Esquire Financial Hldgs Q3 2026 Earnings Call Transcript
Esquire Financial Hldgs (NASDAQ:ESQ) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Esquire Financial Holdings successfully closed the Signature Bank merger, adding significant assets, loans and deposits and contributing to a diversified loan portfolio and funding sources. The combined company now holds $4.8 billion in assets, with a focus on litigation-related loans as a strategic growth area.
The company reported GAAP net income of $17.5 million, or $1.57 per diluted share, including merger expenses. Adjusted net income was $23.6 million, or $2.12 per diluted share, exceeding estimates.
Solid organic growth was observed, with loans and deposits increasing significantly over the past year alongside strong credit metrics and reserve coverage ratios. Management expressed confidence in exceeding initial earnings expectations post-merger and maintaining a strong capital position.
Management expects continued strong growth, projecting 14% loan growth for 2027 and maintaining a net interest margin between 5.70% and 5.75%. Successful integration and system conversion are planned for April 2027, with no significant client attrition reported.
The litigation vertical remains a core focus, with strong market opportunities identified in the Midwest, particularly in Chicago.
Full Transcript
OPERATOR
Q3 2026 earnings release conference call. After today’s prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Andrew Sagliocca, CEO, Vice Chairman and President. Andrew, please go ahead.
Andrew Sagliocca (Vice Chairman, CEO & President)
Thank you, Kenneth. Good morning, everybody. I’m joined in my office by Michael Lacapria, our SVP and CFO, and Eric Bader, our EVP and COO. I’d like to start the call by thanking and welcoming everybody, including our investors, analysts, board members, managers and employees, including our new business partners from our new Signature Division out of Chicago. I’m going to start the call with some high-level thoughts and comments, then turn the call over to Michael for a financial update, and then we’ll address any questions from those on the call.
During the quarter, we successfully closed the Signature Bank merger on 8-1-26, which diversified our loan portfolio and funding sources, and we also continue to show strong organic growth and performance on a combined basis. At closing, Signature had total assets, loans and deposits of approximately $1.9 billion, $1.4 billion and $1.7 billion, respectively. The combined results for Signature for the third quarter include only two months out of the three months of Signature activity.
Most importantly, the merger unites two highly talented management teams and employee bases with strong client relationships and market expertise, positioning the combined company for continued industry-leading growth, performance metrics and enhanced success. Regarding the conversion, our core system conversions are in progress and targeted for April 2027. There has been no material client attrition to date. Our growth and performance metrics remain materially unchanged from announcement, with certain performance metrics improving as noted in our earnings release.
A couple of quick highlights: Excluding the merger, we still experienced strong organic growth in loans and deposits over the past 12 months, totaling approximately half a billion dollars in loan growth and about $450 million in deposit growth. Also, on a linked-quarter basis, we continue to demonstrate similar organic loan and deposit growth as the 12-month period. We have solid credit metrics, asset quality and reserve coverage ratios, and, when we exclude the merger expenses and certain discrete tax benefit items in the tax line, our adjusted diluted earnings per share was $2.12, and our adjusted return on average assets and return on average tangible equity was 2.34% and 23%, respectively.
The Signature merger, coupled with our combined asset size, enhanced resources and diversified loan and deposit platforms, positions our company for continued strong growth and performance, and we believe we will exceed our initial earnings expectations when we announced the merger on March 12, 2026. With that said, I turn it over to Michael to give you his financial update and financial highlights.
Michael Lacapria (Member Board of Directors)
Thank you, Andrew, and good morning. I will provide a brief overview of our third quarter 2026 financial results as highlighted in our earnings release and investor presentation published earlier this morning. Like Andrew said, please note that this is our first quarter reflecting the post-merger combined company, and the results include two months of Signature’s activity from the August 1st closing date. This successful merger closed at a purchase price of $466 million, which is 10% accretive to tangible book value on day one, giving rise to a combined company that is $4.8 billion in assets, $3.4 billion in loans, $4 billion in deposits and $492 million in tangible equity, net of $247 million in goodwill and a $47 million core deposit intangible as of September 30th.
So let me start with net income for the third quarter. We reported GAAP net income of $17.5 million, or $1.57 per diluted share. These results included $8.9 million of pre-tax merger expenses, which is $7.1 million net of tax, and $938,000 of discrete tax benefits related to share-based compensation. Excluding these items, our adjusted net income is $23.6 million, or $2.12 per diluted share, which exceeds consensus estimates. This compares to an adjusted net income of $14 million, or $1.60 per diluted share, on a linked-quarter basis, representing a 69% increase.
Our adjusted returns on average assets and average tangible equity were 2.34% and 23.1%, respectively, for the quarter. These remain industry-leading metrics while we continue to invest in our current resources to support future growth and maintain excellence in client service that our customers have come to expect. Our net interest margin for the quarter was 5.74%, compared to 5.96% for the trailing quarter. That being said, our normalized net interest margin was approximately 5.68%, or 6 basis points less than the full quarter’s result, since Signature was included for two of the three months in the current quarter. This decline from prior quarters appropriately reflects the change in the combined asset and funding mix following the acquisition.
Loans increased $1.5 billion, or 80%, to $3.43 billion from June 30, of which $1.4 billion was attributable to the Signature merger, while the remaining increase was primarily attributable to organic litigation-related loan growth of $160 million, or 49% annualized, bringing our litigation book to $1.46 billion. Our litigation book now represents 42% of loans, as compared to 67% in the trailing quarter, provided for by the expected diversification benefit of the combination.
On a year-over-year basis, organic loan growth was $497 million, or 32%. As it relates to our litigation loan portfolio, we continue to see strong organic growth, healthy client activity levels and a tremendous opportunity in the untapped Midwest market. The litigation vertical remains a primary strategic focus, which is a key source of low-cost core funding to the bank that supports asset growth. Across the balance sheet, deposits increased $1.8 billion, or 83%, to $3.8 billion from June 30, of which $1.65 billion was attributable to the Signature merger, and the remaining $147 million was primarily organic litigation-related deposit growth. From the August 1st closing date, deposits increased $55 million, or 8% annualized, and, on a year-over-year basis, organic deposit growth was $447 million, or 24%. Our litigation-related deposits concentration decreased from 79% to 54% as the merger diversified our exposure, as expected.
Our cost of funds for the quarter, including demand, was 113 basis points. Off-balance-sheet sweeps remain a reliable source of liquidity at $776 million, with approximately $255 million, or 33%, available for liquidity if needed. Administrative service payment fee income on these balances totaled $1.1 million for the quarter. Total liquidity, including cash, off-balance-sheet sweeps and other borrowing capacity, was approximately $1.6 billion as of quarter-end.
Turning over to credit, credit quality remains solid. Our allowance for credit losses remained at 1.3% of loans, consistent with the prior quarter, and we have six nonperforming assets totaling $9.7 million, representing 20 basis points on total assets. The 4% increase in NPAs from the trailing quarter is due to the merger. There are also no material charge-offs or significant downgrades to report. Noninterest income increased $1.5 million, or 24%, as compared to the trailing quarter, to $7.9 million, representing 13% of total revenue. Our payments platform continues to be a meaningful contributor to earnings and client engagement. During the quarter, we supported 94,000 small business clients nationwide, processing approximately $10.5 billion in payment volume across 152 million transactions.
Operating expenses increased $14.9 million, or 71%, as compared to the trailing quarter, to $36 million, which is attributable to normal Signature operating expenses of $5.2 million, incremental merger expenses of $7.8 million and $1.8 million of core deposit intangible amortization. Excluding merger expenses and CDI amortization, the adjusted efficiency ratio was an industry-leading 41.1%. Merger expenses incurred inception-to-date were $11.6 million and are consistent with the guidance at announcement date.
Our capital foundation remains strong. The bank Tier 1 leverage and total risk-based capital ratios were 11.2% and 13.65%, respectively, positioning us well above regulatory well-capitalized standards. Now I’ll turn the call back over to Andrew for his remarks.
Andrew Sagliocca (Vice Chairman, CEO & President)
Thank you, Michael, for that thorough update. Kenneth, we’re going to turn the call back over to you for the Q and A session.
OPERATOR
Great. Thanks, Andrew and Michael. We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. And if you are muted locally, please remember to unmute your device. Please stand by while we compile the Q and A roster. Your first question today comes from the line of Justin Crowley with Piper Sandler. Justin, your line is open. Please go ahead.
Justin Crowley (Analyst at Piper Sandler)
Hey, good morning guys.
Andrew Sagliocca (Vice Chairman, CEO & President)
Good morning, Justin.
Justin Crowley (Analyst at Piper Sandler)
You know, with, you know, some noise with Signature in the numbers, but still, like, growth obviously looks really, really good here with the litigation vertical running on all cylinders. And so wanted to maybe get your thoughts on that vertical and, in particular, the opportunity in Chicago, which I know is a big reason for the deal. Just curious what you’ve learned so far in terms of, you know, what had to be done, maybe anything additional that needs to be done, you know, to penetrate that market, you know, as you bring the Esquire lending model to the Signature markets.
Andrew Sagliocca (Vice Chairman, CEO & President)
Great, Justin. Absolutely. So first and foremost, as you’re aware, Signature, Mick and his team in Chicago run an excellent commercial banking platform. So there is tremendous opportunity in the commercial market itself in the Chicago and greater Midwest area. So we start there by saying that’s a market that we can continue to tap and continue to grow non-litigation C&I loans and select CRE, too. The Chicago market for the litigation-related C&I loans, or plaintiff law firms that we primarily bank in our litigation vertical, is a very robust market — according to our numbers, the third or fourth largest plaintiff law firm market in the country.
Signature has done a good job before we’ve come along in penetrating that market on the depository side. They have a small lending book in this market, but they have a lot of contacts. Mick and Brian and Kevin, the executives over there, and key members of the business development and relationship management team in the lending area have longstanding, deep relationships, not only in the Chicago metro area, but in the litigation area. So that’s what we’ve learned since we announced the deal in March — I think it was March 12th. Through today, we’ve spent — myself, Ari Kornhaber, who runs our litigation division, Frank Leonardo, who is our chief credit officer and heads up the lending area with Bonnie Dougherty, who’s our new CLO — over the past year, have spent a lot of time in Chicago with Mick and his team, primarily on the business development side. And they have really strong relationships in the market and with plaintiff law firms that I believe we’re going to be able to leverage as we move forward.
I’ll end with, because you’ve heard me say this, Justin, and it’s proved itself out on our business development team that we hired prior to announcing the Signature deal: it’s a long sales cycle with plaintiff law firms. They’re all banked. They have to be banked. So their operating and escrow accounts are already banked somewhere. So the goal is to get them over to Esquire and attract them not only with our lending products and what they see as capital in the form of loans we give, but also attract them over because we understand the market and understand their depository needs.
Either or, or both.
Justin Crowley (Analyst at Piper Sandler)
Okay, got it. That’s super helpful. And then I feel like I kind of know the answer here, but just to confirm how you’re thinking about growth, looking out here, you know, somewhere in the 15 to 20% annual growth, is that still the right way to think about, you know, the combined company going forward here?
Andrew Sagliocca (Vice Chairman, CEO & President)
You should think of the combined company around 15%. So we’re modeling ’27 at about half a billion dollars of loan growth. You know, somebody may say that’s conservative — you just did a half a billion ex-Signature — but we may be able to print those type of numbers. But it’s anything but easy. It’s a big heavy lift to get a half a billion dollars worth of growth done, because it usually means we’re double or more in notional originations to get that done.
Because our stats on our lending side for our litigation-related loans clearly plays out at about 50% draws on the notional balance. So we’re comfortable with half a billion dollars worth of growth, which is about 14%. So that’s a good way to think about growth going into ’27.
Justin Crowley (Analyst at Piper Sandler)
Okay, got it. And then just pivoting a little, you know, as far as the margin, you know, I know some moving pieces with Signature only in there for two months. And so if we think about that, that 568 on an adjusted basis, how do you see that trending from there? I think you previously talked about the margin settling out in the 540 to 550 range. Obviously the rate environment has shifted a fair bit since then, so just kind of curious for your updated thoughts there.
Andrew Sagliocca (Vice Chairman, CEO & President)
Yeah, I mean, we’re using FHN Financial’s model. As of 9-4-26, they’re looking at one more rate increase to seven and a quarter if we’re looking at prime. If we’re looking at fed funds from four to four and a quarter, which takes prime from seven to seven and a quarter, and then they hold steady through the end of the third quarter. And then they have rates coming down 25 basis points in the fourth quarter and 1Q28. So with that said, we’re looking at a margin of about 570, maybe as high as 575.
So a pretty stable margin from what we printed in the third quarter, even though Michael gave you the adjusted number of, I think, 568.
Justin Crowley (Analyst at Piper Sandler)
Okay. And that 575.75, is that kind of where you think it, you know, where it reaches, or are you giving a full-year number for ’27?
Andrew Sagliocca (Vice Chairman, CEO & President)
I’m looking at ’27 saying we’re going to be somewhere between 570 and 575 for ’27.
Justin Crowley (Analyst at Piper Sandler)
Okay, perfect. And then maybe just one last one. You know, I think on a combined basis you’re running with what I think you’d probably describe as some excess liquidity, which I know also in the case standalone as well. How do you see that cash position trending and what would be the sweet spot if you’re able to deploy that liquidity?
Andrew Sagliocca (Vice Chairman, CEO & President)
I guess the best answer I can give you is we’re looking at about 14 to 15% growth. In order to achieve half a billion dollars worth of growth, we’re going to have to raise about half a billion dollars worth of core deposits, maybe a little less — 400, 450. Deposits always lag loan growth, but the deposit base is higher than the loan growth because our loans-to-deposit ratio is about 86%. So we see both of those commensurate: half a billion dollars worth of loan growth, about 400, maybe a little bit more, worth of deposit growth.
That will deploy some of the excess liquidity. But we’re not sitting on a lot of excess liquidity when you look at cash, and we prefer to grow naturally with core deposits and invest it in loans. And obviously for liquidity purposes, we’ll continue to stay in the bond market because they’re pledgeable at the Federal Home Loan Bank and the Federal Reserve discount window. So we maintain a strong liquidity level. But that’s how we see it. But we are, you know, we’ve played out ’27 and, you know, we believe we’re comfortable with where earnings is coming out in our revised numbers along with our expense base and our other fee income base. So if that’s something you want to talk about, you know, we’re open to talking about ’27 and how we view it.
Justin Crowley (Analyst at Piper Sandler)
Great. I will. I’ll leave it there and let others ask questions and circle back if needed.
Andrew Sagliocca (Vice Chairman, CEO & President)
All right, Justin, thank you.
OPERATOR
Your next question comes from the line of Tim Switzer with KBW. Tim, your line is open. Please go ahead.
Tim Switzer (Analyst at KBW)
Hey, good morning. Thanks for taking my questions. Hope you guys are doing well.
Andrew Sagliocca (Vice Chairman, CEO & President)
Good morning, Tim. Thanks for joining.
Tim Switzer (Analyst at KBW)
Yeah, so my first one — I’m sorry if you already mentioned this — but I’m trying to understand from the press release: the six basis points within the NIM that you guys are talking about, was that the purchase accounting benefit from closing Signature?
Andrew Sagliocca (Vice Chairman, CEO & President)
No. If you think about it, our margin was around 6 and their margin was south of 6. And mathematically they’re included in our margin for two months, not three. If they were included for three months on a pro forma basis, Michael and I see the margin coming out at about 568, give or take a couple of basis points either way. So it has nothing to do with loan mark. It has nothing to do with the securities and the accretion related to loans and securities.
It has everything to do with them being mathematically included in the margin for two out of three months.
Tim Switzer (Analyst at KBW)
Okay, that makes sense. So what was the purchase accounting benefit on either a dollar or basis-point basis?
Andrew Sagliocca (Vice Chairman, CEO & President)
Purchase accounting — well, the purchase accounting on the securities was the mark, I think, Eric, was about $64 million. And we wound up liquidating most of that at market and buying back in opportunistically at market. So we’re not tracking the purchase accounting on securities, Tim, which was a material piece, because now it’s embedded in the bonds that we want to own as a $5 billion company. So Eric’s goal, liquidating their position, was simple: we’re a $5 billion bank.
We want to own larger blocks that are easier to pledge at the Home Loan Bank or the discount window. And at the same time, we wanted to buy new issuances with shorter duration. That was the goal. So Eric expedited trading out of those bonds at the purchase accounting mark and buying into new bonds. So what that leaves us with is the loan mark. So the loan mark — the accretable loan mark — was about $16 million and its average life is about years. So, okay, so might impact margin by — it’s 13 basis points. Yeah. But again that’s a three-year mark, so we’ll be living with that for three years as we grow.
Tim Switzer (Analyst at KBW)
Okay, so 14 basis points to the NIM this quarter. Should we expect a similar amount in Q4?
Andrew Sagliocca (Vice Chairman, CEO & President)
Is it a little bit higher? Once you get the full quarter impact, you should expect the NIM to be around 575.75. And if we surprise on the upside, then I’ll be as surprised as you and we’ll obviously change our guidance. But that’s a pretty strong NIM considering we all believed on our side, management, when we announced the deal, that we’d be operating somewhere in the high 540s or low 550s. So it’s been a great run to the closing. We were opportunistically, like I said, able to trade into a new issuance of bonds that made us very comfortable.
And the purchase accounting came out materially close to what we thought it was going to be when we announced the deal.
Tim Switzer (Analyst at KBW)
Yeah, no, it’s all good to see. What kind of deposit beta assumptions do you guys have embedded within your guidance? And can you also talk about how you know the pricing power you have on the loan side if rates continue to move higher from here?
Andrew Sagliocca (Vice Chairman, CEO & President)
Yeah. So about at this point, with the diversification in the loan book, I think it’s about 60% of the total loan book is variable. All right. As opposed to probably close to 85 or 90 pre-acquisition, but it’s 60 now. As rates move up — which again, our guidance that we’re using is FHN Financial — so we only see rates moving up on fed funds 25 basis points more, according to their projections, which is minimal for anybody’s model if we’re going to use that. So the reason I keep giving guidance around 575.75 is we’ve already had one rate move, and that’s played into where our NIM is winding up now at about 568 adjusted.
And if there’s another rate move, I know Eric Bader is going to come in my office and tell me that it’d be prudent to move up our IOLTA rates in certain material states, which would be prudent for those states that we operate in. We want to be a good corporate steward in the states we operate in and have IOLTA powers in. So we’re comfortable with the margin hanging around 575.75, considering we only have one more rate increase built into our models.
Tim Switzer (Analyst at KBW)
Got it. Very helpful. Thank you, Andrew.
Andrew Sagliocca (Vice Chairman, CEO & President)
You’re welcome, Tim. And again, like I said, Tim, if at any point on the call or after the call you want to talk about ’27, both Michael and I have modeled that out and are comfortable with the revised guidance, which is why we put in our earnings release that we believe we’re going to exceed the guidance we printed on March 12 with the deal.
Tim Switzer (Analyst at KBW)
Yeah. Good to hear. Thank you. Thank you.
OPERATOR
All right, your next question comes from the line of Steve Moss with Raymond James. Steve, please go ahead.
Steve Moss (Analyst at Raymond James)
Good morning, guys. Nice quarter here.
Andrew Sagliocca (Vice Chairman, CEO & President)
Good morning, Steve. Thank you.
Steve Moss (Analyst at Raymond James)
Morning, Andrew, Eric, Michael. So, you know, maybe just on that subject of looking at the ’27 here — you know, I know you have the integration or the systems conversion and stuff coming up next year. Just kind of curious how you guys are thinking about expenses with regard to the moving parts there. And then also just kind of curious, you know, what are your thoughts on additional investments in, you know, both franchises as you put them together?
Andrew Sagliocca (Vice Chairman, CEO & President)
Excellent, excellent. I’m glad you asked, I really am, because I’m going to start the way I never start, which is with what we believe our diluted EPS is going to be in ’27. And I want to do that on this call, Steve, because as you know, not only is September not a clean quarter, the obvious noise is the merger charge. But there’s only two out of three months of Signature in there. So we haven’t even printed a full quarter combined, which, as you know, is going to be the fourth quarter.
So the way we’re looking at ’27 is approximately $9 a share. And if you walk through the components of that, you’re looking at about a half a billion dollars’ worth of loan growth starting with about a $3.5 billion starting point at the end of December. Again, you’re looking at about a 5.75% margin. On a combined basis, we’re looking at about $33 to $34 million of fee income. And on a combined basis we’re looking at about $138 to $140 million of noninterest expense.
And our run rate on the tax side is about 28 and a half percent. As long as we don’t have any discrete type items and option or restricted stock type exercises, on a normalized basis, we’re modeling that tax rate at about 28 and a half percent. So that comes out to about, give or take, $9 a share on diluted EPS for ’27. And you hit it right on the head, Steve, you know us long enough. We’re going to continue to invest in resources, and that is people and technology. Because at these kind of growth rates, starting with a $3.5 billion dollar loan book and a $4.8 billion combined asset base and size for the company, you know, printing about 14% loan growth, or half a billion dollars, which again means we’re going to print about a billion or more of notional to get about half a billion dollars’ worth of loan growth.
We are going to continue to invest in business development relationship managers where they’re managing the ongoing clients. We’re going to continue to invest in the lending area, especially on the C&I side, both litigation and commercial, where we see growth. We have, and Signature had, a great commercial real estate team. We think that the combined team will be able to handle the growth in that portfolio on a combined basis across those two regions.
And obviously, we continually invest in technology, which, when I say that, it could be as simple as investing in data, which we continuously do to make sure that our digital marketing platform is leading and in front of our business development officers nationally around the country.
Steve Moss (Analyst at Raymond James)
Appreciate all that color there. I mean, I guess just kind of, you know, as you guys continue to invest and grow here and you put up a really good quarter here in terms of growth, you know, it feels like, you know, the loan growth guidance may be a little bit conservative, maybe just getting a little spoiled here with the numbers you’re putting up. But, you know, if the pipeline’s strong, I know you put on a lot this quarter. I hear you. In terms of a billion in commitments, you know, is there anything, you know, is that just you guys being conservative here on the loan growth, or like, are there maybe a few takes that we’re not thinking of?
Andrew Sagliocca (Vice Chairman, CEO & President)
Well, I think in any year or any quarter, we always have a minority of larger opportunities and a majority of smaller opportunities. So I can’t always count on, you know, the minority of larger opportunities happening on a continuous basis. I am very comfortable with—when I say the small loans—those loans, call it, if I had to pick a number, I’d say $25 million in notional and below. And those loans that are greater than $25 million in notional and above.
You know, I can’t build and run a company counting on those type of opportunities over and over again. Am I being conservative? I think I’m—I think I’m being realistic with half a billion dollars’ worth of loan growth. I think we just closed the deal on August 1st. We, as a combined entity, where now we have not only doubled the size of the company effectively, but we’ve doubled the employee base. We have not gone through system conversions. Core system conversions isn’t the only thing that any bank has to focus on as they look towards April 27th for conversion.
There are management systems we need to convert. There are CRM platforms and loan underwriting platforms and deposit and loan origination platforms. There’s culture we have to align. You know, there’s a lot of work in deals that goes unnoticed, that the numbers don’t reflect. So I don’t think we’re being conservative. I think we’re being realistic. I think 14, 15% growth is a great print. I think, you know, $9 a share, give or take, is a great print right after the deal.
And what I don’t want to do is overpromise on a call like this, knowing how much work we have to do that has nothing to do with originating the next loan.
Steve Moss (Analyst at Raymond James)
Great, Andrew. No, I appreciate all that color. Really helpful here. And, you know, great quarter and good luck with the integration.
Andrew Sagliocca (Vice Chairman, CEO & President)
Thank you, Stephen. And as you know, as we get through the fourth quarter and into the first, if we’re feeling better about growth, and we think half a billion dollars is on the conservative end, you know, people like you and Tim and Justin will be the first to know.
Steve Moss (Analyst at Raymond James)
Appreciate that. Looking forward to it.
Andrew Sagliocca (Vice Chairman, CEO & President)
All right, Steve, thank you.
OPERATOR
Your next question comes from the line of Alan Strauss with Ithaca Capital. Alan, your line is open. Please go ahead.
Alan Strauss (Analyst at Ithaca Capital)
All right. Good morning. A few questions. One on the system conversion, are the two companies on the same core operating system, or are you on different systems? That makes this even heavier lifting.
Andrew Sagliocca (Vice Chairman, CEO & President)
We are on Fiserv. Signature is on Jack Henry. So we are on two different core systems. Not sure if it makes it a heavier lift. It obviously does compared to us being on the same platform, but Signature is on Jack Henry, and we are on Fiserv.
Alan Strauss (Analyst at Ithaca Capital)
Okay, and just which one’s going to be the winning system?
Andrew Sagliocca (Vice Chairman, CEO & President)
Fiserv. The Fiserv system will be what our new clients at the former Signature Bank will be converted to.
Alan Strauss (Analyst at Ithaca Capital)
Okay, great. Looking out, say a year to two years, is it feasible to take out some of the asset sensitivity of the bank, or will the combined entities always be asset sensitive?
Andrew Sagliocca (Vice Chairman, CEO & President)
The combined entity will always be asset sensitive. Starting with today, obviously our concentration is less. It’s about 60%, and I think 100 basis points up, we’re looking at about a 6.7% increase in net interest income, which we put in the investor deck on page 11.
Alan Strauss (Analyst at Ithaca Capital)
Okay. All right. And then last question. On the combined company, given the loan growth that you see, what would be the appropriate payout ratio on the dividend looking out?
Andrew Sagliocca (Vice Chairman, CEO & President)
That’s a good question. And that’s a discussion we need to have at the board meeting. We’ve traditionally paid out about a 10 or 12% dividend payout ratio based on earnings. That’s our traditional pre-merger ratio that we reevaluate going into the end of the year and typically announce in early the following year. With these growth projections, our focus is not necessarily on tangible capital to assets or the leverage ratio. Our focus is on our total capital ratio since we are heavily weighted towards C&I loans, which are 100% risk weighted.
So when we look at dividends, we’re not only looking at a dividend payout ratio, but looking at capital preservation as we balance it between using capital towards growth or using capital towards dividend, with a keen eye on the total risk-adjusted capital ratio. That about right, Michael?
Michael Lacapria (Member Board of Directors)
Sounds right to me.
Alan Strauss (Analyst at Ithaca Capital)
Okay, yeah, thanks.
Andrew Sagliocca (Vice Chairman, CEO & President)
Thank you.
Alan Strauss (Analyst at Ithaca Capital)
And that’s it.
OPERATOR
There are no further questions at this time. I will now turn the call back to Andrew for closing remarks.
Andrew Sagliocca (Vice Chairman, CEO & President)
Great, Kenneth, thank you. I want to thank everybody on the call. I know that we have some investors and analysts, obviously board members, managers, employees. I hope our friends and our new business partners at Signature in Chicago were able to join us. I want to congratulate everybody—our board, our management team, our employee base. This was a very heavy lift, as you could imagine. The bank prior to the acquisition was about a $2.7 billion bank.
So again, actively not only doubled the size of assets and loans and deposits, but we doubled the employee base. As you’re aware, Chicago’s about 850 miles away from New York. So there’s been a lot of traveling back and forth between management group and employees to make this happen, and also plan for the system conversion scheduled at this point for April 27th. So I just want to take a moment to thank all of our employees for their focus, their care, their dedication, and their diligent and hard work to get us to this point. We are very pleased with the company’s combined performance, and we are very positive about our earnings expectations and performance as we look forward. So thank you, everybody. And thank you, Kenneth.
OPERATOR
This concludes today’s call. Thank you for attending. You may now disconnect.
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