		49.0	%

Other noninterest expenses increased $3.1 million to $23.9 million (primarily related to the Signature Merger), reflecting the expanded operations of the combined company and continued investment to support organic growth.

Income Tax Expense. We recorded income tax expense of $16.2 million for the nine months ended September 30, 2026, reflecting an effective tax rate of 27.5%, compared to $10.9 million, or 22.5%, for the nine months ended September 30, 2025. The increase was primarily due to certain incremental discrete tax benefits related to share-based compensation in the prior year period.

Management of Market Risk

General. The principal objective of our asset and liability management function is to evaluate the interest rate risk within the balance sheet and pursue a controlled assumption of interest rate risk while maximizing net income and preserving adequate levels of liquidity and capital. The board of directors of our bank has oversight of our asset and liability management function, which is managed by our Asset/Liability Management Committee. Our Asset/Liability Management Committee meets regularly to review, among other things, the sensitivity of our assets and liabilities to market interest rate changes, local and national market conditions and market interest rates. That group also reviews our liquidity, capital, deposit mix, loan mix and investment portfolio.

As a financial institution, our primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the fair value of all interest earning assets and interest bearing liabilities, other than those which have a short-term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. 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.

We manage our exposure to interest rates primarily by structuring our balance sheet in the ordinary course of business. 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. 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. 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.

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 a twelve-month period beginning September 30, 2026.


		September 30,
		2026
		Estimated
Changes in		12-Months
Interest Rates		Net Interest
(Basis Points)		Income				Change

		(Dollars in thousands)
300		$	320,560		$	56,131
200			301,137			36,708
100			282,145			17,716
0			264,429			-
-100			248,255			(16,174)
-200			232,966			(31,463)
-300			217,753			(46,676)

Economic Value of Equity Simulation. We also analyze our sensitivity to changes in interest rates through an economic value of equity ("EVE") model. EVE represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities adjusted for the value of OBS contracts. EVE attempts to quantify our economic value using a discounted cash flow methodology. We estimate what our EVE would be as of a specific date. We then calculate what EVE would be as of the same date throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve.

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 at September 30, 2026.


		September 30,
		2026
Changes in		Economic
Interest Rates		Value of
(Basis Points)		Equity				Change

		(Dollars in thousands)
300		$	1,410,355		$	119,567
200			1,376,025			85,237
100			1,335,969			45,181
0			1,290,788			-
-100			1,233,182			(57,606)
-200			1,161,637			(129,151)
-300			1,079,828			(210,960)

Many assumptions are used to calculate the impact of interest rate fluctuations. Actual results may be significantly different than our projections due to several factors, including the timing and frequency of rate changes, market conditions and the shape of the yield curve. The computations of interest rate risk shown above do not include actions that our management may undertake to manage the risks in response to anticipated changes in interest rates, and actual results may also differ due to any actions taken in response to the changing rates.

Liquidity and Capital Resources

Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments and maturities and sales of securities. 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.

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 duration 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 September 30, 2026, cash and cash equivalents totaled $471.5 million.

At September 30, 2026, through pledging of our securities and certain loans, we had the ability to borrow, on a secured basis, up to $823.2 million from the FHLB of New York and $42.0 million from the FRB of New York discount window. At September 30, 2026, we also had $39.0 million in aggregate unsecured lines of credit with unaffiliated correspondent banks. At September 30, 2026 we had a $2.2 million outstanding borrowing with the FHLB of Chicago and $7.0 million of subordinated debt assumed as a result of the Merger.

At September 30, 2026, our OBS sweep funds totaled $775.5 million, of which $255.4 million, or 32.9%, was available to be swept on balance sheet as reciprocal client deposits.

Our overall liquidity position (cash, borrowing capacity, and available reciprocal client sweep balances) totaled $1.63 billion at September 30, 2026, or 40% of total deposits, creating a highly liquid and unlevered balance sheet.

We have no material commitments or demands that are likely to affect our liquidity other than as follows. In the event loan demand were to increase faster than expected, or any unforeseen demand or commitment were to occur, we could access our borrowing capacity with the FHLB NY, FRB NY, correspondent bank lines or through reciprocal deposits.

The Company and the Bank are subject to various regulatory capital requirements administered by the Federal Reserve Bank and Office of the Comptroller of the Currency (the "OCC"), respectively, and the Federal Deposit Insurance Corporation. At September 30, 2026, The Company and the Bank exceeded all applicable regulatory capital requirements, and the Bank was considered "well capitalized" under applicable prompt corrective action provisions.

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.

The following table presents our capital ratios as of the indicated dates for Company and the Bank.


									To Be Well-Capitalized Under
					For Capital Adequacy Purposes				Prompt Corrective Action Provisions
		Amount	Ratio			Amount	Ratio			Amount	Ratio

	(Dollars in thousands)
Company
Tier 1 leverage ratio ⁽¹⁾	$	523,266	11.76	%	$	178,012	4.00	%		N/A	N/A
Common equity tier 1 capital ratio		523,266	13.45			175,069	4.50			N/A	N/A
Tier 1 capital ratio		523,266	13.45			233,426	6.00			N/A	N/A
Total capital ratio		550,249	14.14			311,234	8.00			N/A	N/A

Bank
Tier 1 leverage ratio ⁽¹⁾	$	497,023	11.20	%	$	177,455	4.00	%	$	221,819	5.00	%
Common equity tier 1 capital ratio		497,023	12.95			172,768	4.50			249,554	6.50
Tier 1 capital ratio		497,023	12.95			230,358	6.00			307,144	8.00
Total capital ratio		523,996	13.65			307,144	8.00			383,930	10.00

(1)

Average consolidated total assets in the Tier 1 leverage capital ratio is measured as if the Merger with Signature occurred on July 1, 2026.

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. 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. 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. A bank can further reduce the impact of inflation with proper management of its rate sensitivity gap. 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.

Esquire Financial Holdings Inc. published this content on November 09, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 09, 2026 at 20:46 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]