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

-- Record operating revenue, strong net interest margin, and positive operating leverage drive record pre-tax, pre-provision earnings --

MADISON, Wis.--(BUSINESS WIRE)-- 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		5		11		4		168		13
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		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%		1.16%		1.20%		1.16%
Non-performing assets as a percent of total assets		0.74%		0.52%		0.59%		0.74%		0.59%

1. 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.
2. 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.

__________________________________________

1. 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		51		56		54		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		219		219		875		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		0.2500		0.2500		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)		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)		32		108		17		(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		51		56		54		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%		0.64%		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		45,000		45,000		45,000		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

1. 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		5		11		65		86		4		168		13
Impairment of tax credit investments		400		0		0		0		0		400		0
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

Source: First Business Financial Services, Inc.