[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited interim consolidated financial statements, including core financial statements and their detailed explanatory notes [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity Consolidated Statements of Financial Condition (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total assets | $2,059,977 | $1,892,503 | $167,474 | 8.8% | | Loans, net of allowance | $1,475,192 | $1,376,042 | $99,150 | 7.2% | | Total deposits | $1,782,328 | $1,642,236 | $140,092 | 8.5% | | Total stockholders' equity | $263,556 | $237,094 | $26,462 | 11.1% | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) This section reports the company's financial performance over specific periods, detailing revenues, expenses, and net income Consolidated Statements of Income (in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net interest income | $29,254 | $24,322 | $56,863 | $47,185 | | Provision for credit losses | $3,525 | $1,000 | $5,025 | $2,000 | | Total noninterest income | $6,577 | $6,275 | $12,728 | $12,664 | | Total noninterest expense | $17,062 | $15,232 | $33,810 | $29,800 | | Net income | $11,890 | $10,487 | $23,297 | $20,545 | | Basic earnings per share | $1.48 | $1.34 | $2.91 | $2.64 | | Diluted earnings per share | $1.38 | $1.25 | $2.70 | $2.45 | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents net income and other comprehensive income items, reflecting the total change in equity from non-owner sources Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net income | $11,890 | $10,487 | $23,297 | $20,545 | | Total other comprehensive income (loss) | $764 | $128 | $3,368 | $(1,006) | | Total comprehensive income | $12,654 | $10,615 | $26,665 | $19,539 | [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section details the changes in each component of stockholders' equity over specific periods, including net income, other comprehensive income, and dividends Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric | Balance at April 1, 2025 (in thousands) | Balance at June 30, 2025 (in thousands) | Balance at January 1, 2025 (in thousands) | | :------------------------------------ | :------------------------------------ | :---------------------------------- | :------------------------------------ | | Total stockholders' equity | $250,724 | $263,556 | $237,094 | | Net income (Q2 2025) | $11,890 | | | | Other comprehensive income (Q2 2025) | $764 | | | | Cash dividends declared (Q2 2025) | $(1,484) | | | | Net income (YTD Q2 2025) | | | $23,297 | | Other comprehensive income (YTD Q2 2025) | | | $3,368 | | Cash dividends declared (YTD Q2 2025) | | | $(2,963) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section reports the cash inflows and outflows from operating, investing, and financing activities over specific periods Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $26,297 | $19,995 | | Net cash used in investing activities | $(127,420) | $(109,585) | | Net cash provided by financing activities | $137,767 | $77,114 | | Increase (decrease) in cash and cash equivalents | $36,644 | $(12,476) | | Cash and cash equivalents at end of period | $162,973 | $152,733 | [Notes to Interim Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Interim%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the interim consolidated financial statements [NOTE 1 — Basis of Presentation and Summary of Significant Accounting Policies](index=10&type=section&id=NOTE%201%20%E2%80%94%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the basis of presentation for the interim consolidated financial statements, significant accounting policies, and the impact of recent accounting pronouncements - The Company's investment in a VIE for its legacy NFL consumer post-settlement loan portfolio had a carrying amount of **$9.0 million** as of June 30, 2025, down from **$9.4 million** at December 31, 2024. No equity method gain or loss was recognized for the three and six months ended June 30, 2025, compared to a **$500 thousand loss** in the prior year period[23](index=23&type=chunk) - The investment in United Payment Systems, LLC (Payzli) had a carrying amount of **$4.8 million** as of June 30, 2025, up from **$4.1 million** at December 31, 2024. The Company funded **$700 thousand** for the six months ended June 30, 2025, compared to **$3.5 million** in the prior year period[24](index=24&type=chunk) - ASU 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' will enhance transparency of income tax disclosures, effective for the Company's annual reporting period ended December 31, 2025[27](index=27&type=chunk) [NOTE 2 — Debt Securities](index=13&type=section&id=NOTE%202%20%E2%80%94%20Debt%20Securities) This note details the Company's debt securities portfolio, including available-for-sale and held-to-maturity categories, fair values, unrealized gains/losses, and pledged securities Securities Portfolio Summary (in thousands) | Category | June 30, 2025 Fair Value | December 31, 2024 Fair Value | June 30, 2025 Gross Unrealized Losses | December 31, 2024 Gross Unrealized Losses | | :-------------------------- | :----------------------- | :------------------------- | :------------------------------------ | :------------------------------------ | | Securities available-for-sale | $257,375 | $241,746 | $(15,888) | $(19,976) | | Securities held-to-maturity | $58,503 | $60,931 | $(5,983) | $(7,729) | - At June 30, 2025, securities with a fair value of **$264.3 million** were pledged to the FHLB, and **$51.5 million** to the FRB, for borrowing capacity. No FHLB or FRB advances were outstanding[30](index=30&type=chunk)[31](index=31&type=chunk) - Management does not consider available-for-sale securities to be impaired as the decline in fair value is attributable to changes in interest rates, not credit quality, and the Company does not intend to sell them before anticipated recovery[32](index=32&type=chunk)[33](index=33&type=chunk) [NOTE 3 — Loans](index=16&type=section&id=NOTE%203%20%E2%80%94%20Loans) This note provides a detailed breakdown of the loan portfolio by class, activity in the allowance for credit losses, aging of past due loans, and credit risk profile Loan Composition (in thousands) | Loan Class | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Multifamily | $366,439 | $355,165 | | Commercial real estate | $91,166 | $87,038 | | 1 – 4 family | $10,093 | $14,665 | | Commercial | $1,007,827 | $920,567 | | Consumer | $18,584 | $19,339 | | Total loans held for investment | $1,494,109 | $1,396,774 | | Allowance for credit losses | $(19,407) | $(20,979) | Allowance for Credit Losses Activity (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Beginning balance | $20,979 | $16,631 | | Provision for credit losses | $5,025 | $2,000 | | Recoveries | $25 | $24 | | Loans charged-off | $(6,622) | $(134) | | Total ending allowance balance | $19,407 | $18,521 | - As of June 30, 2025, total past due and nonaccrual loans were **$8.86 million**, including one collateral-dependent multifamily loan of **$8.0 million** and one commercial loan of **$736 thousand**, with no specific reserves[37](index=37&type=chunk)[99](index=99&type=chunk) - During the six months ended June 30, 2025, one **$10.9 million** multifamily loan was restructured into two notes (**$8.0 million** and **$2.9 million**), with the **$2.9 million** note charged off and the **$8.0 million** note at market terms[47](index=47&type=chunk) [NOTE 4 — Noninterest Income](index=23&type=section&id=NOTE%204%20%E2%80%94%20Noninterest%20Income) This note details the components of noninterest income, primarily payment processing and administrative service fees, along with revenue recognition policies and equity investment gains Noninterest Income (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Payment processing fees | $5,107 | $5,322 | $10,019 | $10,618 | | Administrative service income | $643 | $620 | $1,523 | $1,366 | | Gain on equity investment | $432 | $0 | $432 | $0 | | Other | $395 | $333 | $754 | $680 | | Total noninterest income | $6,577 | $6,275 | $12,728 | $12,664 | - Payment processing income is derived from clearing and settling credit and debit transactions for merchants, with fees based on transaction volume. ACH income is also volume-based[53](index=53&type=chunk) - Administrative service income primarily comes from managing Qualified Settlement Funds (QSFs), where fees are earned monthly for investing funds into safe vehicles[53](index=53&type=chunk)[54](index=54&type=chunk) [NOTE 5 — Share-Based Payment Plans](index=25&type=section&id=NOTE%205%20%E2%80%94%20Share-Based%20Payment%20Plans) This note describes the Company's equity incentive plans, including stock options, restricted stock, and PSUs, detailing grant terms, vesting, and compensation expense Share-Based Compensation Expense (in thousands) | Award Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Options | $184 | $188 | $369 | $368 | | Restricted Stock | $869 | $774 | $1,700 | $1,600 | | PSUs | $138 | $0 | $218 | $0 | | Total | $1,191 | $962 | $2,287 | $1,968 | - As of June 30, 2025, unrecognized compensation cost for nonvested options was **$1.1 million** (expected over **1.92 years**), for restricted stock was **$12.3 million** (expected over **3.72 years**), and for PSUs was **$1.4 million** (expected over **2.61 years**)[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) [NOTE 6 — Earnings per Share](index=28&type=section&id=NOTE%206%20%E2%80%94%20Earnings%20per%20Share) This note presents the calculation of basic and diluted earnings per share (EPS) for the three and six months ended June 30, 2025 and 2024, detailing the net income and weighted average shares outstanding used in the computations Earnings Per Share (EPS) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Basic EPS | $1.48 | $1.34 | $2.91 | $2.64 | | Diluted EPS | $1.38 | $1.25 | $2.70 | $2.45 | | Net income (in thousands) | $11,890 | $10,487 | $23,297 | $20,545 | | Weighted average shares outstanding (basic) | 8,029,541 | 7,798,441 | 8,009,382 | 7,792,664 | | Weighted average shares outstanding (diluted) | 8,639,038 | 8,402,750 | 8,620,501 | 8,402,119 | [NOTE 7 — Leases](index=28&type=section&id=NOTE%207%20%E2%80%94%20Leases) This note outlines the Company's accounting for operating leases, including right-of-use assets, lease liabilities, lease terms, discount rates, and total lease costs Lease Information (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | ROU lease assets | $2,800 | $3,200 | | Related lease liabilities | $3,100 | $3,500 | | Weighted-average remaining lease term | 6.62 years | 2.42 years | | Weighted-average discount rate | 4.29% | 3.29% | Total Lease Cost (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Total lease cost | $252 | $183 | $491 | $374 | [NOTE 8 — Fair Value Measurements](index=31&type=section&id=NOTE%208%20%E2%80%94%20Fair%20Value%20Measurements) This note explains the fair value hierarchy for assets and liabilities, summarizing fair value measurements for recurring items and financial instruments not carried at fair value - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (significant observable inputs), and Level 3 (significant unobservable inputs)[71](index=71&type=chunk)[72](index=72&type=chunk) Fair Value of Securities Available-for-Sale (in thousands) | Category | June 30, 2025 (Level 2) | December 31, 2024 (Level 2) | | :-------------------------- | :---------------------- | :------------------------ | | Mortgage-backed securities – agency | $86,720 | $85,952 | | CMOs – agency | $170,655 | $155,794 | | Total available-for-sale | $257,375 | $241,746 | Fair Value of Financial Instruments Not Carried at Fair Value (in thousands) | Instrument | June 30, 2025 Carrying Value | June 30, 2025 Fair Value (Level 2/3) | December 31, 2024 Carrying Value | December 31, 2024 Fair Value (Level 2/3) | | :----------------------------- | :----------------------------- | :----------------------------------- | :------------------------------- | :----------------------------------- | | Securities, held-to-maturity | $64,470 | $58,503 | $68,660 | $60,931 | | Loans held for investment, net | $1,475,192 | $1,442,939 | $1,376,042 | $1,351,736 | [NOTE 9 — Accumulated Other Comprehensive Loss](index=33&type=section&id=NOTE%209%20%E2%80%94%20Accumulated%20Other%20Comprehensive%20Loss) This note details the changes in accumulated other comprehensive loss (AOCI), net of tax, primarily driven by unrealized gains and losses on securities available-for-sale for the three and six months ended June 30, 2025 and 2024 Accumulated Other Comprehensive Loss (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------ | :------------------------------ | | Beginning balance | $(11,683) | $(14,369) | $(14,287) | $(13,235) | | Other comprehensive income (loss), net of tax | $764 | $128 | $3,368 | $(1,006) | | Ending balance | $(10,919) | $(14,241) | $(10,919) | $(14,241) | [NOTE 10 — Subsequent Event](index=33&type=section&id=NOTE%2010%20%E2%80%94%20Subsequent%20Event) This note discloses a significant subsequent event: the Company executed a lease agreement for a new 50,000 square-foot headquarters in Jericho, New York, with a 12.5-year term and annual contractual lease payments of approximately $1.7 million, anticipated to commence in Q4 2026 - The Company signed a new **12.5-year lease** for a **50,000 sq ft** headquarters in Jericho, NY, with annual payments of **$1.7 million**, starting Q4 2026[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and operating results, including an overview of the business, critical accounting estimates, balance sheet and income statement analysis, market risk, liquidity, capital resources, and inflation effects [General](index=34&type=section&id=General) This subsection introduces the MD&A, emphasizing its context with financial statements and providing cautionary notes on forward-looking statements and associated uncertainties - The report contains forward-looking statements identified by words like 'may,' 'might,' 'should,' 'could,' 'believe,' 'expect,' 'anticipate,' 'estimate,' 'intend,' 'plan,' 'projection,' 'goal,' 'target,' 'aim,' 'would,' 'annualized,' and 'outlook'[81](index=81&type=chunk) - Key factors that could cause actual results to differ include economic conditions, financial industry changes, real estate market risks, concentration in legal and 'litigation' markets, interest rate fluctuations, credit losses, competition, technological changes, and regulatory actions[83](index=83&type=chunk)[84](index=84&type=chunk)[86](index=86&type=chunk)[90](index=90&type=chunk) [Critical Accounting Estimates](index=38&type=section&id=Critical%20Accounting%20Estimates) This section focuses on the Allowance for Credit Losses (ACL) as a critical accounting policy, explaining the CECL Standard's application for estimating lifetime expected credit losses - The Allowance for Credit Losses on loans held for investment is a critical accounting policy due to the subjectivity and uncertainty in estimating credit losses and its material effect on operations[89](index=89&type=chunk) - The Company applies the CECL Standard, estimating lifetime expected credit losses using a static pool methodology, incorporating past events, current conditions, and reasonable and supportable forecasts, with qualitative adjustments[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - Management assesses the sensitivity of key assumptions by stressing quantitative inputs in economic forecasts, and future changes to ACL may be necessary based on evolving economic, market, or other conditions[94](index=94&type=chunk)[101](index=101&type=chunk) [Overview of Business and Strategy](index=42&type=section&id=Overview%20of%20Business%20and%20Strategy) The Company serves legal and small business communities nationally, leveraging technology and AI to drive growth in litigation and payment processing, with strong Q2 2025 performance metrics - Esquire Financial Holdings, Inc. is a financial holding company serving the legal and small business communities nationally through its wholly-owned subsidiary, Esquire Bank, N.A[102](index=102&type=chunk) - The Company's strategy involves developing and embracing cutting-edge technology, including AI, to leverage its national litigation and payment processing verticals for industry-leading growth and returns[104](index=104&type=chunk)[109](index=109&type=chunk) Key Performance Metrics (Q2 2025) | Metric | Value | | :---------------------- | :------ | | Average Return on Assets | 2.37% | | Average Return on Equity | 18.74% | | Net Interest Margin | 6.03% | | Efficiency Ratio | 47.6% | | Fee income as % of total revenue | 17% | - The litigation market represents a significant growth opportunity with a total addressable market (TAM) of **$529 billion** for 2022, where the Company offers unique products and services to law firms, resulting in a blended **9.5% variable rate asset yield** on commercial loans[105](index=105&type=chunk)[107](index=107&type=chunk) - The payment processing market is also a growth opportunity with a TAM of **$11.6 trillion**, where the Company processes approximately **$10 billion** in credit and debit card volume across **153 million** transactions in Q2 2025[108](index=108&type=chunk) [Recent Developments](index=44&type=section&id=Recent%20Developments) This section highlights the recent enactment of H.R. 1, the 'One Big Beautiful Bill Act,' on July 4, 2025. This legislation introduces favorable changes to federal tax law for businesses, including the restoration of immediate expensing for R&D and 100% bonus depreciation, effective for tax years beginning in 2025. The Company is currently evaluating the impact of these changes on future periods - H.R. 1, the 'One Big Beautiful Bill Act,' signed into law on July 4, 2025, includes favorable changes to federal tax law for businesses, such as immediate expensing of R&D and **100% bonus depreciation**, effective for tax years beginning in 2025[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) - These tax law changes were not reflected in the income tax provision for the three and six months ended June 30, 2025, as enactment occurred after the balance sheet date[113](index=113&type=chunk) [Comparison of Financial Condition at June 30, 2025 and December 31, 2024](index=46&type=section&id=Comparison%20of%20Financial%20Condition%20at%20June%2030,%202025%20and%20December%2031,%202024) Total assets increased by 8.8% to $2.06 billion, driven by loan and deposit growth, while stockholders' equity rose, and asset quality remained strong with nonperforming assets at $8.7 million Key Financial Condition Changes (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------------------- | :------------ | :---------------- | :------- | :------- | | Total assets | $2,059,977 | $1,892,503 | $167,474 | 8.8% | | Loans held for investment, net | $1,475,192 | $1,376,042 | $99,150 | 7.2% | | Total deposits | $1,782,328 | $1,642,236 | $140,092 | 8.5% | | Total stockholders' equity | $263,556 | $237,094 | $26,462 | 11.1% | Loan Portfolio Growth (in thousands) | Loan Type | June 30, 2025 | December 31, 2024 | Change | % Change | | :---------------------- | :------------ | :---------------- | :------- | :------- | | Commercial loans | $1,007,827 | $920,567 | $87,260 | 9.5% | | Multifamily loans | $366,439 | $355,165 | $11,274 | 3.2% | | Litigation-Related Loans | $921,383 | $838,555 | $82,828 | 9.9% | - Total deposits increased by **$140.1 million**, or **8.5%**, to **$1.78 billion**, primarily due to client acquisition and growth in the national litigation platform. Core deposits represented **99.7%** of total deposits[121](index=121&type=chunk) - Nonperforming assets totaled **$8.7 million** (**0.58%** of total loans) at June 30, 2025, down from **$10.9 million** (**0.78%** of total loans) at December 31, 2024. The allowance for credit losses was **$19.4 million**, or **1.30%** of total loans[127](index=127&type=chunk)[128](index=128&type=chunk) [Average Balance Sheets and Rate/Volume Analysis](index=51&type=section&id=Average%20Balance%20Sheets%20and%20Rate/Volume%20Analysis) This section analyzes average balance sheet components, interest income, and expense, quantifying changes attributable to both volume and rate fluctuations Average Balance Sheet and Yield/Cost (Three Months Ended June 30, in thousands) | Metric | 2025 Average Balance | 2025 Average Yield/Cost | 2024 Average Balance | 2024 Average Yield/Cost | | :-------------------------------- | :------------------- | :---------------------- | :------------------- | :---------------------- | | Loans, held for investment | $1,462,401 | 7.89% | $1,240,599 | 7.85% | | Total interest earning assets | $1,947,281 | 6.91% | $1,580,952 | 6.97% | | Savings, NOW, Money Market deposits | $1,178,058 | 1.44% | $899,419 | 1.31% | | Total interest bearing liabilities | $1,184,137 | 1.45% | $911,165 | 1.35% | | Net interest spread | | 5.46% | | 5.62% | | Net interest margin | | 6.03% | | 6.19% | Change in Net Interest Income (Three Months Ended June 30, 2025 vs. 2024, in thousands) | Component | Change due to Volume | Change due to Rate | Total Change | | :-------------------------- | :------------------- | :----------------- | :----------- | | Interest earned on loans | $4,424 | $122 | $4,546 | | Total interest income | $5,880 | $271 | $6,151 | | Interest paid on total deposits | $935 | $284 | $1,219 | | Total interest expense | $935 | $284 | $1,219 | | Change in net interest income | $4,945 | $(13) | $4,932 | [Comparison of Operating Results for the Three Months Ended June 30, 2025 and 2024](index=54&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Three%20Months%20Ended%20June%2030,%202025%20and%202024) Net income increased by 13.4% to $11.9 million, driven by net interest income growth, partially offset by higher credit loss provision and noninterest expense, with net interest margin decreasing to 6.03% Operating Results (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Net income | $11,890 | $10,487 | $1,403 | 13.4% | | Net interest income | $29,254 | $24,322 | $4,932 | 20.3% | | Provision for credit losses | $3,525 | $1,000 | $2,525 | 252.5% | | Total noninterest income | $6,577 | $6,275 | $302 | 4.8% | | Total noninterest expense | $17,062 | $15,232 | $1,830 | 12.0% | - Net interest margin decreased **16 basis points** to **6.03%**, primarily due to increased average interest earning cash balances and decreases in short-term market interest rates on these balances[139](index=139&type=chunk) - Loan interest income increased **$4.5 million** (**18.8%**) due to a **$221.8 million** (**17.9%**) increase in average loan balance, driven by higher-yielding national litigation-related loans[142](index=142&type=chunk) - Payment processing fees decreased by **$215 thousand** (**4.0%**) to **$5.1 million**, while a **$432 thousand** deferred gain on a fintech investment was recognized[148](index=148&type=chunk)[149](index=149&type=chunk) - Employee compensation and benefits increased by **$691 thousand** (**7.3%**), and professional and consulting services increased by **$434 thousand** (**50.6%**)[150](index=150&type=chunk)[151](index=151&type=chunk) [Comparison of Operating Results for the Six Months Ended June 30, 2025 and 2024](index=59&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) Net income increased by 13.4% to $23.3 million, driven by net interest income growth, partially offset by higher noninterest expense and credit loss provision, with net interest margin decreasing to 5.99% Operating Results (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Net income | $23,297 | $20,545 | $2,752 | 13.4% | | Net interest income | $56,863 | $47,185 | $9,678 | 20.5% | | Provision for credit losses | $5,025 | $2,000 | $3,025 | 151.3% | | Total noninterest income | $12,728 | $12,664 | $64 | 0.5% | | Total noninterest expense | $33,810 | $29,800 | $4,010 | 13.5% | - Net interest margin decreased **14 basis points** to **5.99%**, primarily due to a **$69.4 million** increase in average interest earning cash balances and decreases in short-term market interest rates[155](index=155&type=chunk) - Loan interest income increased **$8.0 million** (**16.7%**) due to a **$204.2 million** (**16.7%**) increase in average loan balance, driven by higher-yielding national litigation-related loans[157](index=157&type=chunk) - Payment processing fees decreased by **$599 thousand** (**5.6%**) to **$10.0 million**, while administrative service income increased by **$157 thousand** (**11.5%**). A **$432 thousand** deferred gain on a fintech investment was recognized[163](index=163&type=chunk)[164](index=164&type=chunk) - Employee compensation and benefits increased by **$1.6 million** (**8.5%**), professional and consulting services increased by **$747 thousand** (**41.3%**), and data processing costs increased by **$747 thousand** (**23.1%**)[165](index=165&type=chunk) [Management of Market Risk](index=63&type=section&id=Management%20of%20Market%20Risk) The Company's primary market risk is interest rate volatility, which is managed by structuring the balance sheet and using interest rate risk simulation models (Net Interest Income and Economic Value of Equity). These models assess the impact of instantaneous parallel rate shifts on net interest income and economic value, with results indicating sensitivity to rate changes - The primary component of market risk is interest rate volatility, which impacts income, expense, and fair value of assets and liabilities[170](index=170&type=chunk) - The Company uses Net Interest Income (NII) and Economic Value of Equity (EVE) simulation models to test interest rate sensitivity, modeling instantaneous parallel rate shifts[172](index=172&type=chunk)[175](index=175&type=chunk) Estimated Changes in 12-Months Net Interest Income (June 30, 2025, in thousands) | Changes in Interest Rates (Basis Points) | Estimated 12-Months Net Interest Income | Change | | :--------------------------------------- | :-------------------------------------- | :----- | | 300 | $162,718 | $27,143 | | 0 | $135,575 | — | | -300 | $112,695 | $(22,880) | Estimated Changes in Economic Value of Equity (June 30, 2025, in thousands) | Changes in Interest Rates (Basis Points) | Economic Value of Equity | Change | | :--------------------------------------- | :----------------------- | :------- | | 300 | $475,792 | $67,058 | | 0 | $408,734 | — | | -300 | $288,864 | $(119,870) | [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) The Company maintains strong liquidity through deposit inflows and borrowing capacity, with total liquidity at $1.04 billion, and Esquire Bank remains well-capitalized, exceeding all regulatory capital requirements - At June 30, 2025, cash and cash equivalents totaled **$163.0 million**[182](index=182&type=chunk) - The Company had **$456.1 million** in borrowing capacity from the FHLB, **$49.8 million** from the FRB, and **$17.5 million** in unsecured lines of credit, with no outstanding borrowings[183](index=183&type=chunk)[124](index=124&type=chunk) - Off-balance sheet sweep funds totaled **$373.1 million**, with **$349.7 million** available to be swept onto the balance sheet. Total liquidity was **$1.04 billion**, or **58%** of total deposits[184](index=184&type=chunk) Esquire Bank Capital Ratios (June 30, 2025) | Capital Ratio | Minimum Capital with Conservation Buffer | Actual | | :-------------------------- | :--------------------------------------- | :------- | | Total Risk-based Capital Ratio | 10.50% | 16.11% | | Tier 1 Risk-based Capital Ratio | 8.50% | 14.89% | | Common Equity Tier 1 Capital Ratio | 7.00% | 14.89% | | Tier 1 Leverage Ratio | 4.00% | 12.06% | [Effects of Inflation](index=68&type=section&id=Effects%20of%20Inflation) This section explains that inflation's impact on banks differs from non-financial institutions, as bank assets are primarily monetary and tend to move with inflation. The Company manages its rate sensitivity gap to mitigate inflation's effects, structuring assets and liabilities to protect against substantial interest rate changes - Banks' assets are primarily monetary and tend to move with inflation, allowing them to reduce inflation's impact through proper management of their rate sensitivity gap[191](index=191&type=chunk) - The Company structures its assets and liabilities and manages its gap to protect against substantial changes in interest rate scenarios, minimizing potential inflation effects[191](index=191&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=68&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item refers to the 'Management of Market Risk' section within Item 2 for all required quantitative and qualitative disclosures about market risk - Information regarding quantitative and qualitative disclosures about market risk is included in Item 2 under 'Management of Market Risk'[192](index=192&type=chunk) [Item 4. Controls and Procedures](index=68&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025. No material changes to internal controls over financial reporting occurred during the quarter - The Company's disclosure controls and procedures were effective as of June 30, 2025[192](index=192&type=chunk) - No material changes to the Company's internal controls over financial reporting occurred during the quarter ended June 30, 2025[193](index=193&type=chunk) [PART II. OTHER INFORMATION](index=69&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=69&type=section&id=Item%201.%20Legal%20Proceedings) The Company is periodically involved in claims and lawsuits arising in the ordinary course of business. As of June 30, 2025, management does not believe there are any pending legal proceedings that would have a material adverse effect on the Company's financial condition, results of operations, or cash flows - As of June 30, 2025, there are no pending legal proceedings believed to have a material adverse effect on the Company's financial condition, results of operations, or cash flows[196](index=196&type=chunk) [Item 1A. Risk Factors](index=69&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the Company's risk factors have occurred since the Annual Report on Form 10-K for December 31, 2024[197](index=197&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides information on the Company's common stock repurchase program, which authorized the purchase of up to 300,000 shares. No shares were purchased under this program during the three months ended June 30, 2025. Shares may also be withheld or net settled for tax purposes related to stock-based incentive plans - The Company has an authorized share repurchase program for up to **300,000 shares**, with **257,694 shares** remaining available as of June 30, 2025[199](index=199&type=chunk) - No shares were purchased under the publicly announced repurchase program during the three months ended June 30, 2025[199](index=199&type=chunk) [Item 3. Defaults Upon Senior Securities](index=69&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities for the period - There were no defaults upon senior securities[200](index=200&type=chunk) [Item 4. Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[201](index=201&type=chunk) [Item 5. Other Information](index=71&type=section&id=Item%205.%20Other%20Information) During the second quarter of 2025, none of the Company's directors or officers adopted or terminated any Rule 10b5-1(c) trading arrangements or 'non-Rule 10b5-1 trading arrangements' - No directors or officers adopted or terminated any Rule 10b5-1(c) trading arrangements or 'non-Rule 10b5-1 trading arrangements' during Q2 2025[202](index=202&type=chunk) [Item 6. Exhibits](index=71&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including Articles of Incorporation, Bylaws, certifications from the CEO and CFO (Sarbanes-Oxley Act Sections 302 and 906), and the iXBRL formatted financial statements - Exhibits include Articles of Incorporation, Amended and Restated Bylaws, CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act), and iXBRL formatted financial statements[203](index=203&type=chunk) [SIGNATURES](index=72&type=section&id=SIGNATURES) This section contains the required signatures of the Registrant's authorized officers, specifically the Vice Chairman, Chief Executive Officer and President, Andrew C. Sagliocca, and the Senior Vice President and Chief Financial Officer, Michael Lacapria, dated August 8, 2025 - The report is signed by Andrew C. Sagliocca, Vice Chairman, Chief Executive Officer and President, and Michael Lacapria, Senior Vice President and Chief Financial Officer, on August 8, 2025[209](index=209&type=chunk)

Core Viewpoint - Esquire Financial Holdings, Inc. has signed a new lease for a larger headquarters to support its growth and enhance employee experience [1][2][3] Group 1: New Headquarters Lease - The new headquarters lease is located at 300 Jericho Quadrangle, Jericho, New York, and covers 50,000 square feet across two floors [1] - The new space includes a private entrance, 16,000 square feet of outdoor space, and is designed to improve communication and collaboration among employees [2] Group 2: Growth and Employee Focus - The new lease nearly doubles the current office footprint, reflecting the company's commitment to employee investment and future growth [2] - The transition to the new location is expected to occur in late 2026, with a 12-year lease term [2] Group 3: Leadership Statements - The Chairman of the Board emphasized that the expansion supports the company's client-centric and tech-focused approach to growth [3] - The CEO highlighted that the new headquarters will help attract top talent and provide a state-of-the-art environment for exceptional client service [4] Group 4: Company Overview - Esquire Financial Holdings, Inc. is a financial holding company with a focus on serving the litigation industry and small businesses [5] - The company has been recognized on Fortune's 2024 Fastest-Growing Companies list, indicating strong performance and growth [5]

Core Insights - Esquire Financial Holdings, Inc. reported a revenue of $35.83 million for the quarter ended June 2025, reflecting a year-over-year increase of 17.1% and surpassing the Zacks Consensus Estimate by 3.69% [1] - The company's EPS for the quarter was $1.38, consistent with the consensus estimate, showing no EPS surprise [1] Financial Performance Metrics - The efficiency ratio was reported at 47.6%, better than the average estimate of 48.9% from two analysts [4] - The net interest margin stood at 6%, matching the average estimate from two analysts [4] - Total interest-earning assets reached $1.95 billion, exceeding the average estimate of $1.9 billion [4] - Payment processing fees amounted to $5.11 million, higher than the average estimate of $4.95 million [4] - Total non-interest income was reported at $6.58 million, surpassing the average estimate of $6.12 million [4] - Net interest income was $29.25 million, compared to the average estimate of $28.45 million [4] Stock Performance - Esquire Financial's shares have returned +14.1% over the past month, outperforming the Zacks S&P 500 composite's +5.7% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Financial Performance - Esquire Financial Holdings, Inc. reported quarterly earnings of $1.38 per share, matching the Zacks Consensus Estimate and showing an increase from $1.25 per share a year ago [1] - The company posted revenues of $35.83 million for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 3.69% and up from $30.6 million year-over-year [2] - Over the last four quarters, Esquire Financial has surpassed consensus EPS estimates two times and topped consensus revenue estimates four times [2][1] Stock Performance - Esquire Financial shares have increased approximately 30.5% since the beginning of the year, significantly outperforming the S&P 500's gain of 8.1% [3] - The current status of estimate revisions for Esquire Financial translates into a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $1.42 on revenues of $35.01 million, and for the current fiscal year, it is $5.56 on revenues of $139.17 million [7] - The outlook for the industry, specifically the Banks - Northeast sector, is favorable, ranking in the top 23% of over 250 Zacks industries, suggesting potential for outperformance [8]

Financial Performance & Metrics - The company's asset-sensitive model is anchored by law firm loans yielding approximately 9.45%[12] - The company's branchless and tech-enabled core deposit platform is funded at 0.98%[12] - The company has a strong efficiency ratio of 47.6% while investing in resources for future growth[12] - The company's equity to assets is 12.79%[19] - The company's common equity tier 1 is 14.89%[19] - The company's book value per share is $31.01[19] Business Verticals & Growth - The company has been driving loan and deposit growth with a 5 Year CAGR of approximately 20% since 2020[12] - The company's payment processing vertical has a strong growth and stable fee income with a 5 Year CAGR of 14% since 2020[13] - The company's total fee income represents 17% of total revenue[13, 57] - The company services 92,000 merchants nationally through its ISO model in the payment processing vertical[13, 60]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) Esquire Financial Holdings, Inc. reported strong Q2 2025 results, driven by significant growth in low-cost core deposits funding commercial loan expansion, achieving industry-leading earnings and performance metrics Q2 2025 Key Financial Performance Metrics (YoY) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------------- | :------------ | :------------ | :--------- | | Net Income | $11.9 Million | $10.5 Million | 13% | | Diluted EPS | $1.38 | $1.25 | 10.4% | | Return on Average Assets (ROAA) | 2.37% | 2.58% | -0.21 percentage points | | Return on Average Equity (ROAE) | 18.74% | 20.16% | -1.42 percentage points | | Net Interest Margin (NIM) | 6.03% | 6.19% | -0.16 percentage points | | Total Revenue | $35.8 Million | $30.6 Million | 17% | | Total Deposits | $1.78 Billion | $1.49 Billion | 20% | | Total Loans | $1.49 Billion | $1.26 Billion | 19% | | Efficiency Ratio | 47.6% | 49.8% | -2.2 percentage points | | Allowance for Credit Losses to Loans | 1.30% | 1.47% | -0.17 percentage points | | Nonperforming Loans to Total Assets | 0.42% | 0.64% | -0.22 percentage points | | Payment Processing Volume | $10.1 Billion | $9.2 Billion | 9.2% | - Net interest margin expanded to **6.03%** on a linked-quarter basis, a **7 basis point increase**, primarily due to successful deployment of low-cost core deposit growth into higher yielding commercial law firm loans[1](index=1&type=chunk) - Off-balance sheet sweep funds totaled **$373 million**, with approximately **93.7%** available for additional on-balance sheet liquidity, generating **$643 thousand** in administrative service payments (ASP) fee income[1](index=1&type=chunk) [Management Commentary](index=3&type=section&id=Management%20Commentary) Chairman Tony Coelho highlighted the leadership team's innovation and execution in delivering customized solutions to underserved markets, resulting in industry-leading shareholder returns, while CEO Andrew C. Sagliocca emphasized strong capital generation and growth despite elevated charge-offs on an isolated commercial loan - Chairman Tony Coelho praised the leadership team for innovation, execution, and delivery of customized solutions to complex, fragmented, and underserved national markets, providing industry-leading returns to shareholders[3](index=3&type=chunk) - CEO Andrew C. Sagliocca noted that Esquire continues to generate significant capital and industry-leading growth despite elevated charge-offs and provisioning on a previously criticized and isolated commercial loan[4](index=4&type=chunk) - Strategic investments in technology, tailored digital marketing, and key hires have been crucial for expanding the national footprint, including the planned opening of a Los Angeles private client office and service center[4](index=4&type=chunk) [Key Recognitions & Strategic Initiatives](index=3&type=section&id=Key%20Recognitions%20%26%20Strategic%20Initiatives) The company maintained a strong capital foundation and received several industry recognitions, including the Raymond James Community Bankers Cup for the seventh consecutive year and inclusion in the KBW Bank Honor Roll, while strategically appointing Raymond Kelly to the Board and planning a Los Angeles private banking office Capital Ratios (June 30, 2025) | Capital Ratio | Value | | :-------------------------- | :---- | | Common Equity Tier 1 (CET1) | 14.89% | | Tangible Common Equity to Assets | 12.79% | | Tier 1 Leverage Ratio | 12.06% | | Total Capital Ratio | 16.11% | - Esquire Bank remains well above the bank regulatory 'Well Capitalized' standards[6](index=6&type=chunk)[30](index=30&type=chunk) - Key recognitions include the **2024 Raymond James Community Bankers Cup** (7th consecutive year), inclusion in the Keefe, Bruyette & Woods (KBW) Bank Honor Roll (2nd consecutive year), and recognition by the ANA B2 Awards (3rd consecutive year)[6](index=6&type=chunk) - Raymond Kelly was appointed to the Board of Directors, bringing extensive financial services, strategic, financial, governance, SEC, and regulatory experience[6](index=6&type=chunk) [Financial Performance Analysis - Second Quarter 2025](index=4&type=section&id=Financial%20Performance%20Analysis%20-%20Second%20Quarter%202025) [Net Income and Returns](index=4&type=section&id=Net%20Income%20and%20Returns%20(Q2)) Net income for Q2 2025 increased by 13% year-over-year, reaching $11.9 million, or $1.38 per diluted share, though returns on average assets and equity saw a slight decrease compared to the prior year, reflecting an increased asset base and equity Q2 2025 Net Income and Returns (YoY) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :---------------------- | :------------ | :------------ | :--------- | | Net Income | $11.9 Million | $10.5 Million | +13% | | Diluted EPS | $1.38 | $1.25 | +$0.13 | | Return on Average Assets | 2.37% | 2.58% | -0.21 percentage points | | Return on Average Equity | 18.74% | 20.16% | -1.42 percentage points | [Net Interest Income and Margin](index=4&type=section&id=Net%20Interest%20Income%20and%20Margin%20(Q2)) Net interest income grew by 20.3% to $29.3 million, primarily due to a 23.2% increase in average interest-earning assets, funded by low-cost core deposits, with average loan yields increasing despite a 16 basis point decrease in net interest margin year-over-year Q2 2025 Net Interest Income & Margin (YoY) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------------ | :------------ | :--------- | | Net Interest Income | $29.3 Million | $24.3 Million | +20.3% | | Average Interest Earning Assets | $1.95 Billion | $1.58 Billion | +23.2% | | Net Interest Margin | 6.03% | 6.19% | -16 basis points | | Average Loan Yields | 7.89% | 7.85% | +4 basis points | | Average Loans | $1.46 Billion | $1.24 Billion | +17.9% | | Commercial Loan Growth | $211.3 Million | N/A | +27.5% | | Average Securities | $333.0 Million | $253.3 Million | +31.4% | | Securities Yields | 3.77% | 3.21% | +56 basis points | | Average Deposits | $1.75 Billion | $1.41 Billion | +23.8% | | Cost of Deposits | 0.98% | 0.87% | +11 basis points | | Loan-to-Deposit Ratio | 84% | N/A | N/A | - Growth in average interest-earning assets was primarily funded by increases in escrow/IOLTA, money market, and noninterest-bearing demand deposits[8](index=8&type=chunk) - The decrease in NIM was attributed to a **$65 million increase** in average interest-earning cash balances and decreases in short-term market interest rates on these balances[8](index=8&type=chunk) [Provision for Credit Losses](index=4&type=section&id=Provision%20for%20Credit%20Losses%20(Q2)) The provision for credit losses increased significantly to $3.5 million in Q2 2025, primarily due to a $3.3 million charge-off on a small business commercial loan placed on nonaccrual, though management believes the allowance for credit losses remains adequate considering current credit risk and economic conditions Q2 2025 Provision for Credit Losses (YoY) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------------ | :------------ | :--------- | | Provision for Credit Losses | $3.5 Million | $1.0 Million | +$2.5 Million | | Allowance to Loans Ratio (June 30) | 1.30% | 1.47% | -0.17 percentage points | - The increase in provision was primarily driven by a **$3.3 million charge-off** on a small business or merchant-related commercial loan, which was placed on nonaccrual for **$736 thousand**[9](index=9&type=chunk) - Management assesses the allowance for credit losses as adequate, considering current credit risk in multifamily and commercial portfolios, loan growth, composition, and the uncertain economic environment[9](index=9&type=chunk) [Noninterest Income](index=4&type=section&id=Noninterest%20Income%20(Q2)) Total noninterest income remained stable at $6.6 million for Q2 2025, with payment processing income seeing a slight decrease due to changes in merchant risk profile despite increased payment processing volumes, and the company also recognized a deferred gain from a fintech investment sale Q2 2025 Noninterest Income (YoY) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------- | :------------ | :------------ | :------------- | | Total Noninterest Income | $6.6 Million | $6.3 Million | +$0.3 Million | | Payment Processing Income | $5.1 Million | $5.3 Million | -$0.215 Million | | Payment Processing Volumes | $10.1 Billion | $9.2 Billion | +9.2% | | ASP Fees | $643 Thousand | $643 Thousand | Flat | | Deferred Gain (Litify sale) | $432 Thousand | N/A | N/A | - The company continues to expand sales channels through ISOs, prudently manage risk, focus on new merchant originations, and enhance technology in the payment vertical[10](index=10&type=chunk) - The tech-enabled payments platform supports **92,000 small business merchants** nationally and performed commercial treasury clearing services for **$10.1 billion in volume** across **152.9 million transactions**[10](index=10&type=chunk) [Noninterest Expense](index=4&type=section&id=Noninterest%20Expense%20(Q2)) Noninterest expense increased by 12.0% to $17.1 million in Q2 2025, primarily driven by higher employee compensation and benefits, professional and consulting services, and data processing costs, reflecting investments in growth initiatives, risk management, and client service, including staffing for the new Los Angeles branch Q2 2025 Noninterest Expense (YoY) | Expense Category | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------------ | :------------ | :------------- | | Total Noninterest Expense | $17.1 Million | $15.2 Million | +12.0% | | Employee Compensation & Benefits | $10.2 Million | $9.5 Million | +7.3% | | Professional & Consulting Services | N/A | N/A | +$434 Thousand | | Data Processing | N/A | N/A | +$338 Thousand | | Other Operating Costs | N/A | N/A | +$242 Thousand | | Travel & Business Relations | N/A | N/A | +$123 Thousand | - Increases in employee compensation were mainly due to sales commissions, bonuses, stock grants, and salary increases, directly linked to the regional Business Development Officer (BDO) strategy[11](index=11&type=chunk) - Higher professional and consulting services costs were incurred for evaluating business development opportunities and staffing needs for the upcoming Los Angeles private banking branch[11](index=11&type=chunk) [Efficiency Ratio and Tax Rate](index=6&type=section&id=Efficiency%20Ratio%20and%20Tax%20Rate%20(Q2)) The efficiency ratio improved to 47.6% in Q2 2025, despite continuous investments in technology and personnel for future growth and risk management, while the effective tax rate decreased to 22.0% due to discrete tax benefits related to share-based compensation Q2 2025 Efficiency Ratio & Tax Rate (YoY) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--------------- | :------ | :------ | :--------- | | Efficiency Ratio | 47.6% | 49.8% | -2.2 percentage points | | Effective Tax Rate | 22.0% | 27.0% | -5.0 percentage points | - The improved efficiency ratio reflects the company's ability to manage costs while investing in resources to support future growth, lead acquisition initiatives, client service, and enhanced risk management[13](index=13&type=chunk) [Financial Performance Analysis - Year to Date 2025](index=6&type=section&id=Financial%20Performance%20Analysis%20-%20Year%20to%20Date%202025) [Net Income and Returns](index=6&type=section&id=Net%20Income%20and%20Returns%20(YTD)) For the six months ended June 30, 2025, net income increased by 13% to $23.3 million, or $2.70 per diluted share, with returns on average assets and equity slightly decreasing compared to the prior year, reflecting a larger asset and equity base YTD 2025 Net Income and Returns (YoY) | Metric | YTD 2025 | YTD 2024 | YoY Change | | :---------------------- | :------------ | :------------ | :--------- | | Net Income | $23.3 Million | $20.5 Million | +13% | | Diluted EPS | $2.70 | $2.45 | +$0.25 | | Return on Average Assets | 2.38% | 2.59% | -0.21 percentage points | | Return on Average Equity | 18.93% | 20.15% | -1.22 percentage points | [Net Interest Income and Margin](index=6&type=section&id=Net%20Interest%20Income%20and%20Margin%20(YTD)) Year-to-date net interest income rose by 20.5% to $56.9 million, driven by a 23.5% increase in average interest-earning assets, primarily funded by low-cost core deposits, though the net interest margin decreased by 14 basis points year-over-year due to higher cash balances and lower short-term market rates, despite an increase in average loan yields YTD 2025 Net Interest Income & Margin (YoY) | Metric | YTD 2025 | YTD 2024 | YoY Change | | :-------------------------------- | :------------ | :------------ | :--------- | | Net Interest Income | $56.9 Million | $47.2 Million | +20.5% | | Average Interest Earning Assets | $1.91 Billion | $1.55 Billion | +23.5% | | Net Interest Margin | 5.99% | 6.13% | -14 basis points | | Average Loan Yields | 7.84% | 7.82% | +2 basis points | | Average Loans | $1.43 Billion | $1.22 Billion | +16.7% | | Commercial Loan Growth | $199.6 Million | N/A | +26.5% | | Average Securities | $330.4 Million | $239.8 Million | +37.8% | | Securities Yields | 3.77% | 3.04% | +73 basis points | | Average Deposits | $1.71 Billion | $1.38 Billion | +24.2% | | Cost of Deposits | 0.96% | 0.91% | +5 basis points | | Loan-to-Deposit Ratio | 84% | N/A | N/A | - Average deposits increased, led by escrow/IOLTA, money market, and noninterest-bearing demand deposits, reflecting the company's focus on low-cost core funding[15](index=15&type=chunk) - The company strategically purchased short-duration agency mortgage-backed securities throughout 2024 to enhance liquidity and improve the securities-to-asset ratio[15](index=15&type=chunk) [Provision for Credit Losses](index=6&type=section&id=Provision%20for%20Credit%20Losses%20(YTD)) The year-to-date provision for credit losses increased to $5.0 million, a $3.0 million increase from the prior year, primarily due to $6.2 million in charge-offs, including a small business commercial loan and a multifamily loan, though the allowance for credit losses is deemed adequate by management YTD 2025 Provision for Credit Losses (YoY) | Metric | YTD 2025 | YTD 2024 | YoY Change | | :-------------------------------- | :------------ | :------------ | :--------- | | Provision for Credit Losses | $5.0 Million | $2.0 Million | +$3.0 Million | | Total Charge-offs | $6.2 Million | N/A | N/A | | Allowance to Loans Ratio (June 30) | 1.30% | 1.47% | -0.17 percentage points | - Charge-offs included a **$3.3 million small business/merchant commercial loan** (currently nonaccrual for **$736 thousand**) and a **$2.9 million multifamily loan** in Q1 2025[16](index=16&type=chunk) - Management's evaluation of current credit risk in multifamily and commercial portfolios, along with increases in general reserves, supports the adequacy of the allowance for credit losses[16](index=16&type=chunk) [Noninterest Income](index=6&type=section&id=Noninterest%20Income%20(YTD)) Year-to-date noninterest income remained flat at $12.7 million, with payment processing income decreasing slightly due to changes in merchant risk profiles despite increased payment processing volumes, while ASP fee income saw an increase and a deferred gain from a fintech investment sale was recognized YTD 2025 Noninterest Income (YoY) | Metric | YTD 2025 | YTD 2024 | YoY Change | | :-------------------------- | :------------ | :------------ | :------------- | | Total Noninterest Income | $12.7 Million | $12.7 Million | Flat | | Payment Processing Income | $10.0 Million | $10.6 Million | -$0.599 Million | | Payment Processing Volumes | $19.4 Billion | $17.9 Billion | +8.6% | | ASP Fee Income | $1.5 Million | $1.343 Million | +$0.157 Million | | Deferred Gain (Litify sale) | $432 Thousand | N/A | N/A | - Payment processing transactions totaled **293.3 million** for the current six months[17](index=17&type=chunk) - ASP fee income is directly influenced by average balances of off-balance sheet sweep funds and current short-term market interest rates[17](index=17&type=chunk) [Noninterest Expense](index=6&type=section&id=Noninterest%20Expense%20(YTD)) Year-to-date noninterest expense increased by 13.5% to $33.8 million, driven by higher employee compensation and benefits, data processing, professional and consulting services, and occupancy costs, reflecting ongoing investments in technology, business development, and infrastructure, including costs associated with the new Los Angeles branch YTD 2025 Noninterest Expense (YoY) | Expense Category | YTD 2025 | YTD 2024 | YoY Change | | :-------------------------------- | :------------ | :------------ | :------------- | | Total Noninterest Expense | $33.8 Million | $29.8 Million | +13.5% | | Employee Compensation & Benefits | $20.3 Million | $18.7 Million | +8.5% | | Data Processing | N/A | N/A | +$747 Thousand | | Professional & Consulting Services | N/A | N/A | +$747 Thousand | | Other Operating Costs | N/A | N/A | +$536 Thousand | | Occupancy & Equipment | N/A | N/A | +$217 Thousand | | Travel & Business Relations | N/A | N/A | +$151 Thousand | - Increased employee compensation is linked to sales commissions from the regional BDO strategy, attracting commercial banking clients and impacting loan and deposit growth[18](index=18&type=chunk) - Data processing costs increased due to higher core banking processing volumes and continued technology implementation for client relationships, lead acquisition (CRM, digital marketing), and risk management[18](index=18&type=chunk) [Efficiency Ratio and Tax Rate](index=8&type=section&id=Efficiency%20Ratio%20and%20Tax%20Rate%20(YTD)) The year-to-date efficiency ratio improved to 48.6%, reflecting effective cost management despite ongoing investments in growth and risk management, while the effective tax rate decreased to 24.3% due to discrete tax benefits from share-based compensation YTD 2025 Efficiency Ratio & Tax Rate (YoY) | Metric | YTD 2025 | YTD 2024 | YoY Change | | :--------------- | :------ | :------ | :--------- | | Efficiency Ratio | 48.6% | 49.8% | -1.2 percentage points | | Effective Tax Rate | 24.3% | 26.8% | -2.5 percentage points | - The improved efficiency ratio demonstrates the company's commitment to supporting future growth, lead acquisition, client service, and enhanced risk management through continuous investment in resources[21](index=21&type=chunk) [Asset Quality](index=8&type=section&id=Asset%20Quality) [Nonperforming Loans and Allowance for Credit Losses](index=8&type=section&id=Nonperforming%20Loans%20and%20Allowance%20for%20Credit%20Losses) As of June 30, 2025, nonperforming loans totaled $8.7 million, a decrease from the prior year, with the allowance for credit losses at $19.4 million, representing 1.30% of total loans, and despite a $736 thousand commercial loan placed on nonaccrual, management maintains the overall allowance for credit losses is adequate Asset Quality Metrics (June 30, 2025 vs. 2024) | Metric | June 30, 2025 | June 30, 2024 | Change | | :-------------------------------- | :------------ | :------------ | :------------ | | Nonperforming Loans | $8.7 Million | $10.9 Million | -$2.2 Million | | Allowance for Credit Losses | $19.4 Million | $18.5 Million | +$0.9 Million | | Allowance for Credit Losses to Loans | 1.30% | 1.47% | -0.17 percentage points | | Nonperforming Loans to Total Loans | 0.58% | 0.87% | -0.29 percentage points | | Nonperforming Assets to Total Assets | 0.42% | 0.64% | -0.22 percentage points | - The company has no exposure to commercial office and construction related borrowers, and only **$14.4 million** in performing loans to the hospitality industry[23](index=23&type=chunk) - A **$736 thousand commercial loan** (net of a **$3.3 million charge-off**) to a small business/merchant was placed on nonaccrual and classified as substandard, unrelated to the primary commercial litigation lending platform[23](index=23&type=chunk) [Real Estate Portfolio Credit Metrics](index=8&type=section&id=Real%20Estate%20Portfolio%20Credit%20Metrics) The combined multifamily and CRE portfolio, excluding nonaccrual loans, totaled $449.6 million with strong credit metrics, while loans maturing within one to two years also demonstrated healthy debt service coverage ratios and original loan-to-value ratios Multifamily and CRE Portfolio Credit Metrics (June 30, 2025) | Portfolio Segment | Total (excl. nonaccrual) | Current Weighted Average DSCR | Original LTV | | :-------------------------------- | :----------------------- | :---------------------------- | :----------- | | Combined Multifamily & CRE | $449.6 Million | ~1.58 | ~55% | | Loans maturing < 1 year | $79.4 Million | ~1.25 | ~62% | | Loans maturing 1-2 years | $59.8 Million | ~1.39 | ~66% | [Balance Sheet Overview](index=8&type=section&id=Balance%20Sheet%20Overview) [Assets Composition and Growth](index=8&type=section&id=Assets%20Composition%20and%20Growth) Total assets grew by 20.1% to $2.06 billion as of June 30, 2025, primarily driven by an 18.5% increase in loans, particularly higher-yielding variable rate commercial loans, fueled by the company's robust commercial relationship banking sales pipeline, with the securities portfolio also increasing to enhance liquidity Asset Growth (June 30, 2025 vs. 2024) | Asset Category | June 30, 2025 | June 30, 2024 | YoY Change (%) | | :-------------------------------- | :------------ | :------------ | :------------- | | Total Assets | $2.06 Billion | $1.72 Billion | +20.1% | | Total Loans | $1.49 Billion | $1.26 Billion | +18.5% | | Higher Yielding Variable Rate Commercial Loans | $1.00 Billion | $0.78 Billion | +28.1% | | Commercial Litigation Related Loans | $918.4 Million | $668.7 Million | +37.3% | | Available-for-Sale Securities | $257.4 Million | $176.8 Million | +$80.6 Million | | Held-to-Maturity Securities | $64.5 Million | $73.1 Million | -11.8% | | Total Securities to Assets Ratio | 16% | 15% | +1 percentage point | - The commercial relationship banking sales pipeline is robust, anchored by regional Business Development Officers (BDOs) and supported by a best-in-class technology stack, including proprietary CRM, digital marketing cloud, and AI for advanced data analytics[25](index=25&type=chunk) - Management strategically purchased short-duration agency mortgage-backed securities to enhance liquidity and asset composition, especially in light of tempering commercial real estate (CRE) growth[25](index=25&type=chunk) [Loan Portfolio Composition](index=9&type=section&id=Loan%20Portfolio%20Composition) The loan portfolio as of June 30, 2025, was predominantly commercial, with litigation-related loans forming the largest segment at 61.5% of total loans, while real estate loans, including multifamily and commercial real estate, constituted 31.3% of the portfolio Loan Portfolio Composition (June 30, 2025) | Loan Category | Amount (in thousands) | % of Total Loans | | :------------------------ | :-------------------- | :--------------- | | **Real estate:** | | | | Multifamily | $366,439 Thousand | 24.5% | | Commercial real estate | $91,166 Thousand | 6.1% | | 1 – 4 family | $10,093 Thousand | 0.7% | | Total real estate | $467,698 Thousand | 31.3% | | **Commercial:** | | | | Litigation related | $918,424 Thousand | 61.5% | | Other | $89,403 Thousand | 6.0% | | Total commercial | $1,007,827 Thousand | 67.5% | | Consumer | $18,584 Thousand | 1.2% | | **Total loans held for investment** | **$1,494,109 Thousand** | **100.0%** | [Deposits and Funding Strategy](index=9&type=section&id=Deposits%20and%20Funding%20Strategy) Total deposits increased by 19.9% to $1.78 billion, primarily driven by growth in NOW/IOLTA, noninterest-bearing demand, and money market deposits, reflecting a strategy focused on full-service commercial banking relationships rather than rate competition, with a significant portion of deposits being longer-duration IOLTA, escrow, and settlement funds, and uninsured deposits representing 31% of total deposits, largely from full commercial relationship clients Deposit Growth and Composition (June 30, 2025 vs. 2024) | Deposit Category | June 30, 2025 | June 30, 2024 | YoY Change (%) | | :-------------------------- | :------------ | :------------ | :------------- | | Total Deposits | $1.78 Billion | $1.49 Billion | +19.9% | | NOW or IOLTA | N/A | N/A | +16.1% (+$130.8 Million) | | Noninterest Bearing Demand | N/A | N/A | +17.4% (+$84.2 Million) | | Money Market Deposits | N/A | N/A | +61.8% (+$91.9 Million) | | Longer Duration IOLTA, Escrow & Settlement Deposits | $944.4 Million | N/A | 53.0% of total | | Uninsured Deposits | $561.0 Million | N/A | 31% of total | - Approximately **75% of uninsured deposits** are from clients with full commercial relationship banking, including law firm operating accounts, IOLTA/escrow accounts, and merchant/ISO reserves[26](index=26&type=chunk) - Off-balance sheet sweep funds totaled **$373.1 million**, with **93.7%** available to be swept on balance sheet as reciprocal client relationship deposits, demonstrating efficient cash management[27](index=27&type=chunk) [Liquidity and Capital Position](index=9&type=section&id=Liquidity%20and%20Capital%20Position) The company maintains a strong liquidity and capital position, with significant unutilized borrowing capacity from the FHLB and FRB, and stockholders' equity increased by $46.1 million, primarily driven by retained earnings and other comprehensive income, ensuring the bank remains well above regulatory 'Well Capitalized' standards Liquidity and Capital Metrics (June 30, 2025 vs. 2024) | Metric | June 30, 2025 | June 30, 2024 | YoY Change | | :-------------------------- | :------------ | :------------ | :------------ | | FHLB Borrowing Capacity | $456.1 Million | N/A | N/A | | FRB Discount Window Capacity | $49.8 Million | N/A | N/A | | Stockholders' Equity | $263.6 Million | $217.4 Million | +$46.1 Million | | Equity to Assets Ratio | 12.79% | 12.67% | +0.12 percentage points | - Historically, the company has funded asset growth and earnings through core client deposits rather than leveraging its balance sheet[28](index=28&type=chunk) - The increase in stockholders' equity was primarily due to net increases in retained earnings (net income less dividends) and a **$3.3 million unrealized net gain** on available-for-sale securities[29](index=29&type=chunk) [Company Information](index=10&type=section&id=Company%20Information) [About Esquire Financial Holdings, Inc.](index=10&type=section&id=About%20Esquire%20Financial%20Holdings%2C%20Inc.) Esquire Financial Holdings, Inc. is a financial holding company based in Jericho, NY, operating through its wholly-owned subsidiary, Esquire Bank, National Association, specializing in serving the litigation industry and small businesses nationally with tailored financial and payment processing solutions, alongside commercial and retail banking services in the New York metropolitan area - Esquire Bank is a full-service commercial bank dedicated to serving the financial needs of the litigation industry and small businesses nationally[31](index=31&type=chunk) - The bank provides 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[31](index=31&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=10&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section advises readers that the press release contains forward-looking statements subject to various risks and uncertainties, including changes in economic conditions and financial markets, emphasizing that actual events may differ materially from projections and that the company does not undertake to update these statements, except as required by law - Forward-looking statements are subject to risks and uncertainties, including changes in business plans, general economic, business, and political conditions, and financial markets[32](index=32&type=chunk) - Actual events may differ materially from those made or suggested in forward-looking statements, and the company does not undertake to update them except as legally required[32](index=32&type=chunk) [Contact Information](index=10&type=section&id=Contact%20Information) Contact details for investor and media inquiries are provided for Eric S. Bader, Executive Vice President and Chief Operating Officer of Esquire Financial Holdings, Inc - For contact, reach Eric S. Bader, Executive Vice President and Chief Operating Officer, at (516) 535-2002 or eric.bader@esqbank.com[33](index=33&type=chunk) [Consolidated Financial Statements](index=11&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statement of Condition (Balance Sheet)](index=11&type=section&id=Consolidated%20Statement%20of%20Condition%20(Balance%20Sheet)) The Consolidated Statement of Condition provides a snapshot of the company's financial position at various periods, detailing assets, liabilities, and stockholders' equity, with key trends including growth in total assets and loans, alongside an increase in total deposits and stockholders' equity Consolidated Statement of Condition (Unaudited) (Dollars in thousands) | | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :-------------------------------- | :---------------- | :------------------ | :---------------- | | **ASSETS** | | | | | Cash and cash equivalents | $162,973 Thousand | $126,329 Thousand | $152,733 Thousand | | Securities available-for-sale, at fair value | $257,375 Thousand | $241,746 Thousand | $176,814 Thousand | | Securities held-to-maturity, at cost | $64,470 Thousand | $68,660 Thousand | $73,062 Thousand | | Loans, net of allowance | $1,475,192 Thousand | $1,376,042 Thousand | $1,242,541 Thousand | | Total Assets | $2,059,977 Thousand | $1,892,503 Thousand | $1,715,714 Thousand | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | | Total deposits | $1,782,328 Thousand | $1,642,236 Thousand | $1,486,893 Thousand | | Total liabilities | $1,796,421 Thousand | $1,655,409 Thousand | $1,498,303 Thousand | | Total stockholders' equity | $263,556 Thousand | $237,094 Thousand | $217,411 Thousand | | Total Liabilities and Stockholders' Equity | $2,059,977 Thousand | $1,892,503 Thousand | $1,715,714 Thousand | | **Selected Financial Data** | | | | | Book value per share | $31.01 | $28.38 | $26.22 | | Equity to assets | 12.79% | 12.53% | 12.67% | | Nonperforming loans | $8,736 Thousand | $10,940 Thousand | $10,940 Thousand | | Allowance for credit losses to total loans | 1.30% | 1.50% | 1.47% | | Nonperforming loans to total loans | 0.58% | 0.78% | 0.87% | | Nonperforming assets to total assets | 0.42% | 0.58% | 0.64% | [Consolidated Income Statement](index=12&type=section&id=Consolidated%20Income%20Statement) The Consolidated Income Statement presents the company's revenues, expenses, and net income for the three and six months ended June 30, 2025, compared to prior periods, highlighting growth in net interest income and net income, alongside increases in provision for credit losses and noninterest expenses Consolidated Income Statement (Unaudited) (Dollars in thousands) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest income | $33,536 Thousand | $27,385 Thousand | $65,049 Thousand | $53,458 Thousand | | Interest expense | $4,282 Thousand | $3,063 Thousand | $8,186 Thousand | $6,273 Thousand | | Net interest income | $29,254 Thousand | $24,322 Thousand | $56,863 Thousand | $47,185 Thousand | | Provision for credit losses | $3,525 Thousand | $1,000 Thousand | $5,025 Thousand | $2,000 Thousand | | Total noninterest income | $6,577 Thousand | $6,275 Thousand | $12,728 Thousand | $12,664 Thousand | | Total noninterest expense | $17,062 Thousand | $15,232 Thousand | $33,810 Thousand | $29,800 Thousand | | Income before income taxes | $15,244 Thousand | $14,365 Thousand | $30,756 Thousand | $28,049 Thousand | | Income taxes | $3,354 Thousand | $3,878 Thousand | $7,459 Thousand | $7,504 Thousand | | Net income | $11,890 Thousand | $10,487 Thousand | $23,297 Thousand | $20,545 Thousand | | Diluted EPS | $1.38 | $1.25 | $2.70 | $2.45 | | Return on average assets | 2.37% | 2.58% | 2.38% | 2.59% | | Return on average equity | 18.74% | 20.16% | 18.93% | 20.15% | | Net interest margin | 6.03% | 6.19% | 5.99% | 6.13% | | Efficiency ratio | 47.6% | 49.8% | 48.6% | 49.8% | [Consolidated Average Balance Sheets and Average Yield/Cost (Q2)](index=13&type=section&id=Consolidated%20Average%20Balance%20Sheets%20and%20Average%20Yield%2FCost%20(Q2)) This table provides average balance sheet data and corresponding average yields/costs for interest-earning assets and interest-bearing liabilities for the three months ended June 30, 2025, and comparable periods, illustrating the composition of interest income and expense, and the calculation of net interest spread and margin Consolidated Average Balance Sheets and Average Yield/Cost (Unaudited) (Dollars in thousands) - Three Months Ended | | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------------- | :---------------- | :------------- | :---------------- | | **INTEREST EARNING ASSETS** | | | | | Loans, held for investment (Avg. Balance) | $1,462,401 Thousand | $1,394,602 Thousand | $1,240,599 Thousand | | Loans, held for investment (Avg. Yield) | 7.89% | 7.80% | 7.85% | | Securities (Avg. Balance) | $332,965 Thousand | $327,838 Thousand | $253,328 Thousand | | Securities (Avg. Yield) | 3.77% | 3.76% | 3.21% | | Total interest earning assets (Avg. Balance) | $1,947,281 Thousand | $1,878,208 Thousand | $1,580,952 Thousand | | Total interest earning assets (Avg. Yield) | 6.91% | 6.80% | 6.97% | | **INTEREST BEARING LIABILITIES** | | | | | Total interest bearing deposits (Avg. Balance) | $1,184,095 Thousand | $1,144,905 Thousand | $911,121 Thousand | | Total interest bearing deposits (Avg. Cost) | 1.45% | 1.38% | 1.35% | | Total interest bearing liabilities (Avg. Cost) | 1.45% | 1.38% | 1.35% | | **KEY METRICS** | | | | | Net interest income | $29,254 Thousand | $27,609 Thousand | $24,322 Thousand | | Net interest spread | 5.46% | 5.42% | 5.62% | | Net interest margin | 6.03% | 5.96% | 6.19% | | Deposits (incl. noninterest bearing demand) (Avg. Cost) | 0.98% | 0.94% | 0.87% | [Consolidated Average Balance Sheets and Average Yield/Cost (YTD)](index=14&type=section&id=Consolidated%20Average%20Balance%20Sheets%20and%20Average%20Yield%2FCost%20(YTD)) This table presents the average balance sheet data and associated average yields/costs for interest-earning assets and interest-bearing liabilities for the six months ended June 30, 2025, and the comparable prior year period, providing a year-to-date perspective on the drivers of net interest income and margin Consolidated Average Balance Sheets and Average Yield/Cost (Unaudited) (Dollars in thousands) - Six Months Ended June 30, | | 2025 | 2024 | | :-------------------------------- | :---------------- | :---------------- | | **INTEREST EARNING ASSETS** | | | | Loans, held for investment (Avg. Balance) | $1,428,689 Thousand | $1,224,513 Thousand | | Loans, held for investment (Avg. Yield) | 7.84% | 7.82% | | Securities (Avg. Balance) | $330,416 Thousand | $239,752 Thousand | | Securities (Avg. Yield) | 3.77% | 3.04% | | Total interest earning assets (Avg. Balance) | $1,912,936 Thousand | $1,548,647 Thousand | | Total interest earning assets (Avg. Yield) | 6.86% | 6.94% | | **INTEREST BEARING LIABILITIES** | | | | Total interest bearing deposits (Avg. Balance) | $1,164,609 Thousand | $891,161 Thousand | | Total interest bearing deposits (Avg. Cost) | 1.42% | 1.42% | | Total interest bearing liabilities (Avg. Cost) | 1.42% | 1.42% | | **KEY METRICS** | | | | Net interest income | $56,863 Thousand | $47,185 Thousand | | Net interest spread | 5.44% | 5.52% | | Net interest margin | 5.99% | 6.13% | | Deposits (incl. noninterest bearing demand) (Avg. Cost) | 0.96% | 0.91% |

Core Insights - Esquire Financial Holdings, Inc. reported a 13% increase in net income to $11.9 million, or $1.38 per diluted share, for Q2 2025 compared to Q2 2024, despite increased provisions for credit losses and noninterest expenses [1][4][12] - The company achieved a net interest margin of 6.03%, reflecting a 7 basis point increase from the previous quarter, driven by the deployment of low-cost core deposits into higher yielding commercial loans [1][5] - Total revenue rose by 17% to $35.8 million in Q2 2025, supported by strong deposit growth of $94.2 million, or 22% annualized, reaching $1.78 billion [1][22] Financial Performance - Net income for the six months ended June 30, 2025, was $23.3 million, or $2.70 per diluted share, up from $20.5 million, or $2.45 per diluted share, in the same period of 2024 [12][31] - The company maintained strong returns on average assets and equity at 2.38% and 18.93%, respectively, for the first half of 2025 [12] - Noninterest income for Q2 2025 was stable at $6.6 million, with payment processing income contributing $5.1 million [7][31] Loan and Deposit Growth - Total loans increased by $78.7 million, or 22% annualized, to $1.49 billion in Q2 2025, with commercial loan growth of $211.3 million, or 27.5% [1][5][22] - Deposits grew by $295.4 million, or 19.9%, year-over-year, with significant increases in low-cost core deposits [1][22] - The loan-to-deposit ratio stood at 84% as of June 30, 2025 [5][22] Credit Quality and Risk Management - The provision for credit losses was $3.5 million for Q2 2025, reflecting a $2.5 million increase from Q2 2024, primarily due to charge-offs on a commercial loan [6][14] - Nonperforming loans totaled $8.7 million, with a nonperforming loans to total assets ratio of 0.42% [20][22] - The allowance for credit losses to loans ratio was 1.30% as of June 30, 2025, down from 1.47% a year earlier [6][20] Operational Efficiency - The efficiency ratio improved to 47.6% for Q2 2025, down from 49.8% in the prior year, despite ongoing investments in growth and technology [11][18] - Noninterest expenses increased by 12% to $17.1 million in Q2 2025, driven by higher employee compensation and professional services [10][17] Strategic Initiatives - The company plans to open a new private banking office in Los Angeles, California, to enhance its service offerings [3][10] - Esquire Financial was recognized for its performance, receiving the 2024 Raymond James Community Bankers Cup for the seventh consecutive year [1][8]

Core Insights - Esquire Financial Holdings, Inc. has been recognized by the Association of National Advertisers (ANA) B2 Awards for the third consecutive year, highlighting its innovative B2B marketing campaigns [1] - Kyall Mai, Senior Vice President and Chief Innovation Officer, was awarded Individual Marketer of the Year for his leadership and contributions to marketing in the financial services sector [2] - The company's marketing strategy focuses on building trust with contingent fee plaintiff law firms through AI-driven content marketing via its platform, LawyerIQ, reflecting a commitment to customer-focused technology [3] Company Performance - Esquire's marketing team has significantly contributed to the company's national expansion and digital-first model, enhancing engagement in new markets [4] - The company plans to open its first private banking branch in California, marking a key milestone in its national footprint expansion [5] - Esquire Financial Holdings was named to Fortune's 2024 Fastest-Growing Companies list, indicating strong financial performance and growth potential [6]

Core Insights - Esquire Financial Holdings (NASDAQ: ESQ) achieved its best year in 2023 regarding earnings, profitability, and efficiency, with a net income growth of 13.4% for Q1 2025 and an expected growth of 6.5% for the full year 2024, including gains on equity [1] Financial Performance - The company reported a net income growth of 13.4% for Q1 2025 [1] - For the full year 2024, the expected net income growth is 6.5%, which includes gains on equity [1] Industry Focus - The analysis indicates a recent shift towards small-cap community banks and a growing interest in technological stocks [1] - The emphasis is placed on underlying products, services, and working culture rather than solely on numerical data [1]

Core Insights - Esquire Financial Holdings, Inc. has been awarded the 2024 Raymond James Community Bankers Cup, ranking third among 202 banks with assets between $500 million and $10 billion, recognizing its strong performance in profitability, operational efficiency, and balance sheet strength [1][2] - The company has achieved stock market returns of 59%, 152%, and 205% over the past year, three years, and five years, respectively, significantly outperforming the NASDAQ BANK index [2] Company Overview - Esquire Financial Holdings, Inc. is headquartered in Jericho, New York, with a branch office in Jericho and an administrative office in Boca Raton, Florida [4] - The company operates Esquire Bank, which focuses on serving the financial needs of the litigation industry and small businesses, offering tailored financial and payment processing solutions [4] - Esquire was also named to Fortune's 2024 Fastest-Growing Companies list, highlighting its growth trajectory [4]