Business Wire | Jul 29, 2021 04:02PM EDT

First Business Bank Reports Strong Second Quarter 2021 Net Income of $8.2 Million

Jul. 29, 2021

MADISON, Wis.--(BUSINESS WIRE)--Jul. 29, 2021--First Business Financial Services, Inc. (the "Company", the "Bank", or "First Business Bank") (Nasdaq:FBIZ) reported net income of $8.2 million, or $0.95 diluted earnings per share, in the second quarter 2021. This compares to record net income of $9.7 million or $1.12 in the first quarter of 2021, and $3.3 million or $0.38 in the second quarter of 2020.

"First Business Bank again delivered strong financial performance in the second quarter, highlighted by continued double-digit annualized loan growth, further improvement in asset quality metrics, and diversified fee income," President and Chief Executive Officer Corey Chambas said. "Our active management of asset quality led to another significant reduction in non-performing assets as well as a provision benefit that positively impacted the bottom-line. Our NPAs as a percentage of total assets are at the lowest level since 2006 and, based on what we are seeing today, we believe there will be additional reductions in NPAs and release of reserves in the second half of 2021. Therefore, at this time, we believe there will be no meaningful provision for the second half of 2021, even though we expect double-digit organic loan growth to continue."

Quarterly Highlights

* Exceptional Loan Growth. Loans, excluding Paycheck Protection Program ("PPP") loans, grew $55.3 million, or 11.2% annualized, from the first quarter of 2021 and $286.0 million, or 16.5%, from the second quarter of 2020, as we continued to expand specialized lending offerings for commercial clients and focus on business development across products and geographies. This marks the fourth consecutive quarter of 10% or greater annualized loan growth, excluding PPP loans. * Positive Asset Quality Trends. Non-performing assets ("NPAs") declined 39.0% to $11.6 million, marking the third consecutive quarterly reduction of more than 25%. NPAs made up 0.42% of total assets, excluding PPP loans, improving by 39 and 77 basis points from March 31, 2021 and June 30, 2020, respectively. * Diversified Fee Income. Second quarter 2021 non-interest income continued to reflect the strength and diversity of our fee income sources and contributed meaningfully to top-line revenue. Private wealth management generated record revenue of $2.7 million on $2.564 billion in assets under management and administration for the period, while gains on the sale of Small Business Administration ("SBA") loans grew to $1.2 million. * Robust Core Earnings and Top-Line Revenue. Our improved asset quality metrics, net interest margin stability, organic loan growth, and fee income generation produced strong net income of $8.2 million in the second quarter, up $4.9 million, or 147.8%, compared to the same period in 2020. Top-line revenue of $28.0 million was up $2.8 million, or 11.0% from the same period in 2020. * PPP Update. Our participation in PPP has been a tremendous benefit to our clients. As of June 30, 2021, the Company had $123.8 million in gross PPP loans outstanding and deferred processing fees outstanding of $3.1 million to be recognized into income in future quarters. During the quarter, $2.5 million of processing fees were recognized.

Quarterly Financial Results

(Unaudited) As of and for the Three Months Ended As of and for the Six Months Ended

(Dollars inthousands, June 30, March 31, June 30, June 30, June 30,except per 2021 2021 2020 2021 2020share amounts)

Net interest $ 21,652 $ 20,863 $ 18,888 $ 42,515 $ 35,937 income

Adjustednon-interest 6,292 7,195 6,319 13,487 12,737 income ^(1)

Operating 27,944 28,058 25,207 56,002 48,674 revenue ^(1)

Operating 17,932 17,449 15,431 35,383 31,327 expense ^(1)

Pre-tax,pre-provision 10,012 10,609 9,776 20,619 17,347 adjustedearnings ^(1)

Less:

Provision forloan and lease (958) (2,068) 5,469 (3,026) 8,651 losses

Net (gain)loss on (1) 3 348 1 450 foreclosedproperties

Amortizationof other 8 8 9 15 18 intangibleassets

SBA recourseprovision 245 (130) (30) 115 (5) (benefit)

Impairment ontax credit - - 1,841 - 1,954 investments

Loss on earlyextinguishment - - 744 - 744 of debt

Add:

Net gain(loss) on sale 29 - - 29 (4) of securities

Income beforeincome tax 10,747 12,796 1,395 23,543 5,531 expense

Income taxexpense 2,512 3,065 (1,928) 5,577 (1,070) (benefit)

Net income $ 8,235 $ 9,731 $ 3,323 $ 17,966 $ 6,601

Earnings per $ 0.95 $ 1.12 $ 0.38 $ 2.08 $ 0.77 share, diluted

Book value per $ 25.70 $ 24.83 $ 23.04 $ 25.70 $ 23.04 share

Tangible bookvalue per $ 24.28 $ 23.43 $ 21.65 $ 24.28 $ 21.65 share ^(1)



Net interest 3.49 % 3.44 % 3.34 % 3.46 % 3.39 %margin

Adjusted netinterest 3.20 % 3.20 % 3.32 % 3.20 % 3.32 %margin ^(1)

Efficiency 64.17 % 62.19 % 61.22 % 63.18 % 64.36 %ratio ^(1)

Return on 1.26 % 1.51 % 0.55 % 1.38 % 0.58 %average assets

Pre-tax,pre-provisionadjusted 1.53 % 1.65 % 1.61 % 1.59 % 1.53 %return onaverage assets^(1)

Return on 15.09 % 18.48 % 6.70 % 16.75 % 6.92 %average equity



Period-endloans and $ 2,143,561 $ 2,235,112 $ 2,056,863 $ 2,143,561 $ 2,056,863 leasesreceivable

Period-endloans andleases $ 2,022,839 $ 1,967,545 $ 1,736,827 $ 2,022,839 $ 1,736,827 receivable,excluding netPPP loans

Average loansand leases $ 2,223,353 $ 2,182,958 $ 1,983,121 $ 2,203,267 $ 1,858,432 receivable

Period-endin-market $ 2,016,215 $ 1,737,226 $ 1,620,616 $ 2,016,215 $ 1,620,616 deposits

Averagein-market $ 1,735,393 $ 1,722,107 $ 1,570,552 $ 1,728,787 $ 1,468,348 deposits

Allowance forloan and lease $ 25,675 $ 28,982 $ 27,464 $ 25,675 $ 27,464 losses

Non-performing $ 11,601 $ 19,023 $ 25,484 $ 11,601 $ 25,484 assets

Allowance forloan and leaselosses as apercent of 1.20 % 1.29 % 1.33 % 1.20 % 1.33 %total grossloans andleases

Allowance forloan and leaselosses as apercent oftotal gross 1.27 % 1.47 % 1.57 % 1.27 % 1.57 %loans andleases,excluding netPPP loans

Non-performingassets as a 0.40 % 0.73 % 1.03 % 0.40 % 1.03 %percent oftotal assets

Non-performingassets as apercent of 0.42 % 0.81 % 1.19 % 0.42 % 1.19 %total assets,excluding netPPP loans

(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.

Second Quarter 2021 Compared to First Quarter 2021

Net interest income increased $789,000, or 3.8%, to $21.7 million.

* Net interest income reflected increases in average loans and leases, as well as in fees received in lieu of interest. Fees in lieu of interest, which can vary from quarter to quarter based on client-driven activity, totaled $3.5 million, compared to $3.1 million. Excluding fees in lieu of interest, net interest income increased $338,000, or 1.9%. * Average loans and leases receivable, excluding net PPP loans in both periods of comparison, increased $53.5 million, or 11.0% annualized, to $1.994 billion. * The yield on average interest-earning assets increased 3 basis points to 3.96% from 3.93%. Excluding average net PPP loans, the PPP loan interest income of $566,000, and the aforementioned fees in lieu of interest, the yield earned on average interest-earning assets decreased 5 basis points to 3.64% from 3.69%. The rate paid for average total bank funding decreased one basis point to 0.39% from 0.40%. Total bank funding is defined as total deposits plus Federal Home Loan Bank ("FHLB") advances, and Federal Reserve Discount Window advances. * Net interest margin increased five basis points to 3.49% from 3.44%. Adjusted net interest margin, excluding fees in lieu of interest and other recurring but volatile components of net interest margin, was 3.20%, unchanged from the linked quarter.

The Company reported a net benefit to provision for loan and lease losses of $1.0 million, compared to a net benefit of $2.1 million in the first quarter.

* The decrease in the provision for loan and lease losses was primarily due to a $1.7 million reduction in the general reserve from improving historical loss rates and a $1.5 million decrease in specific reserves. These decreases were partially offset by $2.3 million in net charge-offs and a $498,000 increase in the general reserve due to loan growth. Net charge-offs for the quarter principally consisted of a $2.2 million charge-off of one previously identified and partially reserved for legacy SBA loan.

Non-interest income decreased $874,000, or 12.1%, to $6.3 million.

* Private wealth management fee income increased $337,000, or 14.0% to $2.7 million. Private wealth and trust assets under management and administration measured a record $2.564 billion at June 30, 2021, up $177.8 million, or 29.8% annualized, primarily due to growth from new and existing clients and increased equity market values. * Gains on sale of SBA loans increased $125,000, or 11.6%, to $1.2 million. Management believes the gain on sale of traditional SBA loans (i.e., SBA loans unrelated to PPP loans), while variable based on timing of closings, will continue to increase annually at a measured pace. * During the second quarter there was no commercial loan interest rate swap fee income, compared to total swap fees of $684,000 in the first quarter. Swap fee income can vary from period to period based on client demand and the interest rate environment in any given quarter. * Other fee income decreased $729,000 to $835,000, compared to $1.6 million in the first quarter, which reflected higher than typical returns in the first three months of 2021 from the Company's investments in mezzanine funds.

Non-interest expense increased $854,000, or 4.9%, to $18.2 million. Operating expense increased $483,000, or 2.8%, to $17.9 million.

* Compensation expense increased $598,000, or 4.7%, to $13.3 million, primarily due to a $415,000 true up of the Company's performance-based incentive compensation accrual to reflect the strong earnings results through the first half of 2021. * SBA recourse provision for estimated losses in the outstanding guaranteed portion of SBA loans sold totaled $245,000, compared to a net benefit of $130,000 in the linked quarter. * Other non-interest expense decreased $228,000 to $176,000. The decrease was principally due to a reduction in the credit valuation adjustment ("CVA") related to the commercial loan interest rate swap program and a reduction in the loan servicing valuation adjustment related to the Bank's SBA portfolio.

Total period-end loans and leases receivable, excluding net PPP loans in both periods of comparison, increased $55.3 million, or 11.2% annualized, to $2.023 billion.

* Commercial and industrial ("C&I") loans, excluding net PPP loans, increased $58.0 million, or 44.8% annualized, led by First Business Bank's specialized lending commercial business lines. While we believe this level of above average growth is not sustainable, management believes the timely prior-period investments in producers for specialized lending, such as dealer floorplan financing, small-ticket equipment vendor financing, and accounts receivable financing, have positioned C&I lending to increase throughout the current economic cycle. * Commercial real estate ("CRE") loans were unchanged at $1.392 billion, as growth from non-owner occupied CRE was offset by payoffs and paydowns in the remaining categories.

Total period-end in-market deposits increased $279.0 million to $2.016 billion, or 64.2% annualized, and the average rate paid decreased one basis point to 0.15%.

* A significant portion of the large increase in deposits was due to the proceeds of a commercial client's business sale late in the second quarter, the majority of which was moved off the balance sheet in early July. Excluding this temporary deposit, total period-end in-market deposits increased $54.0 million to $1.791 billion, or 12.4% annualized. * Excluding the temporary deposit described above, non-interest bearing transaction and money market accounts increased $52.4 million and $53.1 million, respectively, while interest-bearing transaction accounts and certificates of deposits decreased $49.8 million and $1.7 million, respectively.

Period-end wholesale funding, including FHLB advances, Federal Reserve Discount Window advances, brokered deposit, and deposits gathered through internet deposit listing services, decreased $49.0 million to $532.3 million.

* Wholesale deposits decreased $21.0 million to $144.5 million, due to contractual runoff. The average rate paid on wholesale deposits decreased 2 basis points to 0.74% and the weighted average original maturity of brokered certificates of deposit decreased to 3.5 years from 3.9 years. * FHLB advances decreased $28.0 million to $387.8 million. The average rate paid on FHLB advances decreased nine basis points to 1.27% and the weighted average original maturity increased to 6.1 years from 5.7 years.

Non-performing assets decreased $7.4 million, or 39.0%, to $11.6 million, or 0.40% of total assets, compared to $19.0 million, or 0.73% of total assets. The reduction in non-performing assets was principally due to loan payoffs and charge-offs. Excluding net PPP loans, non-performing assets were 0.42% of total assets as of June 30, 2021, compared to 0.81% as of March 31, 2021.

The allowance for loan and lease losses decreased $3.3 million, or 11.4%, as an increase in the general reserve from loan growth was more than offset by a decrease in the historical loss rate and reduction in specific reserves.

* The allowance for loan and lease losses as a percent of total gross loans and leases was 1.20% compared to 1.29% as of March 31, 2021. * Excluding net PPP loans, the allowance for loan and leases losses as a percent of total gross loans and leases was 1.27%, compared to 1.47% as of March 31, 2021.

Second Quarter 2021 Compared to Second Quarter 2020

Net interest income increased $2.8 million, or 14.6%, to $21.7 million.

* The increase in net interest income reflects an increase in average gross loans and leases and an increase in fees collected in lieu of interest. Fees in lieu of interest, which can vary from quarter to quarter, totaled $3.5 million compared to $2.3 million. Excluding fees in lieu of interest and interest income from PPP loans, net interest income increased $1.5 million, or 9.7%. Excluding net PPP loans, average gross loans and leases increased $263.9 million, or 15.3%. * The yield on average interest-earning assets measured 3.96% compared to 4.03%. Excluding fees collected in lieu of interest, PPP loan interest income and net PPP loans, the yield on average interest-earning assets was 3.64%, compared to 3.96%. The decline in yields was primarily due to the decrease in LIBOR and Prime rates and related impact on variable-rate loans, in addition to the renewal of fixed-rate loans and reinvestment of security cash flows at historically low interest rates. The rate paid for average total bank funding decreased 22 basis points to 0.39% from 0.61%. * Net interest margin increased 15 basis points to 3.49% from 3.34%. Adjusted net interest margin decreased 12 basis points to 3.20% from 3.32%.

The Company reported a net benefit to provision for loan and lease losses of $1.0 million, compared to a $5.5 million expense in the second quarter of 2020.

Non-interest income was $6.3 million for both periods.

* Gains on sale of SBA loans increased $629,000, or 109.6%, to $1.2 million as a result of the Company's rebuilt SBA business line. * Private wealth management fee income increased $620,000, or 29.2%, to $2.7 million. Private wealth and trust assets under management and administration measured a record $2.564 billion at June 30, 2021, up $691.0 million, or 36.9%. * During the second quarter there was no commercial loan interest rate swap fee income, compared to total swap fees of $1.7 million for the year-ago quarter. * Other fee income increased $149,000, or 21.7%, to $835,000 compared to $686,000.

Non-interest expense decreased $159,000, or 0.9%, to $18.2 million. Operating expense increased $2.5 million, or 16.2%, to $17.9 million.

* Compensation expense increased $2.5 million, or 22.8%, to $13.3 million. The increase reflects new hires and an increase in the Company's performance-based incentive compensation accrual based on estimated full year 2021 results, compared to a second quarter 2020 reduction to the same accrual due to COVID-19 pandemic uncertainty. Average full-time equivalent employees increased to 312, up 11.0% for the quarter ended June 30, 2021, compared to 281 for the quarter ended June 30, 2020. * In the second quarter of 2020, the Company recognized $1.7 million in expense due to the impairment of federal historic tax credit investments, which corresponded with the recognition of a $2.5 million in tax credits during the quarter. No federal historic tax credit investments were recognized in the second quarter of 2021. * Other non-interest expense decreased $369,000, or 67.7%, to $176,000. The decrease was principally due to a reduction in the credit valuation adjustment ("CVA") related to the commercial loan interest rate swap program and a decrease in business travel expense.

Total period-end loans and leases receivable, excluding net PPP loans in both periods of comparison, increased $286.0 million, or 16.5%, to $2.023 billion.

* C&I loans, excluding net PPP loans, increased $113.5 million, or 24.6%. * CRE loans increased $169.8 million, or 13.9%, driven by an increase across most CRE categories with the majority in the non-owner occupied and multi-family portfolios.

Total period-end in-market deposits increased $395.6 million, or 24.4%, to $2.016 billion and the average rate paid decreased 18 basis points to 0.15%.

* Excluding the temporary deposit from a client's business sale, total period-end in-market deposits increased $170.6 million to $1.791 billion, or 10.5%. * Excluding the temporary deposit described above, transaction and money market accounts increased $214.0 million and $28.4 million, respectively, while certificates of deposits decreased $71.8 million.

Period-end wholesale funding increased $31.5 million to $532.3 million.

* Wholesale deposits increased $54.7 million to $144.5 million mainly due to adding non-maturity brokered deposits at a favorable rate compared to alternative funding sources. Excluding these deposits, wholesale deposits decreased as the existing portfolio runoff was replaced by in-market deposits and lower cost FHLB advances to match-fund long-term fixed rate loans and fund loan growth. The average rate paid on brokered certificates of deposit decreased 168 basis points to 0.74% and the weighted average original maturity decreased to 3.5 years from 4.6 years. * FHLB advances decreased $23.2 million to $387.8 million. The average rate paid on FHLB advances increased 2 basis points to 1.27% and the weighted average original maturity increased to 6.1 years from 5.3 years.

Non-performing assets decreased to $11.6 million, or 0.40% of total assets, compared to $25.5 million, or 1.03% of total assets. Excluding net PPP loans, non-performing assets were 0.42% of total assets as of June 30, 2021 compared to 1.19% one year prior.

The allowance for loan and lease losses decreased $1.8 million to $25.7 million compared to $27.5 million.

* The allowance for loan and lease losses as a percent of total gross loans and leases was 1.20% compared to 1.33%. * Excluding net PPP loans, the allowance for loan and leases losses as a percent of total gross loans and leases was 1.27% as of June 30, 2021 compared to 1.57% one year prior.

COVID-19 Update

On March 11, 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic as a result of the global spread of the coronavirus illness. In response to the outbreak, federal and state authorities in the U.S. introduced various measures to try to limit or slow the spread of the virus, including travel restrictions, nonessential business closures, stay-at-home orders, and strict social distancing. The Company activated its Pandemic Preparedness Plan to protect the health of employees and clients, which included temporarily limiting lobby hours and transitioning the vast majority of the Company's workforce to remote work. The Company did not incur any significant disruptions to its business activities during this time of transition and extended remote work.

The second half of 2020 saw improvements in economic trends, but continued waves of new cases of COVID-19 created continued uncertainty in the economic environment. However, at the end of the fourth quarter of 2020 and into the first quarter of 2021, the rollout of new vaccines and the ratification of two additional stimulus laws resulted in lower infection rates and significant improvement in the outlook of the economy. In the second quarter of 2021, the Company communicated return to office plans to employees. Based on the national and local guidelines, the Company developed a phased-in approach for returning to the office. Under this phased-in approach, offices opened in early June 2021. The return to office included enhanced safety protocols and processes to provide the best working environment possible for employees.

Paycheck Protection Program

As of June 30, 2021, the Company had $123.8 million in gross PPP loans outstanding and deferred processing fees outstanding of $3.1 million. The processing fees are deferred and recognized over the contractual life of the loan, or accelerated at forgiveness, as an adjustment of yield using the interest method. During the three and six months ended June 30, 2021, the Company recognized $2.5 million and $4.8 million, respectively, of processing fees in loans and leases interest income in the unaudited Consolidated Statements of Income. The SBA provides a guaranty to the lender of 100% of principal and interest, unless the lender violated an obligation under the agreement. Since loan losses are expected to immaterial, if at all due to the government guarantee, management excluded the PPP loans from the allowance for loan and lease losses calculation. These short-term loans were funded primarily through a combination of excess cash held at the Federal Reserve and from an increase in in-market deposits.

Deferral Requests

The Company provided loan modifications deferring payments for certain borrowers impacted by COVID-19 who were current in their payments at the inception of the Company's loan modification program. Excluding gross PPP loans, as of June 30, 2021, the Company had five deferred loans outstanding of $20.5 million, or 1.0% of gross loans and leases, compared to $323.2 million, or 18.6% of gross loans and leases as of June 30, 2020. Of the $20.5 million of deferred loans outstanding, $19.8 million relates to two hospitality credits that went on deferral during the second quarter of 2021 and are both accruing and current on payments. Management believes there will be no losses associated with these two credits.

The following tables represent a breakdown of the deferred loan balances by industry segment and collateral type:

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(1) 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.

Second Quarter 2021 Compared to First Quarter 2021

Net interest income increased $789,000, or 3.8%, to $21.7 million.

* Net interest income reflected increases in average loans and leases, as well as in fees received in lieu of interest. Fees in lieu of interest, which can vary from quarter to quarter based on client-driven activity, totaled $3.5 million, compared to $3.1 million. Excluding fees in lieu of interest, net interest income increased $338,000, or 1.9%. * Average loans and leases receivable, excluding net PPP loans in both periods of comparison, increased $53.5 million, or 11.0% annualized, to $1.994 billion. * The yield on average interest-earning assets increased 3 basis points to 3.96% from 3.93%. Excluding average net PPP loans, the PPP loan interest income of $566,000, and the aforementioned fees in lieu of interest, the yield earned on average interest-earning assets decreased 5 basis points to 3.64% from 3.69%. The rate paid for average total bank funding decreased one basis point to 0.39% from 0.40%. Total bank funding is defined as total deposits plus Federal Home Loan Bank ("FHLB") advances, and Federal Reserve Discount Window advances. * Net interest margin increased five basis points to 3.49% from 3.44%. Adjusted net interest margin, excluding fees in lieu of interest and other recurring but volatile components of net interest margin, was 3.20%, unchanged from the linked quarter.

The Company reported a net benefit to provision for loan and lease losses of $1.0 million, compared to a net benefit of $2.1 million in the first quarter.

* The decrease in the provision for loan and lease losses was primarily due to a $1.7 million reduction in the general reserve from improving historical loss rates and a $1.5 million decrease in specific reserves. These decreases were partially offset by $2.3 million in net charge-offs and a $498,000 increase in the general reserve due to loan growth. Net charge-offs for the quarter principally consisted of a $2.2 million charge-off of one previously identified and partially reserved for legacy SBA loan.

Non-interest income decreased $874,000, or 12.1%, to $6.3 million.

* Private wealth management fee income increased $337,000, or 14.0% to $2.7 million. Private wealth and trust assets under management and administration measured a record $2.564 billion at June 30, 2021, up $177.8 million, or 29.8% annualized, primarily due to growth from new and existing clients and increased equity market values. * Gains on sale of SBA loans increased $125,000, or 11.6%, to $1.2 million. Management believes the gain on sale of traditional SBA loans (i.e., SBA loans unrelated to PPP loans), while variable based on timing of closings, will continue to increase annually at a measured pace. * During the second quarter there was no commercial loan interest rate swap fee income, compared to total swap fees of $684,000 in the first quarter. Swap fee income can vary from period to period based on client demand and the interest rate environment in any given quarter. * Other fee income decreased $729,000 to $835,000, compared to $1.6 million in the first quarter, which reflected higher than typical returns in the first three months of 2021 from the Company's investments in mezzanine funds.

Non-interest expense increased $854,000, or 4.9%, to $18.2 million. Operating expense increased $483,000, or 2.8%, to $17.9 million.

* Compensation expense increased $598,000, or 4.7%, to $13.3 million, primarily due to a $415,000 true up of the Company's performance-based incentive compensation accrual to reflect the strong earnings results through the first half of 2021. * SBA recourse provision for estimated losses in the outstanding guaranteed portion of SBA loans sold totaled $245,000, compared to a net benefit of $130,000 in the linked quarter. * Other non-interest expense decreased $228,000 to $176,000. The decrease was principally due to a reduction in the credit valuation adjustment ("CVA") related to the commercial loan interest rate swap program and a reduction in the loan servicing valuation adjustment related to the Bank's SBA portfolio.

Total period-end loans and leases receivable, excluding net PPP loans in both periods of comparison, increased $55.3 million, or 11.2% annualized, to $2.023 billion.

* Commercial and industrial ("C&I") loans, excluding net PPP loans, increased $58.0 million, or 44.8% annualized, led by First Business Bank's specialized lending commercial business lines. While we believe this level of above average growth is not sustainable, management believes the timely prior-period investments in producers for specialized lending, such as dealer floorplan financing, small-ticket equipment vendor financing, and accounts receivable financing, have positioned C&I lending to increase throughout the current economic cycle. * Commercial real estate ("CRE") loans were unchanged at $1.392 billion, as growth from non-owner occupied CRE was offset by payoffs and paydowns in the remaining categories.

Total period-end in-market deposits increased $279.0 million to $2.016 billion, or 64.2% annualized, and the average rate paid decreased one basis point to 0.15%.

* A significant portion of the large increase in deposits was due to the proceeds of a commercial client's business sale late in the second quarter, the majority of which was moved off the balance sheet in early July. Excluding this temporary deposit, total period-end in-market deposits increased $54.0 million to $1.791 billion, or 12.4% annualized. * Excluding the temporary deposit described above, non-interest bearing transaction and money market accounts increased $52.4 million and $53.1 million, respectively, while interest-bearing transaction accounts and certificates of deposits decreased $49.8 million and $1.7 million, respectively.

Period-end wholesale funding, including FHLB advances, Federal Reserve Discount Window advances, brokered deposit, and deposits gathered through internet deposit listing services, decreased $49.0 million to $532.3 million.

* Wholesale deposits decreased $21.0 million to $144.5 million, due to contractual runoff. The average rate paid on wholesale deposits decreased 2 basis points to 0.74% and the weighted average original maturity of brokered certificates of deposit decreased to 3.5 years from 3.9 years. * FHLB advances decreased $28.0 million to $387.8 million. The average rate paid on FHLB advances decreased nine basis points to 1.27% and the weighted average original maturity increased to 6.1 years from 5.7 years.

Non-performing assets decreased $7.4 million, or 39.0%, to $11.6 million, or 0.40% of total assets, compared to $19.0 million, or 0.73% of total assets. The reduction in non-performing assets was principally due to loan payoffs and charge-offs. Excluding net PPP loans, non-performing assets were 0.42% of total assets as of June 30, 2021, compared to 0.81% as of March 31, 2021.

The allowance for loan and lease losses decreased $3.3 million, or 11.4%, as an increase in the general reserve from loan growth was more than offset by a decrease in the historical loss rate and reduction in specific reserves.

* The allowance for loan and lease losses as a percent of total gross loans and leases was 1.20% compared to 1.29% as of March 31, 2021. * Excluding net PPP loans, the allowance for loan and leases losses as a percent of total gross loans and leases was 1.27%, compared to 1.47% as of March 31, 2021.

Second Quarter 2021 Compared to Second Quarter 2020

Net interest income increased $2.8 million, or 14.6%, to $21.7 million.

* The increase in net interest income reflects an increase in average gross loans and leases and an increase in fees collected in lieu of interest. Fees in lieu of interest, which can vary from quarter to quarter, totaled $3.5 million compared to $2.3 million. Excluding fees in lieu of interest and interest income from PPP loans, net interest income increased $1.5 million, or 9.7%. Excluding net PPP loans, average gross loans and leases increased $263.9 million, or 15.3%. * The yield on average interest-earning assets measured 3.96% compared to 4.03%. Excluding fees collected in lieu of interest, PPP loan interest income and net PPP loans, the yield on average interest-earning assets was 3.64%, compared to 3.96%. The decline in yields was primarily due to the decrease in LIBOR and Prime rates and related impact on variable-rate loans, in addition to the renewal of fixed-rate loans and reinvestment of security cash flows at historically low interest rates. The rate paid for average total bank funding decreased 22 basis points to 0.39% from 0.61%. * Net interest margin increased 15 basis points to 3.49% from 3.34%. Adjusted net interest margin decreased 12 basis points to 3.20% from 3.32%.

The Company reported a net benefit to provision for loan and lease losses of $1.0 million, compared to a $5.5 million expense in the second quarter of 2020.

Non-interest income was $6.3 million for both periods.

* Gains on sale of SBA loans increased $629,000, or 109.6%, to $1.2 million as a result of the Company's rebuilt SBA business line. * Private wealth management fee income increased $620,000, or 29.2%, to $2.7 million. Private wealth and trust assets under management and administration measured a record $2.564 billion at June 30, 2021, up $691.0 million, or 36.9%. * During the second quarter there was no commercial loan interest rate swap fee income, compared to total swap fees of $1.7 million for the year-ago quarter. * Other fee income increased $149,000, or 21.7%, to $835,000 compared to $686,000.

Non-interest expense decreased $159,000, or 0.9%, to $18.2 million. Operating expense increased $2.5 million, or 16.2%, to $17.9 million.

* Compensation expense increased $2.5 million, or 22.8%, to $13.3 million. The increase reflects new hires and an increase in the Company's performance-based incentive compensation accrual based on estimated full year 2021 results, compared to a second quarter 2020 reduction to the same accrual due to COVID-19 pandemic uncertainty. Average full-time equivalent employees increased to 312, up 11.0% for the quarter ended June 30, 2021, compared to 281 for the quarter ended June 30, 2020. * In the second quarter of 2020, the Company recognized $1.7 million in expense due to the impairment of federal historic tax credit investments, which corresponded with the recognition of a $2.5 million in tax credits during the quarter. No federal historic tax credit investments were recognized in the second quarter of 2021. * Other non-interest expense decreased $369,000, or 67.7%, to $176,000. The decrease was principally due to a reduction in the credit valuation adjustment ("CVA") related to the commercial loan interest rate swap program and a decrease in business travel expense.

Total period-end loans and leases receivable, excluding net PPP loans in both periods of comparison, increased $286.0 million, or 16.5%, to $2.023 billion.

* C&I loans, excluding net PPP loans, increased $113.5 million, or 24.6%. * CRE loans increased $169.8 million, or 13.9%, driven by an increase across most CRE categories with the majority in the non-owner occupied and multi-family portfolios.

Total period-end in-market deposits increased $395.6 million, or 24.4%, to $2.016 billion and the average rate paid decreased 18 basis points to 0.15%.

* Excluding the temporary deposit from a client's business sale, total period-end in-market deposits increased $170.6 million to $1.791 billion, or 10.5%. * Excluding the temporary deposit described above, transaction and money market accounts increased $214.0 million and $28.4 million, respectively, while certificates of deposits decreased $71.8 million.

Period-end wholesale funding increased $31.5 million to $532.3 million.

* Wholesale deposits increased $54.7 million to $144.5 million mainly due to adding non-maturity brokered deposits at a favorable rate compared to alternative funding sources. Excluding these deposits, wholesale deposits decreased as the existing portfolio runoff was replaced by in-market deposits and lower cost FHLB advances to match-fund long-term fixed rate loans and fund loan growth. The average rate paid on brokered certificates of deposit decreased 168 basis points to 0.74% and the weighted average original maturity decreased to 3.5 years from 4.6 years. * FHLB advances decreased $23.2 million to $387.8 million. The average rate paid on FHLB advances increased 2 basis points to 1.27% and the weighted average original maturity increased to 6.1 years from 5.3 years.

Non-performing assets decreased to $11.6 million, or 0.40% of total assets, compared to $25.5 million, or 1.03% of total assets. Excluding net PPP loans, non-performing assets were 0.42% of total assets as of June 30, 2021 compared to 1.19% one year prior.

The allowance for loan and lease losses decreased $1.8 million to $25.7 million compared to $27.5 million.

* The allowance for loan and lease losses as a percent of total gross loans and leases was 1.20% compared to 1.33%. * Excluding net PPP loans, the allowance for loan and leases losses as a percent of total gross loans and leases was 1.27% as of June 30, 2021 compared to 1.57% one year prior.

COVID-19 Update

On March 11, 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic as a result of the global spread of the coronavirus illness. In response to the outbreak, federal and state authorities in the U.S. introduced various measures to try to limit or slow the spread of the virus, including travel restrictions, nonessential business closures, stay-at-home orders, and strict social distancing. The Company activated its Pandemic Preparedness Plan to protect the health of employees and clients, which included temporarily limiting lobby hours and transitioning the vast majority of the Company's workforce to remote work. The Company did not incur any significant disruptions to its business activities during this time of transition and extended remote work.

The second half of 2020 saw improvements in economic trends, but continued waves of new cases of COVID-19 created continued uncertainty in the economic environment. However, at the end of the fourth quarter of 2020 and into the first quarter of 2021, the rollout of new vaccines and the ratification of two additional stimulus laws resulted in lower infection rates and significant improvement in the outlook of the economy. In the second quarter of 2021, the Company communicated return to office plans to employees. Based on the national and local guidelines, the Company developed a phased-in approach for returning to the office. Under this phased-in approach, offices opened in early June 2021. The return to office included enhanced safety protocols and processes to provide the best working environment possible for employees.

Paycheck Protection Program

As of June 30, 2021, the Company had $123.8 million in gross PPP loans outstanding and deferred processing fees outstanding of $3.1 million. The processing fees are deferred and recognized over the contractual life of the loan, or accelerated at forgiveness, as an adjustment of yield using the interest method. During the three and six months ended June 30, 2021, the Company recognized $2.5 million and $4.8 million, respectively, of processing fees in loans and leases interest income in the unaudited Consolidated Statements of Income. The SBA provides a guaranty to the lender of 100% of principal and interest, unless the lender violated an obligation under the agreement. Since loan losses are expected to immaterial, if at all due to the government guarantee, management excluded the PPP loans from the allowance for loan and lease losses calculation. These short-term loans were funded primarily through a combination of excess cash held at the Federal Reserve and from an increase in in-market deposits.

Deferral Requests

The Company provided loan modifications deferring payments for certain borrowers impacted by COVID-19 who were current in their payments at the inception of the Company's loan modification program. Excluding gross PPP loans, as of June 30, 2021, the Company had five deferred loans outstanding of $20.5 million, or 1.0% of gross loans and leases, compared to $323.2 million, or 18.6% of gross loans and leases as of June 30, 2020. Of the $20.5 million of deferred loans outstanding, $19.8 million relates to two hospitality credits that went on deferral during the second quarter of 2021 and are both accruing and current on payments. Management believes there will be no losses associated with these two credits.

The following tables represent a breakdown of the deferred loan balances by industry segment and collateral type:

As of

June 30, 2021

Collateral Type

Industries Description Balance Real Non-Real Estate Estate

(In thousands)

Accommodation and Food Services $ 19,811 $ 19,811 $ -

Manufacturing 310 310 -

Agriculture, Forestry, Fishing, and 210 - 210 Hunting

Educational Services 195 195 -

Total deferred loan balances $ 20,526 $ 20,316 $ 210

Exposure to Stressed Industries

Certain industries have been and are expected to be particularly impacted by social distancing, quarantines, and the economic impact of the COVID-19 pandemic, such as the following:

As of

June 30, 2021 December 31, 2020

% Gross % GrossIndustries: Balance Loans Balance Loans and Leases ^ and Leases ^ (1) (1)

(Dollars in Thousands)

Retail ^(2) (3) $ 75,588 3.7 % $ 62,719 3.3 %

Hospitality 82,818 4.1 % 80,832 4.2 %

Entertainment 13,729 0.7 % 14,208 0.7 %

Restaurants & food 23,340 1.2 % 24,854 1.3 %service

Total outstanding $ 195,475 9.6 % $ 182,613 9.5 %exposure

(1)Excluding net PPP loans.

(2)Includes $38.6 million and $48.9 million in loans secured by commercial real estate as of June 30, 2021 and December 31, 2020, respectively.

(3)Includes $24.1 million and $7.7 million in fully collateralized asset-based loans as of June 30, 2021 and December 31, 2020, respectively.

As of June 30, 2021, the Company had no meaningful direct exposure to the energy sector, airline industry or retail consumer, and does not participate in Shared National Credits.

Because of the uncertainties related to the ultimate duration of the COVID-19 pandemic and its effects on our clients and prospects, and on the national and local economies as a whole, there can be no assurances as to how the crisis may ultimately affect the Company's loan portfolio.

About First Business Financial Services, Inc.

First Business Financial Services, Inc., (Nasdaq: FBIZ) is the parent company of First Business Bank. First Business Bank specializes in Business Banking, including Commercial Banking and Specialized Lending, Private Wealth, and Bank Consulting services, and through its refined focus, delivers unmatched expertise, accessibility, and responsiveness. Specialized Lending solutions are delivered through First Business Bank's wholly owned subsidiary First Business Specialty Finance, LLC. For additional information, visit www.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, the adverse effects of the COVID-19 pandemic on the global, national, and local economy. * The effect of the COVID-19 pandemic on the Company's credit quality, revenue, and business operations. * Competitive pressures among depository and other financial institutions nationally and in our markets. * Increases in defaults by borrowers and other delinquencies. * Our 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 us and our 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 our internet banking activities. * Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portion of SBA loans.

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, 2020 and other filings with the Securities and Exchange Commission.

SELECTED FINANCIAL CONDITION DATA

(1) Excluding net PPP loans.

Includes $38.6 million and $48.9 million in loans secured by commercial(2) real estate as of June 30, 2021 and December 31, 2020, respectively.

Includes $24.1 million and $7.7 million in fully collateralized asset-based(3) loans as of June 30, 2021 and December 31, 2020, respectively.

As of June 30, 2021, the Company had no meaningful direct exposure to the energy sector, airline industry or retail consumer, and does not participate in Shared National Credits.

Because of the uncertainties related to the ultimate duration of the COVID-19 pandemic and its effects on our clients and prospects, and on the national and local economies as a whole, there can be no assurances as to how the crisis may ultimately affect the Company's loan portfolio.

About First Business Financial Services, Inc.

First Business Financial Services, Inc., (Nasdaq: FBIZ) is the parent company of First Business Bank. First Business Bank specializes in Business Banking, including Commercial Banking and Specialized Lending, Private Wealth, and Bank Consulting services, and through its refined focus, delivers unmatched expertise, accessibility, and responsiveness. Specialized Lending solutions are delivered through First Business Bank's wholly owned subsidiary First Business Specialty Finance, LLC. For additional information, visit www.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, the adverse effects of the COVID-19 pandemic on the global, national, and local economy. * The effect of the COVID-19 pandemic on the Company's credit quality, revenue, and business operations. * Competitive pressures among depository and other financial institutions nationally and in our markets. * Increases in defaults by borrowers and other delinquencies. * Our 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 us and our 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 our internet banking activities. * Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portion of SBA loans.

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, 2020 and other filings with the Securities and Exchange Commission.

SELECTED FINANCIAL CONDITION DATA

(Unaudited) As of

(in thousands) June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020

Assets

Cash and cash $ 389,977 $ 58,874 $ 56,909 $ 51,728 $ 42,391 equivalents

Securitiesavailable-for-sale, 171,219 173,261 183,925 179,274 171,680 at fair value

Securitiesheld-to-maturity, 22,382 24,783 26,374 28,897 29,826 at amortized cost

Loans held for sale 6,059 6,576 8,695 15,049 13,672

Loans and leases 2,143,561 2,235,112 2,145,970 2,170,299 2,056,863 receivable

Allowance for loan (25,675) (28,982) (28,521) (30,817) (27,464) and lease losses

Loans and leases 2,117,886 2,206,130 2,117,449 2,139,482 2,029,399 receivable, net

Premises and 1,747 1,923 1,998 2,130 2,266 equipment, net

Foreclosed 179 31 34 613 1,389 properties

Right-of-use assets 5,472 5,486 5,814 6,141 6,272

Bank-owned life 52,887 52,537 52,188 51,798 51,433 insurance

Federal Home Loan 13,451 14,941 13,578 15,153 13,470 Bank stock, at cost

Goodwill and other 12,178 12,055 12,018 12,024 11,925 intangible assets

Derivatives 32,377 26,104 49,377 58,210 58,808

Accrued interestreceivable and 39,855 38,017 39,478 41,348 36,283 other assets

Total assets $ 2,865,669 $ 2,620,718 $ 2,567,837 $ 2,601,847 $ 2,468,814

Liabilities andStockholders' Equity

In-market deposits $ 2,016,215 $ 1,737,226 $ 1,683,008 $ 1,667,245 $ 1,620,616

Wholesale deposits 144,492 165,492 172,508 154,130 89,759

Total deposits 2,160,707 1,902,718 1,855,516 1,821,375 1,710,375

Federal Home LoanBank advances and 420,113 448,417 419,167 483,517 465,007 other borrowings

Junior subordinated 10,069 10,065 10,062 10,058 10,054 notes

Lease liabilities 6,005 6,040 6,386 6,728 6,877

Derivatives 36,109 29,565 54,927 64,403 65,390

Accrued interestpayable and other 11,214 9,422 15,617 14,981 13,549 liabilities

Total liabilities 2,644,217 2,406,227 2,361,675 2,401,062 2,271,252

Total stockholders' 221,452 214,491 206,162 200,785 197,562 equity

Total liabilitiesand stockholders' $ 2,865,669 $ 2,620,718 $ 2,567,837 $ 2,601,847 $ 2,468,814 equity

STATEMENTS OF INCOME

(Unaudited) As of and for the Three Months Ended As of and for the Six Months Ended

(Dollars in December Septemberthousands, June 30, March 31, 31, 30, June 30, June 30, June 30,except per share 2021 2021 2020 2020 2020 2021 2020amounts)

Total interest $ 24,599 $ 23,806 $ 25,770 $ 22,276 $ 22,761 $ 48,406 $ 46,132 income

Total interest 2,947 2,943 3,258 3,655 3,873 5,891 10,195 expense

Net interest 21,652 20,863 22,512 18,621 18,888 42,515 35,937 income

Provision forloan and lease (958) (2,068) 4,322 3,835 5,469 (3,026) 8,651 losses

Net interestincome afterprovision for 22,610 22,931 18,190 14,786 13,419 45,541 27,286 loan and leaselosses

Private wealthmanagement 2,744 2,407 2,208 2,167 2,124 5,151 4,235 service fees

Gain on sale of 1,203 1,078 1,300 760 574 2,281 839 SBA loans

Service charges 941 917 887 881 829 1,859 1,647 on deposits

Loan fees 569 545 412 478 451 1,114 936

Net gain on sale 29 - - - - 29 (4) of securities

Swap fees - 684 1,078 2,446 1,655 684 3,336

Othernon-interest 835 1,564 914 676 686 2,398 1,744 income

Totalnon-interest 6,321 7,195 6,799 7,408 6,319 13,516 12,733 income

Compensation 13,255 12,657 12,145 11,857 10,796 25,912 21,848

Occupancy 533 552 556 570 554 1,085 1,126

Professional 913 866 909 943 859 1,778 1,678 fees

Data processing 798 770 668 679 710 1,569 1,386

Marketing 511 391 411 356 352 902 813

Equipment 261 246 294 310 304 506 595

Computer 1,129 1,115 1,028 1,017 966 2,244 1,856 software

FDIC insurance 280 362 479 312 239 642 448

Collateral 84 94 47 45 115 178 236 liquidation cost

Net (gain) losson foreclosed (1) 3 54 (121) 348 1 450 properties

Tax creditinvestment - - 328 113 1,841 - 1,954 impairment

SBA recourseprovision 245 (130) (330) 57 (30) 115 (5) (benefit)

Loss on earlyextinguishment - - - - 744 - 744 of debt

Othernon-interest 176 404 1,062 620 545 582 1,359 expense

Totalnon-interest 18,184 17,330 17,651 16,758 18,343 35,514 34,488 expense

Income beforeincome tax 10,747 12,796 7,338 5,436 1,395 23,543 5,531 expense(benefit)

Income taxexpense 2,512 3,065 1,254 1,143 (1,928) 5,577 (1,070) (benefit)

Net income $ 8,235 $ 9,731 $ 6,084 $ 4,293 $ 3,323 $ 17,966 $ 6,601



Per common share:

Basic earnings $ 0.95 $ 1.12 $ 0.71 $ 0.50 $ 0.38 $ 2.08 $ 0.77

Diluted earnings 0.95 1.12 0.71 0.50 0.38 2.08 0.77

Dividends 0.18 0.18 0.165 0.165 0.165 0.36 0.33 declared

Book value 25.70 24.83 24.06 23.45 23.04 25.70 23.04

Tangible book 24.28 23.43 22.66 22.05 21.65 24.28 21.65 value

Weighted-averagecommon shares 8,385,069 8,429,149 8,417,216 8,404,084 8,392,197 8,381,868 8,379,696 outstanding^(1)

Weighted-averagediluted common 8,385,069 8,429,149 8,417,216 8,404,084 8,392,197 8,381,868 8,379,696 sharesoutstanding^(1)

(1) Excluding participating securities.

NET INTEREST INCOME ANALYSIS

(Unaudited) For the Three Months Ended

(Dollars in thousands) June 30, 2021 March 31, 2021 June 30, 2020

Average Average Average Average Average Average Interest Yield/ Interest Yield/ Interest Yield/ Balance Rate^ Balance Rate^ Balance Rate^ (4) (4) (4)

Interest-earning assets

Commercial real estate and other $ 1,386,187 $ 13,087 3.78 % $ 1,357,141 $ 12,528 3.69 % $ 1,192,530 $ 12,450 4.18 %mortgage loans^(1)

Commercial and industrial loans^ 772,257 9,875 5.11 % 757,898 9,625 5.08 % 726,862 8,347 4.59 %(1)

Direct financing leases^(1) 19,883 222 4.47 % 22,271 244 4.38 % 27,115 395 5.83 %

Consumer and other loans^(1) 45,026 407 3.62 % 45,648 398 3.49 % 36,614 356 3.89 %

Total loans and leases 2,223,353 23,591 4.24 % 2,182,958 22,795 4.18 % 1,983,121 21,548 4.35 %receivable^(1)

Mortgage-related securities^(2) 149,253 631 1.69 % 163,324 666 1.63 % 174,113 912 2.10 %

Other investment securities^(3) 41,569 185 1.78 % 42,177 187 1.77 % 30,194 158 2.09 %

FHLB stock 14,172 176 4.97 % 12,465 152 4.88 % 10,301 127 4.93 %

Short-term investments 55,100 16 0.12 % 24,575 6 0.10 % 61,030 16 0.10 %

Total interest-earning assets 2,483,447 24,599 3.96 % 2,425,499 23,806 3.93 % 2,258,759 22,761 4.03 %

Non-interest-earning assets 137,893 151,665 167,008

Total assets $ 2,621,340 $ 2,577,164 $ 2,425,767

Interest-bearing liabilities

Transaction accounts $ 499,040 248 0.20 % $ 521,130 250 0.19 % $ 368,844 291 0.32 %

Money market 662,919 282 0.17 % 657,690 274 0.17 % 637,714 368 0.23 %

Certificates of deposit 45,993 112 0.97 % 57,424 177 1.23 % 123,581 627 2.03 %

Wholesale deposits 162,580 301 0.74 % 166,752 318 0.76 % 105,597 638 2.42 %

Total interest-bearing deposits 1,370,532 943 0.28 % 1,402,996 1,019 0.29 % 1,235,736 1,924 0.62 %

FHLB advances 405,855 1,284 1.27 % 366,670 1,249 1.36 % 409,281 1,283 1.25 %

Federal Reserve PPPLF - - - % - - - % 20,821 18 0.35 %

Other borrowings 32,447 443 5.46 % 27,296 401 5.88 % 24,681 371 6.01 %

Junior subordinated notes 10,066 277 11.01 % 10,063 274 10.89 % 10,052 277 11.02 %

Total interest-bearing 1,818,900 2,947 0.65 % 1,807,025 2,943 0.65 % 1,700,571 3,873 0.91 %liabilities

Non-interest-bearing demand 527,441 485,863 440,413 deposit accounts

Other non-interest-bearing 56,691 73,695 86,504 liabilities

Total liabilities 2,403,032 2,366,583 2,227,488

Stockholders' equity 218,308 210,581 198,279

Total liabilities and $ 2,621,340 $ 2,577,164 $ 2,425,767 stockholders' equity

Net interest income $ 21,652 $ 20,863 $ 18,888

Interest rate spread 3.31 % 3.27 % 3.12 %

Net interest-earning assets $ 664,547 $ 618,474 $ 558,188

Net interest margin 3.49 % 3.44 % 3.34 %

(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

The average balances of loans and leases include non-accrual loans and(1) 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

(Unaudited) For the Six Months Ended

(Dollars in June 30, 2021 June 30, 2020thousands)

Average Average Average Average Interest Yield/ Interest Yield/ Balance Rate^ Balance Rate^ (4) (4)

Interest-earning assets

Commercial realestate and other $ 1,371,744 $ 25,615 3.73 % $ 1,173,251 $ 25,973 4.43 %mortgage loans^(1)

Commercial and 765,117 19,500 5.10 % 621,399 16,204 5.22 %industrial loans^(1)

Direct financing 21,071 466 4.42 % 27,538 503 3.65 %leases^(1)

Consumer and other 45,335 805 3.55 % 36,244 717 3.96 %loans^(1)

Total loans andleases receivable^ 2,203,267 46,386 4.21 % 1,858,432 43,397 4.67 %(1)

Mortgage-related 156,249 1,297 1.66 % 177,352 1,973 2.22 %securities^(2)

Other investment 41,871 372 1.78 % 26,737 285 2.13 %securities^(3)

FHLB stock 13,323 329 4.94 % 9,407 331 7.04 %

Short-term 39,922 22 0.11 % 48,396 146 0.60 %investments

Totalinterest-earning 2,454,632 48,406 3.94 % 2,120,324 46,132 4.35 %assets

Non-interest-earning 144,741 144,991 assets

Total assets $ 2,599,373 $ 2,265,315

Interest-bearing liabilities

Transaction accounts $ 510,024 498 0.20 % $ 320,188 938 0.59 %

Money market 660,319 557 0.17 % 653,598 2,237 0.68 %

Certificates of 51,677 288 1.11 % 128,791 1,377 2.14 %deposit

Wholesale deposits 164,654 619 0.75 % 119,032 1,488 2.50 %

Totalinterest-bearing 1,386,674 1,962 0.28 % 1,221,609 6,040 0.99 %deposits

FHLB advances 386,371 2,533 1.31 % 367,604 2,842 1.55 %

Federal Reserve - - - % 10,410 18 0.35 %PPPLF

Other borrowings 29,886 844 5.65 % 24,533 740 6.03 %

Junior subordinated 10,064 552 10.97 % 10,050 555 11.04 %notes

Totalinterest-bearing 1,812,995 5,891 0.65 % 1,634,206 10,195 1.25 %liabilities

Non-interest-bearingdemand deposit 506,767 365,771 accounts

Othernon-interest-bearing 65,146 74,436 liabilities

Total liabilities 2,384,908 2,074,413

Stockholders' equity 214,465 190,902

Total liabilitiesand stockholders' $ 2,599,373 $ 2,265,315 equity

Net interest income $ 42,515 $ 35,937

Interest rate spread 3.29 % 3.10 %

Net interest-earning $ 641,637 $ 486,118 assets

Net interest margin 3.46 % 3.39 %

(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.

PROVISION FOR LOAN AND LEASE LOSS COMPOSITION

The average balances of loans and leases include non-accrual loans and(1) 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.

PROVISION FOR LOAN AND LEASE LOSS COMPOSITION

(Unaudited) For the Three Months Ended For the Six Months Ended

(Dollars in June 30, March 31, December September June 30, June 30, June 30,thousands) 2021 2021 31, 30, 2020 2021 2020 2020 2020

Change ingeneralreserve dueto $ (652) $ 1,082 $ 1,008 $ (766) $ 2,388 $ 430 $ 5,224 subjectivefactorchanges

Change ingeneralreserve dueto (1,687) (984) 1,274 (16) (54) (2,671) (334) historicalloss factorchanges

Charge-offs 2,894 144 6,685 505 817 3,038 948

Recoveries (545) (2,673) (68) (23) (64) (3,218) (241)

Change inspecificreserves on (1,466) (194) (5,216) 2,974 2,122 (1,660) 2,559 impairedloans, net

Change dueto loan 498 557 639 1,161 260 1,055 495 growth, net

Totalprovisionfor loan $ (958) $ (2,068) $ 4,322 $ 3,835 $ 5,469 $ (3,026) $ 8,651 and leaselosses

PERFORMANCE RATIOS

For the Three Months Ended For the Six Months Ended

June 30, March December September June 30, June 30, June 30,(Unaudited) 2021 31, 31, 30, 2020 2021 2020 2021 2020 2020

Return onaverage assets 1.26 % 1.51 % 0.93 % 0.68 % 0.55 % 1.38 % 0.58 %(annualized)

Return onaverage equity 15.09 % 18.48 % 11.92 % 8.58 % 6.70 % 16.75 % 6.92 %(annualized)

Efficiency ratio 64.17 % 62.19 % 60.02 % 64.16 % 61.22 % 63.18 % 64.36 %

Interest rate 3.31 % 3.27 % 3.51 % 2.94 % 3.12 % 3.29 % 3.10 %spread

Net interest 3.49 % 3.44 % 3.69 % 3.14 % 3.34 % 3.46 % 3.39 %margin

Averageinterest-earningassets to 136.54 % 134.23 % 132.88 % 131.68 % 132.82 % 135.39 % 129.75 %averageinterest-bearingliabilities

ASSET QUALITY RATIOS

(Unaudited) As of

(Dollars in June 30, March 31, December September June 30,thousands) 2021 2021 31, 30, 2020 2020 2020

Non-accrualloans and $ 11,422 $ 18,992 $ 26,617 $ 36,050 $ 24,095 leases

Foreclosed 179 31 34 613 1,389 properties

Totalnon-performing 11,601 19,023 26,651 36,663 25,484 assets

Performingtroubled debt 56 59 46 47 49 restructurings

Total impaired $ 11,657 $ 19,082 $ 26,697 $ 36,710 $ 25,533 assets



Non-accrualloans andleases as apercent of 0.53 % 0.85 % 1.24 % 1.66 % 1.17 %total grossloans andleases

Non-performingassets as apercent oftotal gross 0.54 % 0.85 % 1.24 % 1.68 % 1.23 %loans andleases plusforeclosedproperties

Non-performingassets as a 0.40 % 0.73 % 1.04 % 1.41 % 1.03 %percent oftotal assets

Allowance forloan and leaselosses as apercent of 1.20 % 1.29 % 1.33 % 1.41 % 1.33 %total grossloans andleases

Allowance forloan and leaselosses as apercent of 224.79 % 152.60 % 107.15 % 85.48 % 113.98 %non-accrualloans andleases

ASSET QUALITY RATIOS - EXCLUDING NET PPP LOANS

(Unaudited) As of

(Dollars in June 30, March 31, December September June 30,thousands) 2021 2021 31, 30, 2020 2020 2020

Non-accrualloans andleases as apercent of 0.56 % 0.96 % 1.38 % 1.95 % 1.38 %total grossloans andleases

Non-performingassets as apercent oftotal gross 0.57 % 0.96 % 1.38 % 1.98 % 1.46 %loans andleases plusforeclosedproperties

Non-performingassets as a 0.42 % 0.81 % 1.14 % 1.61 % 1.19 %percent oftotal assets

Allowance forloan and leaselosses as apercent of 1.27 % 1.47 % 1.48 % 1.67 % 1.57 %total grossloans andleases

PPP loansoutstanding, $ 120,723 $ 267,567 $ 225,323 $ 325,481 $ 320,036 net

NET CHARGE-OFFS (RECOVERIES)

(Unaudited) For the Three Months Ended For the Six Months Ended

(Dollars in June 30, March 31, December September June 30, June 30, June 30,thousands) 2021 2021 31, 30, 2020 2021 2020 2020 2020

Charge-offs $ 2,894 $ 144 $ 6,685 $ 505 $ 817 $ 3,038 $ 948

Recoveries (545) (2,673) (68) (23) (64) (3,218) (241)

Netcharge-offs $ 2,349 $ (2,529) $ 6,617 $ 482 $ 753 $ (180) $ 707 (recoveries)

Netcharge-offs(recoveries)as a percent 0.42 % (0.46) % 1.21 % 0.09 % 0.15 % (0.02) % 0.08 %of averagegross loansand leases(annualized)

Annualizedcharge-offs(recoveries)as a percentof average 0.47 % (0.52) % 1.39 % 0.11 % 0.17 % (0.02) % 0.08 %gross loansand leases,excludingaverage netPPP loans

Average PPPloans $ 229,165 $ 242,242 $ 282,259 $ 323,082 $ 252,834 $ 235,668 $ 126,417 outstanding,net

CAPITAL RATIOS

As of and for the Three Months Ended

June March December September June(Unaudited) 30, 31, 31, 30, 30, 2021 2021 2020 2020 2020

Total capital to 11.22 % 11.52 % 11.25 % 11.42 % 11.97 %risk-weighted assets

Tier I capital to 9.14 % 9.24 % 8.96 % 9.09 % 9.57 %risk-weighted assets

Common equity tier Icapital to risk-weighted 8.72 % 8.81 % 8.53 % 8.64 % 9.08 %assets

Tier I capital to adjusted 8.48 % 8.37 % 7.99 % 8.04 % 8.29 %assets

Tangible common equity to 7.33 % 7.76 % 7.60 % 7.29 % 7.56 %tangible assets

Tangible common equity totangible assets, excluding 7.66 % 8.65 % 8.33 % 8.34 % 8.69 %net PPP loans

LOAN AND LEASE RECEIVABLE COMPOSITION

(Unaudited) As of

(in June 30, March 31, December 31, September 30, June 30,thousands) 2021 2021 2020 2020 2020

Commercial real estate:

Commercialreal estate $ 253,600 $ 256,812 $ 253,882 $ 240,706 $ 229,994 - owneroccupied

Commercialreal estate 614,289 592,090 564,532 565,781 533,211 - non-owneroccupied

Land 45,056 46,544 49,839 50,864 44,299 development

Construction 139,943 151,345 141,043 142,726 133,375

Multi-family 319,351 322,384 311,556 287,583 244,496

1-4 family 19,769 23,319 38,284 38,857 36,823

Totalcommercial 1,392,008 1,392,494 1,359,136 1,326,517 1,222,198 real estate

Commercialand 695,442 784,305 732,318 790,349 781,239 industrial

Directfinancing 18,142 19,616 22,331 24,743 25,525 leases, net

Consumer and other:

Home equityand second 5,740 6,719 7,833 7,106 6,706 mortgages

Other 36,567 38,266 28,897 29,341 29,737

Totalconsumer and 42,307 44,985 36,730 36,447 36,443 other

Total grossloans and 2,147,899 2,241,400 2,150,515 2,178,056 2,065,405 leasesreceivable

Less:

Allowancefor loan and 25,675 28,982 28,521 30,817 27,464 lease losses

Deferred 4,338 6,288 4,545 7,757 8,542 loan fees

Loans andleases $ 2,117,886 $ 2,206,130 $ 2,117,449 $ 2,139,482 $ 2,029,399 receivable,net

LEGACY SBA 7(a) AND EXPRESS LOAN COMPOSITION (1)

(Unaudited) As of

June 30, March 31, December September June 30,(in thousands) 2021 2021 31, 30, 2020 2020 2020

Performing loans:

Off-balance sheet $ 14,161 $ 17,523 $ 23,354 $ 26,017 $ 28,843 loans

On-balance sheet 6,836 7,340 11,117 15,175 16,554 loans

Gross loans 20,997 24,863 34,471 41,192 45,397

Non-performing loans:

Off-balance sheet 3,943 1,835 1,931 2,574 1,640 loans

On-balance sheet 1,800 6,832 7,435 9,561 9,725 loans

Gross loans 5,743 8,667 9,366 12,135 11,365

Total loans:

Off-balance sheet 18,104 19,358 25,285 28,591 30,483 loans

On-balance sheet 8,636 14,172 18,552 24,736 26,279 loans

Gross loans $ 26,740 $ 33,530 $ 43,837 $ 53,327 $ 56,762

(1) Defined as SBA 7(a) and Express loans originated in 2016 and prior.

DEPOSIT COMPOSITION

(Unaudited) As of

(in thousands) June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020

Non-interest-bearing $ 774,253 $ 496,877 $ 472,818 $ 452,268 $ 433,760 transaction accounts

Interest-bearing 511,698 561,466 503,992 484,761 413,214 transaction accounts

Money market 685,127 632,065 641,504 636,872 656,741 accounts

Certificates of 45,137 46,818 64,694 93,344 116,901 deposit

Wholesale deposits 144,492 165,492 172,508 154,130 89,759

Total deposits $ 2,160,707 $ 1,902,718 $ 1,855,516 $ 1,821,375 $ 1,710,375

TRUST ASSETS COMPOSITION

(Unaudited) As of

(in thousands) June 30, March 31, December 31, September 30, June 30, 2021 2021 2020 2020 2020

Trust assetsunder $ 2,362,257 $ 2,195,804 $ 2,061,772 $ 1,841,986 $ 1,704,019 management

Trust assetsunder 202,116 190,721 187,228 175,521 169,388 administration

Total trust $ 2,564,373 $ 2,386,525 $ 2,249,000 $ 2,017,507 $ 1,873,407 assets

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 inthousands, June 30, March 31, December September June 30,except per 2021 2021 31, 30, 2020share 2020 2020amounts)

Commonstockholders' $ 221,452 $ 214,491 $ 206,162 $ 200,785 $ 197,562 equity

Goodwill andother (12,178) (12,055) (12,018) (12,024) (11,925) intangibleassets

Tangible $ 209,274 $ 202,436 $ 194,144 $ 188,761 $ 185,637 common equity

Common shares 8,617,761 8,638,195 8,566,960 8,561,714 8,575,134 outstanding

Book value $ 25.70 $ 24.83 $ 24.06 $ 23.45 $ 23.04 per share

Tangible bookvalue per 24.28 23.43 22.66 22.05 21.65 share

TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS

"Tangible common equity to tangible assets" 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. 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.

(Unaudited) As of

(Dollars in June 30, March 31, December 31, September 30, June 30,thousands) 2021 2021 2020 2020 2020

Commonstockholders' $ 221,452 $ 214,491 $ 206,162 $ 200,785 $ 197,562 equity

Goodwill andother (12,178) (12,055) (12,018) (12,024) (11,925) intangibleassets

Tangible $ 209,274 $ 202,436 $ 194,144 $ 188,761 $ 185,637 common equity

Total assets $ 2,865,669 $ 2,620,718 $ 2,567,837 $ 2,601,847 $ 2,468,814

Goodwill andother (12,178) (12,055) (12,018) (12,024) (11,925) intangibleassets

Tangible $ 2,853,491 $ 2,608,663 $ 2,555,819 $ 2,589,823 $ 2,456,889 assets

Tangiblecommon equity 7.33 % 7.76 % 7.60 % 7.29 % 7.56 %to tangibleassets

Period-end 120,722 267,567 225,323 325,481 320,036 net PPP loans

Tangibleassets, $ 2,732,769 $ 2,341,096 $ 2,330,496 $ 2,264,342 $ 2,136,853 excluding netPPP loans

Tangiblecommon equityto tangible 7.66 % 8.65 % 8.33 % 8.34 % 8.69 %assets,excluding netPPP loans

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 foreclosed properties, 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 Six Months Ended

(Dollars in June 30, March 31, December 31, September 30, June 30, June 30, June 30,thousands) 2021 2021 2020 2020 2020 2021 2020

Totalnon-interest $ 18,184 $ 17,330 $ 17,651 $ 16,758 $ 18,343 $ 35,514 $ 34,488 expense

Less:

Net (gain)loss on (1) 3 54 (121) 348 1 450 foreclosedproperties

Amortizationof other 8 8 8 9 9 15 18 intangibleassets

SBA recourseprovision 245 (130) (330) 57 (30) 115 (5) (benefit)

Tax creditinvestment - - 328 113 1,841 - 1,954 impairment

Loss on earlyextinguishment - - - - 744 - 744 of debt

Totaloperating $ 17,932 $ 17,449 $ 17,591 $ 16,700 $ 15,431 $ 35,383 $ 31,327 expense ^(a)

Net interest $ 21,652 $ 20,863 $ 22,512 $ 18,621 $ 18,888 $ 42,515 $ 35,937 income

Totalnon-interest 6,321 7,195 6,799 7,408 6,319 13,516 12,733 income

Less:

Net gain(loss) on sale 29 - - - - 29 (4) of securities

Adjustednon-interest 6,292 7,195 6,799 7,408 6,319 13,487 12,737 income

Totaloperating $ 27,944 $ 28,058 $ 29,311 $ 26,029 $ 25,207 $ 56,002 $ 48,674 revenue ^(b)

Efficiency 64.17 % 62.19 % 60.02 % 64.16 % 61.22 % 63.18 % 64.36 %ratio



Pre-tax,pre-provisionadjusted $ 10,012 $ 10,609 $ 11,720 $ 9,329 $ 9,776 $ 20,619 $ 17,347 earnings ^(b -a)

Average total $ 2,621,340 $ 2,577,164 $ 2,603,745 $ 2,540,735 $ 2,425,767 $ 2,599,373 $ 2,265,315 assets

Pre-tax,pre-provisionadjusted 1.53 % 1.65 % 1.80 % 1.47 % 1.61 % 1.59 % 1.53 %return onaverage assets

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 average net PPP loans, if any, and 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 Six Months Ended

(Dollars in June 30, March 31, December 31, September 30, June 30, June 30, June 30,thousands) 2021 2021 2020 2020 2020 2021 2020

Interest income $ 24,599 $ 23,806 $ 25,770 $ 22,276 $ 22,761 $ 48,406 $ 46,132

Interest expense 2,947 2,943 3,258 3,655 3,873 5,891 10,195

Net interest 21,652 20,863 22,512 18,621 18,888 42,515 35,937 income ^(a)

Less:

Fees in lieu of 3,536 3,085 4,749 1,511 2,257 6,621 3,055 interest

PPP loan 566 603 718 833 647 1,169 647 interest income

FRB interestincome and FHLB 192 158 188 167 134 350 435 dividend income

Add:

FRB PPPLF - - 9 26 18 - 18 interest expense

Adjusted netinterest income $ 17,358 $ 17,017 $ 16,866 $ 16,136 $ 15,868 $ 34,375 $ 31,818 ^(b)

Averageinterest-earning $ 2,483,447 $ 2,425,499 $ 2,441,735 $ 2,374,891 $ 2,258,759 $ 2,454,632 $ 2,120,324 assets ^(c)

Less:

Average net PPP 229,165 242,242 282,259 323,082 252,834 235,668 126,417 loans

Average FRB cash 68,503 36,643 45,611 33,756 69,176 52,661 53,583 and FHLB stock

Averagenon-accrual 16,744 22,069 36,013 26,931 25,386 19,392 23,797 loans and leases

Adjusted averageinterest-earning $ 2,169,035 $ 2,124,545 $ 2,077,852 $ 1,991,122 $ 1,911,363 $ 2,146,911 $ 1,916,527 assets ^(d)

Net interest 3.49 % 3.44 % 3.69 % 3.14 % 3.34 % 3.46 % 3.39 %margin^ (a / c)

Adjusted netinterest margin^ 3.20 % 3.20 % 3.25 % 3.24 % 3.32 % 3.20 % 3.32 %(b / d)

View source version on businesswire.com: https://www.businesswire.com/news/home/20210729006036/en/

CONTACT: First Business Financial Services, Inc. Edward G. Sloane, Jr. Chief Financial Officer 608-232-5970 esloane@firstbusiness.bank