Esquire Financial Holdings, Inc.

NOTE 1 — Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The Interim Consolidated Financial Statements including the accounts of Esquire Financial Holdings, Inc. and its wholly owned subsidiary, Esquire Bank, N.A., are collectively referred to as “the Company.” All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited Interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial information. In the opinion of management, the interim statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Company on a consolidated basis and all such adjustments are recurring in nature. These financial statements and the accompanying notes should be read in conjunction with the Company’s audited financial statements for the years ended December 31, 2024 and 2023. Operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or any other period.

Subsequent Events

The Company has evaluated events for recognition and disclosure through the date of issuance.

Investment in Variable Interest Entities

During 2022, the Company sold its legacy National Football League (“NFL”) consumer post-settlement loan portfolio to a variable interest entity (“VIE”) in exchange for a nonvoting interest valued at $13.5 million where the Company remained as servicer of the loan portfolio at the discretion of the VIE manager. Gains or losses on this investment are the result of changes in projected cash flows from the VIE’s loan portfolio based on expected claim settlements and the Company’s exposure is limited to its investment. For the three and nine months ended September 30, 2025, the Company didnot recognize an equity method gain or loss on its investment. For the three months ended September 30, 2024, the Company didnot recognize an equity method gain or loss on its investment. For the nine months ended September 30, 2024, the Company recognized an equity method loss of approximately $500 thousand on its investment. As of September 30, 2025, the investment’s carrying amount was $9.0 million with a remaining life of 3.5 years, and a carrying amount of $9.4 million as of December 31, 2024.

During 2024 and 2025, the Company invested cash in United Payment Systems, LLC (doing business as Payzli) in exchange for a 24.99% ownership interest. Payzli is an end-to-end payment technology company that acts as a single source for payment services, business management software, web enablement and mobile solutions. For the three and nine months ended September 30, 2025 and 2024, the Company didnot recognize an equity method gain or loss on its investment. The investment’s carrying amount was $4.8 million and $4.1 million as of September 30, 2025 and December 31, 2024, respectively and there areno remaining unfunded commitments as of September 30, 2025. There were no fundings for the three months ended September 30, 2025 and September 30, 2024. The Company funded $700 thousand and $3.5 million for the nine months ended September 30, 2025 and September 30, 2024, respectively.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the Consolidated Financial Statements.

Summary of Significant Accounting Policies

Please see "Part I - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" for a discussion of areas in the accompanying unaudited Consolidated Financial Statements utilizing significant estimates.

Impact of Issued but Not Yet Effective Accounting Standards

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, intended to enhance the transparency of income tax disclosures, primarily related to the rate reconciliation and income taxes paid information. Specifically, the amendments in this ASU require disclosure of: (i) a tabular reconciliation, using both percentages and reporting currency amounts, with prescribed categories that are required to be disclosed, and the separate disclosure and disaggregation of prescribed reconciling items with an effect equal to 5% or more of the amount determined by multiplying pretax income from continuing operations by the applicable statutory rate; (ii) a qualitative description of the states and local jurisdictions that make up the majority (greater than 50%) of the effect of the state and local income taxes; and (iii) amount of income taxes paid, net of refunds received, disaggregated by federal, state, and foreign taxes and by individual jurisdictions that comprise 5% or more of total income taxes paid, net of refunds received. The ASU also includes other amendments to improve the effectiveness of income tax disclosures. The transition method is prospective with retrospective method permitted. The new disclosure requirements are effective for the Company for the annual reporting period ended December 31, 2025 which will be reflected on the annual Consolidated Financial Statements.

NOTE 2 — Debt Securities

The following tables summarize the major categories of securities as of the dates indicated:

Mortgage-backed securities included all pass-through certificates guaranteed by FHLMC, FNMA, or GNMA and the CMOs are backed by government agency pass-through certificates. CMOs, by virtue of the underlying residential collateral or structure, are fixed rate current pay sequentials. As actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations, these securities are not considered to have a single maturity date.

There wereno sales or calls of securities for the three and nine months ended September 30, 2025 and 2024.

At September 30, 2025, securities having a fair value of $262.7 million were pledged to the Federal Home Loan Bank of New York (“FHLB”) for borrowing capacity totaling $244.7 million. At December 31, 2024, securities having a fair value of $249.6 million were pledged to the FHLB for borrowing capacity totaling $232.3 million. At September 30, 2025 and December 31, 2024, the Company hadno outstanding FHLB advances.

At September 30, 2025, securities having a fair value of $50.5 million were pledged to the Federal Reserve Bank of New York (“FRB”) for borrowing capacity totaling $48.9 million. At December 31, 2024, securities having a fair value of $53.0 million were pledged to the FRB for borrowing capacity totaling $51.4 million. At September 30, 2025 and December 31, 2024, the Company hadno outstanding FRB borrowings.

The following table provides the gross unrealized and unrecognized losses and fair value, aggregated by investment category and length of time the individual securities have been in a continuous unrealized or unrecognized loss position:

Management evaluates securities available-for-sale in unrealized loss positions to determine whether the impairment is due to credit-related factors. Due to the decline in fair value being attributable to changes in interest rates, not credit quality and because the Company does not have the intent to sell the securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider the securities to be impaired at September 30, 2025.

As of September 30, 2025 and December 31, 2024, none of the Company’s available-for-sale securities were in an unrealized loss position due to credit, and thereforeno allowance for credit losses on available-for-sale securities was required. Additionally, there wasno allowance for credit losses on securities held-to-maturity due to the high credit quality composition consisting of issuances from government sponsored agencies as of September 30, 2025 and December 31, 2024.

Accrued interest receivable on securities totaling $1.1 million at September 30, 2025 and $1.1 million at December 31, 2024, was included in Accrued interest receivable in the Consolidated Statements of Financial Condition and excluded from amortized cost and estimated fair value in the tables above.

NOTE 3 — Loans

The composition of loans by class is summarized as follows:

The following tables present the activity in the allowance for credit losses by class for the three months ending September 30, 2025 and September 30, 2024:

The following tables present the activity in the allowance for credit losses by class for the nine months ending September 30, 2025 and September 30, 2024:

As of September 30, 2025, there was one collateral dependent multifamily loan secured by real estate totaling $7.9 million and one collateral dependent commercial loan secured by business assets totaling $736 thousand, with no associated specific reserve for either loan on the Consolidated Statements of Financial Condition. As of December 31, 2024, there was one collateral dependent multifamily loan secured by real estate totaling $10.9 million, with no associated specific reserve on the Consolidated Statements of Financial Condition.

The following tables present the aging of the past due loans measured at amortized cost, excluding deferred fees and unearned premiums, net, due to immateriality, by class of loans as of September 30, 2025 and December 31, 2024:

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed whenever a credit is extended, renewed or modified, or when an observable event occurs indicating a potential decline in credit quality, and no less than annually for large balance loans.

The Company uses the following definitions for risk ratings:

Special Mention - Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

The following is a summary of the credit risk profile of loans, measured at amortized cost, by internally assigned grade as of the periods indicated, the years represent the year of originations for non-revolving loans:

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses. For smaller dollar commercial and consumer loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity.

Loan Modifications to Borrowers Experiencing Financial Difficulty

During the three months ended September 30, 2025, the Company did not modify the terms of any loans or commitments to lend to borrowers experiencing financial difficulty in the form of an interest rate reduction, term extension, principal forgiveness, or other-than-significant payment delay. During the nine months ended September 30, 2025, the Company modified the terms of one $10.9 million multifamily loan which was restructured into two notes for $8.0 million and $2.9 million, respectively, with an extension resulting in an 18 month remaining term where the $2.9 million note was charged off and the $8.0 million note is at market terms.

During the three and nine months ended September 30, 2024, the Company did not modify the terms of any loans or commitments to lend to borrowers experiencing financial difficulty in the form of an interest rate reduction, term extension, principal forgiveness, or other-than-significant payment delay.

The following tables present the amortized cost of the one multifamily loan experiencing financial difficulty that was modified during the second quarter of 2025. The percentage of the amortized cost basis of the loan as compared to the amortized cost basis of total multifamily loans is also presented below:

The Company closely monitors the performance of modified loans to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of the loan that was modified in the last twelve months:

The Company has not committed to lend any additional amounts to the borrower of the one multifamily loan experiencing financial difficulty.

Pledged Loans

At September 30, 2025, loans totaling $316.2 million were pledged to the FHLB for borrowing capacity totaling $215.1 million. At December 31, 2024, loans totaling $297.8 million were pledged to the FHLB for borrowing capacity totaling $199.4 million.

NOTE 4 — Noninterest Income

The majority of the Company’s revenue-generating transactions are not subject to Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, including revenue generated from financial instruments, such as loans, letters of credit, and investment securities. Descriptions of revenue-generating activities that are within the scope of ASC 606, and are presented in the Consolidated Statements of Income as components of noninterest income, are as follows:

The Company has made no significant judgments in applying the revenue guidance prescribed in ASC 606 that affect the determination of the amount and timing of revenue from the above-described contracts with customers.

NOTE 5 — Share-Based Payment Plans

The Company issues incentive and non-statutory stock options, restricted stock awards (“RSAs”), and performance restricted stock units (“PSUs”) to certain employees and directors pursuant to its equity incentive plans, which have been approved by the stockholders. Share-based awards are granted by the Compensation Committee of the Board of Directors.

Under the plans, options are granted with an exercise price equal to the fair value of the Company’s stock at the date of the grant. Options granted vest over three tofive years and haveten-year contractual terms. All options provide for accelerated vesting upon a change in control (as defined in the plans).

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on peer volatility. The Company uses peer data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on peer data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

Restricted shares are granted at the fair value on the date of grant and vest over three tosix years with athird vesting at each of the last three anniversary dates. Restricted shares have the same voting rights as common stock and nonvested restricted shareholders do not have rights to the accrued dividends until vested.

Share payouts of PSUs will be earned based on the Company’s performance with respect to two equally weighted metrics, return on average assets and diluted EPS growth. Performance is measured against pre-established financial targets over atwo-year performance period and will cliff vest on thethree-year anniversary from the date of grant. Compensation expense on PSUs is based upon the fair value of the shares on the date of the grant for the expected aggregate share payout.

The following table presents a summary of the activity related to options for the nine months ended September 30, 2025:

The Company recognized compensation expense related to options of $188 thousand and $178 thousand for the three months ended September 30, 2025 and 2024, respectively. The Company recognized compensation expense related to options of $557 thousand and $546 thousand for the nine months ended September 30, 2025 and 2024, respectively. At September 30, 2025, unrecognized compensation cost related to nonvested options was approximately $945 thousand and is expected to be recognized over a weighted average period of 1.75 years. The intrinsic value for outstanding options, net of expected forfeitures was $25.6 million at September 30, 2025. The intrinsic value for exercisable options was $22.4 million at September 30, 2025.

Information related to stock option exercises during each period is as follows:

The following table presents a summary of the activity related to restricted stock for the nine months ended September 30, 2025:

The Company recognized compensation expense related to restricted stock of $975 thousand and $755 thousand for the three months ended September 30, 2025 and 2024, respectively. The Company recognized compensation expense related to restricted stock of $2.7 million and $2.3 million for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, there was $11.1 million of total unrecognized compensation cost related to nonvested shares granted under the plan. The cost is expected to be recognized over a weighted-average period of 3.51 years.

The following table presents a summary of the activity related to PSUs for the nine months ended September 30, 2025:

The Company recognized compensation expense related to PSUs of $140 thousand for the three months ended September 30, 2025 andno PSU expense in the three months ended September 30, 2024. The Company recognized compensation expense related to PSUs of $358 thousand for the nine months ended September 30, 2025 andno PSU expense in the nine months ended September 30, 2024. As of September 30, 2025, there was $1.3 million of total unrecognized compensation cost related to nonvested PSUs based on the expected aggregate share payout to be recognized over a weighted-average period of 2.36 years.

NOTE 6 — Earnings per Share

The factors used in the earnings per share computation follow:

Share-based awards totaling 25,641 and 41,160 shares of common stock were not considered in computing diluted earnings per common share for the three and nine months ended September 30, 2025, respectively, because they were anti-dilutive. Share-based awards totaling 44,156 and 49,496 shares of common stock were not considered in computing diluted earnings per common share for the three and nine months ended September 30, 2024, respectively, because they were anti-dilutive.

NOTE 7 — Leases

The Company recognizes the present value of its operating lease payments related to its office facilities and retail branches as operating lease assets and corresponding lease liabilities on the Consolidated Statements of Financial Condition. These operating lease assets represent the Company’s right to use an underlying asset for the lease term, and the lease liability represents the Company’s obligation to make lease payments over the lease term. As these leases do not provide an implicit rate, the Company used its incremental borrowing rate, the rate of interest to borrow on a collateralized basis for a similar term, at the lease commencement date in order to determine present value.

Short-term lease payments, those leases with original terms of 12 months or less, are recognized in the Consolidated Statements of Income, on a straight-line basis over the lease term. Certain leases may include one or more options to renew. The exercise of lease renewal options is typically at the Company’s discretion and are included in the operating lease liability if it is reasonably certain that the renewal option will be exercised. Certain real estate leases may contain lease and non-lease components, such as common area maintenance charges, real estate taxes, and insurance, which are generally accounted for separately and are not included in the measurement of the lease liability since they are generally able to be segregated. The Company does not sublease any of its leased properties. The Company does not lease properties from any related parties.

As of September 30, 2025, right of use (“ROU”) lease assets and related lease liabilities were $2.3 million and $2.5 million, respectively. As of December 31, 2024, ROU lease assets and related lease liabilities were $3.2 million and $3.5 million, respectively. ROU assets are included within Other assets and related lease liabilities are included within Accrued expenses and other liabilities on the Consolidated Statements of Financial Condition.

As of September 30, 2025, the Company was obligated under several non-cancelable leases for certain premises and equipment. The minimum annual rental commitments, exclusive of taxes and other charges, under non-cancelable lease agreements for premises at September 30, 2025, are summarized as follows:

In addition to the table above, as of September 30, 2025, the Company had an additional future operating lease commitment for its future corporate headquarters of approximately $24 million that has been executed but not yet commenced. This operating lease is expected to commence no earlier than the fourth quarter of 2026 with a lease term of 12.25 years.

The components of total lease cost are as follows:

NOTE 8 — Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values.

Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 – Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

For available-for-sale securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2).

Assets and liabilities measured at fair value on a recurring basis are summarized below:

There were no transfers between Level 1 and Level 2 during the three and nine months ended September 30, 2025 and 2024.

The following tables present the carrying amounts and fair values (represents exit price) of financial instruments not carried at fair value at September 30, 2025 and December 31, 2024:

NOTE 9 — Accumulated Other Comprehensive Loss

The following presents changes in accumulated other comprehensive loss by component, net of tax, for the three and nine months ended September 30, 2025 and 2024:

There were no reclassifications out of accumulated other comprehensive loss for the three and nine months ended September 30, 2025 and 2024.