Esquire Financial Holdings - 10-Q quarterly report FY2022 Q3

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Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-38131

Esquire Financial Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Maryland		27-5107901
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

100 Jericho Quadrangle, Suite 100, Jericho, New York		11753
(Address of Principal Executive Offices)		(Zip Code)

(516) 535-2002

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

ESQ

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.

YES ⌧ NO ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES ⌧ NO ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ◻		Accelerated filer ◻
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ⌧

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 1, 2022, there were 8,149,321 outstanding shares of the issuer’s common stock.

Table of Contents

Esquire Financial Holdings, Inc.

Form 10-Q

Table of Contents

		Page
PART I. FINANCIAL INFORMATION		3

Item 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Statements of Financial Condition	3

	Condensed Consolidated Statements of Income	4

	Condensed Consolidated Statements of Comprehensive Income	5

	Condensed Consolidated Statements of Changes in Stockholders’ Equity	6

	Condensed Consolidated Statements of Cash Flows	7

	Notes to Interim Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40

Item 4.	Controls and Procedures	40

PART II. OTHER INFORMATION		42

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3.	Defaults Upon Senior Securities	42

Item 4.	Mine Safety Disclosures	42

Item 5.	Other Information	42

Item 6.	Exhibits	43

	SIGNATURES	44

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements

ESQUIRE FINANCIAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars in thousands, except per share data)

(Unaudited)


	September 30,		December 31,
	2022		2021
ASSETS
Cash and cash equivalents	$	182,125	$	149,156
Securities purchased under agreements to resell, at cost		50,225		50,271
Securities available-for-sale, at fair value		111,375		148,384
Securities held-to-maturity, at cost (fair value $71,436 at September 30, 2022)		80,102		—
Securities, restricted, at cost		2,810		2,680

Loans held for investment		875,114		784,517
Less: allowance for loan losses		(10,885)		(9,076)
Loans, net of allowance		864,229		775,441
Premises and equipment, net		2,852		3,334
Accrued interest receivable		5,228		4,197
Other assets		48,597		45,307
Total assets	$	1,347,543	$	1,178,770

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand	$	445,557	$	409,350
Savings, NOW and money market		722,972		599,747
Time		18,928		19,312
Total deposits		1,187,457		1,028,409

Accrued expenses and other liabilities		11,548		6,626
Total liabilities	$	1,199,005	$	1,035,035

Commitments and contingencies		—		—

Stockholders’ equity:
Preferred stock, par value $0.01; authorized 2,000,000 shares; none issued		—		—
Common stock, par value $0.01; authorized 15,000,000 shares; 8,119,000 and 8,123,152 shares issued, respectively; and 8,082,918 and 8,088,846 shares outstanding, respectively		81		81
Additional paid-in capital		95,616		93,611
Retained earnings		69,409		51,460
Accumulated other comprehensive loss		(15,942)		(850)
Treasury stock at cost, 36,082 and 34,306 shares, respectively		(626)		(567)
Total stockholders’ equity		148,538		143,735
Total liabilities and stockholders’ equity	$	1,347,543	$	1,178,770

See accompanying condensed notes to interim condensed consolidated financial statements.

Table of Contents

ESQUIRE FINANCIAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except per share data)

(Unaudited)


	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2022		2021		2022		2021
Interest income:
Loans	$	14,055	$	10,709	$	37,499	$	30,408
Securities		1,126		583		2,975		1,588
Securities purchased under agreements to resell		377		150		699		470
Interest earning deposits and other		402		51		767		134
Total interest income		15,960		11,493		41,940		32,600

Interest expense:
Savings, NOW and Money Market deposits		368		189		841		536
Time deposits		44		19		90		59
Borrowings		1		1		3		2
Total interest expense		413		209		934		597

Net interest income		15,547		11,284		41,006		32,003
Provision for loan losses		650		3,750		2,140		6,400
Net interest income after provision for loan losses		14,897		7,534		38,866		25,603

Noninterest income:
Payment processing fees		5,458		5,227		16,287		15,948
Customer related fees, service charges and other		974		81		1,768		292
Gain (loss) on loans held for sale		—		(384)		88		(384)
Total noninterest income		6,432		4,924		18,143		15,856

Noninterest expense:
Employee compensation and benefits		6,519		5,523		18,952		16,189
Occupancy and equipment		760		696		2,260		2,104
Professional and consulting services		840		773		2,298		2,352
FDIC and regulatory assessments		142		111		401		320
Advertising and marketing		480		289		1,109		936
Travel and business relations		179		105		403		212
Data processing		1,107		977		3,167		2,734
Other operating expenses		811		533		2,019		1,466
Total noninterest expense		10,838		9,007		30,609		26,313

Net income before income taxes		10,491		3,451		26,400		15,146
Income tax expense		2,780		932		6,996		3,951

Net income	$	7,711	$	2,519	$	19,404	$	11,195

Earnings per share
Basic	$	1.01	$	0.34	$	2.54	$	1.50
Diluted	$	0.94	$	0.32	$	2.37	$	1.42

See accompanying condensed notes to interim condensed consolidated financial statements.

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ESQUIRE FINANCIAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)


	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2022		2021		2022		2021
Net income	$	7,711	$	2,519	$	19,404	$	11,195
Other comprehensive loss:
Unrealized losses arising during the period on securities available-for-sale		(6,434)		(686)		(20,799)		(2,203)
Reclassification adjustment for net losses included in net income		—		—		—		—
Tax effect		1,769		196		5,707		628
Total other comprehensive loss		(4,665)		(490)		(15,092)		(1,575)
Total comprehensive income	$	3,046	$	2,029	$	4,312	$	9,620

See accompanying condensed notes to interim condensed consolidated financial statements.

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ESQUIRE FINANCIAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands, except per share data)

(Unaudited)


												Accumulated
								Additional				other				Total
	Preferred	Common		Preferred		Common		paid-in		Retained		comprehensive		Treasury		stockholders'
	shares	shares		stock		stock		capital		earnings		loss		stock		equity
Balance at July 1, 2022	—	8,080,486	$	—	$	81	$	94,923	$	62,426	$	(11,277)	$	(626)	$	145,527
Net income	—	—		—		—		—		7,711		—		—		7,711
Other comprehensive loss	—	—		—		—		—		—		(4,665)		—		(4,665)
Exercise of stock options, net of repurchases (2,734 shares)	—	2,432		—		—		7		—		—		—		7
Stock compensation expense	—	—		—		—		686		—		—		—		686
Cash dividends paid to common stockholders ($0.09 per share)	—	—		—		—		—		(728)		—		—		(728)
Balance at September 30, 2022	—	8,082,918	$	—	$	81	$	95,616	$	69,409	$	(15,942)	$	(626)	$	148,538

												Accumulated
								Additional				other				Total
	Preferred	Common		Preferred		Common		paid-in		Retained		comprehensive		Treasury		stockholders'
	shares	shares		stock		stock		capital		earnings		income (loss)		stock		equity
Balance at July 1, 2021	—	7,830,704	$	—	$	79	$	92,624	$	42,211	$	323	$	(567)	$	134,670
Net income	—	—		—		—		—		2,519		—		—		2,519
Other comprehensive loss	—	—		—		—		—		—		(490)		—		(490)
Exercise of stock options, net of repurchases (18,641 shares)	—	16,790		—		—		—		—		—		—		—
Stock compensation expense	—	—		—		—		482		—		—		—		482
Balance at September 30, 2021	—	7,847,494	$	—	$	79	$	93,106	$	44,730	$	(167)	$	(567)	$	137,181

												Accumulated
								Additional				other				Total
	Preferred	Common		Preferred		Common		paid-in		Retained		comprehensive		Treasury		stockholders'
	shares	shares		stock		stock		capital		earnings		loss		stock		equity
Balance at January 1, 2022	—	8,088,846	$	—	$	81	$	93,611	$	51,460	$	(850)	$	(567)	$	143,735
Net income	—	—		—		—		—		19,404		—		—		19,404
Other comprehensive loss	—	—		—		—		—		—		(15,092)		—		(15,092)
Exercise of stock options, net of repurchases (2,734 shares)	—	9,598		—		—		178		—		—		—		178
Restricted stock award forfeitures	—	(13,750)		—		—		—		—		—		—		—
Stock compensation expense	—	—		—		—		1,827		—		—		—		1,827
Vested restricted stock awards settlement	—	(1,776)		—		—		—		—		—		(59)		(59)
Cash dividends paid to common stockholders ($0.09 per share)	—	—		—		—		—		(1,455)		—		—		(1,455)
Balance at September 30, 2022	—	8,082,918	$	—	$	81	$	95,616	$	69,409	$	(15,942)	$	(626)	$	148,538

												Accumulated
								Additional				other				Total
	Preferred	Common		Preferred		Common		paid-in		Retained		comprehensive		Treasury		stockholders'
	shares	shares		stock		stock		capital		earnings		income (loss)		stock		equity
Balance at January 1, 2021	—	7,793,482	$	—	$	78	$	91,622	$	33,535	$	1,408	$	(567)	$	126,076
Net income	—	—		—		—		—		11,195		—		—		11,195
Other comprehensive loss	—	—		—		—		—		—		(1,575)		—		(1,575)
Exercise of stock options, net of repurchases (59,109 shares)	—	54,012		—		1		20		—		—		—		21
Stock compensation expense	—	—		—		—		1,464		—		—		—		1,464
Balance at September 30, 2021	—	7,847,494	$	—	$	79	$	93,106	$	44,730	$	(167)	$	(567)	$	137,181

See accompanying condensed notes to interim condensed consolidated financial statements.

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ESQUIRE FINANCIAL HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	For the Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income	$	19,404	$	11,195
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		2,140		6,400
Depreciation		533		516
Stock compensation expense		1,827		1,464
(Gain) loss on loans held for sale		(88)		384
Net amortization (accretion):
Securities		426		613
Loans		(747)		(1,034)
Right of use asset		354		415
Software		911		749
Changes in other assets and liabilities:
Accrued interest receivable		(1,031)		67
Other assets		1,619		(543)
Operating lease liability		(424)		(405)
Accrued expenses and other liabilities		5,435		2,868
Net cash provided by operating activities		30,359		22,689

Cash flows from investing activities:
Net change in loans		(90,181)		(94,358)
Net change in securities purchased under agreements to resell		46		827
Purchases of securities available-for-sale		(1,739)		(70,478)
Purchases of securities held-to-maturity		(84,092)		—
Principal repayments on securities available-for-sale		17,602		43,614
Principal repayments on securities held-to-maturity		3,911		—
Redemption (purchase) of securities, restricted		(130)		14
Payoff of loans held for sale		600		—
Purchases of premises and equipment		(51)		(942)
Development of capitalized software		(1,067)		(1,325)
Net cash used in investing activities		(155,101)		(122,648)

Cash flows from financing activities:
Net increase in deposits		159,048		172,989
Decrease in borrowings		(1)		(1)
Exercise of stock options		178		21
Tax withholding payments for vested equity awards		(59)		—
Cash dividends paid to common stockholders		(1,455)		—
Net cash provided by financing activities		157,711		173,009

Increase in cash and cash equivalents		32,969		73,050

Cash and cash equivalents at beginning of the period		149,156		65,185

Cash and cash equivalents at end of the period	$	182,125	$	138,235

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	924	$	597
Taxes		5,879		5,854
Noncash transactions:
Contribution of loans held for sale in exchange for an equity interest in a variable interest entity		13,500		—
Transfer from loans held for investment to held for sale		—		14,584

See accompanying condensed notes to interim condensed consolidated financial statements.

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ESQUIRE FINANCIAL HOLDINGS, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Basis of Presentation

The Interim Consolidated Financial Statements include 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 Condensed 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, 2021 and 2020. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or any other period. Certain balances in the prior year financial statements were reclassified to conform to current presentation. The reclassifications had no effect on prior year net income or stockholders’ equity.

Risks and Uncertainties

On March 11, 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic as a result of the global spread of the coronavirus illness. It is difficult to quantify the impact COVID-19 will have on future periods. This could cause the Company to experience a material adverse effect on our business operations, asset valuations, financial condition, and results of operations. Material adverse impacts may include all or a combination of an increase in the allowance for loan losses, valuation impairments on our investments or deferred tax assets. The Company has evaluated the impact of the effects of COVID-19 and determined that there were no material or systematic adverse impacts on the Company's third quarter 2022 Consolidated Statement of Financial Condition and Consolidated Statement of Income.

Subsequent Events

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

Investment in Variable Interest Entity

On April 1, 2022, the Company sold its legacy 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 will remain as servicer of the loan portfolio at the discretion of the VIE manager. The Company’s investment is considered a significant variable interest, but it does not have the power to direct the activities that most significantly impact the VIE’s economic performance. Therefore, the Company is not considered the primary beneficiary of this VIE and does not consolidate the entity in the Company’s financial statements. The Company’s maximum exposure to loss is limited to the carrying amount of its investment and accounted for under the equity method which is presented within other assets on the Consolidated Statement of Financial Condition.

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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.

Loans Held for Sale

Loans held for sale are accounted for at lower of cost or fair value. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Loans held for sale is included with Other assets on the Consolidated Statement of Financial Condition.

New Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (the ASU). This ASU replaces the incurred loss model with an expected loss model, referred to as “current expected credit loss” (CECL) model. It will significantly change estimates for credit losses related to financial assets measured at amortized cost, including loans receivable and certain other contracts. This ASU will be effective for a smaller reporting company on January 1, 2023. The Company plans to adopt ASU 2016-13 on January 1, 2023, using the required modified retrospective method with a cumulative effect adjustment as of the beginning of the reporting period. The Company has gathered the necessary data and continues to prepare for the implementation of this standard.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions for accounting related to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 applies only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. ASU 2020-04 was effective upon issuance and generally can be applied through December 31, 2022. Adoption of the standard is not expected to have a material impact on the Company’s operating results or financial condition.

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments — Credit Losses (Topic 326): Troubled Debt Restructuring and Vintage Disclosures”. ASU 2022-02 eliminates the accounting guidance for TDRs by creditors in Subtopic 310-40, “Receivables — Troubled Debt Restructurings by Creditors”, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, the amendments in this ASU require that public business entities disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASU 326-20, “Financial Instruments — Credit Losses: Measured at Amortized Cost”. The Company is in the process of evaluating the ASU in conjunction with its adoption of CECL on January 1, 2023.

In March 2022, the SEC issued Staff Accounting Bulletin (SAB) No. 121 which provides interpretive guidance for the accounting and disclosure of obligations to safeguard crypto-assets held for platform users effective the first interim or annual period ending after June 15, 2022. This guidance does not have an impact on the Company’s financial statements as no crypto-asset related activities are conducted by the Company.

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NOTE 2 — Debt Securities

The following tables summarize the amortized cost and fair value of securities available-for-sale and securities held-to-maturity and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive loss and gross unrecognized gains and losses:


	September 30, 2022
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

	(In thousands)
Securities available-for-sale:
Mortgage-backed securities – agency	$	113,658	$	—	$	(19,587)	$	94,071
Collateralized mortgage obligations (CMOs) – agency		19,706		—		(2,402)		17,304
Total available-for-sale	$	133,364	$	—	$	(21,989)	$	111,375

			Gross		Gross
	Amortized		Unrecognized		Unrecognized		Fair
	Cost		Gains		Losses		Value

	(In thousands)
Securities held-to-maturity:
Collateralized mortgage obligations (CMOs) – agency	$	80,102	$	—	$	(8,666)	$	71,436
Total held-to-maturity	$	80,102	$	—	$	(8,666)	$	71,436

	December 31, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

	(In thousands)
Securities available-for-sale:
Mortgage-backed securities – agency	$	122,258	$	673	$	(2,050)	$	120,881
Collateralized mortgage obligations (CMOs) – agency		27,316		237		(50)		27,503
Total available-for-sale	$	149,574	$	910	$	(2,100)	$	148,384

As of December 31, 2021, there were no securities held-to-maturity.

Mortgage-backed securities include 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 or planned amortization classes (PACs). 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 were no sales or calls of securities for the three and nine months ended September 30, 2022 and 2021.

At September 30, 2022, securities having a carrying value of $153.8 million were pledged to the Federal Home Loan Bank of New York (FHLB) for borrowing capacity totaling $139.0 million. At December 31, 2021, securities having a fair value of $121.5 million were pledged to the FHLB for borrowing capacity totaling $115.4 million. At September 30, 2022 and December 31, 2021, the Company had no outstanding FHLB advances.

At September 30, 2022, securities having a fair value of $37.7 million were pledged to the Federal Reserve Bank of New York (FRB) for borrowing capacity totaling $36.6 million. At December 31, 2021, securities having a fair value of $26.9 million were pledged to the FRB for borrowing capacity totaling $26.1 million. At September 30, 2022 and December 31, 2021, the Company had no outstanding FRB borrowings.

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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 as of:


	September 30, 2022
	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

	(In thousands)
Securities available-for-sale:
Mortgage-backed securities – agency	$	24,357	$	(3,618)	$	69,714	$	(15,969)	$	94,071	$	(19,587)
CMOs – agency		16,315		(2,291)		989		(111)		17,304		(2,402)
Total temporarily impaired securities	$	40,672	$	(5,909)	$	70,703	$	(16,080)	$	111,375	$	(21,989)

	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrecognized Losses		Fair Value		Gross Unrecognized Losses		Fair Value		Gross Unrecognized Losses

	(In thousands)
Securities held-to-maturity:
CMOs – agency	$	71,436	$	(8,666)	$	—	$	—	$	71,436	$	(8,666)
Total temporarily impaired securities	$	71,436	$	(8,666)	$	—	$	—	$	71,436	$	(8,666)

	December 31, 2021
	Less Than 12 Months				12 Months or Longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

	(In thousands)
Securities available-for-sale:
Mortgage-backed securities - agency	$	101,235	$	(1,813)	$	4,503	$	(237)	$	105,738	$	(2,050)
CMOs - Agency		7,416		(50)		—		—		7,416		(50)
Total temporarily impaired securities	$	108,651	$	(1,863)	$	4,503	$	(237)	$	113,154	$	(2,100)

Management reviews the investment portfolio on a quarterly basis to determine the cause, magnitude and duration of declines in the fair value of each security. In estimating other-than-temporary impairment (OTTI), management considers many factors including: (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the Company has the intent to sell the security or more likely than not will be required to sell the security before its anticipated recovery. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: (1) OTTI related to credit loss, which must be recognized in the income statement and (2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. The assessment of whether any other than temporary decline exists may involve a high degree of subjectivity and judgment and is based on the information available to management at a point in time. Management evaluates securities for OTTI at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.

At September 30, 2022, securities in unrealized or unrecognized loss positions were issuances from government sponsored entities. 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 other-than-temporarily impaired at September 30, 2022.

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No impairment charges were recorded for the three and nine months ended September 30, 2022 and 2021.

NOTE 3 — Loans

The composition of loans by class is summarized as follows:


	At September 30,		At December 31,
	2022		2021

	(In thousands)
Real estate:
Multifamily	$	263,689	$	254,852
Commercial real estate		83,515		48,589
1 – 4 family		31,496		40,753
Construction		—		—
Total real estate		378,700		344,194
Commercial		478,854		432,108
Consumer		18,424		8,681
Total loans held for investment	$	875,978	$	784,983
Deferred loan fees and unearned premiums, net		(864)		(466)
Allowance for loan losses		(10,885)		(9,076)
Loans held for investment, net	$	864,229	$	775,441

At December 31, 2021, the commercial loans balance included Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans of $4.2 million. There were no PPP loans outstanding at September 30, 2022.

The following tables present the activity in the allowance for loan losses by class for the three months ending September 30, 2022 and 2021:



			Commercial
	Multifamily		Real Estate		1‑4 Family		Construction		Commercial		Consumer		Total

	(In thousands)
September 30, 2022
Allowance for loan losses:
Beginning balance	$	1,916	$	902	$	253	$	—	$	7,045	$	155	$	10,271
Provision (credit) for loan losses		11		35		(15)		—		418		201		650
Recoveries		—		—		—		—		—		—		—
Loans charged-off		—		—		—		—		—		(36)		(36)
Total ending allowance balance	$	1,927	$	937	$	238	$	—	$	7,463	$	320	$	10,885

September 30, 2021
Allowance for loan losses:
Beginning balance	$	1,418	$	603	$	312	$	—	$	5,547	$	6,137	$	14,017
Provision (credit) for loan losses		274		(4)		(3)		—		385		3,098		3,750
Recoveries		—		—		—		—		—		—		—
Loans charged-off		—		—		—		—		—		(9,102)		(9,102)
Total ending allowance balance	$	1,692	$	599	$	309	$	—	$	5,932	$	133	$	8,665

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The following tables present the activity in the allowance for loan losses by class for the nine months ending September 30, 2022 and 2021:


			Commercial
	Multifamily		Real Estate		1‑4 Family		Construction		Commercial		Consumer		Total

	(In thousands)
September 30, 2022
Allowance for loan losses:
Beginning balance	$	1,789	$	552	$	285	$	—	$	6,319	$	131	$	9,076
Provision (credit) for loan losses		299		385		(47)		—		1,206		297		2,140
Recoveries		17		—		—		—		2		—		19
Loans charged-off		(178)		—		—		—		(64)		(108)		(350)
Total ending allowance balance	$	1,927	$	937	$	238	$	—	$	7,463	$	320	$	10,885

September 30, 2021
Allowance for loan losses:
Beginning balance	$	1,278	$	597	$	342	$	—	$	5,003	$	4,182	$	11,402
Provision (credit) for loan losses		414		2		(33)		—		929		5,088		6,400
Recoveries		—		—		—		—		—		—		—
Loans charged-off		—		—		—		—		—		(9,137)		(9,137)
Total ending allowance balance	$	1,692	$	599	$	309	$	—	$	5,932	$	133	$	8,665

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by class and based on impairment method as of September 30, 2022 and December 31, 2021:


			Commercial
	Multifamily		Real Estate		1‑4 Family		Construction		Commercial		Consumer		Total

	(In thousands)
September 30, 2022
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,927		937		238		—		7,463		320		10,885

Total ending allowance balance	$	1,927	$	937	$	238	$	—	$	7,463	$	320	$	10,885

Loans:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	5,819	$	—	$	5,819
Loans collectively evaluated for impairment		263,689		83,515		31,496		—		473,035		18,424		870,159

Total ending loans balance	$	263,689	$	83,515	$	31,496	$	—	$	478,854	$	18,424	$	875,978

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			Commercial
	Multifamily		Real Estate		1‑4 Family		Construction		Commercial		Consumer		Total

	(In thousands)
December 31, 2021
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,789		552		285		—		6,319		131		9,076

Total ending allowance balance	$	1,789	$	552	$	285	$	—	$	6,319	$	131	$	9,076

Loans:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		254,852		48,589		40,753		—		432,108		8,681		784,983

Total ending loans balance	$	254,852	$	48,589	$	40,753	$	—	$	432,108	$	8,681	$	784,983

Recorded investment is not adjusted for accrued interest, deferred fees and costs, and unearned premiums and discounts.

The following table provides an analysis of the impaired loans by segment as of September 30, 2022 and December 31, 2021. There was no related allowance recorded on any impaired loans as of the periods indicated:


	September 30,				December 31,
	2022				2021
			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal
	Investment		Balance		Investment		Balance

	(In thousands)
Multifamily	$	—	$	—	$	—	$	—
Commercial real estate		—		—		—		—
1 – 4 family		—		—		—		—
Construction		—		—		—		—
Commercial		5,819		5,819		—		—
Consumer		1		1		—		—
Total	$	5,820	$	5,820	$	—	$	—

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The following table provides an analysis of average recorded investment and interest income recognized by segment on impaired loans during the three and nine months ended September 30, 2022.


	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
	2022				2021				2022				2021
	Average		Interest		Average		Interest		Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income		Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized		Investment		Recognized		Investment		Recognized

	(In thousands)
Multifamily	$	—	$	—	$	—	$	—	$	206	$	—	$	144	$	—
Commercial real estate		—		—		—		—		—		—		—		—
1 – 4 family		—		—		—		—		—		—		—		—
Construction		—		—		—		—		—		—		—		—
Commercial		1,455		—		—		—		608		—		—		—
Consumer		—		—		1,703		—		1		—		2,054		—
Total	$	1,455	$	—	$	1,703	$	—	$	815	$	—	$	2,198	$	—

The following tables present the aging of the recorded investment in past due loans by class of loans as of September 30, 2022 and December 31, 2021:


									Total Past
	30-59		60-89		Greater than				Due &
	Days		Days		90 Days		Nonaccrual		Nonaccrual		Loans Not
	Past Due		Past Due		Past Due		Loans		Loans		Past Due		Total

	(In thousands)
September 30, 2022
Multifamily	$	—	$	—	$	—	$	—	$	—	$	263,689		263,689
Commercial real estate		—		—		—		—		—		83,515		83,515
1 – 4 family		—		—		—		—		—		31,496	$	31,496
Construction		—		—		—		—		—		—		—
Commercial		—		—		—		5,819		5,819		473,035		478,854
Consumer		18		9		—		1		28		18,396		18,424
Total	$	18	$	9	$	—	$	5,820	$	5,847	$	870,131	$	875,978


									Total Past
	30-59		60-89		Greater than				Due &
	Days		Days		90 Days		Nonaccrual		Nonaccrual		Loans Not
	Past Due		Past Due		Past Due		Loans		Loans		Past Due		Total

	(In thousands)
December 31, 2021
Multifamily	$	1,034	$	—	$	—	$	—	$	1,034	$	253,818	$	254,852
Commercial real estate		—		—		—		—		—		48,589		48,589
1 – 4 family		—		—		—		—		—		40,753		40,753
Construction		—		—		—		—		—		—		—
Commercial		—		—		—		—		—		432,108		432,108
Consumer		21		10		—		6		37		8,644		8,681
Total	$	1,055	$	10	$	—	$	6	$	1,071	$	783,912	$	784,983

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

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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.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:


	Pass		Special Mention		Substandard		Doubtful

	(In thousands)
September 30, 2022
Multifamily	$	259,595	$	3,373	$	721	$	—
Commercial real estate		79,697		3,818		—		—
1 – 4 family		31,496		—		—		—
Construction		—		—		—		—
Commercial		466,480		6,555		5,819		—
Consumer		16,536		1,888		—		—
Total	$	853,804	$	15,634	$	6,540	$	—


	Pass		Special Mention		Substandard		Doubtful

	(In thousands)
December 31, 2021
Multifamily	$	254,131	$	—	$	721	$	—
Commercial real estate		44,771		3,818		—		—
1 – 4 family		37,738		3,015		—		—
Construction		—		—		—		—
Commercial		410,548		17,977		3,583		—
Consumer		8,681		—		—		—
Total	$	755,869	$	24,810	$	4,304	$	—

The Company considers the performance of the loan portfolio and its impact on the allowance for loan 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.

The Company has no loans identified as TDRs at September 30, 2022 and December 31, 2021. Furthermore, there were no loans modified during the three and nine months ended September 30, 2022 and 2021 as TDRs. In order to

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determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

Pledged Loans

At September 30, 2022, loans totaling $25.4 million were pledged to the Federal Home Loan Bank of New York for borrowing capacity totaling $20.0 million. At December 31, 2021, loans totaling $33.9 million were pledged to the Federal Home Loan Bank of New York for borrowing capacity totaling $26.0 million.

NOTE 4 — Noninterest Income

Descriptions of revenue-generating activities that are within the scope of Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, and are presented in the Consolidated Statements of Income as components of noninterest income, are as follows:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021

	(In thousands)
Payment processing fees
Payment processing income	$	5,250	$	5,021	$	15,651	$	15,339
ACH income		208		206		636		609
Customer related fees, service charges and other
Administrative service income		886		—		1,512		29
Other		88		81		256		263
Gain (loss) on loans held for sale ⁽¹⁾		—		(384)		88		(384)
Total noninterest income	$	6,432	$	4,924	$	18,143	$	15,856

(1)

Represents a valuation adjustment on loans held for sale, not within the scope of ASC 606.

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.

●

Payment processing income – We provide payment processing services as an acquiring bank through the third-party or independent sales organization (ISO) business model in which we process credit and debit card transactions on behalf of merchants. We enter into a tri-party merchant agreement, between the Company, ISO and each merchant. The Company’s performance obligation is clearing and settling credit and debit transactions on behalf of the merchants. The Company recognizes revenue monthly once it summarizes and computes all revenue and expenses applicable to each ISO, which is our performance obligation.

●

ACH income – We provide ACH services for merchants and other commercial customers. Contracts are entered into with third parties that require ACH transactions processed on behalf of their customers. Fees are variable and based on the volume of transactions within a given month. Our performance obligations are processing and settling ACHs on behalf of the customers. Our obligation is satisfied within each business day when the transactions (ACH files) are sent to the Federal Reserve Bank for clearing. Revenue is recognized based on the total volume of transactions processed that month for a given customer.

●

Administrative service income – Administrative service income is derived primarily from the management of qualified settlement funds (QSFs), which are funds from settled mass torts and class action lawsuits. Our performance obligations with the QSFs are outlined in court approved orders which includes ensuring funds are invested into safe investment vehicles such as U.S. treasuries and FDIC insured products. Our fees for placing these funds in appropriate vehicles are earned over the course of a month, representing the period over which the Company satisfies the performance obligation.

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●

Other – The other category includes revenue from service charges on deposit accounts, debit card fees, and certain loan related fees where revenue is recognized as performance obligations are satisfied.

NOTE 5 — Share-Based Payment Plans

The Company issues incentive and nonqualified stock options and restricted stock awards 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 or five years and have ten year contractual terms. All options provide for accelerated vesting upon a change in control (as defined in the plans). Restricted shares are granted at the fair value on the date of grant and typically vest over 6 years with a third vesting after years four, five, and six. Restricted shares have the same voting rights as common stock and nonvested restricted shareholders do not have rights to the accrued dividends until vested.

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.

There were no stock options granted during the three and nine months ended September 30, 2022 and 2021.

The following table presents a summary of the activity related to options as of September 30, 2022:


				Weighted
		Weighted		Average
		Average		Remaining
		Exercise		Contractual
	Options	Price		Life (Years)
September 30, 2022
Outstanding at beginning of year	649,600	$	16.66
Granted	—		—
Exercised	(12,332)		22.79
Forfeited	(14,085)		25.20
Expired	—		—
Outstanding at period end	623,183	$	16.35	4.70
Vested or expected to vest	623,183	$	16.35	4.70
Exercisable at period end	521,699	$	14.24	3.90

The Company recognized compensation expense related to options of $112 thousand and $117 thousand for the three months ended September 30, 2022 and 2021, respectively. The Company recognized compensation expense related to options of $347 thousand and $380 thousand for the nine months ended September 30, 2022 and 2021, respectively. At September 30, 2022, unrecognized compensation cost related to nonvested options was approximately $788 thousand and is expected to be recognized over a weighted average period of 1.87 years. The intrinsic value for outstanding options and for options vested or expected to vest was $13.2 million and $12.2 million for exercisable options at September 30, 2022.

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


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021

	(In thousands)
Intrinsic value of options exercised	$	86	$	403	$	166	$	1,275
Cash received from option exercises		7		—		178		21
Excess tax benefit from option exercises		15		78		15		244

The following table presents a summary of the activity related to restricted stock as of September 30, 2022:


		Weighted Average
		Grant Date
	Shares	Fair Value
September 30, 2022
Outstanding at beginning of year	482,750	$	24.59
Granted	—		—
Vested	(25,497)		20.44
Forfeited	(13,750)		24.31
Outstanding at period end	443,503	$	24.84

The Company recognized compensation expense related to restricted stock of $574 thousand and $365 thousand for the three months ended September 30, 2022 and 2021, respectively. The Company recognized compensation expense related to restricted stock of $1.5 million and $1.1 million for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, there was $6.7 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 4.03 years.

NOTE 6 — Earnings per Share

The factors used in the earnings per share computation follow:


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021

	(Dollars in thousands, except per share data)
Basic
Net income	$	7,711	$	2,519	$	19,404	$	11,195
Weighted average shares outstanding		7,637,407		7,460,897		7,628,903		7,445,497
Basic earnings per share	$	1.01	$	0.34	$	2.54	$	1.50

Diluted
Net income	$	7,711	$	2,519	$	19,404	$	11,195
Weighted average shares outstanding for basic earnings per share		7,637,407		7,460,897		7,628,903		7,445,497
Add: Dilutive effects of share based awards		588,807		487,145		557,194		448,076
Average shares and dilutive potential shares		8,226,214		7,948,042		8,186,097		7,893,573
Diluted earnings per share	$	0.94	$	0.32	$	2.37	$	1.42

Share-based awards totaling 61,900 and 107,600 shares of common stock were not considered in computing diluted earnings per common share for the three months ended September 30, 2022 and September 30, 2021, respectively, because they were anti-dilutive. Share-based awards totaling 65,367 and 107,600 shares of common stock were not

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considered in computing diluted earnings per common share for the nine months ended September 30, 2022 and September 30, 2021, 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 branch 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 and does not lease properties from any related parties.

As of September 30, 2022, right of use (“ROU”) lease assets and related lease liabilities were $2.0 million and $2.6 million, respectively. As of December 31, 2021, ROU lease assets and related lease liabilities were $2.4 million and $3.0 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.

Maturities of the Company’s operating lease liabilities at September 30, 2022 are as follows:


		Operating Lease
		Liabilities
		(In thousands)
2022	$	157
2023		636
2024		652
2025		668
2026		627
Thereafter		—
Total operating lease payments	$	2,740
Less: interest		176
Present value of operating lease liabilities	$	2,564


	As of September 30,
	2022			2021
Weighted-average remaining lease term		4.17	years		5.12	years
Weighted-average discount rate		3.08	%		3.05	%

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The components of total lease cost are as follows:



	For the Three Months Ended				For the Nine Months Ended

	September 30,
	2022		2021		2022		2021

	(In thousands)
Operating lease cost	$	135	$	142	$	419	$	425
Short-term lease cost		—		—		—		13
Total lease cost	$	135	$	142	$	419	$	438

Cash paid for operating leases	$	162	$	161	$	490	$	503

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 other 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:


	Fair Value Measurements Using
	Quoted Prices In Active Markets For Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)

	(In thousands)
September 30, 2022
Assets
Available-for-sale securities
Mortgage-backed securities – agency	$	—	$	94,071	$	—
CMOs – agency		—		17,304		—
Total	$	—	$	111,375	$	—

December 31, 2021
Assets
Available-for-sale securities
Mortgage-backed securities – agency	$	—	$	120,881	$	—
CMOs – agency		—		27,503		—
Total	$	—	$	148,384	$	—

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There were no transfers between Level 1 and Level 2 during the three and nine months ended September 30, 2022 and 2021.

There were no assets at fair value measured on a nonrecurring basis at September 30, 2022. The legacy NFL consumer loan portfolio was measured on a nonrecurring basis and assigned a Level 3 fair value of $14.1 million at December 31, 2021.

The following tables present the carrying amounts and fair values (represents exit price) of financial instruments not carried at fair value at September 30, 2022 and December 31, 2021:


	Fair Value Measurement at September 30, 2022, Using:
	Carrying
	Value		(Level 1)		(Level 2)		(Level 3)		Total

	(In thousands)
Financial Assets:
Cash and cash equivalents	$	182,125	$	1,217	$	180,908	$	—	$	182,125
Securities purchased under agreements to resell, at cost		50,225		—		—		50,225		50,225
Securities, held-to-maturity		80,102		—		71,436		—		71,436
Securities, restricted, at cost		2,810		N/A		N/A		N/A		N/A
Loans held for investment, net		864,229		—		—		856,612		856,612
Accrued interest receivable		5,228		—		298		4,728		5,026

Financial Liabilities:
Time deposits		18,928		—		18,813		—		18,813
Demand and other deposits		1,168,529		1,168,529		—		—		1,168,529
Secured borrowings		47		—		47		—		47
Accrued interest payable		10		—		10		—		10


	Fair Value Measurement at December 31, 2021, Using:
	Carrying
	Value		(Level 1)		(Level 2)		(Level 3)		Total

	(In thousands)
Financial Assets:
Cash and cash equivalents	$	149,156	$	2,202	$	146,954	$	—	$	149,156
Securities purchased under agreements to resell, at cost		50,271		—		—		50,271		50,271
Securities, restricted, at cost		2,680		N/A		N/A		N/A		N/A
Loans held for investment, net		775,441		—		—		774,114		774,114
Accrued interest receivable		4,197		—		252		3,945		4,197

Financial Liabilities:
Time deposits		19,312		—		19,330		—		19,330
Demand and other deposits		1,009,097		1,009,097		—		—		1,009,097
Secured borrowings		48		—		48		—		48

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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 ending September 30, 2022 and 2021:


	Three Months Ended				Nine Months Ended

	September 30,
	2022		2021		2022		2021

	(In thousands)
Unrealized Losses on Available-for-Sale Securities
Beginning balance	$	(11,277)	$	323	$	(850)	$	1,408
Other comprehensive loss before reclassifications, net of tax		(4,665)		(490)		(15,092)		(1,575)
Amounts reclassified from accumulated other comprehensive loss		—		—		—		—
Net current period other comprehensive loss		(4,665)		(490)		(15,092)		(1,575)
Ending balance	$	(15,942)	$	(167)	$	(15,942)	$	(167)

There were no reclassifications out of accumulated other comprehensive loss for the three and nine months ended September 30, 2022 and 2021.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Management’s discussion and analysis of financial condition at September 30, 2022 and December 31, 2021 and results of operations for the three and nine months ended September 30, 2022 and 2021 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 audited Consolidated Financial Statements as of December 31, 2021 and the notes thereto appearing in Part I, Item 1, of this quarterly report on Form 10-Q.

Cautionary Note Regarding Forward-Looking Statements

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

●

statements of our goals, intentions and expectations;

●

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

●

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

●

estimates of our risks and future costs and benefits.

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

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

●

our ability to manage our operations under the current economic conditions nationally and in our market area;

●

adverse changes in the financial industry, securities, credit and national local real estate markets (including real estate values);

●

risks related to a high concentration of loans secured by real estate located in our market area;

●

the continuing impact of the COVID-19 pandemic on our business and results of operation;

●

risks related to a high concentration of loans and deposits dependent upon the legal and “litigation” market;

●

the impact of any potential strategic transactions;

●

our ability to enter new markets successfully and capitalize on growth opportunities;

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●

significant increases in our loan losses, including as a result of our inability to resolve classified and nonperforming assets or reduce risks associated with our loans, and management’s assumptions in determining the adequacy of the allowance for loan losses;

●

interest rate fluctuations, which could have an adverse effect on our profitability;

●

external economic and/or market factors, such as changes in monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System (“FRB”), inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits, which may have an adverse impact on our financial condition;

●

continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are;

●

credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and in our allowance for loan losses and provision for loan losses;

●

our success in increasing our legal and “litigation” market lending;

●

our ability to attract and maintain deposits and our success in introducing new financial products;

●

losses suffered by merchants or Independent Sales Organizations (ISOs) with whom we do business;

●

our ability to effectively manage risks related to our payment processing business;

●

our ability to leverage the professional and personal relationships of our board members and advisory board members;

●

changes in interest rates generally, including changes in the relative differences between short-term and long-term interest rates and in deposit interest rates, that may affect our net interest margin and funding sources;

●

fluctuations in the demand for loans;

●

technological changes that may be more difficult or expensive than expected;

●

changes in consumer spending, borrowing and savings habits;

●

declines in the yield on our assets resulting from a low interest rate environment;

●

declines in our payment processing income as a result of reduced demand, competition and changes in laws or government regulations or policies affecting financial institutions, including the Dodd-Frank Act and the JOBS Act, which could result in, among other things, increased deposit insurance premiums and assessments, capital requirements, regulatory fees and compliance costs, particularly the new capital regulations, and the resources we have available to address such changes;

●

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

●

loan delinquencies and changes in the underlying cash flows of our borrowers;

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●

the impairment of our investment securities;

●

our ability to control costs and expenses, particularly those associated with operating as a publicly traded company;

●

the failure or security breaches of computer systems on which we depend;

●

political instability;

●

acts of war, terrorism, natural disasters or global market disruptions, including global pandemics;

●

competition and innovation with respect to financial products and services by banks, financial institutions and non-traditional providers, including retail businesses and technology companies;

●

changes in our organization and management and our ability to retain or expand our management team and our board of directors, as necessary;

●

the costs and effects of legal, compliance and regulatory actions, changes and developments, including the initiation and resolution of legal proceedings, regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations and reviews;

●

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

●

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

The foregoing factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included in our Annual Report on Form 10-K for the year ended December 31, 2021, as supplemented by subsequent Quarterly Reports on Form 10-Q. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to time, and it is not possible for us to predict those events or how they may affect us. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Summary of Significant Accounting Policies

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

Allowance for Loan Losses. Management considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy given the inherent subjectivity and uncertainty in estimating the levels of the allowance required to cover loan losses in the portfolio and the material effect that such judgements can have on the results of operations.

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Emerging Growth Company. Pursuant to the JOBS Act, an emerging growth company is provided the option to adopt new or revised accounting standards that may be issued by the Financial Accounting Standards Board (“FASB”) or the SEC either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. We have irrevocably elected to adopt new accounting standards within the public company adoption period.

We have taken advantage of some of the reduced regulatory and reporting requirements that are available to it so long as we qualify as an emerging growth company, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments.

A company loses emerging growth company status on the earlier of: (i) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.07 billion or more; (ii) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (iii) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non-voting equity held by non-affiliates).

The Company’ status as an emerging growth company expires on December 31, 2022 since that is the last day of the fiscal year of the Company following the fifth anniversary of the date of the first sale of the common equity securities of the Company pursuant to an effective registration statement under the Securities Act of 1933.

Overview

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

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 provision for loan losses, noninterest income and noninterest expense. Noninterest income currently consists primarily of payment processing fees and customer related fees and charges. Noninterest expense currently consists primarily of employee compensation and benefits and professional and consulting services. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies, the litigation market and actions of regulatory authorities.

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

Litigation Market Commercial Banking. The litigation market has been and will continue to be a significant growth opportunity for our Company as we offer focused and tailored products and services to law firms nationally. U.S. tort actions alone are estimated to consume 1.5%-2.0% of U.S. GDP annually according to the Towers Watson 2011 Update on U.S. Tort Cost Trends or a total addressable market (“TAM”) of $429 billion according to the U.S. Chamber Institute for Legal Reform’s report “Costs and Compensation of the U.S. Tort System”. We do not compete directly with

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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 15 years, extensive in-house experience, deep relationships with respected firms nationally, and unique products tailored to commercial law firms’ needs and wants.

We currently have clients in 27 states and our larger markets include the New York metro area, California, Texas, Florida, Pennsylvania, South Carolina and New Jersey. 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 have a duration of 2-3 years, significantly longer than traditional accounts receivables or inventories of goods that can have a duration of 30-60 days or 120 days, respectively. These factors (the unique industry, contingent collateral, longer durations of the law firms’ inventories, atypical revenue streams of the law firms and more) coupled with the TAM create a unique and valuable opportunity for the Company with minimal incumbent competition. This unique risk profile translates into a blended 8.8% variable rate asset yield on these commercial loans for the quarter ended September 30, 2022. More importantly, for every $1.00 we advance on these loans we receive on average $2.12 of low-cost (our cost of funds for the quarter ended September 30, 2022 is 15 basis points) core operating and escrow deposits 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 this vertical. Coupling this with our off-balance sheet commercial litigation funds of $496.1 million at September 30, 2022, this vertical represents a highly desirable core low-cost funding platform for the entire company fueling growth in other lending areas.

Payment Processing. The payment processing (merchant acquiring) market has also been and will continue to be a significant growth opportunity for our company, as we offer focused and tailored products and services to small businesses nationally. The payment industry grew 9.7% from 2019 to 2021 with payment volumes or TAM of $9.5 trillionaccording to a Strawhecker Group report on U.S. payment industry trends. Couple this with the fact that there are less than 85 acquiring financial institutions in the U.S. and this vertical clearly represents a significant growth opportunity for our company. We believe there are various and significant barriers to entry to this market including, but not limited to, our clear industry track record for 10 years, extensive in-house experience, deep 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 technology to ensure card brand and regulatory compliance, support multiple processing platforms, manage daily risk across approximately 75,000 small business merchants in all 50 states, and perform commercial treasury clearing services for approximately $7.3 billion in processing volume across 142.1 million transactions in the most recent quarter.

Proprietary Technology. We are a branchless digital first company with best-in-class technology to fuel future growth with industry leading client retention rates. We have built a customized and fully integrated customer relationship management (“CRM”) platform, integrated into our digital marketing cloud and our nCino loan platform (all built on Salesforce for excellence in client service and operational efficiency) and have begun to invest in artificial intelligence (“AI”) to facilitate precision marketing and client acquisition across both national verticals.

The success of our nationwide branchless technology enabled litigation and payment processing verticals has led to industry leading performance. Our branchless commercial banking loans and deposits have compound annual growth rates of 23% since 2015, a net interest margin of 5.18% for the quarter ended September 30, 2022, and drives a company wide efficiency ratio of 49.3% for the quarter ended September 30, 2022. Our payment processing vertical has a compound annual growth rate of 58% since 2017 and diversifies our product offerings with stable fee income comprising 29% of revenues. The integration of these competencies and businesses has provided a sustainable average return on assets and tangible common equity of 2.48% and 20.60%, respectively, for the quarter ended September 30, 2022.

COVID-19 Pandemic Programs

We elected to participate in the Paycheck Protection Program administered by the SBA with the intention to provide our customer base access to this critical program. The PPP provides borrower guarantees for lenders, as well as loan forgiveness incentives for borrowers that utilize the loan proceeds to cover employee compensation-related costs and

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other qualifying business costs. As of March 31, 2022, we had been fully repaid on our PPP loan portfolio cumulatively totaling $45.5 million, which concluded our participation in the program.

In 2020, management implemented a customer payment deferral program (principal and interest) under the CARES Act to assist business borrowers and certain consumers that may have been experiencing financial hardship due to COVID-19 related challenges. As of September 30, 2022, there were no participants in our payment deferral program, which is now closed.

Comparison of Financial Condition at September 30, 2022 and December 31, 2021

Assets. Our total assets were $1.3 billion at September 30, 2022, an increase of $168.8 million, or 14.3%, from $1.2 billion at December 31, 2021, due to growth in loans held for investment of $90.6 million, or 11.5%, securities held-to-maturity, funded with low cost deposits, increased $80.1 million, offset by net paydowns and unrealized losses on securities available-for-sale of $37.0 million, or 24.9%.

Loans. The following table provides information regarding the composition of our loans held for investment portfolio at the dates indicated:


	At September 30,				At December 31,
	2022				2021
	Amount		Percent		Amount		Percent

	(Dollars in thousands)
Real estate:
Multifamily	$	263,689	30.1	%	$	254,852	32.5	%
Commercial real estate		83,515	9.5			48,589	6.1
1 – 4 family		31,496	3.6			40,753	5.2
Construction		—	—			—	—
Total real estate		378,700	43.2			344,194	43.8
Commercial		478,854	54.7			427,859	54.6
PPP		—	—			4,249	0.5
Consumer		18,424	2.1			8,681	1.1
Total loans held for investment	$	875,978	100.0	%	$	784,983	100.0	%
Deferred loan fees and unearned premiums, net		(864)				(466)
Allowance for loan losses		(10,885)				(9,076)
Loans held for investment, net	$	864,229			$	775,441

Loans held for sale, net (included in Other assets)	$	—			$	14,100

At September 30, 2022, loans were $875.1 million, or 73.7% of total deposits, compared to $784.5 million, or 76.3% of total deposits, at December 31, 2021. The growth in loans was primarily driven by net production in commercial and commercial real estate loans. Commercial loans increased $51.0 million, or 11.9%, to $478.9 million at September 30, 2022 from $427.9 million at December 31, 2021, driven by both our litigation related loans and other commercial relationships. Commercial real estate loans increased $34.9 million, or 71.9%, to $83.5 million at September 30, 2022 from $48.6 million at December 31, 2021.

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


	September 30, 2022				December 31, 2021
	Amount		Percent		Amount		Percent

	(Dollars in thousands)
Litigation-Related Loans
Commercial Litigation-Related:
Working capital lines of credit	$	205,962	51.2	%	$	210,148	54.4	%
Case cost lines of credit		137,428	34.1			127,859	33.1
Term loans		56,417	14.0			45,415	11.8
Total Commercial Litigation-Related		399,807	99.3			383,422	99.3
Consumer Litigation-Related:
Post-settlement consumer loans		2,869	0.7			2,451	0.7
Structured settlement loans		59	—			116	—
Total Consumer Litigation-Related		2,928	0.7			2,567	0.7
Total Litigation-Related Loans	$	402,735	100.0	%	$	385,989	100.0	%

At September 30, 2022, our Litigation-Related loans, which include commercial loans to law firms and consumer lending to plaintiffs/claimants and attorneys, totaled $402.7 million, or 46.0% of our total loan portfolio, compared to $386.0 million, or 49.2% of our total loan portfolio at December 31, 2021. We remain focused on prudently growing our Litigation-Related loan portfolio.

Securities. Securities available-for-sale decreased $37.0 million, or 24.9%, to $111.4 million at September 30, 2022 from $148.4 million at December 31, 2021, driven by unrealized losses of $20.8 million and paydowns of $17.6 million, offset by purchases of $1.7 million. Unrealized losses on our available-for-sale portfolio are due to the negative impact of recent increases in short-term market interest rates. Commencing in the first quarter of 2022, we invested a portion of our excess liquidity in held-to-maturity securities, totaling $80.1 million at September 30, 2022.

Funding. Total deposits increased $159.0 million, or 15.5%, to $1.2 billion at September 30, 2022 from $1.0 billion at December 31, 2021. We continue to focus on the acquisition and expansion of core deposit relationships, which we define as all deposits except certificates of deposit. Core deposits totaled $1.2 billion at September 30, 2022, or 98.4% of total deposits at that date, compared to $1.0 billion or 98.1% of total deposits at December 31, 2021. Litigation and payment processing deposits represent 72% and 13%, respectively, of total deposits. Demand deposits (noninterest bearing) increased $36.2 million, or 8.8%, to $445.6 million, representing 37.5% of total deposits.

In addition to our core deposits as a source of funding, the Company continues to prudently manage its balance sheet through deposit sweep programs, maintaining off-balance sheet funds totaling $496.1 million at September 30, 2022.

At September 30, 2022, we had the ability to borrow a total of $159.1 million from the Federal Home Loan Bank of New York. We also had an available line of credit with the Federal Reserve Bank of New York discount window of $36.6 million. At September 30, 2022, we also had $67.5 million in aggregate unsecured lines of credit with unaffiliated correspondent banks. No amounts were outstanding on any of the aforementioned lines of credit at September 30, 2022.

Equity. Total stockholders’ equity increased $4.8 million to $148.5 million at September 30, 2022, from $143.7 million at December 31, 2021, primarily due to net income of $19.4 million and amortization of share based compensation of $1.8 million, partially offset by other comprehensive losses of $15.1 million due to the decline in fair value of available-for-sale securities reflective of the recent increases in short-term market interest rates and common stock dividends of $1.5 million.

Asset Quality. Nonperforming assets, totaling $5.8 million, consisted of two commercial law firm loan facilities with strong collateral values as of September 30, 2022. As of September 30, 2022, the allowance for loan losses was $10.9 million, or 1.24% of total loans, as compared to $9.1 million, or 1.16% of total loans at December 31, 2021. The increase in the allowance as a percentage of loans was general reserve driven considering the qualitative factors associated with the

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current uncertain economic environment. At September 30, 2022, special mention and substandard loans totaled $15.6 million and $6.5 million, respectively. At December 31, 2021, special mention and substandard loans totaled $24.8 million and $4.3 million, respectively.

Average Balance Sheets and Rate/Volume Analysis

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


	For the Three Months Ended September 30,
	2022						2021

					(Dollars in thousands)
	Average				Average		Average				Average
	Balance		Interest		Yield/Cost		Balance		Interest		Yield/Cost
INTEREST EARNING ASSETS
Loans, held for investment	$	854,447	$	14,055	6.53	%	$	738,281	$	10,709	5.75	%
Securities, includes restricted stock		214,722		1,126	2.08	%		138,200		583	1.67	%
Securities purchased under agreements to resell		49,771		377	3.01	%		50,972		150	1.17	%
Interest earning cash and other		72,902		402	2.19	%		66,726		51	0.30	%
Total interest earning assets		1,191,842		15,960	5.31	%		994,179		11,493	4.59	%

NONINTEREST EARNING ASSETS		43,358						33,765

TOTAL AVERAGE ASSETS	$	1,235,200					$	1,027,944

INTEREST BEARING LIABILITIES

Savings, NOW, Money Market deposits	$	572,966	$	368	0.25	%	$	453,678	$	189	0.17	%
Time deposits		19,141		44	0.91	%		11,126		19	0.68	%
Total interest bearing deposits		592,107		412	0.28	%		464,804		208	0.18	%
Borrowings		48		1	8.27	%		54		1	7.35	%
Total interest bearing liabilities		592,155		413	0.28	%		464,858		209	0.18	%

NONINTEREST BEARING LIABILITIES
Demand deposits		481,599						414,930
Other liabilities		12,966						11,550
Total noninterest bearing liabilities		494,565						426,480
Stockholders' equity		148,480						136,606

TOTAL AVG. LIABILITIES AND EQUITY	$	1,235,200					$	1,027,944
Net interest income			$	15,547					$	11,284
Net interest spread					5.03	%					4.41	%
Net interest margin					5.18	%					4.50	%

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	For the Nine Months Ended September 30,
	2022						2021

					(Dollars in thousands)
	Average				Average		Average				Average
	Balance		Interest		Yield/Cost		Balance		Interest		Yield/Cost
INTEREST EARNING ASSETS
Loans, held for investment	$	824,402	$	37,499	6.08	%	$	705,609	$	30,408	5.76	%
Securities, includes restricted stock		201,502		2,975	1.97	%		131,019		1,588	1.62	%
Securities purchased under agreements to resell		49,307		699	1.90	%		51,185		470	1.23	%
Interest earning cash and other		92,617		767	1.11	%		63,354		134	0.28	%
Total interest earning assets		1,167,828		41,940	4.80	%		951,167		32,600	4.58	%

NONINTEREST EARNING ASSETS		46,577						32,054

TOTAL AVERAGE ASSETS	$	1,214,405					$	983,221

INTEREST BEARING LIABILITIES

Savings, NOW, Money Market deposits	$	557,316	$	841	0.20	%	$	424,468	$	536	0.17	%
Time deposits		19,186		90	0.63	%		11,098		59	0.71	%
Total interest bearing deposits		576,502		931	0.22	%		435,566		595	0.18	%
Borrowings		67		3	5.99	%		70		2	3.82	%
Total interest bearing liabilities		576,569		934	0.22	%		435,636		597	0.18	%

NONINTEREST BEARING LIABILITIES
Demand deposits		481,887						405,427
Other liabilities		10,817						10,393
Total noninterest bearing liabilities		492,704						415,820
Stockholders' equity		145,132						131,765

TOTAL AVG. LIABILITIES AND EQUITY	$	1,214,405					$	983,221
Net interest income			$	41,006					$	32,003
Net interest spread					4.58	%					4.40	%
Net interest margin					4.69	%					4.50	%

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The following table presents the dollar amount of changes in interest income and interest expense for major components of interest earning assets and interest bearing liabilities for the periods indicated. The table distinguishes between: (1) changes attributable to volume (changes in volume multiplied by the prior period’s rate); (2) changes attributable to rate (change in rate multiplied by the prior year’s volume); and (3) total increase (decrease) (the sum of the previous columns). Changes attributable to both volume and rate are allocated ratably between the volume and rate categories.


	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2022 vs. 2021						2022 vs. 2021
	Increase				Total		Increase				Total
	(Decrease) due to				Increase		(Decrease) due to				Increase
	Volume		Rate		(Decrease)		Volume		Rate		(Decrease)

	(In thousands)
Interest earned on:
Loans held for investment	$	1,807	$	1,539	$	3,346	$	5,333	$	1,758	$	7,091
Securities, includes restricted stock		377		166		543		987		400		1,387
Securities purchased under agreements to resell		(4)		231		227		(18)		247		229
Interest earning cash and other		5		346		351		87		546		633
Total interest income		2,185		2,282		4,467		6,389		2,951		9,340

Interest paid on:
Savings, NOW, Money Market deposits		58		121		179		188		117		305
Time deposits		17		8		25		39		(8)		31
Total deposits		75		129		204		227		109		336
Borrowings		—		—		—		—		1		1
Total interest expense		75		129		204		227		110		337
Change in net interest income	$	2,110	$	2,153	$	4,263	$	6,162	$	2,841	$	9,003

Comparison of Operating Results for the Three Months Ended September 30, 2022 and 2021

General. Net income increased $5.2 million, or 206.1%, to $7.7 million for the three months ended September 30, 2022 from $2.5 million for the three months ended September 30, 2021. The increase resulted from a $4.3 million increase in net interest income, a $3.1 million decrease in the provision for loan losses, and an increase in noninterest income of $1.5 million, partially offset by an increase of $1.8 million in noninterest expense.

Net Interest Income. Net interest income increased $4.3 million, or 37.8%, to $15.5 million for the three months ended September 30, 2022 from $11.3 million for the three months ended September 30, 2021, due to a $4.5 million increase in interest income, partially offset by a $204 thousand increase in interest expense.

Our net interest margin increased 68 basis points, which was positively impacted by growth in higher yielding variable rate commercial loans and the impact of increases in short-term market interest rates, to 5.18% for the three months ended September 30, 2022 from 4.50% for the three months ended September 30, 2021.

Interest Income. Interest income increased $4.5 million, or 38.9%, to $16.0 million for the three months ended September 30, 2022 from $11.5 million for the three months ended September 30, 2021 and was attributable to an increase in loan interest income, securities interest income, interest earning cash and other, and reverse repurchase interest income.

Loan interest income increased $3.3 million, or 31.2%, to $14.1 million for the three months ended September 30, 2022 from $10.7 million for the three months ended September 30, 2021. This increase was attributable to a $116.2 million, or 15.7%, increase in the average loan balance driven primarily by our national commercial lending platform and a 78 basis point increase in loan yields to 6.53%. Additionally, approximately 57% of our portfolio is comprised of variable rate commercial loans tied to prime that were positively impacted by increases in short-term market interest rates.

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Securities interest income increased $543 thousand, or 93.1%, to $1.1 million for the three months ended September 30, 2022 from $583 thousand for the three months ended September 30, 2021. This increase was primarily attributable to the opportunistic investment of excess liquidity in the first quarter of 2022 into held-to-maturity agency securities totaling $80.1 million at September 30, 2022, driving a $76.5 million, or 55.4%, increase in these higher yielding average securities balances, and a 41 basis point increase in yields which was positively impacted by increases in short-term market interest rates.

Interest earning cash and other interest income increased $351 thousand, or 688.2%, to $402 thousand for the three months ended September 30, 2022 from $51 thousand for the three months ended September 30, 2021, attributable to a 189 basis point increase in yields which was positively impacted by increases in short-term market interest rates.

Securities purchased under agreements to resell income increased $227 thousand, or 151.3%, to $377 thousand for the three months ended September 30, 2022 from $150 thousand for the three months ended September 30, 2021, attributable to increases in short-term market interest rates.

Interest Expense. Interest expense increased $204 thousand, or 97.6%, to $413 thousand for the three months ended September 30, 2022 from $209 thousand for the three months ended September 30, 2021, primarily attributable to a $127.3 million, or 27.4%, increase in the average balance of interest bearing deposits, driven by our litigation depository relationships. The blended interest rate we paid on interest bearing deposits increased to 28 basis points for the three months ended September 30, 2022, from 18 basis points for the three months ended September 30, 2021.

Provision for Loan Losses. Our provision for loan losses was $650 thousand for the three months ended September 30, 2022, a decrease of $3.1 million from the $3.8 million in the third quarter of 2021. The third quarter of 2021 included a charge for the reclassification of our legacy NFL consumer post settlement loan portfolio to loans held for sale and were subsequently exited. The allowance for loan losses to loans ratio was 1.24% as compared to 1.16% in the prior year quarter. The increase in the allowance as a percentage of loans was general reserve driven considering the qualitative factors associated with the current uncertain economic environment.

Noninterest Income. Noninterest income information is as follows:


	For the Three Months Ended
	September 30,				Change
	2022		2021		Amount		Percent

	(Dollars in thousands)
Payment processing fees
Payment processing income	$	5,250	$	5,021	$	229	4.6	%
ACH income		208		206		2	1.0
Customer related fees and service charges
Administrative service income		886		—		886	NA
Other		88		81		7	8.6
Gain (loss) on loans held for sale		—		(384)		384	NA
Total noninterest income	$	6,432	$	4,924	$	1,508	13.6	%

Payment processing income in the third quarter of 2022 increased $229 thousand to $5.3 million, as compared to the same period in 2021. Payment processing volumes and transactions for the credit and debit card processing platform increased $1.1 billion, or 17.4%, to $7.3 billion and 27.5 million, or 24.0%, to 142.1 million transactions, respectively, for the quarter ended September 30, 2022, as compared to the same period in 2021. These increases were driven by expansion of our sales channels through ISOs, increased number of merchants, volume increases, the reopening of the economy post pandemic and were facilitated by our focus on technology and other resources in the payments vertical. Customer related fees and service charges increased due to the movement in short-term interest rates and its impact on administrative service income on off-balance sheet funds. Off-balance sheet sweep funds totaled $496.1 million at September 30, 2022, demonstrating the continued strength of our branchless core business model.

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Noninterest Expense. Noninterest expense information is as follows:


	For the Three Months Ended
	September 30,				Change
	2022		2021		Amount		Percent

	(Dollars in thousands)
Noninterest expense
Employee compensation and benefits	$	6,519	$	5,523	$	996	18.0	%
Occupancy and equipment		760		696		64	9.2
Professional and consulting services		840		773		67	8.7
FDIC and regulatory assessments		142		111		31	27.9
Advertising and marketing		480		289		191	66.1
Travel and business relations		179		105		74	70.5
Data processing		1,107		977		130	13.3
Other operating expenses		811		533		278	52.2
Total noninterest expense	$	10,838	$	9,007	$	1,831	20.3	%

Income Tax Expense. We recorded an income tax expense of $2.8 million for the three months ended September 30, 2022, reflecting an effective tax rate of 26.5%, compared to $932 thousand, or 27.0%, for the three months ended September 30, 2021.

Comparison of Operating Results for the Nine Months Ended September 30, 2022 and 2021

General. Net income increased $8.2 million, or 73.3%, to $19.4 million for the nine months ended September 30, 2022 from $11.2 million for the nine months ended September 30, 2021. The increase resulted from a $9.0 million increase in net interest income, a decrease in the provision for loan losses of $4.3 million and an increase of $2.3 million in noninterest income, partially offset by an increase of $4.3 million in noninterest expense.

Net Interest Income. Net interest income increased $9.0 million, or 28.1%, to $41.0 million for the nine months ended September 30, 2022 from $32.0 million for the nine months ended September 30, 2021, due to a $9.3 million increase in interest income, partially offset by a $337 thousand increase in interest expense.

Our net interest margin increased 19 basis points, due to growth in higher yielding variable rate commercial loans and the impact of increases in short-term market interest rates, to 4.69% for the nine months ended September 30, 2022 from 4.50% for the nine months ended September 30, 2021.

Interest Income. Interest income increased $9.3 million, or 28.7%, to $41.9 million for the nine months ended September 30, 2022 from $32.6 million for the nine months ended September 30, 2021 and was attributable to an increase in loan interest income, securities interest income, interest earning cash and other, and reverse repurchase interest income.

Loan interest income increased $7.1 million, or 23.3%, to $37.5 million for the nine months ended September 30, 2022 from $30.4 million for the nine months ended September 30, 2021. This increase was attributable to a $118.8 million,

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or 16.8%, increase in the average loan balance primarily from growth in our commercial loan portfolio and a 32 basis point increase in loan yields.

Securities interest income increased $1.4 million, or 87.3%, to $3.0 million for the nine months ended September 30, 2022 from $1.6 million for the nine months ended September 30, 2021. This increase was primarily attributable to the investment of excess liquidity into held-to-maturity agency securities totaling $80.1 million at September 30, 2022, driving a $70.5 million, or 53.8%, increase in these higher yielding average securities balances resulting in a 35 basis point increase in yields.

Interest earning cash and other interest income increased $633 thousand, or 472.4%, to $767 thousand for the nine months ended September 30, 2022 from $134 thousand for the nine months ended September 30, 2021, attributable to a 83 basis point increase in yields, driven by increases in short-term market interest rates and a $29.3 million, or 46.2%, increase in average interest earning cash balances.

Securities purchased under agreements to resell income increased $229 thousand, or 48.7%, to $699 thousand for the nine months ended September 30, 2022 from $470 thousand for the nine months ended September 30, 2021.

Interest Expense. Interest expense increased $337 thousand, or 56.4%, to $934 thousand for the nine months ended September 30, 2022 from $597 thousand for the nine months ended September 30, 2021, primarily attributable to a $140.9 million, or 32.4%, increase in the average balance of interest bearing deposits, driven by our litigation depository relationships. The blended interest rate we paid on interest bearing deposits increased from 18 basis points for the nine months ended September 30, 2021 to 22 basis points for the nine months ended September 30, 2022.

Provision for Loan Losses. Our provision for loan losses was $2.1 million for the nine months ended September 30, 2022 compared to $6.4 million for the nine months ended September 30, 2021. The decrease in the provision relates to the charge recognized in 2021 on our legacy NFL consumer post settlement loan portfolio.

Noninterest Income. Noninterest income information is as follows:


	For the Nine Months Ended
	September 30,				Change
	2022		2021		Amount		Percent

	(Dollars in thousands)
Payment processing fees
Payment processing income	$	15,651	$	15,339	$	312	2.0	%
ACH income		636		609		27	4.4
Customer related fees, service charges and other
Administrative service income		1,512		29		1,483	5,113.8
Other		256		263		(7)	(2.7)
Gain (loss) on loans held for sale		88		(384)		472	(122.9)
Total noninterest income	$	18,143	$	15,856	$	2,287	14.4	%

Payment processing income for the nine months ended 2022 increased $312 thousand to $15.7 million, as compared to the same period in 2021. Payment processing fees in 2021 totaling $15.3 million included $500 thousand in early termination fees on ISO contracts. Excluding these early termination fees, payment processing fees increased $812 thousand, or 5.5%, as compared to the nine months ended 2021. Payment processing volumes and transactions for the credit and debit card processing platform increased $3.3 billion, or 18.7%, to $20.7 billion and 72.0 million, or 22.0%, to 396.0 million transactions, respectively, for the nine months ended September 30, 2022, as compared to the same period in 2021. These increases were driven by expansion of our sales channels through ISOs, increased number of merchants, volume increases, the reopening of the economy post pandemic. Customer related fees and service charges increased due to the impact of increasing short-term interest rates and its impact on administrative service income on off-balance sheet funds. Off-balance sheet sweep funds totaled $496.1 million at September 30, 2022, demonstrating the continued strength of our branchless core business model.

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Noninterest Expense. Noninterest expense information is as follows:


	For the Nine Months Ended
	September 30,				Change
	2022		2021		Amount		Percent

	(Dollars in thousands)
Noninterest expense
Employee compensation and benefits	$	18,952	$	16,189	$	2,763	17.1	%
Occupancy and equipment		2,260		2,104		156	7.4
Professional and consulting services		2,298		2,352		(54)	(2.3)
FDIC and regulatory assessments		401		320		81	25.3
Advertising and marketing		1,109		936		173	18.5
Travel and business relations		403		212		191	90.1
Data processing		3,167		2,734		433	15.8
Other operating expenses		2,019		1,466		553	37.7
Total noninterest expense	$	30,609	$	26,313	$	4,296	16.3	%

Employee compensation and benefits costs increased due to increases in staff and officer level employees to support our growth, investment in digital platforms and related sales/marketing divisions, and the impact of salary, bonus and stock-based compensation increases. Due to the effects of inflation on the overall economy and consumer prices, we proactively increased our employees’ base salary at year-end in excess of industry and national averages to support employee retention. Professional and consulting service costs decreased, partially offsetting the increase in employee compensation and benefits as previously contracted consultants were hired, primarily in our technology development and digital marketing departments. Hiring related costs, a component of other operating expenses, increased as we continue to increase our staffing to support our growth. Data processing costs increased due to increased processing volume, primarily driven by our core banking platform, and additional costs related to our technology implementations. Travel and business relations costs increased as we continued to re-engage in our traditional high touch marketing and sales efforts on a national basis to complement our digital marketing efforts. Advertising and marketing costs increased as we continued to grow our digital marketing platform and expand our thought leadership in our national verticals. Occupancy and equipment costs increased primarily due to amortization of our investments in internally developed software to support our new digital platform and additional office space to support our continued growth.

Income Tax Expense. We recorded an income tax expense of $7.0 million for the nine months ended September 30, 2022, reflecting an effective tax rate of 26.5%, compared to $4.0 million, or 26.1%, for the nine months ended September 30, 2021.

Management of Market Risk

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

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.

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We manage our exposure to interest rates primarily by structuring our balance sheet in the ordinary course of business. We do not typically enter into derivative contracts for the purpose of managing interest rate risk, but we may do so in the future. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.

Net Interest Income Simulation. We use an interest rate risk simulation model to test the interest rate sensitivity of net interest income and the balance sheet. Instantaneous parallel rate shift scenarios are modeled and utilized to evaluate risk and establish exposure limits for acceptable changes in net interest margin. These scenarios, known as rate shocks, simulate an instantaneous change in interest rates and use various assumptions, including, but not limited to, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment and replacement of asset and liability cash flows.

The following table presents the estimated changes in net interest income of Esquire Bank, National Association, calculated on a bank-only basis, which would result from changes in market interest rates over a twelve-month period.


	At September 30,
	2022
	Estimated
Changes in	12-Months
Interest Rates	Net Interest
(Basis Points)	Income			Change

	(Dollars in thousands)
400	$	97,913	$	23,105
300		92,101		17,293
200		86,321		11,513
100		80,558		5,750
0		74,808		—
-100		68,566		(6,242)
-200		62,088		(12,720)

Economic Value of Equity Simulation. We also analyze our sensitivity to changes in interest rates through an economic value of equity (“EVE”) model. EVE represents the present value of the expected cash flows from our assets less the present value of the expected cash flows arising from our liabilities adjusted for the value of off-balance sheet contracts. EVE attempts to quantify our economic value using a discounted cash flow methodology. We estimate what our EVE would be as of a specific date. We then calculate what EVE would be as of the same date throughout a series of interest rate scenarios representing immediate and permanent, parallel shifts in the yield curve. We currently calculate EVE under the assumptions that interest rates increase 100, 200, 300 and 400 basis points from current market rates, and under the assumption that interest rates decrease 100 and 200 basis points from current market rates.

The following table presents the estimated changes in EVE of Esquire Bank, National Association, calculated on a bank-only basis that would result from changes in market interest rates at September 30, 2022.


	At September 30,
	2022
Changes in	Economic
Interest Rates	Value of
(Basis Points)	Equity			Change

	(Dollars in thousands)
400	$	315,291	$	32,924
300		308,100		25,733
200		300,345		17,978
100		291,937		9,570
0		282,367		—
-100		267,933		(14,434)
-200		246,597		(35,770)

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

Liquidity and Capital Resources

Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments and maturities and sales of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

We regularly review the need to adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest earning deposits and securities, and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest earning deposits and short- and intermediate-term securities.

Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At September 30, 2022, cash and cash equivalents totaled $182.1 million.

At September 30, 2022, through pledging of our securities and certain loans, we had the ability to borrow a total of $159.1 million from the Federal Home Loan Bank of New York and had an available line of credit with the Federal Reserve Bank of New York discount window of $36.6 million. At September 30, 2022, we also had $67.5 million in aggregate unsecured lines of credit with unaffiliated correspondent banks. No amounts were outstanding on any of the aforementioned lines of credit at September 30, 2022.

We have no material commitments or demands that are likely to affect our liquidity other than set forth below. In the event loan demand were to increase faster than expected, or any unforeseen demand or commitment were to occur, we could access our borrowing capacity with the Federal Home Loan Bank of New York or obtain additional funds through brokered certificates of deposit.

Esquire Bank is subject to various regulatory capital requirements administered by the Office of the Comptroller of the Currency (the “OCC”), and the Federal Deposit Insurance Corporation. At September 30, 2022, Esquire Bank exceeded all applicable regulatory capital requirements, and was considered “well capitalized” under regulatory guidelines.

We manage our capital to comply with our internal planning targets and regulatory capital standards administered by the OCC. We review capital levels on a monthly basis.

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


			For Capital Adequacy
			Purposes
			Minimum Capital with		Actual
	“Well Capitalized”		Conservation Buffer		At September 30, 2022
Total Risk-based Capital Ratio
Bank	10.00	%	10.50	%	15.90	%

Tier 1 Risk-based Capital Ratio
Bank	8.00	%	8.50	%	14.77	%

Common Equity Tier 1 Capital Ratio
Bank	6.50	%	7.00	%	14.77	%

Tier 1 Leverage Ratio
Bank	5.00	%	4.00	%	11.57	%

Effective January 1, 2020, the federal banking agencies adopted a rule to establish for institutions with assets of less than $10 billion that meet other specified criteria a “community bank leverage ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) of 9% that such institutions may elect to utilize in lieu of the generally applicable leverage and risk-based capital requirements noted above. A “qualifying community bank” with capital exceeding 9% will be considered compliant with all applicable regulatory capital and leverage requirements, including the requirement to be “well capitalized”. The CARES Act and implementing rules temporarily reduced the community bank leverage ratio to 8%, to be gradually increased back to 9% by 2022. The CARES Act also provides that, during the same time period, if a qualifying community banking organization falls no more than 1% below the community bank leverage ratio, it will have a two-quarter grace period to satisfy the community bank leverage ratio. For the current period, Esquire Bank has elected to continue to utilize the generally applicable leverage and risk based requirements and not apply the community bank leverage ratio.

Effects of Inflation. The impact of inflation, as it affects banks, differs substantially from the impact on non-financial institutions. Banks have assets which are primarily monetary in nature and which tend to move with inflation. This is especially true for banks with a high percentage of rate sensitive interest-earning assets and interest-bearing liabilities. A bank can further reduce the impact of inflation with proper management of its rate sensitivity gap. This gap represents the difference between interest rate sensitive assets and interest rate sensitive liabilities. The Company attempts to structure its assets and liabilities and manages its gap to protect against substantial changes in interest rate scenarios, in order to minimize the potential effects of inflation.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is included in Item 2 of this quarterly report under “Management of Market Risk.”

Item 4.Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2022. Based on that evaluation, the Company’s management, including the Principal Executive Officer and the Principal Financial Officer, concluded that the Registrant’s disclosure controls and procedures were effective.

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During the quarter ended September 30, 2022, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Periodically, we are involved in claims and lawsuits, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. At September 30, 2022, we are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes to our risk factors as disclosed in the Company’s Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information with respect to purchases we made of our common stock during the quarter ended September 30, 2022.


Period	Total number of shares purchased		Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs (1)
July 1, 2022 through July 31, 2022	—	$	—	—	265,694
August 1, 2022 through August 31, 2022	—		—	—	265,694
September 1, 2022 through September 30, 2022	—		—	—	265,694

(1)

On January 9, 2019, the Company announced a share repurchase program, which authorized the purchase of up to 300,000 shares of common stock. There is no expiration date for the stock repurchase program.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits


Exhibit
Number		Description

3.1		Articles of Incorporation of Esquire Financial Holdings, Inc. (1)

3.2		Amended and Restated Bylaws of Esquire Financial Holdings, Inc. (2)

31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Written Statement of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.0		The following materials for the quarter ended September 30, 2022, formatted in XBRL (Extensible Business Reporting Language): (i) Balance Sheets, (ii) Statements of Income, (iii) Statements of Comprehensive Income, (iv) Statements of Cash Flows, and (v) Notes to Financial Statements.

101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Label Linkbase Document

101.PRE		XBRL Taxonomy Presentation Linkbase Document

104		Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

(1)	Incorporated by reference to Exhibit 3.1 in the Registration Statement on Form S-1 (File No. 333-218372) originally filed by the Company under the Securities Act of 1933 with the Commission on May 31, 2017, and all amendments or reports filed thereto.

(2)	Incorporated by reference to Exhibit 3.3 in the Registration Statement on Form S-1/A (File No. 333-218372) originally filed by the Company under the Securities Act of 1933 with the Commission on June 22, 2017, and all amendments or reports filed thereto.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ESQUIRE FINANCIAL HOLDINGS, INC.

Date: November 10, 2022	/s/ Andrew C. Sagliocca
	Andrew C. Sagliocca
	President and Chief Executive Officer

Date: November 10, 2022	/s/ Michael Lacapria
	Michael Lacapria
	Senior Vice President and Chief Financial Officer

Esquire Financial Holdings - 10-Q quarterly report FY2022 Q3

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