Esquire Financial Holdings, Inc.

Previous wording

Management’s discussion and analysis of financial condition at September 30, 2025 and December 31, 2024 and results of operations for the three and nine months ended September 30, 2025 and 2024 is intended to assist in understanding the financial condition and results of operations of Esquire Financial Holdings, Inc. The information contained in this section should be read in conjunction with the unaudited Consolidated Financial Statements and the notes thereto appearing in Part I, Item 1, of this quarterly report on Form 10-Q and the audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Current wording

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

Previous wording

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

Current wording

contractual term of a loan for expected extensions, renewals, and modifications, unless there is a borrower-held extension or renewal option that is not unconditionally cancelable. In developing the estimate of expected credit losses, the Company must reflect information about past events, current conditions, and reasonable and supportable forecasts. This information should include what is reasonably available without undue cost and effort and may include information sourced internally, externally, or a combination of both.

Previous wording

The Company measures the allowance for credit losses on a collective basis by pooling loans according to similar risk characteristics. When a loan is deemed to no longer share risk characteristics similar to others in the portfolio, the Company evaluates such loans on an individual basis. Management may consider changes to a borrower’s circumstances impacting cash collections, delinquency and non-accrual status, probability of default, industry, or other facts and circumstances when determining whether a loan shares risk characteristics with other loans in a pool. For a loan that does not share risk characteristics with other loans in a pool and is not collateral dependent, expected credit loss is measured

Current wording

The Company measures the allowance for credit losses on a collective basis by pooling loans according to similar risk characteristics. When a loan is deemed to no longer share risk characteristics similar to others in the portfolio, the Company evaluates such loans on an individual basis. Management may consider changes to a borrower’s circumstances impacting cash collections, delinquency and non-accrual status, probability of default, industry, or other facts and circumstances when determining whether a loan shares risk characteristics with other loans in a pool. For a loan that does not share risk characteristics with other loans in a pool and is not collateral dependent, expected credit loss is measured based on the discounted value of the expected future cash flows and the amortized cost of the loan. If an entity determines that foreclosure of the collateral is probable, the CECL Standard requires the entity to measure expected credit losses of collateral dependent loans based on the difference between the current fair value of the collateral and the amortized cost basis of the financial asset. As of March 31, 2026, there was one collateral dependent commercial loan secured by business assets totaling $736 thousand that was individually analyzed, with no associated specific reserve on the Consolidated Statements of Financial Condition.

Previous wording

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

Current wording

Future changes to the allowance for credit losses may be necessary based on changes in economic, market, or other conditions. Changes to estimates could result in a material change in the allowance for credit losses and charges to

Previous wording

We are a financial holding company headquartered in Jericho, New York and registered under the Bank Holding Company Act of 1956, as amended. Through our wholly owned bank subsidiary, Esquire Bank, National Association (“Esquire Bank” or the “Bank”), we are a full service commercial bank dedicated to serving the financial needs of the legal and small business communities (as well as their owners and employees) on a national basis, and commercial and retail customers in the New York metropolitan market. We offer tailored products and solutions to the legal community and their clients as well as dynamic and flexible payment processing solutions to small business owners, both on a national basis. We also offer traditional banking products for businesses and consumers in our local market areas (a subset of the New York and Los Angeles markets).

Current wording

We are a financial holding company headquartered in Jericho, New York and registered under the Bank Holding Company Act of 1956, as amended. Through our wholly owned bank subsidiary, Esquire Bank, National Association (“Esquire Bank” or the “Bank”), we are a full service commercial bank dedicated to serving the financial needs of the legal and small business communities on a national basis, and commercial and retail customers in the New York and Los Angeles metropolitan markets. We offer tailored products and solutions to the legal community and their clients as well as dynamic and flexible payment processing solutions to small business owners, both on a national basis. We also offer traditional banking products for businesses and consumers in our local market areas (a subset of the New York and Los Angeles metropolitan markets).

Previous wording

Our results of operations depend primarily on our net interest income which is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for credit losses, noninterest income and noninterest expense. Noninterest income currently consists primarily of payment processing income, administrative service payment (“ASP”) fee income and customer related fees and charges. Noninterest expense currently consists primarily of employee compensation and benefits, data processing costs, occupancy and equipment costs and professional and consulting services. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies, the litigation market and actions of regulatory authorities.

Current wording

Our results of operations depend primarily on our net interest income which is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for credit losses, noninterest income and noninterest expense. Noninterest income currently consists primarily of payment processing fees, administrative service payment (“ASP”) fee income and customer related fees and charges. Noninterest expense currently consists primarily of employee compensation and benefits, data processing costs, occupancy and equipment costs and professional and consulting services. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies, the litigation market and actions of regulatory authorities.

Previous wording

Litigation Market Commercial Banking. The litigation market has been and will continue to be a significant growth opportunity for our Company as we offer focused and tailored products and services to law firms nationally. U.S. tort actions alone are estimated to consume approximately 2.1% of U.S. GDP annually according to the U.S. Chamber of Commerce Institute for Legal Reform (“Tort Costs in America – An Empirical Analysis of Costs and Compensation of the U.S. Tort System”) published in November 2024 with a total addressable market (“TAM”) of $529 billion for 2022. We do not compete directly with non-bank finance companies, the primary funders in this market, and believe there are various and significant barriers to entry including, but not limited to, our clear industry track record for decades, extensive in-house experience, deep relationships with respected firms nationally, and unique products tailored to commercial law firms’ needs and wants.

Current wording

Litigation Market Commercial Banking. The litigation market has been and will continue to be a significant growth opportunity for our Company as we offer focused and tailored products and services to law firms nationally. U.S. tort actions alone are estimated to consume approximately 2.1% of U.S. GDP annually according to the U.S. Chamber of Commerce Institute for Legal Reform (“Tort Costs in America – An Empirical Analysis of Costs and Compensation of U.S. Tort System”) published in November 2024 with an estimated total addressable market (“TAM”) of $529 billion for 2022. We do not compete directly with non-bank finance companies, the primary funders in this market, and believe there are various and significant barriers to entry including, but not limited to, our clear industry track record for decades, extensive in-house experience, deep relationships with respected firms nationally, and unique products tailored to commercial law firms’ needs and wants.

Previous wording

We currently have lending clients in 33 states and our larger markets include California, New York and Texas. Our success is tied to our unique ability to couple traditional commercial underwriting with non-traditional asset-based underwriting. Our team understands law firms’ contingent case inventory valuation process (as well as traditional hourly billing firms). Typically, these inventories of claims for injured consumers or claimants have a duration of 2 to 3 years, significantly longer than traditional accounts receivables or inventories of goods that can have a duration of 30 to 60 days or 120 days, respectively. These factors (the unique industry, contingent collateral, longer durations of the law firms’ inventories, atypical revenue streams of the law firms and more) coupled with the TAM create a unique and valuable opportunity for the Company with minimal incumbent competition. This unique risk profile translates approximately into a blended 9.4% variable rate asset yield on these commercial loans for the quarter ended September 30, 2025. More importantly, since our commercial banking platform is focused on full service relationship banking, for every $1.00 we advance on these loans we receive on average $1.44 of low-cost core operating and escrow deposits from these law firms through our branchless platform, fueling and funding additional growth in our other asset classes. Our extremely low historic delinquency rates and low charge-off rates clearly demonstrate our strong underwriting process and expertise in the litigation vertical. Our longer duration escrow or claimant trust settlement deposits represent accounts where the law firm is trustee for the claimant settlement funds and represent $1.02 billion, or 54%, of total deposits at September 30, 2025. These law firm escrow accounts as well as other fiduciary deposit accounts are for the benefit of the law firm’s customers (or claimants) and are titled in a manner to ensure that the maximum amount of FDIC insurance coverage passes through the account to the beneficial owner of the funds held in the account. Therefore, these law firm escrow accounts carry FDIC insurance at the claimant settlement level, not at the deposit account level. Coupling these types of commercial relationships with our off-balance sheet commercial litigation funds of $412 million at September 30, 2025, makes this litigation vertical a highly desirable core low-cost funding platform fueling bank-wide growth.

Current wording

We currently have lending clients in 33 states and our larger markets include California, New York and Texas. Our success is tied to our unique ability to couple traditional commercial underwriting with non-traditional asset-based underwriting. Our team understands law firms’ contingent case inventory valuation process (as well as traditional hourly billing firms). Typically, these inventories of claims for injured consumers or claimants have a duration of 2 to 3 years, significantly longer than traditional accounts receivables or inventories of goods that can have a duration of 30 to 60 days or 120 days, respectively. These factors (the unique industry, contingent collateral, longer durations of the law firms’ inventories, atypical revenue streams of the law firms and more) coupled with the TAM create a unique and valuable opportunity for the Company with minimal incumbent competition. This unique risk profile translates approximately into a blended 9% variable rate asset yield on these commercial loans for the quarter ended March 31, 2026. More importantly, since our commercial banking platform is focused on full service relationship banking, for every $1.00 we advance on these loans we receive on average $1.32 of low-cost core operating and escrow deposits from these law firms through our branchless platform, fueling and funding additional growth in our other asset classes. Our extremely low historic delinquency rates and low charge-off rates clearly demonstrate our strong underwriting process and expertise in the litigation vertical. Our longer duration escrow or claimant trust settlement deposits represent accounts where the law firm is trustee for the claimant settlement funds and represent $1.17 billion, or 56%, of total deposits at March 31, 2026. These

Previous wording

Payment Processing. The payment processing (merchant acquiring) market will continue to be a growth opportunity for our company, as we offer focused and tailored products and services to small businesses nationally. The payment industry grew approximately 11% on a compound annual growth rate from 2020 to 2024 with payment volumes or TAM of $11.7 trillion according to company records on U.S. payment industry trends. Couple this with the fact that there are less than 100 acquiring financial institutions in the U.S., this vertical represents a growth opportunity for our Company. We believe there are various and significant barriers to entry to this market including, but not limited to, our industry track record, extensive in-house experience, strong relationships with non-bank acquirers, and our unique approach to servicing these small business merchants and their respective verticals. We use proprietary and industry leading/customized technology to ensure card brand and regulatory compliance, to support multiple processing platforms, to manage daily risk across 93,000 small business merchants in all 50 states, and to perform commercial treasury clearing services for $10 billion in volume across 152 million in transactions in the quarter ended September 30, 2025.

Current wording

Payment Processing. The payment processing (merchant acquiring) market will continue to be a growth opportunity for our company, as we offer focused and tailored products and services to small businesses nationally. The payment industry grew approximately 8% on a compound annual growth rate from 2021 to 2025 with payment volumes or TAM of $12.2 trillion according to company records on U.S. payment industry trends. Couple this with the fact that there are less than 100 acquiring financial institutions in the U.S., this vertical represents a growth opportunity for our Company. We believe there are various and significant barriers to entry to this market including, but not limited to, our industry track record, extensive in-house experience, strong relationships with non-bank acquirers, and our unique approach to servicing these small business merchants and their respective verticals. We use proprietary and industry leading/customized technology to ensure card brand and regulatory compliance, to support multiple processing platforms, to manage daily risk across approximately 93,000 small business merchants in all 50 states, and to perform commercial treasury clearing services for approximately $10 billion in volume across 137 million in transactions in the quarter ended March 31, 2026.

Previous wording

The success of our national litigation and payment processing verticals coupled with our focus on branchless technology has led to industry leading performance. For the quarter ended September 30, 2025, we have produced industry leading returns including, but not limited to, an average return on assets and equity of 2.61% and 20.83%, respectively; industry leading net interest margin of 6.04%; strong efficiency ratio of 48.9%; and a diversified revenue stream as demonstrated by a strong net interest margin and stable fee income representing 17% of total revenue (our payment processing vertical has a compound annual growth rate of 14% since 2020). Coupling these performance metrics with strong balance sheet management including, but not limited to, loan portfolio diversification, an asset sensitive balance sheet with approximately 68% of our loans being variable rate and tied to prime, with interest rate floors in place on 90% of our variable rate loan portfolio, solid credit metrics, a stable low cost deposit base, and strong available liquidity of $1.17 billion, or 62% of deposits, with no outstanding borrowings, positions our Company for future growth and success.

Current wording

The success of our national litigation and payment processing verticals coupled with our focus on financial technology (“fin-tech”) has led to industry leading performance. For the quarter ended March 31, 2026, we have produced industry leading returns including, but not limited to, an average return on assets and equity of 2.10% and 16.82%, respectively; industry leading net interest margin of 6.04%; strong efficiency ratio of 51.1%; and diversified revenue streams as demonstrated by a strong net interest margin and stable fee income representing 16% of total revenue. Coupling these performance metrics with strong balance sheet management including, but not limited to, loan portfolio diversification, an asset sensitive balance sheet with approximately 70% of our loans being variable rate and tied to prime (with interest rate floors in place on 90% of our variable rate loan portfolio), solid credit metrics, a stable low cost deposit base, and strong available liquidity of $1.10 billion with no outstanding borrowings, positions our Company for future growth and success.

Previous wording

Assets. Our total assets were $2.18 billion at September 30, 2025, an increase of $291.8 million, or 15.4%, from $1.89 billion at December 31, 2024, due to growth in loans held for investment of $150.0 million, or 10.7%, increases in cash and cash equivalents of $114.4 million, or 90.6%, and increases in securities available-for-sale of $23.4 million, or 9.7%.

Current wording

Assets. Our total assets were $2.42 billion at March 31, 2026, an increase of $55.5 million, or 2.3%, from $2.37 billion at December 31, 2025, due to growth in loans held for investment of $56.7 million, or 3.2%, and increases in securities available-for-sale of $11.5 million, or 4.7%, offset by decreases in cash and cash equivalents of $13.7 million, or 5.8%.

Previous wording

Loan Portfolio Analysis. At September 30, 2025, loans, net of deferred fees and unearned premiums, were $1.55 billion, or 82.3% of total deposits, compared to $1.40 billion, or 85.1% of total deposits, at December 31, 2024. The growth in loans was primarily driven by net production in commercial loans and to a lesser extent, commercial real estate and multifamily loans. Commercial loans increased $128.0 million, or 13.9%, to $1.05 billion at September 30, 2025 from $920.6 million at December 31, 2024. Commercial real estate loans increased $18.6 million, or 21.4%, to $105.6 million at September 30, 2025 from $87.0 million at December 31, 2024. Multifamily loans increased $10.1 million, or 2.9%, to $365.3 million at September 30, 2025 from $355.2 million at December 31, 2024.

Current wording

Loan Portfolio Analysis. At March 31, 2026, loans, net of deferred fees and unearned premiums, were $1.82 billion, or 86.3% of total deposits, compared to $1.76 billion, or 85.2% of total deposits, at December 31, 2025. The growth in loans was primarily driven by net production in commercial loans and to a lesser extent, multifamily and commercial real estate loans. Commercial loans increased $30.0 million, or 2.4%, to $1.28 billion at March 31, 2026 from $1.25 billion at December 31, 2025. Multifamily loans increased $16.2 million, or 4.3%, to $389.0 million at March 31, 2026 from $372.8 million at December 31, 2025. Commercial real estate loans increased $7.1 million, or 6.6%, to $114.4 million at March 31, 2026 from $107.3 million at December 31, 2025.

Previous wording

At September 30, 2025, our Litigation-Related loans, which include commercial and consumer lending to attorneys, law firms and plaintiffs/claimants, totaled $996.0 million, or 64.4% of our total loan portfolio, compared to

Current wording

At March 31, 2026, our Litigation-Related loans, which include commercial and consumer lending to attorneys, law firms and plaintiffs/claimants, totaled $1.23 billion, or 67.5% of our total loan portfolio, compared to $1.18 billion, or 67.2% of our total loan portfolio at December 31, 2025. We also had Commercial Litigation-Related committed and uncommitted undrawn lines of credit totaling $136.8 million and $812.9 million, respectively, at March 31, 2026.

Previous wording

Litigation-Related post-settlement consumer loans increased $242 thousand to $3.0 million as of September 30, 2025, from $2.7 million as of December 31, 2024.

Current wording

Litigation-Related post-settlement consumer loans decreased $77 thousand to $3.1 million as of March 31, 2026, from $3.1 million as of December 31, 2025.

Previous wording

Debt Securities Portfolio. Securities available-for-sale increased $23.4 million, or 9.7%, to $265.1 million at September 30, 2025 from $241.7 million at December 31, 2024, due to securities purchases of $47.6 million at current market interest rates and decreases in unrealized losses of $6.8 million, offset by portfolio amortization of primarily lower yielding securities of $30.7 million. Securities held-to-maturity decreased $6.4 million, or 9.3%, to $62.3 million at September 30, 2025 from $68.7 million at December 31, 2024, driven by portfolio amortization.

Current wording

Debt Securities Portfolio. Securities available-for-sale increased $11.5 million, or 4.7%, to $258.0 million at March 31, 2026 from $246.5 million at December 31, 2025, due to securities purchases of $29.7 million, offset by portfolio amortization of $17.2 million and increases in unrealized losses of $1.0 million. Securities held-to-maturity decreased $1.9 million, or 3.1%, to $58.3 million at March 31, 2026 from $60.2 million at December 31, 2025, driven by portfolio amortization.

Previous wording

Funding**.** Total deposits increased $237.2 million, or 14.4% to $1.88 billion at September 30, 2025 from $1.64 billion at December 31, 2024, primarily due to our focus on client acquisition and expansion/growth in our national litigation platform. Core deposits, which we define as total deposits excluding time deposits, totaled $1.87 billion at September 30, 2025, or 99.7% of total deposits, compared to $1.63 billion or 99.1% of total deposits at December 31, 2024. Litigation and payment processing deposits represent $1.58 billion, or 84.1%, of total deposits at September 30, 2025. Savings, NOW and money market deposits increased $137.7 million, or 12.2%, to $1.27 billion and noninterest bearing demand deposits increased $107.6 million, or 21.6%, to $605.5 million at September 30, 2025.

Current wording

management services in our two national verticals. Core deposits, which we define as total deposits excluding time deposits, totaled $2.09 billion at March 31, 2026, or 99.3% of total deposits, compared to $2.06 billion or 99.7% of total deposits at December 31, 2025. Litigation and payment processing deposits represent $1.77 billion, or 84.2%, of total deposits at March 31, 2026. Savings, NOW and money market deposits increased $61.9 million, or 4.2%, to $1.54 billion while noninterest bearing demand deposits decreased $30.6 million, or 5.3%, to $545.9 million at March 31, 2026.

Previous wording

Core commercial relationship banking clients in our two national verticals represent approximately 80% of our $1.88 billion deposit base at September 30, 2025. These relationship banking clients are derived from coupling lending facilities, payment processing, and other unique custodial banking needs with commercial cash management depository services. Our deposit strategy primarily focuses on developing full service commercial banking relationships with our clients through commercial lending facilities, payment processing, and other unique commercial cash management services in our two national verticals, rather than competing with other institutions on rate. Our longer duration interest on lawyer trust accounts (“IOLTA”), escrow and settlement deposits represent $1.02 billion, or 54.2%, of total deposits. As of September 30, 2025, uninsured deposits were $610.3 million, or 32%, of our total deposits of $1.88 billion, excluding $16.7 million of the Company’s deposits held at the Bank. Approximately 75% of our uninsured deposits represent clients with full commercial relationship banking with us (commercial loans, payment processing, and other commercial service-oriented relationships) including, but not limited to, law firm operating accounts, law firm IOLTA/escrow accounts, merchant reserves, ISO reserves, ACH processing, and custodial accounts.

Current wording

Core commercial relationship banking clients in our two national verticals represent approximately 75% of our $2.10 billion deposit base at March 31, 2026. These relationship banking clients are derived from coupling lending facilities, payment processing, and other unique custodial banking needs with commercial cash management depository services. Our deposit strategy primarily focuses on developing full service commercial banking relationships with our clients through commercial lending facilities, payment processing, and other unique commercial cash management services in our two national verticals, rather than competing with other institutions on rate. Our longer duration interest on lawyer trust accounts (“IOLTA”), escrow and settlement deposits represent $1.17 billion, or 55.8%, of total deposits. As of March 31, 2026, uninsured deposits were $623.0 million, or 30%, of our total deposits, excluding $17.9 million of the Company’s deposits held at the Bank. Approximately 70% of our uninsured deposits represent clients with full commercial relationship banking with us (commercial loans, payment processing, and other commercial service-oriented relationships) including, but not limited to, law firm operating accounts, law firm IOLTA/escrow accounts, merchant reserves, ISO reserves, ACH processing, and custodial accounts.

Previous wording

Due to the nature of our larger mass tort and class action settlements related to the litigation vertical, we participate in FDIC insured sweep programs as well as treasury secured money market funds. As of September 30, 2025, off-balance sheet sweep funds totaled approximately $411.6 million, of which approximately $390.6 million, or 94.9%, was available to be swept onto our balance sheet as reciprocal client relationship deposits. Our core low-cost deposit growth and off-balance sheet client funds continue to clearly demonstrate our highly efficient, full service commercial relationship and tech-enabled cash management platform.

Current wording

Due to the nature of our larger mass tort and class action settlements related to the litigation vertical, we participate in FDIC insured sweep programs as well as treasury secured money market funds. As of March 31, 2026, off-balance sheet sweep funds totaled approximately $1.00 billion, of which approximately $330.4 million, or 33.0%, was available to be swept onto our balance sheet as reciprocal client relationship deposits. Our core low-cost deposit growth and off-balance sheet client funds continue to clearly demonstrate our highly efficient, full service commercial relationship and tech-enabled cash management platform.

Previous wording

At September 30, 2025, we had the ability to borrow, on a secured basis, up to $459.8 million from the Federal Home Loan Bank of New York and $48.9 million from the Federal Reserve Bank of New York discount window. At September 30, 2025, we also had $29.0 million in aggregate unsecured lines of credit with unaffiliated correspondent banks. No borrowing amounts were outstanding during the third quarter of 2025. Historically, we have not leveraged our balance sheet to generate earnings and have always utilized core client deposits to fund our asset growth and related earnings.

Current wording

At March 31, 2026, we had the ability to borrow, on a secured basis, up to $475.1 million from the Federal Home Loan Bank of New York and $46.5 million from the Federal Reserve Bank of New York discount window. At March 31, 2026, we also had $29.0 million in aggregate unsecured lines of credit with unaffiliated correspondent banks. No borrowing amounts were outstanding during the first quarter of 2026. Historically, we have not leveraged our balance sheet to generate earnings and have always utilized core client deposits to fund our asset growth and related earnings.

Previous wording

Stockholders’ Equity. Total stockholders’ equity increased $42.1 million to $279.2 million at September 30, 2025, from $237.1 million at December 31, 2024, primarily due to net income of $37.4 million, other comprehensive income of $4.8 million, as unrealized losses on our securities available-for-sale declined due to current short-term market interest rates, and amortization of share-based compensation of $3.6 million, partially offset by dividends declared to common stockholders of $4.5 million.

Current wording

Stockholders’ Equity. Total stockholders’ equity increased $11.7 million to $301.3 million at March 31, 2026, from $289.6 million at December 31, 2025, primarily due to net income of $12.2 million, and amortization of share-based compensation of $2.0 million, partially offset by dividends declared to common stockholders of $1.7 million and other comprehensive loss of $960 thousand, as unrealized losses on our securities available-for-sale increased due to fluctuations in short-term market interest rates.

Previous wording

Asset Quality. Nonperforming assets totaled $8.6 million as of September 30, 2025, and consisted of one multifamily loan totaling $7.9 million and one commercial loan (a small business merchant uncorrelated to our primary commercial litigation lending platform and other commercial loans) totaling $736 thousand. Nonperforming assets totaled $10.9 million as of December 31, 2024. We had no exposure to commercial office space, no construction loans, and $14.2 million in performing loans to the hospitality industry. The allowance for credit losses was $21.1 million, or 1.37% of total loans, as of September 30, 2025, as compared to $21.0 million, or 1.50% of total loans at December 31, 2024. Based on management’s evaluation of current credit risk in our multifamily and commercial portfolios as well as increases in the general reserve considering loan growth, loan composition, and the current uncertain economic and short-term interest rate environment (including, but not limited to, its potential impact on the New York metro multifamily real estate market), management believes the allowance for credit losses is adequate at September 30, 2025.

Current wording

Asset Quality. Nonperforming assets totaled $736 thousand as of March 31, 2026, and consisted of one commercial loan (a small business merchant uncorrelated to our primary commercial litigation lending platform and other commercial loans) totaling $736 thousand. Nonperforming assets totaled $8.6 million as of December 31, 2025. During the quarter, we foreclosed on the property securing the one nonaccrual multifamily loan (totaling $7.8 million), recorded it as OREO, recorded a charge-off totaling $3.2 million (consisting of principal and certain costs to perfect its lien), and sold the OREO to an unrelated third party. We had no exposure to commercial office space, no construction loans, and $13.9 million in performing loans to the hospitality industry. The allowance for credit losses was $23.5 million, or 1.30% of total loans, as of March 31, 2026, as compared to $24.0 million, or 1.37% of total loans at December 31, 2025. Based on management’s evaluation of current credit risk in our commercial real estate and commercial portfolios as well as increases in the general reserve considering loan growth, loan composition, and the current uncertain economic and short-term interest rate environment, management believes the allowance for credit losses is adequate at March 31, 2026.

Previous wording

At September 30, 2025, special mention and substandard loans totaled $26.5 million and $8.6 million, respectively, compared to $4.0 million and $10.9 million, respectively, as of December 31, 2024. The $22.5 million increase in special mention balances primarily relates to law firm related commercial loans totaling $20.4 million and a $6.1 million multifamily loan (to the same sponsor as the $7.9 million nonaccrual substandard loan) offset by the transfer of a non-litigation related loan to substandard. The ratio of nonperforming loans to total loans and total assets was 0.56% and 0.40%, respectively, as of September 30, 2025, as compared to 0.78% and 0.58%, respectively, as of December 31, 2024. The allowance for credit losses to nonperforming loans was 244% as of September 30, 2025, as compared to 192% as of December 31, 2024.

Current wording

respectively, as of December 31, 2025. The allowance for credit losses to nonperforming loans was 3,198% as of March 31, 2026, as compared to 280% as of December 31, 2025.

Previous wording

From a credit risk management perspective, the combined multifamily and CRE portfolio, excluding one nonaccrual loan, totaled $463.0 million and has a current weighted average debt service coverage ratio (“DSCR”) and an original loan-to value (“LTV”) (defined as unpaid principal balance as of September 30, 2025 divided by appraised value at origination) of approximately 1.59 and 55%, respectively. When further evaluating this population, loans with below current market rates maturing in (1) less than one year totaled $44.5 million and had a current weighted average DSCR and an original LTV of approximately 1.27 and 65%, respectively; and (2) one to two years totaled $57.3 million and had a current weighted average DSCR and an original LTV of approximately 1.43 and 67%, respectively.

Current wording

From a credit risk management perspective, the combined multifamily and CRE portfolio, totaled $503.4 million and has a current weighted average debt service coverage ratio (“DSCR”) and an original loan-to value (“LTV”) (defined as unpaid principal balance as of March 31, 2026 divided by appraised value at origination) of approximately 1.61 and 56%, respectively. When further evaluating this population, loans with below current market rates maturing in (1) less than one year totaled $66.8 million and had a current weighted average DSCR and an original LTV of approximately 1.38 and 66%, respectively; and (2) one to two years totaled $29.2 million and had a current weighted average DSCR and an original LTV of approximately 1.29 and 69%, respectively.

Previous wording

General. Net income increased $2.7 million, or 23.7%, to $14.1 million for the three months ended September 30, 2025 from $11.4 million for the three months ended September 30, 2024. The increase resulted from a $5.5 million increase in net interest income, a $797 thousand decrease in income tax expense, and a $171 thousand increase in noninterest income, partially offset by a $3.0 million increase in noninterest expense, and a $750 thousand increase to the provision for credit losses.

Current wording

General. Net income increased $804 thousand, or 7.0%, to $12.2 million for the three months ended March 31, 2026 from $11.4 million for the three months ended March 31, 2025. The increase resulted from a $6.4 million increase in net interest income, partially offset by a $3.9 million increase in noninterest expense, and a $1.2 million increase to the provision for credit losses.

Previous wording

Net Interest Income. Net interest income increased $5.5 million, or 21.2%, to $31.3 million for the three months ended September 30, 2025 from $25.9 million for the three months ended September 30, 2024, due to a $7.0 million increase in interest income, partially offset by a $1.5 million increase in interest expense.

Current wording

Net Interest Income. Net interest income increased $6.4 million, or 23.2%, to $34.0 million for the three months ended March 31, 2026 from $27.6 million for the three months ended March 31, 2025, due to a $7.5 million increase in interest income, partially offset by a $1.1 million increase in interest expense.

Previous wording

Our net interest margin of 6.04% decreased 12 basis points from the comparable period in 2024 as increases in higher yielding loans and securities were muted by elevated interest earning cash balances of $69.1 million, negatively impacting our net interest margin by approximately 12 basis points. Average loan yields increased 11 basis points to 7.98% while average loans increased $262.0 million, or 20.6%, to $1.53 billion, primarily due to commercial loan growth of $238.0 million, or 29.9%, focused in our higher yielding law firm commercial loans that grew $250.5 million, or 35.7%. Average securities increased $57.9 million, or 20.7%, to $337.7 million with a securities to assets ratio of 15% at September 30, 2025. Average deposits increased $364.2 million, or 24.5%, to $1.85 billion, led by increases in litigation related escrow or IOLTA, commercial money market and noninterest bearing commercial demand deposits totaling $215.4 million, $121.3 million, and $36.2 million, respectively. Our cost of deposits, including noninterest bearing demand deposits, increased 15 basis points to 1.03% due to changes in deposit composition coupled with increases in short-term money market rates.

Current wording

Our net interest margin of 6.04% increased 8 basis points from the comparable period in 2025, led by growth in higher yielding commercial loan production nationally. Average loan yields increased 5 basis points to 7.85% while average loans increased $376.4 million, or 27.0%, to $1.77 billion, with litigation related loan growth totaling $354.6 million, or 42.7%. Average securities increased $6.6 million, or 2.0%, to $334.5 million with a securities to assets ratio of 13% at March 31, 2026. Average deposits increased $364.2 million, or 21.7%, to $2.04 billion, led by increases in litigation related escrow or IOLTA, commercial money market and noninterest bearing commercial demand deposits totaling $215.8 million, $96.9 million, and $42.0 million, respectively. Our cost of deposits, including noninterest bearing demand deposits, increased 6 basis points to 1.00% due to changes in deposit composition.

Previous wording

Interest Income. Interest income increased $7.0 million, or 24.0%, to $36.1 million for the three months ended September 30, 2025 from $29.1 million for the three months ended September 30, 2024 and was attributable to increases in income on loans, securities and interest earning cash.

Current wording

Interest Income. Interest income increased $7.5 million, or 23.9%, to $39.0 million for the three months ended March 31, 2026 from $31.5 million for the three months ended March 31, 2025 and was attributable to increases in income on loans and securities, offset slightly by a decrease in interest earning cash income.

Previous wording

Loan interest income increased $5.7 million, or 22.8%, to $30.8 million for the three months ended September 30, 2025 from $25.1 million for the three months ended September 30, 2024. This increase was attributable to a $262.0 million, or 20.6%, increase in the average loan balance primarily due to commercial loan growth focused in our higher yielding law firm commercial loans that grew $250.5 million, or 35.7%, increasing total loan yields by 11 basis points to 7.98%. The increase in loan interest income was driven by an increase of $5.3 million related to growth in average loan volumes (substantially all commercial) and $386 thousand due to an increase in average loan rates (substantially all commercial). Overall, the commercial loan portfolio average balance increased $238.0 million to $1.04 billion, driving commercial loan yields to 9.45% for the three months ended September 30, 2025.

Current wording

Loan interest income increased $7.5 million, or 27.9%, to $34.3 million for the three months ended March 31, 2026 from $26.8 million for the three months ended March 31, 2025. This increase was attributable to a $376.4 million, or 27.0%, increase in the average loan balance primarily due to commercial loan growth focused in our higher yielding law firm commercial loans that grew $354.6 million, or 42.7%, increasing total loan yields by 5 basis points to 7.85%. The increase in loan interest income was driven by an increase of $7.3 million related to growth in average loan volumes, led by litigation related commercial growth, and $200 thousand due to an increase in average loan rates. Overall, the commercial loan portfolio average balance increased $323.6 million to $1.25 billion, driving average commercial loan yields to approximately 9% for the three months ended March 31, 2026.

Previous wording

Securities interest income increased $855 thousand, or 35.8%, to $3.2 million in the current quarter with $538 thousand attributable to average volume increases and $317 thousand attributable to increases in average rate. Average securities increased $57.9 million, or 20.7%, to $337.7 million with a securities to assets ratio of 15% at September 30, 2025.

Current wording

Securities interest income increased $136 thousand, or 4.5%, to $3.2 million in the current quarter with $62 thousand attributable to average volume increases and $74 thousand attributable to increases in average rate. Average securities increased $6.6 million, or 2.0%, to $334.5 million with a securities to assets ratio of 13% at March 31, 2026.

Previous wording

Income on interest earning cash increased $428 thousand to $2.0 million for the three months ended September 30, 2025 with $798 thousand attributable to average volume increases (funded with core deposits) offset by $370 thousand due to decreases in short-term rates. Average interest earning cash balances increased $69.1 million, or 57.4%, to $189.4 million, negatively impacting our net interest margin by approximately 12 basis points.

Current wording

Income on interest earning cash decreased $104 thousand to $1.6 million for the three months ended March 31, 2026 with $306 thousand due to decreases in short-term rates, offset by a $202 thousand increase attributable to average volume increases (funded with core deposits). Average interest earning cash balances increased $20.5 million, or 13.2%, to $176.3 million.

Previous wording

Interest Expense. Interest expense increased $1.5 million, or 46.4%, to $4.8 million for the three months ended September 30, 2025 from $3.3 million for the three months ended September 30, 2024, with $1.2 million attributable to increases in average deposit balances (primarily commercial money market and litigation related escrow or IOLTA), and $361 thousand attributable to increases in short-term rates (primarily money market). Average deposits increased $364.2 million, or 24.5%, to $1.85 billion, led by increases in litigation related escrow or IOLTA, commercial money market, and noninterest bearing demand deposits totaling $215.4 million, $121.3 million, and $36.2 million, respectively.

Current wording

Interest Expense. Interest expense increased $1.1 million, or 28.8%, to $5.0 million for the three months ended March 31, 2026 from $3.9 million for the three months ended March 31, 2025, with $1.1 million attributable to increases in average deposit balances (primarily commercial money market and litigation related escrow or IOLTA), and $44 thousand attributable to increases in rate as a result of changes in deposit composition (primarily money market). Average deposits increased $364.2 million, or 21.7%, to $2.0 billion, led by increases in litigation related escrow or IOLTA, commercial money market, and noninterest bearing demand deposits totaling $215.8 million, $96.9 million, and $42.0 million, respectively.

Previous wording

Provision for Credit Losses. Our provision for credit losses was $1.8 million for the three months ended September 30, 2025, an increase of $750 thousand from the $1.0 million provision for the three months ended September 30, 2024. As of September 30, 2025, our allowance to loans ratio was 1.37% as compared to 1.50% as of September 30, 2024. Based on management’s evaluation of current credit risk in our multifamily and commercial portfolios as well as increases in the general reserve considering loan growth, loan composition, and the current uncertain economic and short-term interest rate environment (including, but not limited to, its potential impact on the New York metro multifamily real estate market), management believes the allowance for credit losses is adequate at September 30, 2025.

Current wording

Provision for Credit Losses. Our provision for credit losses was $2.7 million for the three months ended March 31, 2026, an increase of $1.2 million from the $1.5 million provision for the three months ended March 31, 2025, primarily due to a $3.2 million charge-off as we foreclosed on the property securing our one nonaccrual multifamily loan (totaling $7.8 million), recorded it as OREO, and sold the OREO to an unrelated third party. As of March 31, 2026, our allowance to loans ratio was 1.30% as compared to 1.37% as of March 31, 2025. The decrease in the allowance as a percentage of loans was a result of management’s evaluation of credit risk in our multifamily portfolio subsequent to the above-mentioned transaction, which was partially offset by an increase in the general reserve considering loan growth, loan composition, and the current uncertain economic and short-term interest rate environment. Based on management’s evaluation of current credit risk in our commercial real estate and commercial portfolios, management believes the allowance for credit losses is adequate at March 31, 2026.

Previous wording

Payment processing income was $5.1 million for the quarter ended September 30, 2025, a $100 thousand decrease from the same period in 2024, primarily due to changes in our overall merchant risk profile and composition. Payment processing volumes for the credit and debit card processing platform increased $880.3 million, or 9.5%, to $10.1 billion while transactions volume totaled 151.8 million for the quarter ended September 30, 2025. We continue to focus on the expansion of sales channels through ISOs, prudently managing risk while focusing on new merchant originations, increasing overall volumes as well as managing merchant risk profiles, and expanding our technology and other resources in the payment vertical. The Company utilizes proprietary and industry leading/customized technology to ensure card brand and regulatory compliance, to support multiple processing platforms, to manage daily risk across 93,000 small business merchants in all 50 states, and to perform commercial treasury clearing services for $10.1 billion in volume across 151.8 million in transactions in the quarter ended September 30, 2025. ASP fee income increased $73 thousand, or 11.1%, to $731 thousand for the quarter ended September 30, 2025. ASP fee income is directly impacted by the average balances of off-balance sheet sweep funds as well as current short-term market interest rates. Off-balance sheet sweep funds totaled $411.6 million at September 30, 2025, demonstrating our highly efficient, full service commercial relationships and tech-enabled cash management platform. Other income increased $198 thousand, or 84.3%, to $433 thousand due to increases in loan and other banking fees.

Current wording

Payment processing income was $5.1 million for the quarter ended March 31, 2026, a $231 thousand increase from the same period in 2025. Growth in payment processing income has been muted, primarily due to changes in our overall merchant risk profile and merchant composition. Payment processing volumes for the credit and debit card processing platform increased $421.7 million, or 4.6%, to $9.7 billion while transactions volume totaled 137.3 million for the quarter ended March 31, 2026. We continue to focus on the expansion of merchant sales channels through our current and future ISOs, new merchant originations, active management of our merchant risk profiles, and by expanding our technology and other resources in the payment vertical. The Company utilizes proprietary and industry leading/customized technology to ensure card brand and regulatory compliance, to support multiple processing platforms, to manage daily risk across 93,000 small business merchants in all 50 states, and to perform commercial treasury clearing services for $9.7 billion in volume across 137.3 million transactions in the current quarter. ASP fee income increased $257 thousand, or 29.2%, to $1.1 million for the quarter ended March 31, 2026, and is directly impacted by the average balances of off-balance sheet sweep funds as well as current short-term market interest rates. Off-balance sheet sweep funds totaled $1.0 billion at March 31, 2026, demonstrating our highly efficient, full service commercial relationships and tech-enabled cash management platform. Other income decreased $184 thousand, or 51.3%, to $175 thousand due to decreases in loan and other banking fees.

Previous wording

Employee compensation and benefits costs increased primarily due to increases in sales commissions, bonuses, year-end stock grants and related stock-based compensation, staffing needs for our Los Angeles banking facility, and the impact of year end salary and benefit increases. The increase in sales related commissions is directly related to our regional senior business development officer (“BDO”) strategy and their success in the litigation market, attracting full-service commercial banking clients nationally and directly impacting commercial lending and core-deposit growth. Data processing costs increased due to increases in core banking processing volumes and the continued implementation/improvement of technology supporting client relationships and lead acquisition initiatives (CRM platform, digital marketing, business development, and lending) as well as overall risk management across all platforms. Professional and consulting services costs increased due to continuously evaluating business development opportunities, and professional search costs related to staffing needs, primarily at our Los Angeles banking facility. Travel and business relations expenses increased as a result of our high touch sales efforts that complement our digital marketing efforts. Occupancy and equipment costs increased due to amortization of our investments in internally developed software to support our digital platform, as well as costs associated with the opening of our Los Angeles banking facility.

Current wording

Employee compensation and benefits costs increased primarily due to increases in year-end salaries, employee benefit costs, stock grants and related stock-based compensation, staffing, regional business development officer (“BDO”) incentive pay or sales commissions, and year-end bonuses. The increase in BDO incentive pay is directly correlated to our litigation related/commercial loan and related core commercial deposit growth, attracting full-service commercial banking clients nationally. Due to the departure of two board members for personal reasons, we incurred one time compensation charges related to accelerated stock grant amortization totaling $398 thousand. In connection with the announced merger with Signature, we incurred merger related costs (advisory, legal, accounting, valuation, and other professional or consulting fees, and general administrative costs) of $1.3 million in the first quarter of 2026. Data processing costs increased due to increases in core banking processing volumes and the continued implementation/improvement of technology supporting client relationships and lead acquisition initiatives (CRM platform, digital marketing, business development, and lending) as well as overall risk management across all platforms. Advertising and marketing costs increased as we continued to grow our brand, targeting digital marketing platform, and expand our thought leadership in our national verticals. Occupancy and equipment costs increased due to costs associated with the operation of our Los Angeles branch which opened in late 2025.

Previous wording

Income Tax Expense. We recorded income tax expense of $3.4 million for the three months ended September 30, 2025, reflecting an effective tax rate of 19.5%, compared to $4.2 million, or 27.0%, for the three months ended September 30, 2024. The decrease in the effective tax rate resulted from certain discrete tax benefits related to the exercise of certain stock options totaling approximately $1.3 million.

Current wording

Income Tax Expense. We recorded income tax expense of $4.9 million for the three months ended March 31, 2026, reflecting an effective tax rate of 28.6%, compared to $4.1 million, or 26.5%, for the three months ended March 31, 2025. The increase in the effective tax rate was primarily due to the impact of non-deductible merger related costs.

Previous wording

As a financial institution, our primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the fair value of all interest earning assets and interest bearing liabilities, other than those which have a short-term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair values. The objective is to measure the effect

Current wording

As a financial institution, our primary component of market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of our assets and liabilities, and the fair value of all interest earning assets and interest bearing liabilities, other than those which have a short-term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.

Previous wording

Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At September 30, 2025, cash and cash equivalents totaled $240.8 million.

Current wording

Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At March 31, 2026, cash and cash equivalents totaled $222.2 million.

Previous wording

At September 30, 2025, through pledging of our securities and certain loans, we had the ability to borrow, on a secured basis, up to $459.8 million from the FHLB of New York and $48.9 million from the FRB of New York discount window. At September 30, 2025, we also had $29.0 million in aggregated unsecured lines of credit with unaffiliated correspondent banks. No amounts were outstanding on any of the aforementioned lines as of September 30, 2025.

Current wording

At March 31, 2026, through pledging of our securities and certain loans, we had the ability to borrow, on a secured basis, up to $475.1 million from the FHLB of New York and $46.5 million from the FRB of New York discount window. At March 31, 2026, we also had $29.0 million in aggregated unsecured lines of credit with unaffiliated correspondent banks. No amounts were outstanding on any of the aforementioned lines as of March 31, 2026.

Previous wording

At September 30, 2025, our off-balance sheet sweeps funds totaled $411.6 million, of which $390.6 million, or 94.9%, was available to be swept on balance sheet as reciprocal client deposits.

Current wording

At March 31, 2026, our off-balance sheet sweeps funds totaled $1.00 billion, of which $330.4 million, or 33.0%, was available to be swept on balance sheet as reciprocal client deposits.

Previous wording

Our overall liquidity position (cash, borrowing capacity, and available reciprocal client sweep balances) totaled $1.17 billion at September 30, 2025, or 62% of total deposits, creating a highly liquid and unlevered balance sheet.

Current wording

Our overall liquidity position (cash, borrowing capacity, and available reciprocal client sweep balances) totaled $1.10 billion at March 31, 2026, or 53% of total deposits, creating a highly liquid and unlevered balance sheet.