First Business Bank Reports Record Fourth Quarter 2024 Net Income of $14.2 Million

Share Name	Share Symbol	Market	Type
First Business Financial Services Inc	NASDAQ:FBIZ	NASDAQ	Common Stock

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	2.11	4.26%	51.66	45.00	82.65	52.98	49.90	49.90	43,077	00:33:00

First Business Financial... (NASDAQ:FBIZ)
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-- Record operating revenue, strong net interest margin, and positive operating leverage drive record pre-tax, pre-provision earnings --

First Business Financial Services, Inc. (the “Company”, the “Bank”, or “First Business Bank”) (Nasdaq:FBIZ) reported quarterly net income available to common shareholders of $14.2 million, or earnings per share ("EPS") of $1.71. This compares to net income available to common shareholders of $10.3 million, or $1.24 per share, in the third quarter of 2024 and $9.6 million, or $1.15 per share, in the fourth quarter of 2023. EPS for the fourth quarter of 2024 included tax and Small Business Administration ("SBA") recourse reserve benefits totaling $0.28 per share.

“First Business Bank’s excellent execution throughout 2024 culminated in outstanding fourth quarter performance,” said Corey Chambas, Chief Executive Officer. “Our success is attributable to our deep client relationships and exceptional team, who produced near 10% loan growth once again. At the same time, we are very pleased with the 13% expansion of fee income in the fourth quarter, which helped drive an improved efficiency ratio. Excluding the tax and recourse benefits in the quarter, our earnings per share amounted to $1.43, marking growth of 15% and 24% from the linked and prior year quarters and supporting our key focus on meaningful tangible book value expansion. We remain confident in our ability to execute our strategic plan and achieve 10% balance sheet and top line revenue growth in 2025.”

Quarterly Highlights

Consistent Loan Growth. Loans increased $63.6 million, or 8.3% annualized, from the third quarter of 2024, and $263.8 million, or 9.3%, from the fourth quarter of 2023, reflecting growth throughout the Company.
Strong Net Interest Margin. The Company's long-held match-funding strategy and pricing discipline produced a net interest margin of 3.77%, compared to 3.64% for the linked quarter. Net interest income grew 6.9% from the linked quarter and 12.2% from the prior year quarter.
Record Operating Revenue. Operating revenue increased to $41.2 million, up 8.1% and 12.3% from the linked and prior year quarters, respectively, driven by loan growth, strong net interest margin, and fee income expansion.
Continued Private Wealth Management Expansion. Private Wealth assets under management and administration grew to a record $3.419 billion, generating Private Wealth fee income of $3.4 million. Private Wealth fees increased by 16.8% from the prior year quarter and comprised 43% of total non-interest income.
Record Pre-Tax, Pre-Provision ("PTPP") Income. PTPP income grew to $17.7 million, up 14.8% and 16.1% from the linked and prior year quarters, respectively. This performance reflects continued growth across the Company’s balance sheet coupled with operational efficiency.
Tangible Book Value Growth. The Company’s strong earnings and sound balance sheet management continued to drive growth in tangible book value per share, producing a 23.0% annualized increase compared to the linked quarter and a 15.0% increase compared to the prior year quarter.
Reported Earnings Elevated by Tax Benefit and Recourse Reserve. EPS of $1.71 included income tax and SBA recourse reserve benefits totaling $0.28 per share. Excluding these items, EPS increased 15.3% and 24.3% from the linked and prior year quarters.

Quarterly Financial Results

(Unaudited)

As of and for the Three Months Ended

As of and for the Year Ended

(Dollars in thousands, except per share amounts)

December 31, 2024

September 30, 2024

December 31, 2023

December 31, 2024

December 31, 2023

Net interest income

$33,148

$31,007

$29,540

$124,206

$112,588

Adjusted non-interest income (1)

8,005

7,064

7,094

29,259

31,353

Operating revenue (1)

41,153

38,071

36,634

153,465

143,941

Operating expense (1)

23,434

22,630

21,374

93,016

87,787

Pre-tax, pre-provision adjusted earnings (1)

17,719

15,441

15,260

60,449

56,154

Less:

Provision for credit losses

2,701

2,087

2,573

8,827

8,182

Net loss on repossessed assets

168

SBA recourse (benefit) provision

(687)

466

210

(104)

775

Impairment of tax credit investments

400

—

400

—

Add:

Net loss on sale of securities

—

(8)

(45)

Income before income tax expense

15,300

12,877

12,473

51,150

47,139

Income tax expense

885

2,351

2,703

6,905

10,112

Net income

$14,415

$10,526

$9,770

$44,245

$37,027

Preferred stock dividends

219

218

219

875

Net income available to common shareholders

$14,196

$10,308

$9,551

$43,370

$36,152

Earnings per share, diluted

$1.71

$1.24

$1.15

$5.20

$4.33

Book value per share

$38.17

$36.17

$33.39

$38.17

$33.39

Tangible book value per share (1)

$36.74

$34.74

$31.94

$36.74

$31.94

Net interest margin (2)

3.77%

3.64%

3.69%

3.66%

3.78%

Adjusted net interest margin (1)(2)

3.48%

3.51%

3.50%

3.47%

3.62%

Fee income ratio (non-interest income / total revenue)

19.45%

18.55%

19.36%

19.06%

21.76%

Efficiency ratio (1)

56.94%

59.50%

58.34%

60.61%

60.99%

Return on average assets (2)

1.52%

1.13%

1.11%

1.20%

1.13%

Return on average tangible common equity (2)

19.21%

14.40%

14.64%

15.35%

14.45%

Period-end loans and leases receivable

$3,113,128

$3,050,079

$2,850,261

$3,113,128

$2,850,261

Average loans and leases receivable

$3,103,703

$3,031,880

$2,810,793

$2,996,881

$2,647,851

Period-end core deposits

$2,396,429

$2,382,730

$2,339,071

$2,396,429

$2,339,071

Average core deposits

$2,416,919

$2,375,002

$2,247,639

$2,378,465

$2,098,153

Allowance for credit losses, including unfunded commitment reserves

$37,268

$35,509

$32,997

$37,268

$32,997

Non-performing assets

$28,418

$19,420

$20,844

$28,418

$20,844

Allowance for credit losses as a percent of total gross loans and leases

1.20%

1.16%

1.20%

1.16%

Non-performing assets as a percent of total assets

0.74%

0.52%

0.59%

0.74%

0.59%

This is a non-GAAP financial measure. Management believes these measures are meaningful because they reflect adjustments commonly made by management, investors, regulators, and analysts to evaluate financial performance, provide greater understanding of ongoing operations, and enhance comparability of results with prior periods. See the section titled Non-GAAP Reconciliations at the end of this release for a reconciliation of GAAP financial measures to non-GAAP financial measures.
Calculation is annualized.

Fourth Quarter 2024 Compared to Third Quarter 2024

Net interest income increased $2.1 million, or 6.9%, to $33.1 million.

The increase in net interest income was driven by higher average loans and leases receivable and fees in lieu of interest, partially offset by a decrease in adjusted net interest margin. Average loans and leases receivable grew by $71.8 million, or 9.5% annualized, to $3.104 billion. Fees in lieu of interest, which vary from quarter to quarter based on client-driven activity, totaled $2.4 million, compared to $1.0 million in the prior quarter. Excluding fees in lieu of interest, net interest income increased $784,000, or 2.6%.
The yield on average interest-earning assets decreased 13 basis points to 6.84% from 6.97%. Excluding fees in lieu of interest, the yield on average interest-earning assets decreased 29 basis points to 6.57% from 6.85%. The adjusted interest-earning asset beta compared to the prior quarter was 46.8%. The change in yield of the respective interest-earning asset or the rate paid on interest-bearing liability compared to the change in the effective daily fed funds rate is commonly referred to as beta.
The rate paid for average interest-bearing core deposits decreased 45 basis points to 3.65% from 4.10%. The rate paid for average total bank funding decreased 26 basis points to 3.18% from 3.44%. Total bank funding is defined as total deposits plus Federal Home Loan Bank (“FHLB”) advances. The total core deposit beta compared to the prior quarter was 58.1%. The total bank funding beta compared to the prior quarter was 41.9%.
Net interest margin was 3.77% compared to 3.64% for the linked quarter. Adjusted net interest margin1 was 3.48%, down 2 basis points compared to 3.50% in the linked quarter. The decrease in adjusted net interest margin was driven by a decrease in the yield on interest-earning assets partially offset by a decrease in rate paid on total bank funding.
The Company maintains a long-term target for net interest margin in the range of 3.60% - 3.65%. Performance in future quarters will vary due to factors such as the level of fees in lieu of interest and the timing, pace and scale of future interest rate changes.

The Bank reported a provision expense of $2.7 million, compared to $2.1 million in the third quarter of 2024. The increase was driven by new specific reserves and charge-offs in the Commercial and Industrial ("C&I") loan portfolio, partially offset by decreases in general reserves primarily related to the annual review of model assumptions for both qualitative and quantitative factors.

Non-interest income increased $941,000, or 13.3%, to $8.0 million.

Private Wealth fee income increased $162,000, or 5.0% to $3.4 million. Private Wealth assets under management and administration measured $3.419 billion on December 31, 2024, up $20.8 million, or 2.4% annualized from the prior quarter. Fee income is based on overall asset levels and may vary based on seasonal activity and the timing of fluctuations in market values.
Gains on sale of SBA loans increased $478,000, or 103.9%, to $938,000. Gain on sale of SBA loans varies period to period based on the amount of closed and fully funded loans. While quarterly gains may vary, management expects the SBA loan sales to continue growing year-over-year.
Commercial loan swap fee income of $588,000 increased by $128,000, or 27.8%. Swap fee income varies from period to period based on loan activity and the interest rate environment.
Loan fee income increased $102,000 or 12.6% to $914,000.

__________________________________________

Adjusted net interest margin is a non-GAAP measure representing net interest income excluding fees in lieu of interest and other recurring, but volatile, components of net interest margin divided by average interest-earning assets less other recurring, but volatile, components of average interest-earning assets.

Non-interest expense increased $45,000, or 0.2%, to $23.2 million, while operating expense increased $804,000, or 3.6%, to $23.4 million.

Compensation expense was $15.5 million, reflecting an increase of $337,000, or 2.2%, from the linked quarter primarily due to an increase in individual incentive and share-based compensation accruals. This was partially offset by a $261,000 decrease in annual cash bonus accrual. Average full-time equivalents (“FTEs”) for the fourth quarter of 2024 were 349, down from 355 in the linked quarter. The decrease in average FTEs is associated with temporary vacancies of existing positions that we expect to fill in 2025.
Data processing expense was $1.6 million, increasing $602,000, or 57.6%, from the linked quarter primarily due to a one-time expense as result of a change in credit card vendors.
Other non-interest expense was $517,000, decreasing $784,000, or 60.3%, from the linked quarter primarily due to an SBA recourse provision benefit of $687,000, or $0.07 after tax per share. This benefit, considered a change in estimate, is the result of a review of assumptions which identified that actual losses over the past three years were significantly below estimated losses. Management will evaluate the need for a recourse provision on a loan-by-loan basis.

Income tax expense decreased $1.5 million, or 62.4%, to $885,000. The effective tax rate was 5.8% for the three months ended December 31, 2024, compared to 18.3% for the linked quarter. The decrease is primarily due to a $1.7 million, or $0.21 after tax per share, partial release of a state deferred tax asset valuation allowance due to changes in projected taxable income based on revised state taxation guidance and 2023 state tax return actual results. The Company expects to report an effective tax rate between 16% and 18% for 2025.

Total period-end loans and leases receivable increased $63.6 million, or 8.3% annualized, to $3.114 billion. The average rate earned on average loans and leases receivable was 7.21%, down 11 basis points from 7.32% in the prior quarter. Excluding fees in lieu of interest, the average rate earned on average loans and leases receivable was 6.91%, down 29 basis points from 7.19% in the prior quarter. This decrease in yield was primarily due to the decrease in short-term market rates.

Commercial Real Estate (“CRE”) loans increased by $87.8 million, or 19.2% annualized, to $1.917 billion. The increase was primarily due to an increase in CRE non-owner occupied and multi-family loans in the Wisconsin markets as construction projects funded.
C&I loans decreased $22.6 million, or 7.69% annualized, to $1.152 billion. The decrease was primarily due to asset-based lending and accounts receivable financing payoffs, partially offset by an increase in floorplan line balances.

Total period-end core deposits increased $13.7 million, or 2.3% annualized, to $2.396 billion, compared to $2.383 billion. The average rate paid was 2.98%, down 36 basis points from 3.34% in the prior quarter.

New non-maturity deposit balances of $56.5 million were added at a weighted average rate of 2.92%. Certificate of deposit maturities of $119.8 million at a weighted average rate of 4.62% were replaced by new and renewed certificates of deposit of $98.5 million at a weighted average rate of 3.92%.

Period-end wholesale funding, including FHLB advances and brokered deposits, increased $94.4 million, or 10.7%, to $976.1 million. Consistent with the Bank’s long-held philosophy to minimize exposure to interest rate risk, management will continue to utilize the most efficient and cost-effective source of wholesale funds to match-fund fixed-rate loans as necessary.

Wholesale deposits increased $123.5 million, or 21.0%, to $710.7 million, compared to $587.2 million. The average rate paid on wholesale deposits decreased one basis point to 4.11% and the weighted average original maturity decreased to 3.9 years from 4.6 years.
FHLB advances decreased $29.1 million, or 9.9%, to $265.4 million, compared to $294.5 million. The average rate paid on FHLB advances decreased 5 basis points to 2.91% and the weighted average original maturity increased to 5.4 years from 4.6 years.

Non-performing assets increased $9.0 million to $28.4 million, or 0.74% of total assets, increasing as a percentage of total assets from 0.52% in the prior quarter. The increase is primarily driven by a conventional C&I loan that management identified as non-performing and recognized a specific reserve. We continue to expect full repayment of the previously disclosed Asset-Based Lending ("ABL") loan that defaulted during the second quarter of 2023. The liquidation process under Chapter 7 bankruptcy has delayed final resolution. Through the Bank's collection efforts, the current balance of this loan is $6.2 million, down from $8.8 million in the prior- year quarter. Excluding this ABL loan, non-performing assets totaled $22.2 million, or 0.58% of total assets in the current quarter and $13.0 million, or 0.35% of total assets in the linked quarter.

The allowance for credit losses, including the unfunded credit commitments reserve, increased $1.8 million, or 5.0%, as increases in new specific reserves and loan growth were partially offset by net charge-offs and changes in quantitative and qualitative factors. The allowance for credit losses, including unfunded credit commitment reserves, as a percent of total gross loans and leases was 1.20% compared to 1.16% in the prior quarter.

Fourth Quarter 2024 Compared to Fourth Quarter 2023

Net interest income increased $3.6 million, or 12.2%, to $33.1 million.

The increase in net interest income primarily reflects an increase in average gross loans and leases and an increase in fees in lieu of interest. Fees in lieu of interest increased to $2.4 million from $1 million. Excluding fees in lieu of interest, net interest income increased $2.4 million, or 8.3%.
The yield on average interest-earning assets decreased one basis point to 6.84% from 6.85%. Excluding fees in lieu of interest, the yield on average interest-earning assets measured 6.57% compared to 6.71%. This decrease in yield was primarily due to the decrease in short-term market rates partially offset by the reinvestment of cash flows from the securities and fixed-rate loan portfolios.
The rate paid for average interest-bearing core deposits decreased 34 basis points to 3.65% from 3.99%. The rate paid for average total bank funding decreased 9 basis points to 3.18% from 3.27%.
Net interest margin increased 8 basis points to 3.77% from 3.69%. adjusted net interest margin decreased 2 basis points to 3.48% from 3.50%.

The Company reported a credit loss provision expense of $2.7 million, compared to $2.6 million in the fourth quarter of 2023. See the provision breakdown table below for more detail on the components of provision expense.

Non-interest income increased $911,000, or 12.8%, to $8.0 million.

Private Wealth fee income increased $493,000, or 16.8%, to $3.4 million. Private Wealth assets under management and administration measured $3.419 billion at December 31, 2024, up $297.2 million, or 9.5%.
Gain on sale of SBA loans increased $654,000 to $938,000. Gain on sale of SBA loans varies period to period based on the number of closed commitments. Management expects the SBA loan sales pipeline to remain strong as production increases and previously closed commitments fully fund and become eligible for sale.
Commercial loan swap fee income increased by $150,000, or 34.2%, to $588,000. Swap fee income varies from period to period based on loan activity and the interest rate environment.
Service charges on deposits increased $112,000, or 13.2%, to $960,000, primarily driven by new core deposit relationships.
Other fee income decreased $543,000, or 31.5%, to $1.2 million. The decrease was primarily due to lower returns on the Company’s investments in Small Business Investment Company ("SBIC") funds in the fourth quarter. Income from SBIC funds was $251,000 in the fourth quarter, compared to $860,000 in the prior year quarter. Income from SBIC funds varies from period to period based on changes in the realized and unrealized fair value of underlying investments.

Non-interest expense increased $1.6 million, or 7.2%, to $23.2 million. Operating expense increased $2.1 million, or 9.6%, to $23.4 million.

Compensation expense increased $1.1 million, or 7.5%, to $15.5 million. The increase in compensation expense was primarily due to an increase in average FTEs and annual merit increases and promotions. Average FTEs increased 2% to 349 in the fourth quarter of 2024, compared to 343 in the fourth quarter of 2023.
Data processing expense increased $711,000 or 76.1%, to $1.6 million, primarily due to a one-time expense resulting from a change in credit card vendors as well as an increase in core processing costs commensurate with loan and deposit account growth.
Computer software expense increased $268,000, or 20.3%, to $1.6 million, primarily due to our commitment to innovative technology to support growth initiatives, enhance productivity, and improve the client experience.
Marketing expense increased $204,000, or 28.2%, to $928,000, primarily due to increased business development efforts and advertising projects to support Company growth goals.
FDIC Insurance increased $143,000, or 24.4%, to $728,000 primarily due to an increase in total assets and an increase in use of brokered deposits.
Other expense decreased $835,000, or 61.8%, to $517,000 primarily due to an SBA recourse provision benefit.

Total period-end loans and leases receivable increased $263.8 million, or 9.3%, to $3.114 billion.

CRE loans increased $217.3 million, or 12.8%, to $1.917 billion, primarily due to increases in all loan categories in the Wisconsin market.
C&I loans increased $45.9 million, or 4.1%, to $1.152 billion, primarily due to growth in Equipment Finance and Floorplan Financing.

Total period-end core deposits grew $57.4 million, or 2.5%, to $2.396 billion, and the average rate paid decreased 22 basis points to 2.98%. The decrease in average rate paid on core deposits was primarily due to a decrease in short-term market rates. Total average core deposits grew $169.3 million, or 7.5%, to $2.417 billion.

Period-end wholesale funding increased $263.9 million, or 32.0%, to $976.1 million.

Wholesale deposits increased $253.0 million, or 55.3%, to $710.7 million, as the Bank utilized more wholesale deposits in lieu of FHLB advances to maintain excess liquidity and to match-fund fixed-rate assets. The average rate paid on wholesale deposits decreased 4 basis points to 4.11% and the weighted average original maturity decreased to 3.9 years from 4.0 years. Consistent with our balance sheet strategy to use the most efficient and cost-effective source of wholesale funding, the Company has entered into derivative contracts which hedge a portion of the wholesale deposits to reduce the fixed rate funding costs.
FHLB advances decreased $16.2 million, or 5.7%, to $265.4 million. The average rate paid on FHLB advances increased 46 basis points to 2.91% and the weighted average original maturity increased to 5.4 years from 5.2 years.

Non-performing assets increased to $28.4 million, or 0.74% of total assets, compared to $20.8 million, or 0.59% of total assets, driven by a conventional C&I loan and new past-due Equipment Finance loans within the C&I portfolio. Excluding the ABL loan described above for which we expect full repayment, non-performing assets totaled $22.2 million, or 0.58% of total assets and $12.0 million, or 0.34% of total assets in the prior year quarter.

The allowance for credit losses, including unfunded commitment reserves, increased $4.3 million to $37.3 million, compared to $33.0 million primarily due to an increase in specific reserves and loan growth, partially offset by net charge-offs and changes in general reserve. The allowance for credit losses as a percent of total gross loans and leases was 1.20%, compared 1.16% in the prior year.

Investor Presentation and Conference Call

On January 30, 2025, the Company posted an investor presentation to its website firstbusiness.bank under the “Investor Relations” tab which will also be furnished to the U.S. Securities and Exchange Commission on January 30, 2025. The information included in the presentation provides an overview of the Company’s recent operating performance, financial condition, and business strategy. The Company intends to use this presentation in connection with its fourth quarter 2024 earnings call to be held at 1:00 p.m. Central time on January 31, 2025, and from time to time when the Company's executives interact with shareholders, analysts, and other third parties. The conference call can be accessed at 800-549-8228 (289-819-1520 if outside the United States and Canada), using the conference call access code: FBIZ. Investors may also listen live via webcast at: https://events.q4inc.com/attendee/585942928. A replay of the call will be available through Friday, February 7, 2025, by calling 888-660-6264 or 289-819-1325 for international participants. The webcast archive of the conference call will be available on the Company’s website, ir.firstbusiness.bank.

About First Business Bank

First Business Bank® specializes in Business Banking, including Commercial Banking and Specialty Finance, Private Wealth, and Bank Consulting services, and through its refined focus delivers unmatched expertise, accessibility, and responsiveness. Specialty Finance solutions are delivered through First Business Bank’s wholly owned subsidiary First Business Specialty Finance, LLC®. First Business Bank is a wholly owned subsidiary of First Business Financial Services, Inc®. (Nasdaq: FBIZ). For additional information, visit firstbusiness.bank.

This release may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which reflect First Business Bank’s current views with respect to future events and financial performance. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results, or other developments. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, uncertainties, and other factors that may cause actual results to differ materially from the views, beliefs, and projections expressed in such statements. Such statements are subject to risks and uncertainties, including among other things:

Adverse changes in the economy or business conditions, either nationally or in our markets including, without limitation, inflation, economic downturn, labor shortages, wage pressures, and the adverse effects of public health events on the global, national, and local economy.
Competitive pressures among depository and other financial institutions nationally and in the Company’s markets.
Increases in defaults by borrowers and other delinquencies.
Management’s ability to manage growth effectively, including the successful expansion of our client service, administrative infrastructure, and internal management systems.
Fluctuations in interest rates and market prices.
Changes in legislative or regulatory requirements applicable to the Company and its subsidiaries.
Changes in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations.
Fraud, including client and system failure or breaches of our network security, including the Company’s internet banking activities.
Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portion of SBA loans.
Ongoing volatility in the banking sector may result in new legislation, regulations or policy changes that could subject the Company and the Bank to increased government regulation and supervision.
The proportion of the Company’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk.
The Company may be subject to increases in FDIC insurance assessments.

For further information about the factors that could affect the Company’s future results, please see the Company’s annual report on Form 10-K for the year ended December 31, 2023, and other filings with the Securities and Exchange Commission.

SELECTED FINANCIAL CONDITION DATA

(Unaudited)

As of

(in thousands)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

Assets

Cash and cash equivalents

$157,702

$131,972

$81,080

$72,040

$139,510

Securities available-for-sale, at fair value

341,392

313,336

308,852

314,114

297,006

Securities held-to-maturity, at amortized cost

6,741

6,907

7,082

8,131

8,503

Loans held for sale

13,498

8,173

6,507

4,855

4,589

Loans and leases receivable

3,113,128

3,050,079

2,985,414

2,910,864

2,850,261

Allowance for credit losses

(35,785)

(33,688)

(33,088)

(32,799)

(31,275)

Loans and leases receivable, net

3,077,343

3,016,391

2,952,326

2,878,065

2,818,986

Premises and equipment, net

5,227

5,478

6,381

6,268

6,190

Repossessed assets

317

247

Right-of-use assets

5,702

5,789

6,041

6,297

6,559

Bank-owned life insurance

57,210

56,767

56,351

55,948

55,536

Federal Home Loan Bank stock, at cost

11,616

12,775

11,901

13,326

12,042

Goodwill and other intangible assets

11,912

11,834

11,841

11,950

12,023

Derivatives

65,762

42,539

70,773

69,703

55,597

Accrued interest receivable and other assets

99,059

103,707

97,872

90,344

91,058

Total assets

$3,853,215

$3,715,724

$3,617,061

$3,531,358

$3,507,846

Liabilities and Stockholders’ Equity

Core deposits

$2,396,429

$2,382,730

$2,309,635

$2,297,843

$2,339,071

Wholesale deposits

710,711

587,217

575,548

457,563

457,708

Total deposits

3,107,140

2,969,947

2,885,183

2,755,406

2,796,779

Federal Home Loan Bank advances and other borrowings

320,049

349,109

327,855

381,718

330,916

Lease liabilities

7,926

8,054

8,361

8,664

8,954

Derivatives

57,068

45,399

61,821

61,133

51,949

Accrued interest payable and other liabilities

32,443

31,233

28,671

26,649

29,660

Total liabilities

3,524,626

3,403,742

3,311,891

3,233,570

3,218,258

Total stockholders’ equity

328,589

311,982

305,170

297,788

289,588

Total liabilities and stockholders’ equity

$3,853,215

$3,715,724

$3,617,061

$3,531,358

$3,507,846

STATEMENTS OF INCOME

(Unaudited)

As of and for the Three Months Ended

As of and for the Year Ended

(Dollars in thousands, except per share amounts)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

December 31, 2024

December 31, 2023

Total interest income

$60,110

$59,327

$57,910

$55,783

$54,762

$233,130

$194,928

Total interest expense

26,962

28,320

27,370

26,272

25,222

108,924

82,340

Net interest income

33,148

31,007

30,540

29,511

29,540

124,206

112,588

Provision for credit losses

2,701

2,087

1,713

2,326

2,573

8,827

8,182

Net interest income after provision for credit losses

30,447

28,920

28,827

27,185

26,967

115,379

104,406

Private wealth management service fees

3,426

3,264

3,461

3,111

2,933

13,262

11,425

Gain on sale of SBA loans

938

460

349

195

284

1,942

2,055

Service charges on deposits

960

920

951

940

848

3,771

3,131

Loan fees

914

812

826

847

869

3,399

3,363

Loss on sale of securities

—

(8)

—

(8)

(45)

Swap fees

588

460

157

198

438

1,403

2,964

Other non-interest income

1,179

1,148

1,681

1,474

1,722

5,482

8,415

Total non-interest income

8,005

7,064

7,425

6,757

7,094

29,251

31,308

Compensation

15,535

15,198

16,215

16,157

14,450

63,105

61,059

Occupancy

588

585

593

607

571

2,373

2,381

Professional fees

1,323

1,305

1,472

1,571

1,313

5,671

5,325

Data processing

1,647

1,045

1,182

1,018

936

4,892

3,826

Marketing

928

922

850

818

724

3,518

2,889

Equipment

301

333

335

345

340

1,314

1,340

Computer software

1,585

1,608

1,555

1,418

1,317

6,166

4,985

FDIC insurance

728

810

612

610

585

2,760

2,238

Other non-interest expense

517

1,301

1,065

798

1,352

3,681

4,532

Total non-interest expense

23,152

23,107

23,879

23,342

21,588

93,480

88,575

Income before income tax expense

15,300

12,877

12,373

10,600

12,473

51,150

47,139

Income tax expense

885

2,351

1,917

1,752

2,703

6,905

10,112

Net income

$14,415

$10,526

$10,456

$8,848

$9,770

$44,245

$37,027

Preferred stock dividends

219

218

219

875

Net income available to common shareholders

$14,196

$10,308

$10,237

$8,629

$9,551

$43,370

$36,152

Per common share:

Basic earnings

$1.71

$1.24

$1.23

$1.04

$1.15

$5.20

$4.33

Diluted earnings

1.71

1.24

1.23

1.04

1.15

5.20

4.33

Dividends declared

0.2500

0.2275

1.0000

0.9100

Book value

38.17

36.17

35.35

34.41

33.39

38.17

33.39

Tangible book value

36.74

34.74

33.92

32.97

31.94

36.74

31.94

Weighted-average common shares outstanding(1)

8,107,308

8,111,215

8,113,246

8,125,319

8,110,462

8,148,259

8,131,251

Weighted-average diluted common shares outstanding(1)

8,107,308

8,111,215

8,113,246

8,125,319

8,110,462

8,148,259

8,131,251

(1)

Excluding participating securities.

NET INTEREST INCOME ANALYSIS

(Unaudited)

For the Three Months Ended

(Dollars in thousands)

December 31, 2024

September 30, 2024

December 31, 2023

Average Balance

Interest

Average Yield/Rate(4)

Average Balance

Interest

Average Yield/Rate(4)

Average Balance

Interest

Average Yield/Rate(4)

Interest-earning assets

Commercial real estate and other mortgage loans(1)

$1,879,136

$30,580

6.51%

$1,805,020

$30,340

6.72%

$1,675,926

$27,359

6.53%

Commercial and industrial loans(1)

1,176,175

24,709

8.40

1,177,112

24,481

8.32

1,089,558

22,751

8.35

Consumer and other loans(1)

48,392

663

5.48

49,748

685

5.51

45,309

577

5.09

Total loans and leases receivable(1)

3,103,703

55,952

7.21

3,031,880

55,506

7.32

2,810,793

50,687

7.21

Mortgage-related securities(2)

290,471

2,858

3.94

269,842

2,662

3.95

221,708

2,061

3.72

Other investment securities(3)

45,174

231

2.05

51,446

315

2.45

67,444

541

3.21

FHLB stock

11,788

274

9.30

11,960

285

9.53

12,960

279

8.61

Short-term investments

65,254

795

4.87

40,406

559

5.53

86,580

1,193

5.51

Total interest-earning assets

3,516,390

60,110

6.84

3,405,534

59,327

6.97

3,199,485

54,761

6.85

Non-interest-earning assets

230,218

231,353

255,167

Total assets

$3,746,608

$3,636,887

$3,454,652

Interest-bearing liabilities

Transaction accounts

$928,428

8,161

3.52

$864,936

8,451

3.91

$785,480

7,657

3.90

Money market

833,501

7,571

3.63

850,590

8,780

4.13

734,903

7,145

3.89

Certificates of deposit

210,307

2,282

4.34

219,315

2,584

4.71

278,438

3,160

4.54

Wholesale deposits

594,578

6,106

4.11

531,472

5,475

4.12

450,880

4,682

4.15

Total interest-bearing deposits

2,566,814

24,120

3.76

2,466,313

25,290

4.10

2,249,701

22,644

4.03

FHLB advances

270,476

1,969

2.91

278,103

2,059

2.96

301,773

1,851

2.45

Other borrowings

54,672

874

6.39

50,642

971

7.67

49,394

727

5.89

Total interest-bearing liabilities

2,891,962

26,963

3.73

2,795,058

28,320

4.05

2,600,868

25,222

3.88

Non-interest-bearing demand deposit accounts

444,683

440,161

448,818

Other non-interest-bearing liabilities

90,555

91,520

119,833

Total liabilities

3,427,200

3,326,739

3,169,519

Stockholders’ equity

319,408

310,148

285,133

Total liabilities and stockholders’ equity

$3,746,608

$3,636,887

$3,454,652

Net interest income

$33,147

$31,007

$29,539

Interest rate spread

3.11%

2.92%

2.97%

Net interest-earning assets

$624,428

$610,476

$598,617

Net interest margin

3.77%

3.64%

3.69%

(1)

The average balances of loans and leases include non-accrual loans and leases and loans held for sale. Interest income related to non-accrual loans and leases is recognized when collected. Interest income includes net loan fees collected in lieu of interest.

(2)

Includes amortized cost basis of assets available for sale and held to maturity.

(3)

Yields on tax-exempt municipal obligations are not presented on a tax-equivalent basis in this table.

(4)

Represents annualized yields/rates.

NET INTEREST INCOME ANALYSIS

For the Year Ended December 31,

2024

2023

2022

Average Balance

Interest

Average Yield/ Rate

Average Balance

Interest

Average Yield/ Rate

Average Balance

Interest

Average Yield/ Rate

(Dollars in Thousands)

Interest-earning assets

Commercial real estate and other mortgage loans(1)

$1,793,041

$118,339

6.60%

$1,586,967

$98,370

6.20%

$1,484,239

$66,917

4.51%

Commercial and industrial loans(1)

1,153,955

95,782

8.30%

1,013,866

81,963

8.08%

771,056

46,575

6.04%

Consumer and other loans(1)

49,885

2,777

5.57%

47,018

2,316

4.93%

49,695

1,876

3.78%

Total loans and leases receivable(1)

2,996,881

216,898

7.24%

2,647,851

182,649

6.90%

2,304,990

115,368

5.01%

Mortgage-related securities(2)

266,098

10,405

3.91%

200,383

6,433

3.21%

173,495

3,486

2.01%

Other investment securities(3)

56,301

1,507

2.68%

62,921

1,770

2.81%

51,700

986

1.91%

FHLB and FRB stock

12,167

1,133

9.31%

15,162

1,231

8.12%

16,462

989

6.01%

Short-term investments

59,853

3,186

5.32%

54,311

2,845

5.24%

30,845

542

1.76%

Total interest-earning assets

3,391,300

233,129

6.87%

2,980,628

194,928

6.54%

2,577,492

121,371

4.71%

Non-interest-earning assets

234,973

231,521

175,424

Total assets

$3,626,273

$3,212,149

$2,752,916

Interest-bearing liabilities

Transaction accounts

$884,321

33,796

3.82%

$689,500

23,727

3.44%

$503,668

3,963

0.79%

Money market accounts

815,603

32,180

3.95%

681,336

22,129

3.25%

761,469

6,241

0.82%

Certificates of deposit

237,228

10,879

4.59%

273,387

11,209

4.10%

97,448

1,358

1.39%

Wholesale deposits

515,197

21,066

4.09%

346,285

14,353

4.14%

48,825

1,616

3.31%

Total interest-bearing deposits

2,452,349

97,921

3.99%

1,990,508

71,418

3.59%

1,411,410

13,178

0.93%

FHLB advances

282,437

7,719

2.73%

351,990

8,881

2.52%

414,191

7,024

1.70%

Other borrowings

51,072

3,284

6.43%

38,891

2,041

5.25%

43,818

2,243

5.12%

Junior subordinated notes(4)

—

2,429

504

20.75%

Total interest-bearing liabilities

2,785,858

108,924

3.91%

2,381,389

82,340

3.46%

1,871,848

22,949

1.23%

Non-interest-bearing demand deposit accounts

441,313

453,930

566,230

Other non-interest-bearing liabilities

92,708

102,668

65,611

Total liabilities

3,319,879

2,937,987

2,503,689

Stockholders’ equity

306,394

274,162

249,227

Total liabilities and stockholders’ equity

$3,626,273

$3,212,149

$2,752,916

Net interest income

$124,205

$112,588

$98,422

Interest rate spread

2.96%

3.08%

3.48%

Net interest-earning assets

$605,442

$599,239

$705,644

Net interest margin

3.66%

3.78%

3.82%

Average interest-earning assets to average interest-bearing liabilities

121.73%

125.16%

137.70%

Return on average assets(4)

1.20%

1.13%

1.46%

Return on average common equity(4)

14.73%

13.79%

16.79%

Average equity to average assets

8.45%

8.54%

9.05%

Non-interest expense to average assets(4)

2.58%

2.76%

2.89%

BETA ANALYSIS

For the Three Months Ended

(Unaudited)

December 31, 2024

September 30, 2024

Average Yield/Rate (3)

Increase (Decrease)

Total loans and leases receivable (a)

7.21%

7.32%

(0.11)%

Total interest-earning assets(b)

6.84%

6.97%

(0.13)%

Adjusted total loans and leases receivable (1)(c)

6.91%

7.20%

(0.29)%

Adjusted total interest-earning assets (1)(d)

6.57%

6.86%

(0.29)%

Total core deposits(e)

2.98%

3.34%

(0.36)%

Total bank funding(f)

3.18%

3.44%

(0.26)%

Net interest margin(g)

3.77%

3.64%

0.13%

Adjusted net interest margin(h)

3.48%

3.51%

(0.03)%

Effective fed funds rate (2)(i)

4.65%

5.27%

(0.62)%

Beta Calculations:

Total loans and leases receivable(a)/(i)

17.6%

Total interest-earning assets(b)/(i)

21.3%

Adjusted total loans and leases receivable (1)(c)/(i)

46.8%

Adjusted total interest-earning assets (1)(d)/(i)

46.8%

Total core deposits(e/i)

58.1%

Total bank funding(f)/(i)

41.9%

Net interest margin(g/i)

(21.0)%

Adjusted net interest margin(h/i)

4.8%

PROVISION FOR CREDIT LOSS COMPOSITION

(Unaudited)

For the Three Months Ended

For the Twelve Months Ended

(Dollars in thousands)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

December 31, 2024

December 31, 2023

Change due to qualitative factor changes

$(460)

$(444)

$496

$740

$(432)

$332

$33

Change due to quantitative factor changes

(598)

(330)

150

(199)

(260)

(977)

(1,453)

Charge-offs

1,132

1,619

1,583

921

724

5,255

1,781

Recoveries

(190)

(91)

(191)

(227)

(114)

(699)

(548)

Change in reserves on individually evaluated loans, net

2,579

757

(1,037)

629

2,008

2,928

4,330

Change due to loan growth, net

577

616

680

354

629

2,227

3,652

Change in unfunded commitment reserves

(339)

(40)

108

(239)

387

Total provision for credit losses

$2,701

$2,087

$1,713

$2,326

$2,572

$8,827

$8,182

PERFORMANCE RATIOS

For the Three Months Ended

For the Twelve Months Ended

(Unaudited)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

December 31, 2024

December 31, 2023

Return on average assets (annualized)

1.52%

1.13%

1.14%

0.98%

1.11%

1.20%

1.13%

Return on average tangible common equity (annualized)

19.21%

14.40%

14.73%

12.79%

14.64%

15.35%

14.45%

Efficiency ratio

56.94%

59.44%

62.75%

63.76%

58.34%

60.61%

60.99%

Interest rate spread

3.11%

2.92%

2.95%

2.88%

2.97%

2.96%

3.08%

Net interest margin

3.77%

3.64%

3.65%

3.58%

3.69%

3.66%

3.78%

Average interest-earning assets to average interest-bearing liabilities

121.59%

121.84%

121.37%

122.15%

123.02%

121.73%

125.16%

ASSET QUALITY RATIOS

(Unaudited)

As of

(Dollars in thousands)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

Non-accrual loans and leases

$28,367

$19,364

$18,999

$19,829

$20,597

Repossessed assets

317

247

Total non-performing assets

$28,418

$19,420

$19,053

$20,146

$20,844

Non-accrual loans and leases as a percent of total gross loans and leases

0.91%

0.63%

0.64%

0.68%

0.72%

Non-performing assets as a percent of total gross loans and leases plus repossessed assets

0.91%

0.64%

0.69%

0.73%

Non-performing assets as a percent of total assets

0.74%

0.52%

0.53%

0.57%

0.59%

Allowance for credit losses as a percent of total gross loans and leases

1.20%

1.16%

1.17%

1.19%

1.16%

Allowance for credit losses as a percent of non-accrual loans and leases

131.38%

183.38%

183.96%

174.64%

160.21%

NET CHARGE-OFFS (RECOVERIES)

(Unaudited)

For the Three Months Ended

For the Twelve Months Ended

(Dollars in thousands)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

December 31, 2024

December 31, 2023

Charge-offs

$1,132

$1,619

$1,583

$921

$724

$5,255

$1,781

Recoveries

(190)

(91)

(191)

(227)

(114)

(699)

(548)

Net charge-offs (recoveries)

$942

$1,528

$1,392

$694

$610

$4,556

$1,233

Net charge-offs (recoveries) as a percent of average gross loans and leases (annualized)

0.12%

0.20%

0.19%

0.10%

0.09%

0.15%

0.05%

CAPITAL RATIOS

As of and for the Three Months Ended

(Unaudited)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

Total capital to risk-weighted assets

12.08%

11.72%

11.45%

11.36%

11.19%

Tier I capital to risk-weighted assets

9.45%

9.11%

8.99%

8.86%

8.74%

Common equity tier I capital to risk- weighted assets

9.10%

8.76%

8.64%

8.51%

8.38%

Tier I capital to adjusted assets

8.78%

8.68%

8.51%

8.45%

8.43%

Tangible common equity to tangible assets

7.93%

7.78%

7.80%

7.78%

7.60%

LOAN AND LEASE RECEIVABLE COMPOSITION

(Unaudited)

As of

(in thousands)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

Commercial real estate:

Commercial real estate - owner occupied

$273,397

$259,532

$258,636

$263,748

$256,479

Commercial real estate - non-owner occupied

845,298

768,195

777,704

792,858

773,494

Construction

221,086

266,762

229,181

202,382

193,080

Multi-family

530,853

494,954

470,176

453,321

450,529

1-4 family

46,496

39,933

39,680

27,482

26,289

Total commercial real estate

1,917,130

1,829,376

1,775,377

1,739,791

1,699,871

Commercial and industrial

1,151,720

1,174,295

1,161,711

1,120,779

1,105,835

Consumer and other

45,000

46,610

48,145

50,020

44,312

Total gross loans and leases receivable

3,113,850

3,050,281

2,985,233

2,910,590

2,850,018

Less:

Allowance for credit losses

35,785

33,688

33,088

32,799

31,275

Deferred loan fees

722

202

(181)

(274)

(243)

Loans and leases receivable, net

$3,077,343

$3,016,391

$2,952,326

$2,878,065

$2,818,986

DEPOSIT COMPOSITION

(Unaudited)

As of

(in thousands)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

Non-interest-bearing transaction accounts

$436,111

$428,012

$406,804

$400,267

$445,376

Interest-bearing transaction accounts

965,637

930,252

841,146

818,080

895,319

Money market accounts

809,695

817,129

837,569

813,467

711,245

Certificates of deposit

184,986

207,337

224,116

266,029

287,131

Wholesale deposits

710,711

587,217

575,548

457,563

457,708

Total deposits

$3,107,140

$2,969,947

$2,885,183

$2,755,406

$2,796,779

Uninsured deposits

$980,278

$1,088,496

$1,011,977

$995,428

$994,687

Less: uninsured deposits collateralized by pledged assets

6,864

10,755

34,810

16,622

17,051

Total uninsured, net of collateralized deposits

973,414

1,077,741

977,167

978,806

977,636

% of total deposits

31.3%

36.3%

33.9%

35.5%

35.0%

SOURCES OF LIQUIDITY

(Unaudited)

As of

(in thousands)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

Short-term investments

$128,207

$86,670

$54,680

$46,984

$107,162

Collateral value of unencumbered pledged loans

444,453

397,852

401,602

340,639

367,471

Market value of unencumbered securities

310,125

279,191

289,104

288,965

259,791

Readily accessible liquidity

882,785

763,713

745,386

676,588

734,424

Fed fund lines

45,000

Excess brokered CD capacity(1)

981,463

1,102,767

1,051,678

1,166,661

1,231,791

Total liquidity

$1,909,248

$1,911,480

$1,842,064

$1,888,249

$2,011,215

Total uninsured, net of collateralized deposits

973,414

1,077,741

977,167

978,806

977,636

Bank internal policy limits brokered CDs to 50% of total bank funding when combined with FHLB advances.

PRIVATE WEALTH OFF-BALANCE SHEET COMPOSITION

(Unaudited)

As of

(in thousands)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

Trust assets under management

$3,160,449

$3,145,789

$3,008,897

$3,080,951

$2,898,516

Trust assets under administration

258,255

252,152

239,766

239,249

223,013

Total trust assets

$3,418,704

$3,397,941

$3,248,663

$3,320,200

$3,121,529

NON-GAAP RECONCILIATIONS

Certain financial information provided in this release is determined by methods other than in accordance with generally accepted accounting principles (United States) (“GAAP”). Although the Company’s management believes that these non-GAAP financial measures provide a greater understanding of its business, these measures are not necessarily comparable to similar measures that may be presented by other companies.

TANGIBLE BOOK VALUE

“Tangible book value per share” is a non-GAAP measure representing tangible common equity divided by total common shares outstanding. “Tangible common equity” itself is a non-GAAP measure representing common stockholders’ equity reduced by intangible assets, if any. The Company’s management believes that this measure is important to many investors in the marketplace who are interested in period-to-period changes in book value per common share exclusive of changes in intangible assets. The information provided below reconciles tangible book value per share and tangible common equity to their most comparable GAAP measures.

(Unaudited)

As of

(Dollars in thousands, except per share amounts)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

Common stockholders’ equity

$316,597

$299,990

$293,178

$285,796

$277,596

Less: Goodwill and other intangible assets

(11,912)

(11,834)

(11,841)

(11,950)

(12,023)

Tangible common equity

$304,685

$288,156

$281,337

$273,846

$265,573

Common shares outstanding

8,293,928

8,295,017

8,294,589

8,306,573

8,314,778

Book value per share

$38.17

$36.17

$35.35

$34.41

$33.39

Tangible book value per share

36.74

34.74

33.92

32.97

31.94

TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS

“Tangible common equity to tangible assets” (“TCE”) is defined as the ratio of common stockholders’ equity reduced by intangible assets, if any, divided by total assets reduced by intangible assets, if any. Adjusted TCE ratio is defined as TCE adjusted for net fair value adjustments of financial assets and liabilities. For more information on fair value adjustments please refer to Note 19 - Fair Value Disclosures in the annual report on Form 10-K for the year ended December 31, 2023. The Company’s management believes that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. The information below reconciles tangible common equity and tangible assets to their most comparable GAAP measures.

As of

(Dollars in thousands)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

Common stockholders’ equity

$316,597

$299,990

$293,178

$285,796

$277,596

Less: Goodwill and other intangible assets

(11,912)

(11,834)

(11,841)

(11,950)

(12,023)

Tangible common equity (a)

$304,685

$288,156

$281,337

$273,846

$265,573

Total assets

$3,853,215

$3,715,724

$3,617,061

$3,531,358

$3,507,846

Less: Goodwill and other intangible assets

(11,912)

(11,834)

(11,841)

(11,950)

(12,023)

Tangible assets (b)

$3,841,303

$3,703,890

$3,605,220

$3,519,408

$3,495,823

Tangible common equity to tangible assets

7.93%

7.78%

7.80%

7.78%

7.60%

Fair Value Adjustments:

Financial assets - MTM (c)

$(26,580)

$(17,615)

$(17,432)

$(29,019)

$(29,136)

Financial liabilities - MTM (d)

$5,946

$8,358

$9,032

$12,560

$11,945

Net MTM, after-tax e = (c-d)*(1-21%)

$(16,301)

$(7,313)

$(6,636)

$(13,003)

$(13,581)

Adjusted tangible equity f = (a-e)

$288,384

$280,843

$274,701

$260,843

$251,992

Adjusted tangible assets g = (b-c)

$3,814,723

$3,686,275

$3,587,788

$3,490,389

$3,466,687

Adjusted TCE ratio (f/g)

7.56%

7.62%

7.66%

7.47%

7.27%

EFFICIENCY RATIO & PRE-TAX, PRE-PROVISION ADJUSTED EARNINGS

“Efficiency ratio” is a non-GAAP measure representing non-interest expense excluding the effects of the SBA recourse provision, impairment of tax credit investments, losses or gains on repossessed assets, amortization of other intangible assets and other discrete items, if any, divided by operating revenue, which is equal to net interest income plus non-interest income less realized gains or losses on securities, if any. “Pre-tax, pre-provision adjusted earnings” is defined as operating revenue less operating expense. In the judgment of the Company’s management, the adjustments made to non-interest expense and non-interest income allow investors and analysts to better assess the Company’s operating expenses in relation to its core operating revenue by removing the volatility that is associated with certain one-time items and other discrete items. The information provided below reconciles the efficiency ratio and pre-tax, pre-provision adjusted earnings to its most comparable GAAP measure.

(Unaudited)

For the Three Months Ended

For the Twelve Months Ended

(Dollars in thousands)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

December 31, 2024

December 31, 2023

Total non-interest expense

$23,152

$23,107

$23,879

$23,342

$21,588

$93,480

$88,575

Less:

Net loss on repossessed assets

168

Impairment of tax credit investments

400

SBA recourse (benefit) provision

(687)

466

(9)

126

210

(104)

775

Total operating expense (a)

$23,434

$22,630

$23,823

$23,130

$21,374

$93,016

$87,787

Net interest income

$33,148

$31,007

$30,540

$29,511

$29,540

$124,206

$112,588

Total non-interest income

8,005

7,064

7,425

6,757

7,094

29,251

31,308

Less:

Net loss on sale of securities

—

(8)

—

(8)

(45)

Adjusted non-interest income

8,005

7,064

7,425

6,765

7,094

29,259

31,353

Total operating revenue (b)

$41,153

$38,071

$37,965

$36,276

$36,634

$153,465

$143,941

Efficiency ratio

56.94%

59.44%

62.75%

63.76%

58.34%

60.61%

60.99%

Pre-tax, pre-provision adjusted earnings (b - a)

$17,719

$15,441

$14,142

$13,146

$15,260

$60,449

$56,154

Average total assets

$3,746,608

$3,636,887

$3,592,215

$3,527,941

$3,454,652

$3,626,273

$3,212,149

ADJUSTED NET INTEREST MARGIN

“Adjusted Net Interest Margin” is a non-GAAP measure representing net interest income excluding the fees in lieu of interest and other recurring, but volatile, components of net interest margin divided by average interest-earning assets less other recurring, but volatile, components of average interest-earning assets. Fees in lieu of interest are defined as prepayment fees, asset-based loan fees, non-accrual interest, and loan fee amortization. In the judgment of the Company’s management, the adjustments made to net interest income allow investors and analysts to better assess the Company’s net interest income in relation to its core client-facing loan and deposit rate changes by removing the volatility that is associated with these recurring but volatile components. The information provided below reconciles the net interest margin to its most comparable GAAP measure.

(Unaudited)

For the Three Months Ended

For the Twelve Months Ended

(Dollars in thousands)

December 31, 2024

September 30, 2024

June 30, 2024

March 31, 2024

December 31, 2023

December 31, 2024

December 31, 2023

Interest income

$60,110

$59,327

$57,910

$55,783

$54,762

$233,130

$194,928

Interest expense

26,962

28,320

27,370

26,272

25,222

108,924

82,340

Net interest income (a)

33,148

31,007

30,540

29,511

29,540

124,206

112,588

Less:

Fees in lieu of interest

2,359

1,002

1,306

849

1,121

5,516

3,452

FRB interest income and FHLB dividend income

1,062

841

959

1,436

1,466

4,298

4,056

Adjusted net interest income (b)

$29,727

$29,164

$28,275

$27,226

$26,953

$114,392

$105,080

Average interest-earning assets (c)

$3,516,390

$3,405,534

$3,347,027

$3,294,717

$3,199,485

$3,391,300

$2,980,628

Less:

Average FRB cash and FHLB stock

76,576

52,603

61,082

97,036

99,118

71,784

69,014

Average non-accrual loans and leases

19,077

18,954

19,807

20,540

18,602

19,589

10,450

Adjusted average interest-earning assets (d)

$3,420,737

$3,333,977

$3,266,138

$3,177,141

$3,081,765

$3,299,927

$2,901,164

Net interest margin (a / c)

3.77%

3.64%

3.65%

3.58%

3.69%

3.66%

3.78%

Adjusted net interest margin (b / d)

3.48%

3.50%

3.46%

3.43%

3.50%

3.47%

3.62%

View source version on businesswire.com: https://www.businesswire.com/news/home/20250130887550/en/

First Business Financial Services, Inc. Brian D. Spielmann Chief Financial Officer 608-232-5977 bspielmann@firstbusiness.bank

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FBIZ First Business Financial Services Inc