Esquire Financial NASDAQ: ESQ reported first-quarter GAAP net income of $12.2 million, or $1.40 per diluted share, as management pointed to continued loan growth, a resilient net interest margin and progress toward its pending acquisition of Signature Bancorporation, Inc.
Quarterly results and notable adjustments
Chief Financial Officer Michael Lacapria said results included $1.7 million of “elevated pre-tax non-interest costs,” primarily tied to the pending Signature transaction and board-related items. Lacapria said $1.3 million of those expenses were merger costs associated with the Signature acquisition, while $398,000 reflected “accelerated stock compensation expense related to the previously announced departure of two board members.”
Excluding those items, Lacapria said adjusted net income was $13.8 million, or $1.58 per diluted share, compared with adjusted fourth-quarter 2025 net income of $13.6 million, or $1.57 per share. He added that adjusted first-quarter results represented a $2.4 million, or 21%, increase over first-quarter 2025 net income of $11.4 million, or $1.33 per diluted share.
Lacapria reported adjusted returns on average assets and equity of 2.37% and 18.95%, respectively, and said the company’s adjusted efficiency ratio was 46.9%.
Net interest margin, balance sheet growth, and liquidity
Lacapria said net interest margin remained “resilient” at 604 basis points, despite an asset-sensitive balance sheet and what he described as “significant declines in short-term interest rates over these past three years.”
Loan growth totaled $56.7 million on a linked-quarter basis, reaching $1.82 billion. Lacapria said that growth included $30 million in commercial loans and $23.3 million in commercial real estate loans, while commercial loan draws in the prior quarter contributed to “anticipated litigation loan paydowns” of $53.1 million in the first quarter.
Within the litigation loan portfolio, Lacapria reported $44 million of net growth, or 15% annualized, bringing the litigation book to $1.22 billion. He said the litigation portfolio yield was “approximately 9% for the quarter.”
Deposits rose $39.6 million, or 8% annualized, to $2.1 billion, with cost of funds “inclusive of demand remaining flat at 1%,” according to Lacapria. He said deposit growth was tempered by “anticipated escrow and IOLTA disbursements from elevated settlement balances in the prior quarter.”
On liquidity, Lacapria noted off-balance-sheet sweep funds totaled $1 billion, with “approximately 33%” available for on-balance-sheet liquidity, and said administrative service fees tied to those funds were $1.1 million. He added that additional available liquidity, including cash borrowings and additional sweep balances, totaled about $1.1 billion.
Credit quality and charge-offs
Lacapria said asset quality “remains strong,” with an allowance coverage ratio of 1.3% and non-performing loans of $736,000, which he described as “only three basis points” of total assets. He also emphasized that the company has “zero exposure to commercial office space or construction and vacant land loans.”
During the quarter, Lacapria said the company foreclosed on the property securing a $7.8 million non-accrual multifamily loan and sold it to an unrelated third party, resulting in a $3.2 million net charge-off.
Payment processing platform and fee income
Non-interest income was $6.5 million, representing 16% of total revenue, Lacapria said. He highlighted the company’s payment processing platform, which he said services 93,000 small business clients and processed $9.7 billion across 137 million transactions during the quarter.
In response to an analyst question about the payment processing business’ growth and whether it could be divested, CEO Andrew Sagliocca said the platform is “absolutely core to the overall strategy” and that the company has “no plans on divesting of it.” Sagliocca described merchant acquiring as a “commodity,” but said the platform is “very valuable” and “invaluable.” He added that Esquire plans to continue growing it and, with the pending Signature deal, “look towards doing direct business with merchants…rather than the indirect business” conducted through ISO networks.
Signature merger progress, outlook items, and capital actions
Sagliocca opened his remarks by recognizing former board member Selig Zises, a founding director who retired for health reasons. Sagliocca thanked Zises for his “vision, stewardship, dedication” and said Zises had served as chairman of the directors loan committee.
On the pending Signature merger, Sagliocca said the company has filed regulatory applications and an S-4 with the SEC, and has engaged “a nationally recognized advisory firm” to assist with integration milestones. He said Esquire has held multiple planning sessions with both management teams and called the transaction “transformational,” describing it as a strategic foothold in the Chicago metro area while also referencing the New York and Los Angeles markets.
Asked about cultural integration and readiness to expand litigation-related lending at Signature, Sagliocca said the reception “has been outstanding” and described cross-visits between teams in Chicago and Jericho. He said the transaction has “minimal cost savings,” which he suggested helps from a people and culture standpoint. On training, Sagliocca said Esquire has a “really robust commercial underwriting team,” and that a key part of training will be joint visits to law firms, calling it “the best on-the-job training you could ask for.”
On net interest margin expectations, Sagliocca said that using an internal rate forecast with no cuts in 2026, management expects NIM “on average being around 590-ish…through the end of the year,” with “some compression from 604,” and “another 10 basis points” of compression in 2027.
Regarding liquidity and deposit deployment, Sagliocca said the company keeps roughly $100 million to $150 million on the balance sheet to support the merchant platform. He said excess liquidity can be deployed “fairly quickly,” adding he would prefer having “a lot of dry powder” even if it results in a modest NIM miss. He also said the company has not needed to borrow “to date” and indicated that an approximately 85% loan-to-deposit ratio is a “good ratio before and after the merger is consummated.”
On capital, Lacapria said the company remains well-capitalized with equity-to-assets of 12.44%, and bank-level leverage and CET1 ratios of 11.85% and 14.25%, respectively. He also noted that the company increased its regular quarterly cash dividend by 14% to $0.20 per share, paid in March.
About Esquire Financial NASDAQ: ESQ
Esquire Financial Holdings, Inc is a bank holding company whose principal subsidiary, Esquire Bank, specializes in residential mortgage lending and community banking services. Headquartered in Kansas City, Missouri, the company operates through multiple distribution channels, including retail branches, wholesale and correspondent lending divisions. Esquire Financial focuses on tailored home financing solutions while maintaining a community-oriented approach to banking.
In its mortgage lending business, Esquire Bank originates and services a range of home loan products, including government-insured mortgages (FHA, VA and USDA) as well as conventional conforming and jumbo loans.
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