Esquire Financial Holdings Acquires Signature Bank
Esquire Financial Holdings, a New York-based banking services provider specializing in serving plaintiff law firms, has struck a deal to acquire privately held Signature Bank in Chicago. The acquisition, valued at $348 million and to be paid in stock, is set to significantly reduce Esquire’s concentration of litigation-related loans. This move opens up more room for growth in this niche market. This development comes as Esquire experiences a combined annual growth rate of 22% in its total loan portfolio since 2021.
Expanding Reach into Chicago’s Legal Marketplace
The acquisition of Signature Bank provides Esquire with a broader entry point into Chicago’s vast legal marketplace. As per Esquire, the parent company of Esquire Bank which has been in operation for over 20 years, Chicago’s litigation market is the fourth-largest in the country. The city trails behind Los Angeles, New York, and Houston in this respect.
As Esquire’s Vice Chairman and CEO, Andrew Sagliocca, put it during a recent meeting with analysts, “The geographic density of the law firms just in the downtown area is well over 1,000 law firms.” However, despite this potential, Esquire has seen limited success in Chicago to date, ranking eleventh in penetration rankings. Sagliocca acknowledged this, stating “We do not do a good job, we are number eleven as far as the penetration rankings. All that means is that there is a lot of upside … for us.”
The Rationale behind the Acquisition
The primary reason for the acquisition is the belief that incorporating a local bank, such as Signature Bank, that understands and appreciates Esquire’s litigation-focused business model, will help boost its operation in Chicago. Signature Bank already operates in the litigation-finance business, albeit on a smaller scale than Esquire, and its CEO, Michael O’Rourke, and his team “understand this vertical,” according to Sagliocca.
Sagliocca emphasized the mutual understanding and appreciation between the two institutions, stating, “They clearly understand the value of the plaintiff-law-firm market and the peripheral businesses. They get the upside.” He further noted that the choice of business partners was mutual, adding, “When you choose a business partner and you’re private, you’re absolutely choosing someone and selecting someone that adds as much value to your franchise as you add to them.”
Addressing Concentration Concerns
Esquire’s business model, primarily serving law firms that file civil suits on a contingency basis, has delivered impressive results in recent years. However, this success has also raised concerns as litigation loans have grown faster than conventional credits. Sagliocca acknowledged this, saying, “We see that growth accelerating. At some point there’s a tipping point with concentration. … We have to be way out in front of that.”
The acquisition of Signature Bank, which concentrates on middle-market commercial and commercial real estate lending, will significantly alleviate these concentration concerns. If the deal goes through as planned, litigation loans will drop to 39% of the combined company’s loan portfolio, a significant reduction from Esquire’s current 67% level.
Looking Forward
The combined company is expected to start with assets of $4.8 billion, loans of $3.3 billion, and deposits totaling $4.1 billion. “By bringing together Signature’s strong Midwest commercial banking franchise with Esquire’s national capabilities, we will have greater resources and expanded reach to support our clients as they grow,” O’Rourke said in a recent press release.
The deal is expected to close in the third quarter. Investors seem to agree with the move, with Esquire shares trading up about 7% on the day of the announcement, closing at $106.
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