Business Wire | Jan 27, 2022 04:03PM EST

First Business Bank Reports Strong Fourth Quarter 2021 Net Income of $8.6 Million

Jan. 27, 2022

MADISON, Wis.--(BUSINESS WIRE)--Jan. 27, 2022--First Business Financial Services, Inc. (the "Company", the "Bank", or "First Business Bank") (Nasdaq:FBIZ) reported net income of $8.6 million, or $1.01 diluted earnings per share, in the fourth quarter of 2021. The Company reported net income of $9.2 million, or $1.07 per share, in the third quarter of 2021 and $6.1 million, or $0.71, in the fourth quarter of 2020. For the full year 2021, the Company reported net income of $35.8 million, or $4.17 per share, compared to $17.0 million, or $1.97 per share, in 2020.

"First Business Bank's fourth quarter reflects a continuation of the strong performance our team has achieved throughout 2021, highlighted by record loan growth for both the quarter and year and continued improvement in our already strong asset quality metrics which resulted in a loan loss provision benefit in the quarter," President and Chief Executive Officer Corey Chambas said. "As we look ahead to 2022, we see ample runway for continued above-market performance. Our lending pipelines are robust, giving us confidence in our ability to drive double-digit loan growth again in 2022. In addition, we see potential for continued reserve release in 2022."

Quarterly and Annual Highlights

* Continued Robust Loan Growth. Loans, excluding Paycheck Protection Program ("PPP") loans, grew a record $153.3 million, or 29.8% annualized, from the third quarter of 2021 and $291.5 million, or 15.2%, from the fourth quarter of 2020, as the Company continued to expand its traditional lending throughout its geographies and grow its specialized lending mix.

* Strong In-Market Deposit Growth. Total period-end in-market deposits grew by $98.6 million, or 21.6% annualized, from the third quarter of 2021 and $245.3 million, or 14.6%, from the fourth quarter of 2020. Period-end in-market deposits represent 82.9% of total Bank funding at December 31, 2021 compared to 74.8% at December 31, 2020.

* Expanded Fee Income. Non-interest income grew by $554,000, or 7.9%, and $770,000, or 11.3%, from the linked quarter and prior year quarter, respectively, to $7.6 million and made up 26.6% of top line revenue, as the Company continued to expand its diversified fee income streams. Revenue from private wealth management reached a record of $2.9 million on $2.921 billion in assets under management and administration for the period, while gains on the sale of Small Business Administration ("SBA") loans were $1.0 million and commercial loan interest rate swap fee income was $684,000.

* Further Improvement of Asset Quality Metrics. Non-performing assets declined 14.2% to $6.5 million, or 0.25% of total assets, improving by 4 and 79 basis points from September 30, 2021 and December 31, 2020, respectively. The Company had no material active COVID-19 loan modifications as of December 31, 2021.

* Compounding Tangible Book Value. Tangible Book Value per share grew by 14.7% annualized in the quarter to $26.03, which is nearly double the ten-year compound annual growth rate of 8%.

Quarterly Financial Results

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

(Dollars inthousands, December 31, September 30, December 31, December 31, December 31,except per 2021 2021 2020 2021 2020share amounts)

Net interest $ 20,924 $ 21,223 $ 22,512 $ 84,662 $ 77,071 income

Adjustednon-interest 7,569 7,015 6,799 28,071 26,944 income ^(1)

Operating 28,493 28,238 29,311 112,733 104,015 revenue ^(1)

Operating 17,644 18,546 17,591 71,571 65,619 expense ^(1)

Pre-tax,pre-provision 10,849 9,692 11,720 41,162 38,396 adjustedearnings ^(1)

Less:

Provision forloan and lease (508 ) (2,269 ) 4,322 (5,803 ) 16,808 losses

Net loss onforeclosed 7 6 54 15 383 properties

Amortizationof other 2 7 8 25 35 intangibleassets

SBA recourse (122 ) (69 ) (330 ) (76 ) (278 )benefit

Impairment ontax credit - - 328 - 2,395 investments

Loss on earlyextinguishment - - - - 744 of debt

Add:

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

Income beforeincome tax 11,470 12,017 7,338 47,030 18,305 expense

Income tax 2,879 2,819 1,254 11,275 1,327 expense

Net income $ 8,591 $ 9,198 $ 6,084 $ 35,755 $ 16,978

Earnings per $ 1.01 $ 1.07 $ 0.71 $ 4.17 $ 1.97 share, diluted

Book value per $ 27.48 $ 26.56 $ 24.06 $ 27.48 $ 24.06 share

Tangible bookvalue per $ 26.03 $ 25.11 $ 22.66 $ 26.03 $ 22.66 share ^(1)



Net interest 3.39 % 3.45 % 3.69 % 3.44 % 3.40 %margin ^(2)

Adjusted netinterest 3.23 % 3.22 % 3.25 % 3.21 % 3.28 %margin ^(1)(2)

Fee incomeratio(non-interest 26.56 % 24.84 % 23.20 % 24.92 % 25.90 %income / totalrevenue)

Efficiency 61.92 % 65.68 % 60.02 % 63.49 % 63.09 %ratio ^(1)

Return onaverage assets 1.32 % 1.41 % 0.93 % 1.37 % 0.70 %^(2)

Pre-tax,pre-provisionadjusted 1.66 % 1.49 % 1.80 % 1.58 % 1.59 %return onaverage assets^(1)(2)

Return onaverage equity 15.04 % 16.39 % 11.92 % 16.21 % 8.64 %^(2)



Period-endloans and $ 2,239,408 $ 2,123,306 $ 2,145,970 $ 2,239,408 $ 2,145,970 leasesreceivable

Period-endloans andleases $ 2,212,111 $ 2,058,852 $ 1,920,647 $ 2,212,111 $ 1,920,647 receivable,excluding netPPP loans

Specializedlending as apercent oftotal gross 20.01 % 18.31 % 18.63 % 17.78 % 17.03 %loans andleases,excluding netPPP loans

Average loansand leases $ 2,179,769 $ 2,131,099 $ 2,185,662 $ 2,179,154 $ 2,011,322 receivable

Period-endin-market $ 1,928,285 $ 1,829,644 $ 1,683,008 $ 1,928,285 $ 1,683,008 deposits

Averagein-market $ 1,866,875 $ 1,810,948 $ 1,690,433 $ 1,784,302 $ 1,568,502 deposits

Allowance forloan and lease $ 24,336 $ 24,676 $ 28,521 $ 24,336 $ 28,521 losses

Non-performing $ 6,522 $ 7,605 $ 26,651 $ 6,522 $ 26,651 assets

Allowance forloan and leaselosses as apercent of 1.09 % 1.16 % 1.33 % 1.09 % 1.33 %total grossloans andleases

Allowance forloan and leaselosses as apercent oftotal gross 1.10 % 1.20 % 1.48 % 1.10 % 1.48 %loans andleases,excluding netPPP loans

Non-performingassets as a 0.25 % 0.29 % 1.04 % 0.25 % 1.04 %percent oftotal assets

Non-performingassets as apercent of 0.25 % 0.30 % 1.14 % 0.25 % 1.14 %total assets,excluding netPPP loans

(1) This is a non-GAAP financial measure. Management believes these measuresare meaningful because they reflect adjustments commonly made by management,investors, regulators, and analysts to evaluate financial performance, providegreater understanding of ongoing operations, and enhance comparability ofresults with prior periods. See the section titled Non-GAAP Reconciliations atthe end of this release for a reconciliation of GAAP financial measures tonon-GAAP financial measures.

(2) Calculation is annualized.

Fourth Quarter 2021 Compared to Third Quarter 2021

Net interest income decreased $299,000, or 1.4%, to $20.9 million.

* Net interest income decreased primarily due to a reduction in fees in lieu of interest. Fees in lieu of interest, which can vary from quarter to quarter based on client-driven activity, totaled $1.7 million, compared to $2.8 million, and included $892,000 and $1.7 million in PPP fees, respectively. Excluding fees collected in lieu of interest and interest income from PPP loans, net interest income increased $927,000, or 20.4% annualized.

* Average loans and leases receivable, excluding net PPP loans in both periods of comparison, increased $83.3 million, or 16.3% annualized, to $2.127 billion.

* The yield on average interest-earning assets decreased nine basis points to 3.81% from 3.90%. Excluding average net PPP loans, the PPP loan interest income of $134,000, and the aforementioned fees in lieu of interest, the yield earned on average interest-earning assets increased seven basis points to 3.60% from 3.53%. The rate paid for average total bank funding decreased three basis point to 0.33% from 0.36%. Total bank funding is defined as total deposits plus Federal Home Loan Bank ("FHLB") and Federal Reserve Paycheck Protection Program Liquidity ("PPPLF") advances, if any.

* Net interest margin decreased six basis points to 3.39% from 3.45%. Adjusted net interest margin was 3.23%, up one basis point compared to 3.22% in the linked quarter. 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 average net PPP loans and other recurring but volatile components of average interest-earning assets such as excess liquidity and non-accrual loans. Due to significant loan growth in 2021 and expectations for low double-digit growth in 2022, management believes excess liquidity will revert back to historical averages in 2022.

* The Bank maintained its historically neutral-to-asset-sensitive balance sheet through 2021 and ended the year appropriately positioned for net interest income to benefit from rising short-term interest rates in 2022.

The Company reported a net benefit to provision for loan and lease losses of $508,000, compared to a $2.3 million benefit in the third quarter of 2021.

* The benefit to provision for loan and lease losses in the fourth quarter of 2021 was primarily due to a $862,000 reduction in the general reserve from improving historical loss rates and an $805,000 reduction due to qualitative risk factor improvements, which were partially offset by a $1.4 million increase in the general reserve due to loan growth.

* The benefit to provision in the third quarter of 2021 was primarily due to a $923,000 reduction in the general reserve from improving historical loss rates, $1.3 million in net recoveries, and a $451,000 decrease in specific reserves. These decreases were partially offset by a $426,000 increase in the general reserve due to loan growth.

Non-interest income increased $554,000, or 7.9%, to $7.6 million.

* Private wealth management fee income increased $115,000, or 4.2% to $2.9 million. Private wealth and trust assets under management and administration measured a record $2.921 billion at December 31, 2021, up $173.0 million, or 25.2% annualized, primarily due to growth from new and existing clients.

* Gains on sale of SBA loans increased $321,000 to $1.0 million. Management believes SBA 7a loan production, while variable based on timing of closings, will continue to increase annually at a measured pace.

* Commercial loan interest rate swap fee income was $684,000. In the linked third quarter the Company reported no swap fee income, which can vary from period to period based on client demand and the interest rate environment.

* Other fee income decreased $599,000 to $1.3 million, compared to $1.9 million in the third quarter, when the Company recorded higher than typical returns from its investments in mezzanine funds.

Non-interest expense decreased $959,000, or 5.2%, to $17.5 million, while operating expense decreased $902,000, or 4.9%, to $17.6 million.

* Compensation expense was $12.4 million, reflecting a decrease of $904,000, or 6.8%, from the linked third quarter primarily due to a decrease in average full-time equivalent employees ("FTE") in the fourth quarter and an increase to the Company's performance-based incentive compensation accruals in the third quarter of 2021 as a result of strong company performance relative to bonus criteria. Average FTEs for the fourth quarter of 2021 were 301, down 10 from 311 in the linked quarter. The Company's compensation philosophy is to provide base salaries competitive with the market. Given the incredibly competitive job market and the critical importance to the Company of retaining employees, annual base salaries were increased an additional $650,000, or approximately 2%, more in 2022 than the Company's historical average annual merit increase.

* Other non-interest expense increased $185,000 to $904,000, due to an increase in the credit valuation adjustment related to the commercial loan interest rate swap program and a seasonal fourth quarter increase in charitable donations.

The full year effective tax rate for 2021 was 23.96%. For 2022, the Company expects to report an effective tax rate of 22%-23%, excluding discrete items, as management intends to continue actively pursuing tax credit opportunities.

Total period-end loans and leases receivable, excluding net PPP loans in both periods of comparison, increased $153.3 million, or 29.8% annualized, to $2.212 billion. This growth rate is not sustainable and was primarily due to an unusually high number of loan closings in the quarter and a negligible amount of payoffs. Management believes loan growth will moderate to low double-digits as the Company's specialized lending products scale over time.

* Commercial and industrial ("C&I") loans, excluding net PPP loans, increased $86.9 million, or 56.4% annualized, led by First Business Bank's conventional commercial lending, as well as specialized commercial lending which represents 20.0% of total loans, up from 17.0% last year. Management believes the timely prior-period investments in the Company's specialized lending business lines, such as dealer floorplan financing, small-ticket equipment vendor financing, accounts receivable financing, and asset based lending have positioned C&I lending for strong and sustainable growth.

* Commercial real estate ("CRE") loans increased by $66.9 million, or 19.3% annualized, to $1.455 billion, compared to $1.388 billion, as new production more than offset payoffs and paydowns. This increase was driven by term financing of existing non-owner-occupied real estate, as well as financing of construction projects where the Bank will also be the source of permanent financing when construction is complete.

Total period-end in-market deposits increased $98.6 million, or 21.6% annualized, to $1.928 billion, compared to $1.830 billion, and the average rate paid decreased one basis point to 0.13%.

* Non-interest bearing transaction accounts and money market accounts increased $63.5 million and $25.7 million, respectively, during the quarter.

Period-end wholesale funding, including FHLB advances, Federal Reserve PPPLF advances, brokered deposits, and deposits gathered through internet deposit listing services, decreased $34.0 million to $398.4 million.

* Wholesale deposits decreased $45.0 million to $29.6 million. The average rate paid on wholesale deposits increased 11 basis points to 1.03% and the weighted average original maturity of brokered certificates of deposit increased to 3.8 years from 3.5 years.

* FHLB advances increased $11.0 million to $368.8 million. The average rate paid on FHLB advances increased one basis point to 1.30% and the weighted average original maturity decreased to 5.9 years from 6.1 years.

Non-performing assets decreased $1.1 million, or 14.2%, to $6.5 million, or 0.25% of total assets, compared to $7.6 million, or 0.29% of total assets. The reduction in non-performing assets was primarily due to loan payoffs and paydowns. Excluding net PPP loans, non-performing assets were 0.25% of total assets as of December 31, 2021, compared to 0.30% as of September 30, 2021.

The allowance for loan and lease losses decreased $340,000, or 1.4%, as an increase in the general reserve from loan growth was more than offset by a decrease in the historical loss rates, qualitative risk factors, and specific reserves.

* The allowance for loan and lease losses as a percent of total gross loans and leases was 1.09% compared to 1.16% as of September 30, 2021.

* Excluding net PPP loans, the allowance for loan and leases losses as a percent of total gross loans and leases was 1.10%, compared to 1.20% as of September 30, 2021.

Fourth Quarter 2021 Compared to Fourth Quarter 2020

Net interest income decreased $1.6 million, or 7.1%, to $20.9 million.

* The decrease in net interest income primarily reflects lower yields on average gross loans and leases and lower fees collected in lieu of interest. Fees in lieu of interest, which can vary from quarter to quarter based on client-driven activity, totaled $1.7 million, compared to $4.7 million, and included $892,000 and $3.3 million in PPP fees, respectively. Excluding fees collected in lieu of interest and interest income from PPP loans, net interest income increased $2.0 million, or 11.9%. Excluding net PPP loans, average gross loans and leases increased $223.4 million, or 11.7%.

* The yield on average interest-earning assets measured 3.81% compared to 4.22%. Excluding fees collected in lieu of interest, PPP loan interest income and net PPP loans, the yield on average interest-earning assets measured 3.60%, compared to 3.76%. This decrease in yield was primarily due to the decrease in LIBOR and related impact on variable-rate loans, in addition to the renewal of fixed-rate loans and reinvestment of cash flows from the securities portfolio at historically low interest rates. The rate paid for average total bank funding decreased 12 basis points to 0.33% from 0.45%.

* Net interest margin decreased 30 basis points to 3.39% from 3.69%. Adjusted net interest margin decreased two basis points to 3.23% from 3.25%.

The Company reported a net benefit to provision for loan and lease losses of $508,000, compared to provision expense of $4.3 million in the fourth quarter of 2020.

* The benefit to provision for loan and lease losses in the fourth quarter of 2021 was primarily due to a $862,000 reduction in the general reserve from improving historical loss rates and an $805,000 reduction due to qualitative risk factor improvements, which were partially offset by a $1.4 million increase in the general reserve due to loan growth.

* The provision expense in the fourth quarter of 2020 included $6.7 million in charge-offs, which were partially offset by the release of $5.2 million in related specific reserves. Changes in the general reserve increased the provision for loan and lease losses $1.3 million due to historical loss rate updates from net charge-off activity, $1.0 million due to qualitative factor changes in our commercial real estate portfolio, and $639,000 due to loan growth.

Non-interest income of $7.6 million increased by $770,000, or 11.3%, from $6.8 million in the prior year period.

* Private wealth management fee income increased $666,000, or 30.2%, to $2.9 million. Private wealth and trust assets under management and administration measured a record $2.921 billion at December 31, 2021, up $671.7 million, or 29.9%.

* Loan fees of $679,000 increased by $267,000, or 64.8%, primarily due to an increase in conventional, SBA, and floorplan financing activity generating additional processing and service fee income.

* Gains on sale of SBA loans decreased $258,000 to $1.0 million. Management believes SBA 7a loan production, while variable based on timing of closings, will continue to increase annually at a measured pace.

* Commercial loan interest rate swap fee income was $684,000, compared to $1.1 million in the year-ago period. Swap fee income varies from period to period based on client demand and the interest rate environment in any given quarter.

* Other fee income increased $353,000, or 38.6%, to $1.3 million compared to $914,000, primarily due to higher returns from the Company's investments in mezzanine funds.

Non-interest expense decreased $120,000, or 0.7%, to $17.5 million. Operating expense increased $53,000, or 0.3%, to $17.6 million.

* FDIC insurance decreased $269,000 from $479,000 to $210,000. The decrease was primarily due to improved asset quality and an increase in pre-tax return on average assets.

* During the fourth quarter 2020, the Corporation recognized $328,000 in expense due to the remaining impairment of a federal historic tax credit and community development entity investment, which corresponded with the recognition of $383,000 in tax credits during the quarter. No tax credit investments were recognized in the fourth quarter of 2021.

* Compensation expense increased $302,000, or 2.5%, to $12.4 million. Average FTE were 301 for both the fourth quarter of 2021 and 2020.

Total period-end loans and leases receivable, excluding net PPP loans in both periods of comparison, increased $291.5 million, or 15.2%, to $2.212 billion.

* C&I loans, excluding net PPP loans, increased $196.5 million, or 38.8%, due to an increase in both conventional and specialized lending. This above average growth rate is not sustainable and will moderate to lower double-digits as the Company's specialized lending products scale over time.

* CRE loans increased $95.5 million, or 7.0%, primarily due to an increase in non-owner-occupied real estate.

Total period-end in-market deposits increased $245.3 million, or 14.6%, to $1.928 billion and the average rate paid decreased seven basis points to 0.13%.

* Transaction and money market accounts increased $143.0 million and $112.9 million, respectively, while certificates of deposits decreased $10.6 million.

Period-end wholesale funding decreased $168.6 million to $398.4 million.

* Wholesale deposits decreased $142.9 million to $29.6 million, compared to $172.5 million, as the existing portfolio runoff was replaced by in-market deposits. The average rate paid on brokered certificates of deposit increased seven basis points to 1.03% and the weighted average original maturity decreased to 3.8 years from 4.3 years.

* FHLB advances decreased $25.7 million to $368.8 million. The average rate paid on FHLB advances was 1.30% in both periods of comparison and the weighted average original maturity increased to 5.9 years from 5.1 years.

Non-performing assets decreased to $6.5 million, or 0.25% of total assets, compared to $26.7 million, or 1.04% of total assets. Excluding net PPP loans, non-performing assets decreased to 0.25% of total assets as of December 31, 2021 compared to 1.14% one year prior.

The allowance for loan and lease losses decreased $4.2 million to $24.3 million, compared to $28.5 million.

* The allowance for loan and lease losses as a percent of total gross loans and leases was 1.09% 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 1.10% as of December 31, 2021 compared to 1.48% one year prior.

Paycheck Protection Program

As of December 31, 2021, the Company had $27.9 million in gross PPP loans outstanding and deferred processing fees outstanding of $557,000. 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 twelve months ended December 31, 2021, the Company recognized $892,000 and $7.3 million of processing fees in loans and leases interest income in the unaudited Consolidated Statements of Income, respectively, compared to $3.3 million and $5.3 million for three and twelve months ended December 30, 2020, respectively. 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 be 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.

Share Repurchase Program Update

During the fourth quarter the Company repurchased a total of 24,631 shares for approximately $716,000 at an average cost of $29.05 per share. The Company had no repurchase authority remaining as of December 31, 2021 in its previously disclosed share repurchase program.

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 the Company's 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 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.

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

Assets

Cash and cash $ 57,110 $ 110,624 $ 389,977 $ 58,874 $ 56,909 equivalents

Securitiesavailable-for-sale, 205,702 194,056 171,219 173,261 183,925 at fair value

Securitiesheld-to-maturity, 19,746 21,196 22,382 24,783 26,374 at amortized cost

Loans held for sale 3,570 5,603 6,059 6,576 8,695

Loans and leases 2,239,408 2,123,306 2,143,561 2,235,112 2,145,970 receivable

Allowance for loan (24,336 ) (24,676 ) (25,675 ) (28,982 ) (28,521 )and lease losses

Loans and leases 2,215,072 2,098,630 2,117,886 2,206,130 2,117,449 receivable, net

Premises and 1,694 1,700 1,747 1,923 1,998 equipment, net

Foreclosed 164 172 179 31 34 properties

Right-of-use assets 4,910 5,263 5,472 5,486 5,814

Bank-owned life 53,600 53,244 52,887 52,537 52,188 insurance

Federal Home Loan 13,336 12,351 13,451 14,941 13,578 Bank stock, at cost

Goodwill and other 12,268 12,229 12,178 12,055 12,018 intangible assets

Derivatives 26,343 28,678 32,377 26,104 49,377

Accrued interestreceivable and 39,390 40,664 39,855 38,017 39,478 other assets

Total assets $ 2,652,905 $ 2,584,410 $ 2,865,669 $ 2,620,718 $ 2,567,837

Liabilities andStockholders' Equity

In-market deposits $ 1,928,285 $ 1,829,644 $ 2,016,215 $ 1,737,226 $ 1,683,008

Wholesale deposits 29,638 74,638 144,492 165,492 172,508

Total deposits 1,957,923 1,904,282 2,160,707 1,902,718 1,855,516

Federal Home LoanBank advances and 403,451 394,090 420,113 448,417 419,167 other borrowings

Junior subordinated 10,076 10,072 10,069 10,065 10,062 notes

Lease liabilities 5,406 5,780 6,005 6,040 6,386

Derivatives 28,283 31,890 36,109 29,565 54,927

Accrued interestpayable and other 15,344 13,016 11,214 9,422 15,617 liabilities

Total liabilities 2,420,483 2,359,130 2,644,217 2,406,227 2,361,675

Total stockholders' 232,422 225,280 221,452 214,491 206,162 equity

Total liabilitiesand stockholders' $ 2,652,905 $ 2,584,410 $ 2,865,669 $ 2,620,718 $ 2,567,837 equity

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 31,2021

September 30,2021

June 30,2021

March 31,2021

December 31,2020

December 31,2021

December 31,2020

Total interest income

$

23,576

$

24,014

$

24,599

$

23,806

$

25,770

$

95,995

$

94,179

Total interest expense

2,652

2,791

2,947

2,943

3,258

11,333

17,108

Net interest income

20,924

21,223

21,652

20,863

22,512

84,662

77,071

Provision for loan and lease losses

(508

)

(2,269

)

(958

)

(2,068

)

4,322

(5,803

)

16,808

Net interest income after provision for loan and lease losses

21,432

23,492

22,610

22,931

18,190

90,465

60,263

Private wealth management service fees

2,874

2,759

2,744

2,407

2,208

10,784

8,611

Gain on sale of SBA loans

1,042

721

1,203

1,078

1,300

4,044

2,899

Service charges on deposits

1,023

956

941

917

887

3,837

3,415

Loan fees

679

713

569

545

412

2,506

1,826

Net gain (loss) on sale of securities

-

-

29

-

-

29

(4

)

Swap fees

684

-

-

684

1,078

1,368

6,860

Other non-interest income

1,267

1,866

835

1,564

914

5,532

3,333

Total non-interest income

7,569

7,015

6,321

7,195

6,799

28,100

26,940

Compensation

12,447

13,351

13,255

12,657

12,145

51,710

45,850

Occupancy

551

544

533

552

556

2,180

2,252

Professional fees

933

1,024

913

866

909

3,736

3,530

Data processing

773

746

798

770

668

3,087

2,734

Marketing

548

572

511

391

411

2,022

1,580

Equipment

223

260

261

246

294

990

1,199

Computer software

1,017

999

1,129

1,115

1,028

4,260

3,900

FDIC insurance

210

291

280

362

479

1,143

1,238

Collateral liquidation cost

40

47

84

94

47

265

328

Net loss (gain) on foreclosed properties

7

6

(1

)

3

54

15

383

Tax credit investment impairment

-

-

-

-

328

-

2,395

SBA recourse (benefit) provision

(122

)

(69

)

245

(130

)

(330

)

(76

)

(278

)

Loss on early extinguishment of debt

-

-

-

-

-

-

744

Other non-interest expense

904

719

176

404

1,062

2,203

3,043

Total non-interest expense

17,531

18,490

18,184

17,330

17,651

71,535

68,898

Income before income tax expense

11,470

12,017

10,747

12,796

7,338

47,030

18,305

Income tax expense

2,879

2,819

2,512

3,065

1,254

11,275

1,327

Net income

$

8,591

$

9,198

$

8,235

$

9,731

$

6,084

$

35,755

$

16,978

Per common share:

Basic earnings

$

1.01

$

1.07

$

0.95

$

1.12

$

0.71

$

4.17

$

1.97

Diluted earnings

1.01

1.07

0.95

1.12

0.71

4.17

1.97

Dividends declared

0.18

0.18

0.18

0.18

0.165

0.72

0.66

Book value

27.48

26.56

25.70

24.83

24.06

27.48

24.06

Tangible book value

26.03

25.11

24.28

23.43

22.66

26.03

22.66

Weighted-average common shares outstanding(1)

8,228,311

8,340,042

8,385,069

8,429,149

8,417,216

8,314,921

8,384,464

Weighted-average diluted common shares outstanding(1)

8,228,311

8,340,042

8,385,069

8,429,149

8,417,216

8,314,921

8,384,464

(1) Excluding participating securities.

STATEMENTS OF INCOME

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

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

Total interest $ 23,576 $ 24,014 $ 24,599 $ 23,806 $ 25,770 $ 95,995 $ 94,179 income

Total interest 2,652 2,791 2,947 2,943 3,258 11,333 17,108 expense

Net interest 20,924 21,223 21,652 20,863 22,512 84,662 77,071 income

Provision forloan and lease (508 ) (2,269 ) (958 ) (2,068 ) 4,322 (5,803 ) 16,808 losses

Net interestincome afterprovision for 21,432 23,492 22,610 22,931 18,190 90,465 60,263 loan and leaselosses

Private wealthmanagement 2,874 2,759 2,744 2,407 2,208 10,784 8,611 service fees

Gain on sale of 1,042 721 1,203 1,078 1,300 4,044 2,899 SBA loans

Service charges 1,023 956 941 917 887 3,837 3,415 on deposits

Loan fees 679 713 569 545 412 2,506 1,826

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

Swap fees 684 - - 684 1,078 1,368 6,860

Othernon-interest 1,267 1,866 835 1,564 914 5,532 3,333 income

Totalnon-interest 7,569 7,015 6,321 7,195 6,799 28,100 26,940 income

Compensation 12,447 13,351 13,255 12,657 12,145 51,710 45,850

Occupancy 551 544 533 552 556 2,180 2,252

Professional 933 1,024 913 866 909 3,736 3,530 fees

Data processing 773 746 798 770 668 3,087 2,734

Marketing 548 572 511 391 411 2,022 1,580

Equipment 223 260 261 246 294 990 1,199

Computer 1,017 999 1,129 1,115 1,028 4,260 3,900 software

FDIC insurance 210 291 280 362 479 1,143 1,238

Collateral 40 47 84 94 47 265 328 liquidation cost

Net loss (gain)on foreclosed 7 6 (1 ) 3 54 15 383 properties

Tax creditinvestment - - - - 328 - 2,395 impairment

SBA recourse(benefit) (122 ) (69 ) 245 (130 ) (330 ) (76 ) (278 )provision

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

Othernon-interest 904 719 176 404 1,062 2,203 3,043 expense

Totalnon-interest 17,531 18,490 18,184 17,330 17,651 71,535 68,898 expense

Income beforeincome tax 11,470 12,017 10,747 12,796 7,338 47,030 18,305 expense

Income tax 2,879 2,819 2,512 3,065 1,254 11,275 1,327 expense

Net income $ 8,591 $ 9,198 $ 8,235 $ 9,731 $ 6,084 $ 35,755 $ 16,978



Per common share:

Basic earnings $ 1.01 $ 1.07 $ 0.95 $ 1.12 $ 0.71 $ 4.17 $ 1.97

Diluted earnings 1.01 1.07 0.95 1.12 0.71 4.17 1.97

Dividends 0.18 0.18 0.18 0.18 0.165 0.72 0.66 declared

Book value 27.48 26.56 25.70 24.83 24.06 27.48 24.06

Tangible book 26.03 25.11 24.28 23.43 22.66 26.03 22.66 value

Weighted-averagecommon shares 8,228,311 8,340,042 8,385,069 8,429,149 8,417,216 8,314,921 8,384,464 outstanding^(1)

Weighted-averagediluted common 8,228,311 8,340,042 8,385,069 8,429,149 8,417,216 8,314,921 8,384,464 sharesoutstanding^(1)

(1) Excluding participating securities.

NET INTEREST INCOME ANALYSIS

(Unaudited)

For the Three Months Ended

(Dollars in thousands)

December 31, 2021

September 30, 2021

December 31, 2020

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)

$

1,417,498

$

13,225

3.73

%

$

1,388,236

$

13,090

3.77

%

$

1,353,333

$

12,875

3.81

%

Commercial and industrial loans(1)

702,108

8,711

4.96

%

680,563

9,259

5.44

%

768,869

11,149

5.80

%

Direct financing leases(1)

17,662

200

4.53

%

18,611

207

4.45

%

25,071

278

4.44

%

Consumer and other loans(1)

42,501

376

3.54

%

43,689

391

3.58

%

38,389

355

3.70

%

Total loans and leases receivable(1)

2,179,769

22,512

4.13

%

2,131,099

22,947

4.31

%

2,185,662

24,657

4.51

%

Mortgage-related securities(2)

170,002

677

1.59

%

154,372

659

1.71

%

170,400

742

1.74

%

Other investment securities(3)

49,927

209

1.67

%

45,196

196

1.73

%

39,647

183

1.85

%

FHLB stock

12,345

155

5.02

%

13,279

167

5.03

%

14,608

179

4.90

%

Short-term investments

59,970

23

0.15

%

116,621

45

0.15

%

31,418

9

0.11

%

Total interest-earning assets

2,472,013

23,576

3.81

%

2,460,567

24,014

3.90

%

2,441,735

25,770

4.22

%

Non-interest-earning assets

140,892

147,631

162,010

Total assets

$

2,612,905

$

2,608,198

$

2,603,745

Interest-bearing liabilities

Transaction accounts

$

497,743

239

0.19

%

$

509,089

251

0.20

%

$

482,670

250

0.21

%

Money market

749,247

321

0.17

%

703,460

306

0.17

%

655,581

287

0.18

%

Certificates of deposit

42,507

36

0.34

%

42,370

71

0.67

%

78,693

308

1.57

%

Wholesale deposits

62,342

161

1.03

%

89,135

206

0.92

%

171,718

414

0.96

%

Total interest-bearing deposits

1,351,839

757

0.22

%

1,344,054

834

0.25

%

1,388,662

1,259

0.36

%

FHLB advances

353,637

1,149

1.30

%

381,061

1,228

1.29

%

404,174

1,309

1.30

%

Federal Reserve PPPLF

-

-

-

%

-

-

-

%

10,297

9

0.35

%

Other borrowings

35,270

466

5.28

%

32,630

449

5.50

%

24,419

400

6.55

%

Junior subordinated notes

10,073

280

11.12

%

10,070

280

11.12

%

10,059

281

11.17

%

Total interest-bearing liabilities

1,750,819

2,652

0.61

%

1,767,815

2,791

0.63

%

1,837,611

3,258

0.71

%

Non-interest-bearing demand deposit accounts

577,378

556,029

473,489

Other non-interest-bearing liabilities

56,280

59,865

88,496

Total liabilities

2,384,477

2,383,709

2,399,596

Stockholders' equity

228,428

224,489

204,149

Total liabilities and stockholders' equity

$

2,612,905

$

2,608,198

$

2,603,745

Net interest income

$

20,924

$

21,223

$

22,512

Interest rate spread

3.21

%

3.27

%

3.51

%

Net interest-earning assets

$

721,194

$

692,752

$

604,124

Net interest margin

3.39

%

3.45

%

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

(Unaudited) For the Three Months Ended

(Dollars in thousands) December 31, 2021 September 30, 2021 December 31, 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 estateand other mortgage $ 1,417,498 $ 13,225 3.73 % $ 1,388,236 $ 13,090 3.77 % $ 1,353,333 $ 12,875 3.81 %loans^(1)

Commercial and 702,108 8,711 4.96 % 680,563 9,259 5.44 % 768,869 11,149 5.80 %industrial loans^(1)

Direct financing 17,662 200 4.53 % 18,611 207 4.45 % 25,071 278 4.44 %leases^(1)

Consumer and other 42,501 376 3.54 % 43,689 391 3.58 % 38,389 355 3.70 %loans^(1)

Total loans and leases 2,179,769 22,512 4.13 % 2,131,099 22,947 4.31 % 2,185,662 24,657 4.51 %receivable^(1)

Mortgage-related 170,002 677 1.59 % 154,372 659 1.71 % 170,400 742 1.74 %securities^(2)

Other investment 49,927 209 1.67 % 45,196 196 1.73 % 39,647 183 1.85 %securities^(3)

FHLB stock 12,345 155 5.02 % 13,279 167 5.03 % 14,608 179 4.90 %

Short-term investments 59,970 23 0.15 % 116,621 45 0.15 % 31,418 9 0.11 %

Total interest-earning 2,472,013 23,576 3.81 % 2,460,567 24,014 3.90 % 2,441,735 25,770 4.22 %assets

Non-interest-earning 140,892 147,631 162,010 assets

Total assets $ 2,612,905 $ 2,608,198 $ 2,603,745

Interest-bearing liabilities

Transaction accounts $ 497,743 239 0.19 % $ 509,089 251 0.20 % $ 482,670 250 0.21 %

Money market 749,247 321 0.17 % 703,460 306 0.17 % 655,581 287 0.18 %

Certificates of 42,507 36 0.34 % 42,370 71 0.67 % 78,693 308 1.57 %deposit

Wholesale deposits 62,342 161 1.03 % 89,135 206 0.92 % 171,718 414 0.96 %

Total interest-bearing 1,351,839 757 0.22 % 1,344,054 834 0.25 % 1,388,662 1,259 0.36 %deposits

FHLB advances 353,637 1,149 1.30 % 381,061 1,228 1.29 % 404,174 1,309 1.30 %

Federal Reserve PPPLF - - - % - - - % 10,297 9 0.35 %

Other borrowings 35,270 466 5.28 % 32,630 449 5.50 % 24,419 400 6.55 %

Junior subordinated 10,073 280 11.12 % 10,070 280 11.12 % 10,059 281 11.17 %notes

Total interest-bearing 1,750,819 2,652 0.61 % 1,767,815 2,791 0.63 % 1,837,611 3,258 0.71 %liabilities

Non-interest-bearingdemand deposit 577,378 556,029 473,489 accounts

Othernon-interest-bearing 56,280 59,865 88,496 liabilities

Total liabilities 2,384,477 2,383,709 2,399,596

Stockholders' equity 228,428 224,489 204,149

Total liabilities and $ 2,612,905 $ 2,608,198 $ 2,603,745 stockholders' equity

Net interest income $ 20,924 $ 21,223 $ 22,512

Interest rate spread 3.21 % 3.27 % 3.51 %

Net interest-earning $ 721,194 $ 692,752 $ 604,124 assets

Net interest margin 3.39 % 3.45 % 3.69 %

(1) The average balances of loans and leases include non-accrual loans andleases and loans held for sale. Interest income related to non-accrual loansand leases is recognized when collected. Interest income includes net loan feescollected in lieu of interest.(2) Includes amortized cost basis of assets available for sale and held tomaturity.(3) Yields on tax-exempt municipal obligations are not presented on atax-equivalent basis in this table.(4) Represents annualized yields/rates.NET INTEREST INCOME ANALYSIS

(Unaudited)

For the Year Ended

(Dollars in thousands)

December 31, 2021

December 31, 2020

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)

$

1,387,434

$

51,930

3.74

%

$

1,245,886

$

51,188

4.11

%

Commercial and industrial loans(1)

727,923

37,470

5.15

%

701,328

35,487

5.06

%

Direct financing leases(1)

19,591

872

4.45

%

26,564

1,039

3.91

%

Consumer and other loans(1)

44,206

1,572

3.56

%

37,544

1,446

3.85

%

Total loans and leases receivable(1)

2,179,154

91,844

4.21

%

2,011,322

89,160

4.43

%

Mortgage-related securities(2)

159,242

2,633

1.65

%

173,084

3,548

2.05

%

Other investment securities(3)

44,739

777

1.74

%

31,809

639

2.01

%

FHLB stock

13,066

651

4.98

%

11,576

671

5.80

%

Short-term investments

64,308

90

0.14

%

37,314

161

0.43

%

Total interest-earning assets

2,460,509

95,995

3.90

%

2,265,105

94,179

4.16

%

Non-interest-earning assets

144,499

154,511

Total assets

$

2,605,008

$

2,419,616

Interest-bearing liabilities

Transaction accounts

$

506,693

988

0.19

%

$

392,577

1,448

0.37

%

Money market

693,608

1,183

0.17

%

651,402

2,842

0.44

%

Certificates of deposit

47,020

396

0.84

%

111,698

2,198

1.97

%

Wholesale deposits

119,831

986

0.82

%

142,591

2,434

1.71

%

Total interest-bearing deposits

1,367,152

3,553

0.26

%

1,298,268

8,922

0.69

%

FHLB advances

376,781

4,908

1.30

%

379,891

5,507

1.45

%

Federal Reserve PPPLF

-

-

-

%

15,207

54

0.36

%

Other borrowings

31,935

1,759

5.51

%

24,472

1,509

6.17

%

Junior subordinated notes

10,068

1,113

11.05

%

10,054

1,116

11.10

%

Total interest-bearing liabilities

1,785,936

11,333

0.63

%

1,727,892

17,108

0.99

%

Non-interest-bearing demand deposit accounts

536,981

412,825

Other non-interest-bearing liabilities

61,580

82,337

Total liabilities

2,384,497

2,223,054

Stockholders' equity

220,511

196,562

Total liabilities and stockholders' equity

$

2,605,008

$

2,419,616

Net interest income

$

84,662

$

77,071

Interest rate spread

3.27

%

3.17

%

Net interest-earning assets

$

674,573

$

537,213

Net interest margin

3.44

%

3.40

%

(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

(Unaudited) For the Year Ended

(Dollars in December 31, 2021 December 31, 2020thousands)

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

Interest-earning assets

Commercial realestate and other $ 1,387,434 $ 51,930 3.74 % $ 1,245,886 $ 51,188 4.11 %mortgage loans^(1)

Commercial and 727,923 37,470 5.15 % 701,328 35,487 5.06 %industrial loans^(1)

Direct financing 19,591 872 4.45 % 26,564 1,039 3.91 %leases^(1)

Consumer and other 44,206 1,572 3.56 % 37,544 1,446 3.85 %loans^(1)

Total loans andleases receivable^ 2,179,154 91,844 4.21 % 2,011,322 89,160 4.43 %(1)

Mortgage-related 159,242 2,633 1.65 % 173,084 3,548 2.05 %securities^(2)

Other investment 44,739 777 1.74 % 31,809 639 2.01 %securities^(3)

FHLB stock 13,066 651 4.98 % 11,576 671 5.80 %

Short-term 64,308 90 0.14 % 37,314 161 0.43 %investments

Totalinterest-earning 2,460,509 95,995 3.90 % 2,265,105 94,179 4.16 %assets

Non-interest-earning 144,499 154,511 assets

Total assets $ 2,605,008 $ 2,419,616

Interest-bearing liabilities

Transaction accounts $ 506,693 988 0.19 % $ 392,577 1,448 0.37 %

Money market 693,608 1,183 0.17 % 651,402 2,842 0.44 %

Certificates of 47,020 396 0.84 % 111,698 2,198 1.97 %deposit

Wholesale deposits 119,831 986 0.82 % 142,591 2,434 1.71 %

Totalinterest-bearing 1,367,152 3,553 0.26 % 1,298,268 8,922 0.69 %deposits

FHLB advances 376,781 4,908 1.30 % 379,891 5,507 1.45 %

Federal Reserve - - - % 15,207 54 0.36 %PPPLF

Other borrowings 31,935 1,759 5.51 % 24,472 1,509 6.17 %

Junior subordinated 10,068 1,113 11.05 % 10,054 1,116 11.10 %notes

Totalinterest-bearing 1,785,936 11,333 0.63 % 1,727,892 17,108 0.99 %liabilities

Non-interest-bearingdemand deposit 536,981 412,825 accounts

Othernon-interest-bearing 61,580 82,337 liabilities

Total liabilities 2,384,497 2,223,054

Stockholders' equity 220,511 196,562

Total liabilitiesand stockholders' $ 2,605,008 $ 2,419,616 equity

Net interest income $ 84,662 $ 77,071

Interest rate spread 3.27 % 3.17 %

Net interest-earning $ 674,573 $ 537,213 assets

Net interest margin 3.44 % 3.40 %

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

(2) Includes amortized cost basis of assets available for sale and held tomaturity.

(3) Yields on tax-exempt municipal obligations are not presented on atax-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 Year Ended

(Dollars in thousands)

December 31,2021

September 30,2021

June 30,2021

March 31,2021

December 31,2020

December 31,2021

December 31,2020

Change in general reserve due to subjective factor changes

$

(805

)

$

(51

)

$

(652

)

$

1,082

$

1,008

$

(426

)

$

5,460

Change in general reserve due to historical loss factor changes

(862

)

(923

)

(1,687

)

(984

)

1,274

(4,456

)

949

Charge-offs

106

364

2,894

144

6,685

3,508

8,139

Recoveries

(274

)

(1,634

)

(545

)

(2,673

)

(68

)

(5,126

)

(332

)

Change in specific reserves on impaired loans, net

(64

)

(451

)

(1,466

)

(194

)

(5,216

)

(2,175

)

316

Change due to loan growth, net

1,391

426

498

557

639

2,872

2,276

Total provision for loan and lease losses

$

(508

)

$

(2,269

)

$

(958

)

$

(2,068

)

$

4,322

$

(5,803

)

$

16,808

PROVISION FOR LOAN AND LEASE LOSS COMPOSITION

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

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

Change ingeneralreserve dueto $ (805 ) $ (51 ) $ (652 ) $ 1,082 $ 1,008 $ (426 ) $ 5,460 subjectivefactorchanges

Change ingeneralreserve dueto (862 ) (923 ) (1,687 ) (984 ) 1,274 (4,456 ) 949 historicalloss factorchanges

Charge-offs 106 364 2,894 144 6,685 3,508 8,139

Recoveries (274 ) (1,634 ) (545 ) (2,673 ) (68 ) (5,126 ) (332 )

Change inspecificreserves on (64 ) (451 ) (1,466 ) (194 ) (5,216 ) (2,175 ) 316 impairedloans, net

Change dueto loan 1,391 426 498 557 639 2,872 2,276 growth, net

Totalprovisionfor loan $ (508 ) $ (2,269 ) $ (958 ) $ (2,068 ) $ 4,322 $ (5,803 ) $ 16,808 and leaselosses

PERFORMANCE RATIOS

For the Three Months Ended

For the Year Ended

(Unaudited)

December 31,2021

September 30,2021

June 30,2021

March 31,2021

December 31,2020

December 31,2021

December 31,2020

Return on average assets (annualized)

1.32

%

1.41

%

1.26

%

1.51

%

0.93

%

1.37

%

0.70

%

Return on average equity (annualized)

15.04

%

16.39

%

15.09

%

18.48

%

11.92

%

16.21

%

8.64

%

Efficiency ratio

61.92

%

65.68

%

64.17

%

62.19

%

60.02

%

63.49

%

63.09

%

Interest rate spread

3.21

%

3.27

%

3.31

%

3.27

%

3.51

%

3.27

%

3.17

%

Net interest margin

3.39

%

3.45

%

3.49

%

3.44

%

3.69

%

3.44

%

3.40

%

Average interest-earning assets to average interest-bearing liabilities

141.19

%

139.19

%

136.54

%

134.23

%

132.88

%

137.77

%

131.09

%

PERFORMANCE RATIOS

For the Three Months Ended For the Year Ended

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

Return onaverage assets 1.32 % 1.41 % 1.26 % 1.51 % 0.93 % 1.37 % 0.70 %(annualized)

Return onaverage equity 15.04 % 16.39 % 15.09 % 18.48 % 11.92 % 16.21 % 8.64 %(annualized)

Efficiency ratio 61.92 % 65.68 % 64.17 % 62.19 % 60.02 % 63.49 % 63.09 %

Interest rate 3.21 % 3.27 % 3.31 % 3.27 % 3.51 % 3.27 % 3.17 %spread

Net interest 3.39 % 3.45 % 3.49 % 3.44 % 3.69 % 3.44 % 3.40 %margin

Averageinterest-earningassets to 141.19 % 139.19 % 136.54 % 134.23 % 132.88 % 137.77 % 131.09 %averageinterest-bearingliabilities

ASSET QUALITY RATIOS

(Unaudited)

As of

(Dollars in thousands)

December 31,2021

September 30,2021

June 30,2021

March 31,2021

December 31,2020

Non-accrual loans and leases

$

6,358

$

7,433

$

11,422

$

18,992

$

26,617

Foreclosed properties

164

172

179

31

34

Total non-performing assets

6,522

7,605

11,601

19,023

26,651

Performing troubled debt restructurings

217

53

56

59

46

Total impaired assets

$

6,739

$

7,658

$

11,657

$

19,082

$

26,697

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

0.28

%

0.35

%

0.53

%

0.85

%

1.24

%

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

0.29

%

0.36

%

0.54

%

0.85

%

1.24

%

Non-performing assets as a percent of total assets

0.25

%

0.29

%

0.40

%

0.73

%

1.04

%

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

1.09

%

1.16

%

1.20

%

1.29

%

1.33

%

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

382.76

%

331.98

%

224.79

%

152.60

%

107.15

%

ASSET QUALITY RATIOS

(Unaudited) As of

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

Non-accrualloans and $ 6,358 $ 7,433 $ 11,422 $ 18,992 $ 26,617 leases

Foreclosed 164 172 179 31 34 properties

Totalnon-performing 6,522 7,605 11,601 19,023 26,651 assets

Performingtroubled debt 217 53 56 59 46 restructurings

Total impaired $ 6,739 $ 7,658 $ 11,657 $ 19,082 $ 26,697 assets



Non-accrualloans andleases as apercent of 0.28 % 0.35 % 0.53 % 0.85 % 1.24 %total grossloans andleases

Non-performingassets as apercent oftotal gross 0.29 % 0.36 % 0.54 % 0.85 % 1.24 %loans andleases plusforeclosedproperties

Non-performingassets as a 0.25 % 0.29 % 0.40 % 0.73 % 1.04 %percent oftotal assets

Allowance forloan and leaselosses as apercent of 1.09 % 1.16 % 1.20 % 1.29 % 1.33 %total grossloans andleases

Allowance forloan and leaselosses as apercent of 382.76 % 331.98 % 224.79 % 152.60 % 107.15 %non-accrualloans andleases

ASSET QUALITY RATIOS - EXCLUDING NET PPP LOANS

(Unaudited)

As of

(Dollars in thousands)

December 31,2021

September 30,2021

June 30,2021

March 31,2021

December 31,2020

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

0.29

%

0.36

%

0.56

%

0.96

%

1.38

%

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

0.29

%

0.37

%

0.57

%

0.96

%

1.38

%

Non-performing assets as a percent of total assets

0.25

%

0.30

%

0.42

%

0.81

%

1.14

%

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

1.10

%

1.20

%

1.27

%

1.47

%

1.48

%

PPP loans outstanding, net

$

27,297

$

64,454

$

120,723

$

267,567

$

225,323

ASSET QUALITY RATIOS - EXCLUDING NET PPP LOANS

(Unaudited) As of

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

Non-accrualloans andleases as apercent of 0.29 % 0.36 % 0.56 % 0.96 % 1.38 %total grossloans andleases

Non-performingassets as apercent oftotal gross 0.29 % 0.37 % 0.57 % 0.96 % 1.38 %loans andleases plusforeclosedproperties

Non-performingassets as a 0.25 % 0.30 % 0.42 % 0.81 % 1.14 %percent oftotal assets

Allowance forloan and leaselosses as apercent of 1.10 % 1.20 % 1.27 % 1.47 % 1.48 %total grossloans andleases

PPP loansoutstanding, $ 27,297 $ 64,454 $ 120,723 $ 267,567 $ 225,323 net

NET CHARGE-OFFS (RECOVERIES)

(Unaudited)

For the Three Months Ended

For the Year Ended

(Dollars in thousands)

December 31,2021

September 30,2021

June 30,2021

March 31,2021

December 31,2020

December 31,2021

December 31,2020

Charge-offs

$

106

$

364

$

2,894

$

144

$

6,685

$

3,508

$

8,139

Recoveries

(274

)

(1,634

)

(545

)

(2,673

)

(68

)

(5,126

)

(332

)

Net (recoveries) charge-offs

$

(168

)

$

(1,270

)

$

2,349

$

(2,529

)

$

6,617

$

(1,618

)

$

7,807

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

(0.03

)%

(0.24

)%

0.42

%

(0.46

)%

1.21

%

(0.07

)%

0.39

%

Annualized (recoveries) charge-offs as a percent of average gross loans and leases, excluding average net PPP loans

(0.03

)%

(0.25

)%

0.47

%

(0.52

)%

1.39

%

(0.08

)%

0.43

%

Average PPP loans outstanding, net

$

52,923

$

87,517

$

229,165

$

242,242

$

282,259

$

152,264

$

215,025

NET CHARGE-OFFS (RECOVERIES)

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

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

Charge-offs $ 106 $ 364 $ 2,894 $ 144 $ 6,685 $ 3,508 $ 8,139

Recoveries (274 ) (1,634 ) (545 ) (2,673 ) (68 ) (5,126 ) (332 )

Net(recoveries) $ (168 ) $ (1,270 ) $ 2,349 $ (2,529 ) $ 6,617 $ (1,618 ) $ 7,807 charge-offs

Net(recoveries)charge-offsas a percent (0.03 ) (0.24 ) 0.42 % (0.46 ) 1.21 % (0.07 ) 0.39 %of average % % % %gross loansand leases(annualized)

Annualized(recoveries)charge-offsas a percentof average (0.03 ) (0.25 ) 0.47 % (0.52 ) 1.39 % (0.08 ) 0.43 %gross loans % % % %and leases,excludingaverage netPPP loans

Average PPPloans $ 52,923 $ 87,517 $ 229,165 $ 242,242 $ 282,259 $ 152,264 $ 215,025 outstanding,net

CAPITAL RATIOS

As of and for the Three Months Ended

(Unaudited)

December 31,2021

September 30,2021

June 30,2021

March 31,2021

December 31,2020

Total capital to risk-weighted assets

10.82

%

11.14

%

11.22

%

11.52

%

11.25

%

Tier I capital to risk-weighted assets

8.94

%

9.14

%

9.14

%

9.24

%

8.96

%

Common equity tier I capital to risk-weighted assets

8.55

%

8.73

%

8.72

%

8.81

%

8.53

%

Tier I capital to adjusted assets

8.94

%

8.69

%

8.48

%

8.37

%

7.99

%

Tangible common equity to tangible assets

8.34

%

8.28

%

7.33

%

7.76

%

7.60

%

Tangible common equity to tangible assets, excluding net PPP loans

8.42

%

8.50

%

7.66

%

8.65

%

8.33

%

CAPITAL RATIOS

As of and for the Three Months Ended

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

Total capital to 10.82 % 11.14 % 11.22 % 11.52 % 11.25 %risk-weighted assets

Tier I capital to 8.94 % 9.14 % 9.14 % 9.24 % 8.96 %risk-weighted assets

Common equity tier Icapital to risk-weighted 8.55 % 8.73 % 8.72 % 8.81 % 8.53 %assets

Tier I capital to 8.94 % 8.69 % 8.48 % 8.37 % 7.99 %adjusted assets

Tangible common equity to 8.34 % 8.28 % 7.33 % 7.76 % 7.60 %tangible assets

Tangible common equity totangible assets, 8.42 % 8.50 % 7.66 % 8.65 % 8.33 %excluding net PPP loans

LOAN AND LEASE RECEIVABLE COMPOSITION

(Unaudited)

As of

(in thousands)

December 31,2021

September 30,2021

June 30,2021

March 31,2021

December 31,2020

Commercial real estate:

Commercial real estate - owner occupied

$

235,589

$

241,977

$

253,600

$

256,812

$

253,882

Commercial real estate - non-owner occupied

661,423

639,423

614,289

592,090

564,532

Land development

42,792

39,119

45,056

46,544

49,839

Construction

179,841

139,933

139,943

151,345

141,043

Multi-family

320,072

313,787

319,351

322,384

311,556

1-4 family

14,911

13,487

19,769

23,319

38,284

Total commercial real estate

1,454,628

1,387,726

1,392,008

1,392,494

1,359,136

Commercial and industrial

730,819

681,065

695,442

784,305

732,318

Direct financing leases, net

15,743

16,810

18,142

19,616

22,331

Consumer and other:

Home equity and second mortgages

4,223

4,576

5,740

6,719

7,833

Other

35,518

35,645

36,567

38,266

28,897

Total consumer and other

39,741

40,221

42,307

44,985

36,730

Total gross loans and leases receivable

2,240,931

2,125,822

2,147,899

2,241,400

2,150,515

Less:

Allowance for loan and lease losses

24,336

24,676

25,675

28,982

28,521

Deferred loan fees

1,523

2,516

4,338

6,288

4,545

Loans and leases receivable, net

$

2,215,072

$

2,098,630

$

2,117,886

$

2,206,130

$

2,117,449

LOAN AND LEASE RECEIVABLE COMPOSITION

(Unaudited) As of

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

Commercial real estate:

Commercialreal estate $ 235,589 $ 241,977 $ 253,600 $ 256,812 $ 253,882- owneroccupied

Commercialreal estate 661,423 639,423 614,289 592,090 564,532- non-owneroccupied

Land 42,792 39,119 45,056 46,544 49,839development

Construction 179,841 139,933 139,943 151,345 141,043

Multi-family 320,072 313,787 319,351 322,384 311,556

1-4 family 14,911 13,487 19,769 23,319 38,284

Totalcommercial 1,454,628 1,387,726 1,392,008 1,392,494 1,359,136real estate

Commercialand 730,819 681,065 695,442 784,305 732,318industrial

Directfinancing 15,743 16,810 18,142 19,616 22,331leases, net

Consumer and other:

Home equityand second 4,223 4,576 5,740 6,719 7,833mortgages

Other 35,518 35,645 36,567 38,266 28,897

Totalconsumer and 39,741 40,221 42,307 44,985 36,730other

Total grossloans and 2,240,931 2,125,822 2,147,899 2,241,400 2,150,515leasesreceivable

Less:

Allowancefor loan and 24,336 24,676 25,675 28,982 28,521lease losses

Deferred 1,523 2,516 4,338 6,288 4,545loan fees

Loans andleases $ 2,215,072 $ 2,098,630 $ 2,117,886 $ 2,206,130 $ 2,117,449receivable,net

DEPOSIT COMPOSITION

(Unaudited)

As of

(in thousands)

December 31,2021

September 30,2021

June 30,2021

March 31,2021

December 31,2020

Non-interest-bearing transaction accounts

$

589,559

$

526,047

$

774,253

$

496,877

$

472,818

Interest-bearing transaction accounts

530,225

517,248

511,698

561,466

503,992

Money market accounts

754,410

728,751

685,127

632,065

641,504

Certificates of deposit

54,091

57,598

45,137

46,818

64,694

Wholesale deposits

29,638

74,638

144,492

165,492

172,508

Total deposits

$

1,957,923

$

1,904,282

$

2,160,707

$

1,902,718

$

1,855,516

DEPOSIT COMPOSITION

(Unaudited) As of

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

Non-interest-bearing $ 589,559 $ 526,047 $ 774,253 $ 496,877 $ 472,818transaction accounts

Interest-bearing 530,225 517,248 511,698 561,466 503,992transaction accounts

Money market 754,410 728,751 685,127 632,065 641,504accounts

Certificates of 54,091 57,598 45,137 46,818 64,694deposit

Wholesale deposits 29,638 74,638 144,492 165,492 172,508

Total deposits $ 1,957,923 $ 1,904,282 $ 2,160,707 $ 1,902,718 $ 1,855,516

TRUST ASSETS COMPOSITION

(Unaudited)

As of

(in thousands)

December 31,2021

September 30,2021

June 30,2021

March 31,2021

December 31,2020

Trust assets under management

$

2,711,760

$

2,545,089

$

2,362,257

$

2,195,804

$

2,061,772

Trust assets under administration

208,954

202,657

202,116

190,721

187,228

Total trust assets

$

2,920,714

$

2,747,746

$

2,564,373

$

2,386,525

$

2,249,000

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.

TRUST ASSETS COMPOSITION

(Unaudited) As of

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

Trust assetsunder $ 2,711,760 $ 2,545,089 $ 2,362,257 $ 2,195,804 $ 2,061,772management

Trust assetsunder 208,954 202,657 202,116 190,721 187,228administration

Total trust $ 2,920,714 $ 2,747,746 $ 2,564,373 $ 2,386,525 $ 2,249,000assets

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, December 31, September 30, June 30, March 31, December 31,except per 2021 2021 2021 2021 2020shareamounts)

Commonstockholders' $ 232,422 $ 225,280 $ 221,452 $ 214,491 $ 206,162 equity

Goodwill andother (12,268 ) (12,229 ) (12,178 ) (12,055 ) (12,018 )intangibleassets

Tangible $ 220,154 $ 213,051 $ 209,274 $ 202,436 $ 194,144 common equity

Common shares 8,457,564 8,483,099 8,617,761 8,638,195 8,566,960 outstanding

Book value $ 27.48 $ 26.56 $ 25.70 $ 24.83 $ 24.06 per share

Tangible bookvalue per 26.03 25.11 24.28 23.43 22.66 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 December 31, September 30, June 30, March 31, December 31,thousands) 2021 2021 2021 2021 2020

Commonstockholders' $ 232,422 $ 225,280 $ 221,452 $ 214,491 $ 206,162 equity

Goodwill andother (12,268 ) (12,229 ) (12,178 ) (12,055 ) (12,018 )intangibleassets

Tangible $ 220,154 $ 213,051 $ 209,274 $ 202,436 $ 194,144 common equity

Total assets $ 2,652,905 $ 2,584,410 $ 2,865,669 $ 2,620,718 $ 2,567,837

Goodwill andother (12,268 ) (12,229 ) (12,178 ) (12,055 ) (12,018 )intangibleassets

Tangible $ 2,640,637 $ 2,572,181 $ 2,853,491 $ 2,608,663 $ 2,555,819 assets

Tangiblecommon equity 8.34 % 8.28 % 7.33 % 7.76 % 7.60 %to tangibleassets

Period-end 27,297 64,454 120,722 267,567 225,323 net PPP loans

Tangibleassets, $ 2,613,340 $ 2,507,727 $ 2,732,769 $ 2,341,096 $ 2,330,496 excluding netPPP loans

Tangiblecommon equityto tangible 8.42 % 8.50 % 7.66 % 8.65 % 8.33 %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 Year Ended

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

Totalnon-interest $ 17,531 $ 18,490 $ 18,184 $ 17,330 $ 17,651 $ 71,535 $ 68,898 expense

Less:

Net loss(gain) on 7 6 (1 ) 3 54 15 383 foreclosedproperties

Amortizationof other 2 7 8 8 8 25 35 intangibleassets

SBA recourse(benefit) (122 ) (69 ) 245 (130 ) (330 ) (76 ) (278 )provision

Tax creditinvestment - - - - 328 - 2,395 impairment

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

Totaloperating $ 17,644 $ 18,546 $ 17,932 $ 17,449 $ 17,591 $ 71,571 $ 65,619 expense ^(a)

Net interest $ 20,924 $ 21,223 $ 21,652 $ 20,863 $ 22,512 $ 84,662 $ 77,071 income

Totalnon-interest 7,569 7,015 6,321 7,195 6,799 28,100 26,940 income

Less:

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

Adjustednon-interest 7,569 7,015 6,292 7,195 6,799 28,071 26,944 income

Totaloperating $ 28,493 $ 28,238 $ 27,944 $ 28,058 $ 29,311 $ 112,733 $ 104,015 revenue ^(b)

Efficiency 61.92 % 65.68 % 64.17 % 62.19 % 60.02 % 63.49 % 63.09 %ratio



Pre-tax,pre-provisionadjusted $ 10,849 $ 9,692 $ 10,012 $ 10,609 $ 11,720 $ 41,162 $ 38,396 earnings ^(b -a)

Average total $ 2,612,905 $ 2,608,198 $ 2,621,340 $ 2,577,164 $ 2,603,745 $ 2,605,008 $ 2,419,616 assets

Pre-tax,pre-provisionadjusted 1.66 % 1.49 % 1.53 % 1.65 % 1.80 % 1.58 % 1.59 %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 Year Ended

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

Interest income $ 23,576 $ 24,014 $ 24,599 $ 23,806 $ 25,770 $ 95,995 $ 94,179

Interest expense 2,652 2,791 2,947 2,943 3,258 11,333 17,108

Net interest 20,924 21,223 21,652 20,863 22,512 84,662 77,071 income ^(a)

Less:

Fees in lieu of 1,700 2,839 3,536 3,085 4,749 11,160 9,315 interest

PPP loan 134 221 566 603 718 1,524 2,198 interest income

FRB interestincome and FHLB 179 212 192 158 188 741 789 dividend income

Add:

FRB PPPLF - - - - 9 - 54 interest expense

Adjusted netinterest income $ 18,911 $ 17,951 $ 17,358 $ 17,017 $ 16,866 $ 71,237 $ 64,823 ^(b)

Averageinterest-earning $ 2,472,013 $ 2,460,567 $ 2,483,447 $ 2,425,499 $ 2,441,735 $ 2,460,509 $ 2,265,105 assets ^(c)

Less:

Average net PPP 52,923 87,517 229,165 242,242 282,259 152,264 215,025 loans

Average FRB cash 71,939 129,469 68,503 36,643 45,611 76,880 46,595 and FHLB stock

Averagenon-accrual 6,796 11,298 16,744 22,069 36,013 14,172 27,656 loans and leases

Adjusted averageinterest-earning $ 2,340,355 $ 2,232,283 $ 2,169,035 $ 2,124,545 $ 2,077,852 $ 2,217,193 $ 1,975,829 assets ^(d)

Net interest 3.39 % 3.45 % 3.49 % 3.44 % 3.69 % 3.44 % 3.40 %margin^ (a / c)

Adjusted netinterest margin^ 3.23 % 3.22 % 3.20 % 3.20 % 3.25 % 3.21 % 3.28 %(b / d)

View source version on businesswire.com: https://www.businesswire.com/news/home/20220127005900/en/

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