What changed in this filing

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Item 1. Financial Statements

2024-07-26 compared with 2024-04-26 · 343 added, 525 removed, 701 unchanged (55% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

2024 December 31,

(In Thousands, Except Share Data)

5 unchanged sentences

Loans held for sale

Loans and leases receivable, net of allowance for credit losses of $ 32,799 and $ 31,275 , respectively

2,878,065 2,818,986

Loans and leases receivable, net of allowance for credit losses of $ 33,088

and $ 31,275 , respectively

Premises and equipment, net

4 unchanged sentences

Goodwill and other intangible assets

Derivatives 69,703 55,597

Accrued interest receivable and other assets

Total assets $ 3,531,358 $ 3,507,846

Liabilities and Stockholders’ Equity

Deposits $ 2,755,406 $ 2,796,779

Federal Home Loan Bank advances and other borrowings

Lease liabilities

Derivatives 61,133 51,949

Accrued interest payable and other liabilities

1 unchanged sentence

Stockholders’ equity:

Preferred stock, $ 0.01 par value, 2,500,000 shares authorized, 12,500 shares of 7 % non-cumulative perpetual preferred stock, Series A, outstanding at March 31, 2024 and December 31, 2023, respectively

11,992 11,992

Common stock, $ 0.01 par value, 25,000,000 shares authorized, 9,426,316 and 9,418,463 shares issued, 8,306,573 and 8,314,778 shares outstanding at March 31, 2024 and December 31, 2023, respectively

Preferred stock, $ 0.01 par value, 2,500,000 shares authorized, 12,500 shares of 7 %

non-cumulative perpetual preferred stock, Series A, outstanding at

June 30, 2024 and December 31, 2023

Common stock, $ 0.01 par value, 25,000,000 shares authorized, 9,433,759 and 9,418,463

shares issued, 8,294,589 and 8,314,778 shares outstanding at June 30, 2024

and December 31, 2023, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated other comprehensive loss

Treasury stock, 1,119,743 and 1,103,685 shares at March 31, 2024 and December 31, 2023, respectively, at cost

( 30,705 ) ( 30,126 )

Treasury stock, 1,139,170 and 1,103,685 shares at June 30, 2024

and December 31, 2023, respectively, at cost

Total stockholders’ equity

3 unchanged sentences

Consolidated Statements of Income (Unaudited)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

(In Thousands, Except Per Share Data)

1 unchanged sentence

Loans and leases

Securities 2,794 1,590

Short-term investments

1 unchanged sentence

Interest expense

Deposits 23,837 12,430

Federal Home Loan Bank advances and other borrowings

7 unchanged sentences

Service charges on deposits

Loan fees 847 803

Increase in cash surrender value of bank-owned life insurance

Net loss on sale of securities

Swap fees 198 557

Other non-interest income

1 unchanged sentence

Non-interest expense

Compensation 16,157 15,908

Occupancy 607 631

Professional fees

Data processing

Marketing 818 628

Equipment 345 295

Computer software

4 unchanged sentences

Income tax expense

Net income 8,848 8,979

Preferred stock dividend

1 unchanged sentence

Earnings per common share

Basic $ 1.04 $ 1.05

Diluted 1.04 1.05

Dividends declared per share

1 unchanged sentence

First Business Financial Services, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

For the Three Months Ended March 31,

Consolidated Statements of Comp rehensive Income (Unaudited)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

(In Thousands)

Net income $ 8,848 $ 8,979

Other comprehensive income

Other comprehensive (loss) income

Securities available-for-sale:

Unrealized securities (losses) gains arising during the period ( 2,861 ) 3,762

Unrealized securities losses arising during the period

Reclassification adjustment for net loss realized in net income

2 unchanged sentences

Interest rate swaps:

Unrealized gains (losses) on interest rate swaps arising during the period

4,922 ( 1,562 )

Income tax expense ( 529 ) ( 563 )

Total other comprehensive income 1,541 1,639

Unrealized gains on interest rate swaps arising during the period

Income tax (expense) benefit

Total other comprehensive (loss) income

Comprehensive income

2 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

Common Shares Outstanding Preferred Stock Common

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Loss Treasury

(In Thousands, Except Share Data)

Balance at December 31, 2022

Cumulative change in accounting principle — — — — ( 1,353 ) — — ( 1,353 )

Cumulative change in

accounting principle

Balance at January 1, 2023

Net income — — — — 8,979 — — 8,979

Other comprehensive income

Share-based compensation - restricted shares and employee stock purchase plan ( 426 ) — — 634 — — — 634

Issuance of common stock under the employee stock purchase plan 1,005 — — 27 — — — 27

Share-based compensation -

restricted shares and employee

stock purchase plan

Issuance of common stock

under the employee stock

purchase plan

Preferred stock dividends

Cash dividends ($ 0.2275 per share)

— — — — ( 1,906 ) — — ( 1,906 )

Cash dividends ($ 0.2275

Treasury stock purchased

Balance at March 31, 2023

Common Shares Outstanding Preferred Stock Common

Stock Additional

Capital Retained

Earnings Accumulated

Other comprehensive loss

Share-based compensation -

restricted shares and employee

stock purchase plan

Issuance of common stock

under the employee stock

purchase plan

Preferred stock dividends

Cash dividends ($ 0.2275

Treasury stock purchased

Balance at June 30, 2023

Comprehensive

Loss Treasury

(In Thousands, Except Share Data)

Balance at December 31, 2023

Net income — — — — 8,848 — — 8,848

Other comprehensive income

Share-based compensation - restricted shares and employee stock purchase plan 6,940 — — 665 — — — 665

Issuance of common stock under the employee stock purchase plan 913 — — 31 — — — 31

Share-based compensation -

restricted shares and employee

stock purchase plan

Issuance of common stock

under the employee stock

purchase plan

Preferred stock dividends

Cash dividends ($ 0.2500 per share)

— — — — ( 2,087 ) — — ( 2,087 )

Cash dividends ($ 0.25

Treasury stock purchased

Balance at March 31, 2024

Other comprehensive loss

Share-based compensation -

restricted shares and employee

stock purchase plan

Issuance of common stock

under the employee stock

purchase plan

Preferred stock dividends

Cash dividends ($ 0.25

Treasury stock purchased

Balance at June 30, 2024

See accompanying Notes to Unaudited Consolidated Financial Statements.

1 unchanged sentence

Consolidated Statements of Cash Flows (Unaudited)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

(In Thousands)

Operating activities

Net income $ 8,848 $ 8,979

Adjustments to reconcile net income to net cash provided by operating activities:

4 unchanged sentences

Net loss on disposal of fixed assets

Gain on disposal of lease equipment — 1

Net loss on sale of securities

9 unchanged sentences

Net increase (decrease) in accrued interest receivable and other assets

977 ( 5,738 )

Net (decrease) increase in accrued interest payable and other liabilities

( 8,263 ) 1,766

Net cash provided by operating activities

4 unchanged sentences

Purchases of available-for-sale securities

Proceeds from sale of repossessed assets

Net increase in loans and leases

10 unchanged sentences

Financing activities

Net (decrease) increase in deposits

( 41,373 ) 308,635

Net increase in deposits

Repayment of Federal Home Loan Bank advances

7 unchanged sentences

Net (decrease) increase in cash and cash equivalents

( 67,470 ) 83,291

Cash and cash equivalents at the beginning of the period

3 unchanged sentences

Interest paid on deposits and borrowings

Net income taxes paid (received) 7 ( 7 )

Net income taxes paid

Non-cash investing and financing activities:

Transfer of loans to repossessed assets 157 —

Transfer of repossessed assets to loans

See accompany Notes to Unaudited Consolidated Financial Statements

9 unchanged sentences

The Bank is subject to competition from other financial institutions and service providers and is also subject to state and federal regulations.

As of March 31, 2024, FBB had the following wholly-owned subsidiaries:

As of June 30, 2024, FBB had the following wholly-owned subsidiaries:

First Business Specialty Finance, LLC (“FBSF”), First Madison Investment Corp.

8 unchanged sentences

Material estimates that could significantly change in the near-term include the value of securities and interest rate swaps, level of the allowance for credit losses, lease residuals, property under operating leases, goodwill, and income taxes .

The results of operations for the three months ended March 31, 2024, are not necessarily indicative of results that may be expected for any other interim period or the entire fiscal year ending December 31, 2024.

The results of operations for the three and six months ended June 30, 2024, are not necessarily indicative of results that may be expected for any other interim period or the entire fiscal year ending December 31, 2024 .

Certain amounts in prior periods may have been reclassified to conform to the current presentation.

3 unchanged sentences

Recent Accounting Pronouncements

In March 2023, the Financial Accounting Standards Board issued Accounting Standards Update No.

2023-02 “Investments-Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force).” The amendments in this Update permit reporting entities to elect to account for their tax equity investments, regardless of the program from which the income tax credits are received, using the proportional amortization method if certain conditions are met.

A reporting entity may make an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments.

The ASU is effective for annual and interim periods beginning after December 15, 2023.

The Corporation adopted the standard effective January 1, 2024.

The implementation did not have a material effect on the Consolidated Financial Statements.

In October 2023, the FASB issued ASU No.

2023-06, “Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” This update is intended to improve the relevance and usefulness of financial information for investors and other users by incorporating certain SEC disclosure requirements into the FASB Accounting Standards Codification.

This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023.

The adoption of this standard did not have a material effect on the Consolidated Financial Statements.

In November 2023, the FASB issued ASU No.

2 unchanged sentences

This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024.

The Corporation is assessing the impact of the standard.

The Corporation is one operating segment;

therefore, we do not anticipate any impact to the financial statements.

In December 2023, the FASB issued ASU No.

9 unchanged sentences

Diluted earnings per share are computed by dividing net income allocated to common shares adjusted for reallocation of undistributed earnings of unvested restricted shares by the weighted average number of shares determined for the basic earnings per common share computation plus the dilutive effect of common stock equivalents using the treasury stock method.

For the Three Months Ended March 31,

(Dollars in Thousands, Except Share Data)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

(Dollars in Thousands, Except

Basic earnings per common share

Net income $ 8,848 $ 8,979

preferred stock dividends

2 unchanged sentences

Weighted-average common shares outstanding, excluding participating securities

8,125,319 8,148,525

Basic earnings per common share

2 unchanged sentences

Weighted-average diluted common shares outstanding, excluding participating securities

8,125,319 8,148,525

Diluted earnings per common share

2 unchanged sentences

The Plan is administered by the Compensation Committee of the Board of Directors (the “Board”) of the Corporation and provides for the grant of equity ownership opportunities through incentive stock options and nonqualified stock options, restricted stock, restricted stock units, dividend equivalent units, and any other type of award permitted by the Plan.

As of March 31, 2024, 274,242 shares were available for future grants under the Plan, as amended.

As of June 30, 2024, 267,882 shares were available for future grants under the Plan, as amended.

Shares covered by awards that expire, terminate, or lapse will again be available for the grant of awards under the Plan.

1 unchanged sentence

Under the Plan, the Corporation may grant restricted stock awards (“RSA”), restricted stock units (“RSU”), and other stock-based awards to plan participants, subject to forfeiture upon the occurrence of certain events until the dates specified in the participant’s award agreement.

While restricted stock is subject to forfeiture, RSA participants may exercise full voting rights and will receive all dividends and other distributions paid with respect to the restricted shares.

While restricted stock is subject to forfeiture, RSA participants may exercise full voting rights and will receive all

dividends and other distributions paid with respect to the restricted shares.

RSUs do not have voting rights.

10 unchanged sentences

The compensation expense for the awards expected to vest for the percentage of PRSU subject to the TSR metric are never adjusted and are amortized utilizing the accounting fair value provided using a Monte Carlo pricing model.

Restricted stock activity for the year ended December 31, 2023 and the three months ended March 31, 2024 was as follows:

RSA Weighted Average Grant Price PRSU Weighted Average Grant Price RSU Weighted Average Grant Price Total Weighted Average Grant Price

Restricted stock activity for the year ended December 31, 2023 and the six months ended June 30, 2024 was as follows:

Weighted Average

Nonvested balance as of December 31, 2022

— — 34,840 35.79 54,955 34.43 89,795 34.96

Vested ( 56,931 ) 27.03 ( 36,120 ) 31.31 ( 3,253 ) 26.06 ( 96,304 ) 28.60

Forfeited ( 4,435 ) 30.20 — — ( 820 ) 36.42 ( 5,255 ) 31.17

Nonvested balance as of December 31, 2023

— — 17,025 42.89 46,025 36.08 63,050 32.78

Vested ( 32,211 ) 26.87 — — ( 13,264 ) 34.47 ( 45,475 ) 29.09

Forfeited ( 5,085 ) 30.33 — — ( 3,875 ) 36.30 ( 8,960 ) 32.91

Nonvested balance as of March 31, 2024 34,655 $ 29.81 73,180 $ 37.37 85,873 $ 34.92 193,708 $ 34.93

Nonvested balance as of June 30, 2024

Unrecognized compensation cost (in thousands)

2 unchanged sentences

The number of shares actually issued may vary.

During the six months ended June 30, 2024, an additional 10,589 were issued related to actual performance results of previously granted awards.

Employee Stock Purchase Plan

The Corporation is authorized to issue up to 250,000 shares of common stock under the ESPP.

The Corporation is authorized to issue up to 250,000 shares of common stock under the employee stock purchase plan ("ESPP").

The plan qualifies as an employee stock purchase plan under section 423 of the Internal Revenue Code of 1986.

2 unchanged sentences

The ESPP is treated as a compensatory item for purposes of share-based compensation expense.

During the three months ended March 31, 2024, the Corporation issued 913 shares of common stock under the ESPP.

As of March 31, 2024, 229,725 shares remained available for issuance under the ESPP.

During the six months ended June 30, 2024 , the Corporation issued 1,862 shares of common stock under the ESPP.

As of June 30, 2024, 228,776 shares remained available for issuance under the ESPP.

Share-based compensation expense related to restricted stock and ESPP included in the unaudited Consolidated Statements of Income was as follows:

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

(In Thousands)

2 unchanged sentences

The amortized cost and fair value of securities available-for-sale and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows:

As of March 31, 2024

Amortized Cost Gross

Unrealized Gains Gross

Unrealized Losses Fair Value

As of June 30, 2024

Amortized Cost

Unrealized Gains

Unrealized Losses

(In Thousands)

Available-for-sale:

treasuries $ 14,239 $ — $ ( 410 ) 13,829

government agency securities - government-sponsored enterprises 15,901 — ( 463 ) 15,438

government agency securities - government-sponsored

Municipal securities

Residential mortgage-backed securities - government issued

Residential mortgage-backed securities - government-sponsored enterprises 127,841 145 ( 11,754 ) 116,232

Residential mortgage-backed securities - government-sponsored

Commercial mortgage-backed securities - government issued

Commercial mortgage-backed securities - government-sponsored enterprises 32,603 44 ( 4,552 ) 28,095

$ 339,042 $ 598 $ ( 25,526 ) $ 314,114

Commercial mortgage-backed securities - government-sponsored

As of December 31, 2023

Amortized Cost Gross

Unrealized Gains Gross

Unrealized Losses Fair Value

Amortized Cost

Unrealized Gains

Unrealized Losses

(In Thousands)

Available-for-sale:

treasuries $ 14,158 $ 7 $ ( 389 ) $ 13,776

government agency securities - government-sponsored enterprises

27,986 35 ( 455 ) 27,566

government agency securities - government-sponsored

Municipal securities

Residential mortgage-backed securities - government issued

Residential mortgage-backed securities - government-sponsored enterprises

131,321 281 ( 10,769 ) 120,833

Residential mortgage-backed securities - government-sponsored

Commercial mortgage-backed securities - government issued

Commercial mortgage-backed securities - government-sponsored enterprises 32,774 65 ( 4,470 ) 28,369

$ 319,082 $ 1,388 $ ( 23,464 ) $ 297,006

Commercial mortgage-backed securities - government-sponsored

The amortized cost and fair value of securities held-to-maturity and the corresponding amounts of gross unrecognized gains and losses were as follows:

As of March 31, 2024

Amortized Cost Gross

Unrecognized Gains Gross

Unrecognized Losses Fair Value

As of June 30, 2024

Amortized Cost

Unrecognized Gains

Unrecognized Losses

(In Thousands)

2 unchanged sentences

Residential mortgage-backed securities - government issued

Residential mortgage-backed securities - government-sponsored enterprises

996 — ( 57 ) 939

Commercial mortgage-backed securities - government-sponsored enterprises 2,004 — ( 96 ) 1,908

$ 8,131 $ — $ ( 283 ) $ 7,848

Residential mortgage-backed securities - government-sponsored

Commercial mortgage-backed securities - government-sponsored

As of December 31, 2023

Amortized Cost Gross

Unrecognized Gains Gross

Unrecognized Losses Fair Value

Amortized Cost

Unrecognized Gains

Unrecognized Losses

(In Thousands)

2 unchanged sentences

Residential mortgage-backed securities - government issued

Residential mortgage-backed securities - government-sponsored enterprises

1,078 — ( 53 ) 1,025

Commercial mortgage-backed securities - government-sponsored enterprises

2,004 — ( 82 ) 1,922

$ 8,503 $ 4 $ ( 252 ) $ 8,255

Residential mortgage-backed securities - government-sponsored

Commercial mortgage-backed securities - government-sponsored

Treasuries contain treasury bonds issued by the United States Treasury.

3 unchanged sentences

Residential and commercial mortgage-backed securities - government-sponsored enterprises include securities guaranteed by the Federal Home Loan Mortgage Corporation, FNMA, and the FHLB.

The Corporation sold five available-for-sale securities during the three months ended March 31, 2024.

There were no sales of available-for-sale securities during the three months ended March 31, 2023.

At March 31, 2024 and December 31, 2023, securities with a fair value of $ 33.0 million and $ 45.4 million, respectively, were pledged to secure various obligations, including interest rate swap contracts and municipal deposits.

The amortized cost and fair value of securities by contractual maturity at March 31, 2024 are shown below.

The Corporation sold no available-for-sale securities during the three months ended June 30, 2024 and 5 available-for-sale securities during the six months ended June 30, 2024.

The Corporation sold 16 available-for-sale securities during the three and six months ended June 30, 2023.

At June 30, 2024 and December 31, 2023, securities with a fair value of $ 31.6 million and $ 45.4 million , respectively, were pledged to secure various obligations, including interest rate swap contracts and municipal deposits.

The amortized cost and fair value of securities by contractual maturity at June 30, 2024 are shown below.

Actual maturities may differ from contractual maturities because issuers have the right to call or prepay certain obligations with or without call or prepayment penalties.

Available-for-Sale Held-to-Maturity

Amortized Cost Fair Value Amortized Cost Fair Value

Available-for-Sale

Held-to-Maturity

Amortized Cost

(In Thousands)

3 unchanged sentences

Due in over ten years

70,444 64,564 4,017 3,960

Residential mortgage-backed securities

Commercial mortgage-backed securities

$ 339,042 $ 314,114 $ 8,131 $ 7,848

The tables below show the Corporation’s gross unrealized losses and fair value of available-for-sale investments aggregated by investment category and length of time that individual investments were in a continuous loss position at March 31, 2024 and December 31, 2023.

At March 31, 2024, the Corporation held 182 available-for-sale securities that were in an unrealized loss position, 159 of which have been in a continuous unrealized loss position for twelve months or greater.

At June 30, 2024, the Corporation held 184 available-for-sale securities that were in an unrealized loss position, 164 of which have been in a continuous unrealized loss position for twelve months or greater.

The Corporation has not specifically identified available-for-sale securities in a loss position that it intends to sell in the near term and does not believe that it will be required to sell any such securities.

1 unchanged sentence

Consideration is given to such factors as the credit rating of the borrower, market conditions such as current interest rates, any adverse conditions specific to the security, and delinquency status on contractual payments.

For the three months ended March 31, 2024 and 2023, management concluded that in all instances securities with fair value less than carrying value was due to market and other factors;

For the three and six months ended June 30, 2024 and 2023, management concluded that in all instances securities with fair value less than carrying value was due to market factors;

thus, no credit loss provision was required.

A summary of unrealized loss information for securities available-for-sale, categorized by security type and length of time for which the security has been in a continuous unrealized loss position, follows:

As of March 31, 2024

Less than 12 Months 12 Months or Longer Total

Fair Value Unrealized

Losses Fair Value Unrealized

As of June 30, 2024

Less than 12 Months

12 Months or Longer

(In Thousands)

Available-for-sale:

treasuries $ 9,252 $ 3 $ 4,577 $ 407 $ 13,829 $ 410

government agency securities - government-sponsored enterprises

10,381 20 5,057 443 15,438 463

government agency securities - government-

sponsored enterprises

Municipal securities

— — 35,297 5,007 35,297 5,007

Residential mortgage-backed securities - government issued

37,001 409 17,270 2,462 54,271 2,871

Residential mortgage-backed securities - government-sponsored enterprises

20,280 331 86,461 11,423 106,741 11,754

Commercial mortgage-backed securities - government issued

— — 2,354 469 2,354 469

Commercial mortgage-backed securities - government-sponsored enterprises

— — 27,102 4,552 27,102 4,552

$ 76,914 $ 763 $ 178,118 $ 24,763 $ 255,032 $ 25,526

Residential mortgage-backed securities -

government issued

Residential mortgage-backed securities -

government-sponsored enterprises

Commercial mortgage-backed securities -

government issued

Commercial mortgage-backed securities -

government-sponsored enterprises

As of December 31, 2023

Less than 12 Months 12 Months or Longer Total

Fair Value Unrealized

Losses Fair Value Unrealized

Less than 12 Months

12 Months or Longer

(In Thousands)

Available-for-sale:

treasuries $ — $ — $ 4,595 $ 389 $ 4,595 $ 389

government agency securities - government-sponsored enterprises

13,370 30 3,076 425 16,446 455

government agency securities - government-

sponsored enterprises

Municipal securities

— — 35,881 4,526 35,881 4,526

Residential mortgage-backed securities - government issued

13,178 160 13,819 2,225 26,997 2,385

Residential mortgage-backed securities - government-sponsored enterprises

19,925 285 78,086 10,484 98,011 10,769

Commercial mortgage-backed securities - government issued

— — 2,525 470 2,525 470

Commercial mortgage-backed securities - government-sponsored enterprises

893 20 26,465 4,450 27,358 4,470

$ 47,366 $ 495 $ 164,447 $ 22,969 $ 211,813 $ 23,464

The tables below show the Corporation’s gross unrealized losses and fair value of held-to-maturity investments, aggregated by investment category and length of time that individual investments were in a continuous loss position at March 31, 2024 and December 31, 2023.

At March 31, 2024, the Corporation held 25 held-to-maturity securities that were in an unrealized loss position, 21 of which have been in a continuous loss position for twelve months or greater.

Residential mortgage-backed securities -

government issued

Residential mortgage-backed securities -

government-sponsored enterprises

Commercial mortgage-backed securities -

government issued

Commercial mortgage-backed securities -

government-sponsored enterprises

At June 30, 2024, the Corporation held 23 held-to-maturity securities that were in an unrealized loss position, 22 of which have been in a continuous loss position for twelve months or greater.

Management assesses held-to-maturity securities for credit losses on a quarterly basis.

The assessment includes review of credit ratings, identification of

delinquency and evaluation of market factors.

The assessment includes review of credit ratings, identification of delinquency and evaluation of market factors.

Based on this analysis, management concludes the decline in fair value is due to market factors, specifically changes in interest rates.

Accordingly, no credit loss provision was recorded in the unaudited Consolidated Statements of Income for the three months ended March 31, 2024 and 2023.

Accordingly, no credit loss provision was recorded in the unaudited Consolidated Statements of Income for the three and six months ended June 30, 2024 and 2023.

A summary of unrecognized loss information for securities held-to-maturity, categorized by security type and length of time for which the security has been in a continuous unrealized loss position, follows:

As of March 31, 2024

Less than 12 Months 12 Months or Longer Total

Fair Value Unrecognized

Losses Fair Value Unrecognized

As of June 30, 2024

Less than 12 Months

12 Months or Longer

(In Thousands)

1 unchanged sentence

Municipal securities

$ 1,655 $ 12 $ 1,765 $ 45 $ 3,420 $ 57

Residential mortgage-backed securities - government issued

— — 1,041 73 1,041 73

Residential mortgage-backed securities - government-sponsored enterprises

— — 939 57 939 57

Commercial mortgage-backed securities - government-sponsored enterprises — — 1,908 96 1,908 96

$ 1,655 $ 12 $ 5,653 $ 271 $ 7,308 $ 283

Residential mortgage-backed securities -

government issued

Residential mortgage-backed securities -

government-sponsored enterprises

Commercial mortgage-backed securities -

government-sponsored enterprises

As of December 31, 2023

Less than 12 Months 12 Months or Longer Total

Fair Value Unrecognized

Losses Fair Value Unrecognized

Less than 12 Months

12 Months or Longer

(In Thousands)

1 unchanged sentence

Municipal securities

$ 1,424 $ 4 $ 2,234 $ 37 $ 3,658 $ 41

Residential mortgage-backed securities - government issued

— — 1,135 76 1,135 76

Residential mortgage-backed securities - government-sponsored enterprises

— — 1,025 53 1,025 53

Commercial mortgage-backed securities - government-sponsored enterprises — — 1,922 82 1,922 82

$ 1,424 $ 4 $ 6,316 $ 248 $ 7,740 $ 252

Residential mortgage-backed securities -

government issued

Residential mortgage-backed securities -

government-sponsored enterprises

Commercial mortgage-backed securities -

government-sponsored enterprises

Note 5 — Loans, Lease Receivables, and Allowance for Credit Losses

Loan and lease receivables consist of the following:

2024 December 31,

(In Thousands)

1 unchanged sentence

Commercial real estate — owner occupied

$ 263,748 $ 256,479

Commercial real estate — non-owner occupied

792,858 773,494

Construction 202,382 193,080

453,321 450,529

27,482 26,289

Total commercial real estate

1,739,791 1,699,871

Commercial and industrial

1 unchanged sentence

Total gross loans and leases receivable

2,910,590 2,850,018

Allowance for loan losses 32,799 31,275

Allowance for credit losses

Deferred loan fees and costs, net

Loans and leases receivable, net

$ 2,878,065 $ 2,818,986

Loans transferred to third parties consist of the guaranteed portions of SBA loans which the Corporation sold in the secondary market and participation interests in other, non-SBA originated loans.

The total principal amount of the guaranteed portions of SBA loans sold during the three months ended March 31, 2024, and 2023, was $ 2.1 million and $ 5.0 million, respectively.

Each of the transfers of these financial assets met the qualifications for sale accounting, and therefore all of the loans transferred during the three months ended March 31, 2024, and 2023, have been derecognized in the unaudited Consolidated Financial Statements.

The total principal amount of the guaranteed portions of SBA loans sold during the three months ended June 30, 2024 and 2023, was $ 3.5 million and $ 4.9 million , respectively.

The total principal amount of the guaranteed portions of SBA loans sold during the six months ended June 30, 2024 and 2023, was $ 5.7 million and $ 9.8 million , respectively.

Each of the transfers of these financial assets met the qualifications for sale accounting, and therefore all of the loans transferred during the three and six months ended June 30, 2024 and 2023, have been derecognized in the unaudited Consolidated Financial Statements.

The guaranteed portions of SBA loans were transferred at their fair value and the related gain was recognized upon the transfer as non-interest income in the unaudited Consolidated Financial Statements.

The total outstanding balance of sold SBA loans at March 31, 2024, and December 31, 2023, was $ 80.8 million and $ 84.2 million, respectively.

The total principal amount of transferred participation interests in other, non-SBA originated loans during the three months ended March 31, 2024, and 2023, was $ 34.8 million and $ 22.6 million, respectively, all of which were treated as sales and derecognized under the applicable accounting guidance at the time of transfer.

The total outstanding balance of sold SBA loans serviced by the Corporation at June 30, 2024, and December 31, 2023, was $ 74.1 million and $ 84.2 million , respectively.

The total principal amount of transferred participation interests in other, non-SBA originated loans during the three months ended June 30, 2024 and 2023, was $ 23.8 million and $ 32.0 million , respectively, all of which were treated as sales and derecognized under the applicable accounting guidance at the time of transfer.

The total principal amount of transferred participation interests in other, non-SBA originated loans during the six months ended June 30, 2024 and 2023, was $ 58.6 million and $ 54.7 million , respectively, all of which were treated as sales and derecognized under the applicable accounting guidance at the time of transfer.

No gain or loss was recognized on participation interests in other, non-SBA originated loans as they were transferred at or near the date of loan origination and the payments received for servicing the portion of the loans participated represents adequate compensation.

The total outstanding balance of these transferred loans at March 31, 2024, and December 31, 2023, was $ 302.8 million and $ 279.5 million, respectively.

As of March 31, 2024, and December 31, 2023, the total amount of the Corporation’s partial ownership of these transferred loans on the unaudited Consolidated Balance Sheets was $ 376.8 million and $ 367.4 million, respectively.

As of March 31, 2024 and December 31, 2023, the non-SBA originated participation portfolio contained no non-performing loans.

The total outstanding balance of these transferred loans serviced by the Corporation at June 30, 2024, and December 31, 2023, was $ 312.4 million and $ 279.5 million , respectively.

As of June 30, 2024, and December 31, 2023, the total amount of the Corporation’s retained ownership of these transferred loans was $ 375.2 million and $ 367.4 million , respectively.

As of June 30, 2024 and December 31, 2023 , the non-SBA originated participation portfolio contained no non-accrual loans.

The Corporation does not share in the participant’s portion of any potential charge-offs.

The following table illustrates ending balances of the Corporation’s loan and lease portfolio, including non-performing loans by class of receivable, and considering certain credit quality indicators:

March 31, 2024 Term Loans Amortized Cost Basis by Origination Year

(In Thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

Commercial real estate — owner occupied

I $ 4,587 $ 39,361 $ 46,629 $ 38,100 $ 44,415 $ 88,783 $ 1,118 $ 262,993

II — — — — — 303 — 303

III — — — — — 452 — 452

IV — — — — — — — —

Total $ 4,587 $ 39,361 $ 46,629 $ 38,100 $ 44,415 $ 89,538 $ 1,118 $ 263,748

Commercial real estate — non-owner occupied

I $ 14,263 $ 71,834 $ 76,485 $ 72,049 $ 87,338 $ 368,191 $ 34,705 $ 724,865

II — — — 2,289 2,227 43,867 — 48,383

III — 680 — — — 18,930 — 19,610

IV — — — — — — — —

Total $ 14,263 $ 72,514 $ 76,485 $ 74,338 $ 89,565 $ 430,988 $ 34,705 $ 792,858

I $ 10,982 $ 85,216 $ 64,039 $ 8,845 $ 739 $ 6,148 $ 10,688 $ 186,657

II — — — — — — — —

III — — 454 9,289 5,713 269 — 15,725

IV — — — — — — — —

Total $ 10,982 $ 85,216 $ 64,493 $ 18,134 $ 6,452 $ 6,417 $ 10,688 $ 202,382

I $ 19,964 $ 77,049 $ 42,927 $ 69,755 $ 103,163 $ 137,451 $ 3,012 $ 453,321

II — — — — — — — —

III — — — — — — — —

IV — — — — — — — —

Total $ 19,964 $ 77,049 $ 42,927 $ 69,755 $ 103,163 $ 137,451 $ 3,012 $ 453,321

I $ 599 $ 4,231 $ 7,395 $ 2,642 $ 2,340 $ 3,004 $ 7,251 $ 27,462

II — — — — — — — —

III — — — — — — — —

IV — — — — — 20 — 20

Total $ 599 $ 4,231 $ 7,395 $ 2,642 $ 2,340 $ 3,024 $ 7,251 $ 27,482

March 31, 2024 Term Loans Amortized Cost Basis by Origination Year

(In Thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total

The following table illustrates ending balances of the Corporation’s loan and lease portfolio, including non-accrual loans by class of receivable, and considering certain credit quality indicators:

June 30, 2024

Term Loans Amortized Cost Basis by Origination Year

(In Thousands)

Commercial real estate —

owner occupied

Commercial real estate —

non-owner occupied

Commercial and industrial

I $ 62,280 $ 281,217 $ 128,662 $ 76,007 $ 34,882 $ 41,167 $ 434,523 $ 1,058,738

II 4,161 1,778 5,952 839 255 264 5,287 18,536

III — 1,277 7,612 1,802 1,403 4,989 6,613 23,696

IV — 2,593 6,366 1,221 523 1,627 7,479 19,809

Total $ 66,441 $ 286,865 $ 148,592 $ 79,869 $ 37,063 $ 48,047 $ 453,902 $ 1,120,779

Consumer and other

I $ 6,738 $ 5,873 $ 8,182 $ 3,068 $ 12,139 $ 5,989 $ 8,031 $ 50,020

II — — — — — — — —

III — — — — — — — —

IV — — — — — — — —

Total $ 6,738 $ 5,873 $ 8,182 $ 3,068 $ 12,139 $ 5,989 $ 8,031 $ 50,020

I $ 119,413 $ 564,781 $ 374,319 $ 270,466 $ 285,016 $ 650,733 $ 499,328 $ 2,764,056

II 4,161 1,778 5,952 3,128 2,482 44,434 5,287 67,222

III — 1,957 8,066 11,091 7,116 24,640 6,613 59,483

IV — 2,593 6,366 1,221 523 1,647 7,479 $ 19,829

Total $ 123,574 $ 571,109 $ 394,703 $ 285,906 $ 295,137 $ 721,454 $ 518,707 $ 2,910,590

December 31, 2023 Term Loans Amortized Cost Basis by Origination Year

(In Thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total

Commercial real estate — owner occupied

I $ 31,637 $ 43,156 $ 38,803 $ 44,704 $ 22,078 $ 72,774 $ 451 $ 253,603

II — — — 260 — — — 260

III — — — — — 2,616 — 2,616

IV — — — — — — — —

Total $ 31,637 $ 43,156 $ 38,803 $ 44,964 $ 22,078 $ 75,390 $ 451 $ 256,479

Commercial real estate — non-owner occupied

I $ 71,857 $ 76,689 $ 72,660 $ 78,212 $ 66,262 $ 314,970 $ 32,478 $ 713,128

II — — 2,302 2,252 19,838 16,274 — 40,666

III — — — — — 19,700 — 19,700

IV — — — — — — — —

Total $ 71,857 $ 76,689 $ 74,962 $ 80,464 $ 86,100 $ 350,944 $ 32,478 $ 773,494

I $ 63,660 $ 83,161 $ 8,542 $ 744 $ 433 $ 6,528 $ 15,011 $ 178,079

II — — 9,289 5,712 — — — 15,001

III — — — — — — — —

IV — — — — — — — —

Total $ 63,660 $ 83,161 $ 17,831 $ 6,456 $ 433 $ 6,528 $ 15,011 $ 193,080

I $ 84,932 $ 41,068 $ 70,054 $ 113,294 $ 22,925 $ 115,243 $ 3,013 $ 450,529

II — — — — — — — —

III — — — — — — — —

IV — — — — — — — —

Total $ 84,932 $ 41,068 $ 70,054 $ 113,294 $ 22,925 $ 115,243 $ 3,013 $ 450,529

I $ 4,242 $ 7,684 $ 2,672 $ 2,359 $ 443 $ 2,805 $ 6,062 $ 26,267

II — — — — — — — —

III — — — — — — — —

IV — — — — — 22 — 22

Total $ 4,242 $ 7,684 $ 2,672 $ 2,359 $ 443 $ 2,827 $ 6,062 $ 26,289

December 31, 2023 Term Loans Amortized Cost Basis by Origination Year

(In Thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total

December 31, 2023

Term Loans Amortized Cost Basis by Origination Year

(In Thousands)

Commercial real estate —

owner occupied

Commercial real estate —

non-owner occupied

Commercial and industrial

I $ 302,612 $ 144,167 $ 85,504 $ 38,164 $ 20,151 $ 26,490 $ 415,301 $ 1,032,389

II 1,496 5,280 785 353 94 219 5,706 13,933

III 1,093 7,168 1,882 5,919 3,861 3,957 15,058 38,938

IV 1,482 6,519 1,319 321 133 1,644 9,157 20,575

Total $ 306,683 $ 163,134 $ 89,490 $ 44,757 $ 24,239 $ 32,310 $ 445,222 $ 1,105,835

Consumer and other

I $ 5,920 $ 8,786 $ 3,167 $ 12,193 $ 2,049 $ 3,485 $ 8,712 $ 44,312

II — — — — — — — —

III — — — — — — — —

IV — — — — — — — —

Total $ 5,920 $ 8,786 $ 3,167 $ 12,193 $ 2,049 $ 3,485 $ 8,712 $ 44,312

I $ 564,860 $ 404,711 $ 281,402 $ 289,670 $ 134,341 $ 542,295 $ 481,028 $ 2,698,307

II 1,496 5,280 12,376 8,577 19,932 16,493 5,706 69,860

III 1,093 7,168 1,882 5,919 3,861 26,273 15,058 61,254

IV 1,482 6,519 1,319 321 133 1,666 9,157 $ 20,597

Total $ 568,931 $ 423,678 $ 296,979 $ 304,487 $ 158,267 $ 586,727 $ 510,949 $ 2,850,018

Each credit is evaluated for proper risk rating upon origination, at the time of each subsequent renewal, upon receipt and evaluation of updated financial information from the Corporation’s borrowers, or as other circumstances dictate.

1 unchanged sentence

The risk rating grades follow a consistent definition and are then applied to specific loan types based on the nature of the loan.

Each risk rating is subjective and, depending on the size and nature of the credit, subject to various levels of review and concurrence on the stated risk rating.

Each risk rating is determined based on various quantitative and qualitative factors and is subject to various levels of review and concurrence on the stated risk rating.

In addition to its nine grade risk rating system, the Corporation groups loans into four loan and related risk categories which determine the level and nature of review by management.

6 unchanged sentences

However, the balance in this category is not intended to represent the amount of adversely classified assets held by the Bank.

loans and leases generally exhibit undesirable characteristics, such as evidence of adverse financial trends and conditions, managerial problems, deteriorating economic conditions within the related industry, or evidence of adverse public filings and may exhibit collateral shortfall positions.

Category III loans and leases generally exhibit undesirable characteristics, such as evidence of adverse financial trends and conditions, managerial problems, deteriorating economic conditions within the related industry, or evidence of adverse public filings and may exhibit collateral shortfall positions.

Management continues to believe that it will collect all contractual principal and interest in accordance with the original terms of the contracts relating to the loans and leases in this category, and therefore Category III loans are considered performing with no specific reserves established for this category.

Category III loans are monitored by management and asset quality review committees on a monthly basis.

Category IV — Loans and leases in this category are non-performing loans.

Category IV — Loans and leases in this category are non-accrual loans.

Management has determined that it is unlikely that the Bank will receive the contractual principal and interest in accordance with the original terms of the agreement.

Non-performing loans are individually evaluated to assess the need for the establishment of specific reserves or charge-offs.

Non-accrual loans are individually evaluated to assess the need for the establishment of specific reserves or charge-offs.

When analyzing the adequacy of collateral, the Corporation obtains external appraisals at least annually.

3 unchanged sentences

The delinquency aging of the loan and lease portfolio by class of receivable was as follows:

March 31, 2024

Days Past Due 60-89

Days Past Due Greater

Days Past Due Total Past Due Current Total Loans and Leases

June 30, 2024

(Dollars in Thousands)

3 unchanged sentences

Non-owner occupied

Construction — — — — 202,382 202,382

Multi-family — — — — 453,321 453,321

1-4 family — — — — 27,482 27,482

Commercial and industrial

Consumer and other

Total $ 2,071 $ 480 $ 16,745 $ 19,296 $ 2,891,294 $ 2,910,590

Percent of portfolio

December 31, 2023

Days Past Due 60-89

Days Past Due Greater

Days Past Due Total Past Due Current Total Loans and Leases

(Dollars in Thousands)

3 unchanged sentences

Non-owner occupied

Construction — — — — 193,080 193,080

Multi-family — — — — 450,529 450,529

1-4 family — — — — 26,289 26,289

Commercial and industrial

Consumer and other

Total $ 3,430 $ 1,041 $ 18,347 $ 22,818 $ 2,827,200 $ 2,850,018

Percent of portfolio

The following tables present the amortized cost basis of loans on non-accrual status and loans past due over 89 days still accruing as of:

March 31, 2024

Non-accrual With No Allowance for Credit Loss

Non-accrual With Allowance for Credit Loss

Loans Past Due Over 89 Days Still Accruing

June 30, 2024

Allowance for

With Allowance

for Credit Loss

Loans Past Due

Still Accruing

(In Thousands)

2 unchanged sentences

Commercial real estate — non-owner occupied

Construction — — —

Multi-family — — —

1-4 family 20 — —

Total commercial real estate

2 unchanged sentences

Total non-accrual loans and leases

$ 9,325 $ 10,504 $ —

December 31, 2023

Non-accrual With No Allowance for Credit Loss

Loans Past Due Over 89 Days Still Accruing

Allowance for

With Allowance

for Credit Loss

Loans Past Due

Still Accruing

(In Thousands)

2 unchanged sentences

Commercial real estate — non-owner occupied

Construction — — —

Multi-family — — —

1-4 family — 22 —

Total commercial real estate

2 unchanged sentences

Total non-accrual loans and leases

$ 9,690 $ 10,907 $ —

2024 December 31,

Total non-accrual loans and leases to gross loans and leases

0.68 % 0.72 %

Allowance for credit losses to gross loans and leases

Allowance for credit losses to non-accrual loans and leases

174.64 160.21

The following table presents the amortized cost basis of the non-accrual, collateral-dependent commercial and industrial loans as of:

2024 December 31,

(In Thousands)

Inventory $ 1,120 $ 8,879

Equipment 4,753 3,740

Real Estate 140 46

Accounts Receivable

Other 1,191 1,348

Total $ 13,563 $ 14,291

Occasionally, the Corporation modifies loans to borrowers in financial distress.

There were six commercial and industrial loans for a total of $ 1.1 million and two commercial real estate non-owner occupied loans for a total of $ 5.9 million modified during the three months ended March 31, 2024.

There were seven commercial and industrial loans for a total of $ 1.6 million and two commercial real estate non-owner occupied loans for a total of $ 5.9 million modified during the six months ended June 30, 2024 .

The modifications consisted of payment deferrals and modified loan repayment schedules.

Of these modified loans, two are included in total non-performing loans and are currently between zero and 300 days past due as of March 31, 2024.

No loans were modified during the three months ended March 31, 2023.

There was one commercial and industrial loan to borrowers experiencing financial distress for a total of $ 283,000 that was modified during the previous 12 months and which subsequently defaulted during three months ended March 31, 2024.

There were no loans to borrowers experiencing financial distress that were modified during the previous 12 months and which subsequently defaulted during the three months ended March 31, 2023.

There were no unfunded commitments associated with loans modified for borrowers experiencing financial distress as of March 31, 2024.

Of these modified loans, four are included in total non-performing loans and are currently between zero and 117 days past due as of June 30, 2024.

There was one commercial and industrial loan for a total of $ 382,000 modified during the six months ended June 30, 2023.

This modification consisted of a payment deferral.

There was one commercial and industrial loan to borrowers experiencing financial distress in the amount of $ 238,000 that was modified during the 12 months ended June 30, 2024 which subsequently defaulted .

There were no loans to borrowers experiencing financial distress that were modified during the 12 months ended June 30, 2023 which subsequently defaulted .

There were no unfunded commitments associated with loans modified for borrowers experiencing financial distress as of June 30, 2024.

Allowance for Credit Losses

7 unchanged sentences

The Corporation plans to update the LDA annually.

• Probability of default – PD is the probability that an asset will be in default within a given time frame.

• Probability of default ("PD") – PD is the probability that an asset will be in default within a given time frame.

The Corporation has defined default as when a charge-off has occurred, a loan goes to non-accrual status, or a loan is greater than 90 days past due.

The forecast model is utilized to estimate PDs.

• Loss given default – LGD is the percentage of the asset not expected to be collected due to default.

• Loss given default ("LGD") – LGD is the percentage of the asset not expected to be collected due to default.

The LGD is derived from using a method referred to as Frye Jacobs which uses industry data.

4 unchanged sentences

As of December 31, 2023, the Corporation selected a forecast which estimates unemployment between 3.89% and 4.04% and GDP growth change between 1.29% and 2.32% over the next four quarters.

As of March 31, 2024, the Corporation selected a forecast which estimates unemployment between 3.96% and 4.10% and GDP growth change between 1.43% and 2.99% over the next four quarters.

Following the forecast period, the model reverts to long-term averages over four

As of June 30, 2024, the Corporation selected a forecast which estimates unemployment between 4.06% and 4.08% and GDP growth change between 1.76% and 2.21% over the next four quarters.

Following the forecast period, the model reverts to long-term averages over four quarters.

Management believes that the resulting quantitative reserve appropriately balances economic indicators with identified risks.

5 unchanged sentences

• The experience, ability, and depth of the Corporation’s lending, investment, collection, and other relevant management and staff;

• The volume of past due financial assets, the volume of non-performing assets, and the volume and severity of adversely classified or graded assets;

• The volume of past due financial assets, the volume of non-accrual loans and leases, and the volume and severity of adversely classified or graded assets;

• The existence and effect of industry concentrations of credit;

• The nature and volume of the portfolio segment or class;

• The quality of the Corporation’s credit review function;

• The quality of the Corporation’s credit function;

• The effect of other external factors such as the regulatory, legal and technological environments, competition, and events such as natural disasters or pandemics.

A summary of the activity in the allowance for credit losses by portfolio segment is as follows:

As of and for the Three Months Ended March 31, 2024

Owner Occupied Non-Owner Occupied Construction Multi-Family 1-4 Family Commercial

Industrial Consumer

and Other Total

As of and for the Three Months Ended June 30, 2024

(In Thousands)

Beginning balance

Charge-offs — — — — — ( 899 ) ( 22 ) ( 921 )

Recoveries 1 — — — 110 116 — 227

Net recoveries (charge-offs)

2 unchanged sentences

Allowance for credit losses on loans

1,562 6,164 1,515 3,588 282 19,250 438 32,799

Allowance for credit losses on unfunded credit commitments

14 38 1,022 11 30 664 51 1,830

Total ACL $ 1,576 $ 6,202 $ 2,537 $ 3,599 $ 312 $ 19,914 $ 489 $ 34,629

As of and for the Three Months Ended March 31, 2023

Owner Occupied Non-Owner Occupied Construction Multi-Family 1-4 Family Commercial

Industrial Consumer and Other Total

Allowance for credit losses on

unfunded credit commitments

As of and for the Three Months Ended June 30, 2023

(In Thousands)

Beginning balance

Net recoveries (charge-offs)

Provision for credit losses

Ending balance

Allowance for credit losses on loans

Allowance for credit losses on

unfunded credit commitments

As of and for the Six Months Ended June 30, 2024

(In Thousands)

Beginning balance

Net recoveries (charge-offs)

Provision for credit losses

Ending balance

Allowance for credit losses on loans

Allowance for credit losses on

unfunded credit commitments

As of and for the Six Months Ended June 30, 2023

(In Thousands)

Beginning balance

Impact of adopting ASC 326

Charge-offs — — — — — ( 166 ) — ( 166 )

Recoveries — 1 — — — 95 11 107

Net recoveries (charge-offs)

2 unchanged sentences

Allowance for credit losses on loans

$ 1,636 $ 4,915 $ 1,586 $ 2,892 $ 201 $ 14,348 $ 562 $ 26,140

Allowance for credit losses on unfunded credit commitments

20 51 701 9 20 557 52 1,410

Total ACL $ 1,656 $ 4,966 $ 2,287 $ 2,901 $ 221 $ 14,905 $ 614 $ 27,550

Loans collectively evaluated for credit losses in the following tables include all performing loans at March 31, 2024 and December 31, 2023.

Loans individually evaluated for credit losses include all non-performing loans.

Allowance for credit losses on

unfunded credit commitments

Loans collectively evaluated for credit losses in the following tables include all performing loans at June 30, 2024 and December 31, 2023.

Loans individually evaluated for credit losses include all non-accrual loans.

The following tables provide information regarding the allowance for credit losses and balances by type of allowance methodology.

As of March 31, 2024

Owner Occupied Non-Owner Occupied Construction Multi-Family 1-4 Family Commercial

Industrial Consumer

and Other Total

As of June 30, 2024

(In Thousands)

Allowance for credit losses:

Collectively evaluated for credit losses $ 1,562 $ 6,164 $ 1,515 $ 3,588 $ 282 $ 12,632 $ 438 $ 26,181

Individually evaluated for credit loss — — — — — 6,618 — 6,618

Total $ 1,562 $ 6,164 $ 1,515 $ 3,588 $ 282 $ 19,250 $ 438 $ 32,799

Collectively evaluated for credit

Individually evaluated for credit

Loans and lease receivables:

Collectively evaluated for credit losses $ 263,748 $ 792,858 $ 202,382 $ 453,321 $ 27,462 $ 1,100,970 $ 50,020 $ 2,890,761

Individually evaluated for credit loss — — — — 20 19,809 — 19,829

Total $ 263,748 $ 792,858 $ 202,382 $ 453,321 $ 27,482 $ 1,120,779 $ 50,020 $ 2,910,590

Collectively evaluated for credit

Individually evaluated for credit

As of December 31, 2023

Owner Occupied Non-Owner Occupied Construction Multi-Family 1-4 Family Commercial

Industrial Consumer

and Other Total

(In Thousands)

Allowance for credit losses:

Collectively evaluated for credit losses $ 1,525 $ 5,596 $ 1,244 $ 3,562 $ 221 $ 12,743 $ 395 $ 25,286

Individually evaluated for credit loss — — — — 22 5,967 — 5,989

Total $ 1,525 $ 5,596 $ 1,244 $ 3,562 $ 243 $ 18,710 $ 395 $ 31,275

Collectively evaluated for credit

Individually evaluated for credit

Loans and lease receivables:

Collectively evaluated for credit losses $ 256,479 $ 773,494 $ 193,080 $ 450,529 $ 26,267 $ 1,085,260 $ 44,312 $ 2,829,421

Individually evaluated for credit loss — — — — 22 20,575 — 20,597

Total $ 256,479 $ 773,494 $ 193,080 $ 450,529 $ 26,289 $ 1,105,835 $ 44,312 $ 2,850,018

Collectively evaluated for credit

Individually evaluated for credit

Note 6 — Leases

5 unchanged sentences

The components of total lease expense were as follows:

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

(In Thousands)

5 unchanged sentences

Quantitative information regarding the Corporation’s operating leases was as follows:

March 31, 2024 December 31, 2023

June 30, 2024

December 31, 2023

Weighted-average remaining lease term (in years)

Weighted-average discount rate

3.66 % 3.61 %

The following maturity analysis shows the undiscounted cash flows due on the Corporation’s operating lease liabilities:

(In Thousands)

Thereafter 3,600

Total undiscounted cash flows

3 unchanged sentences

A summary of accrued interest receivable and other assets was as follows:

March 31, 2024 December 31, 2023

June 30, 2024

December 31, 2023

(In Thousands)

3 unchanged sentences

Investment in low-income housing development entities

31,471 33,303

Investment in limited partnerships

Prepaid expenses

Other assets 13,688 13,283

Total accrued interest receivable and other assets

For the three months ended March 31, 2024 and 2023, the Corporation amortized tax credit investments of $ 1.3 million and $ 436,000 respectively, and recognized tax credits and other benefits for the three months ended March 31, 2024 and 2023 of $ 1.7 million and $ 586,000 , respectively, within the income tax expense on the unaudited consolidated statements of income.

For the six months ended June 30, 2024 and 2023, the Corporation amortized tax credit investments of $ 2.6 million and $ 870,000 respectively, and recognized tax credits and other benefits for the six months ended June 30, 2024 and 2023 of $ 3.3 million and $ 1.2 million , respectively, within the income tax expense line on the unaudited Consolidated Statements of Income.

Note 8 — Deposits

1 unchanged sentence

Average balances represent year-to-date averages.

March 31, 2024 December 31, 2023

Balance Average

Balance Average Rate Balance Average

Balance Average Rate

June 30, 2024

December 31, 2023

(Dollars in Thousands)

Non-interest-bearing transaction accounts

$ 400,267 $ 443,416 — % $ 445,376 $ 453,930 — %

Interest-bearing transaction accounts

818,080 862,896 3.92 895,319 689,500 3.44

Money market accounts

2 unchanged sentences

Total deposits

A summary of annual maturities of core and wholesale certificates of deposit at March 31, 2024 is as follows:

A summary of annual maturities of core and wholesale certificates of deposit at June 30, 2024 is as follows:

(In Thousands)

Maturities during the year ended December 31,

2024 $ 494,093

Thereafter 2,072

Wholesale deposits include $ 407.6 million and $ 50.0 million of wholesale certificates of deposit and non-reciprocal interest-bearing transaction accounts, respectively, at March 31, 2024, compared to $ 407.7 million and $ 50.0 million of wholesale certificates of deposit and non-reciprocal interest-bearing transaction accounts, respectively, at December 31, 2023.

Wholesale deposits include $ 420.5 million and $ 155.0 million of wholesale certificates of deposit and non-reciprocal interest-bearing transaction accounts, respectively, at June 30, 2024, compared to $ 407.7 million and $ 50.0 million of wholesale certificates of deposit and non-reciprocal interest-bearing transaction accounts, respectively, at December 31, 2023.

The Corporation has entered into derivative contracts hedging a portion of the certificates of deposit included in the 2024 maturities above.

As of March 31, 2024, the notional amount of derivatives designated as cash flow hedges totaled $ 306.3 million with a weighted average remaining maturity of 3.7 years and a weighted average rate of 3.95 %.

Certificates of deposit and wholesale deposits denominated in amounts greater than $250,000 were $ 102.2 million at March 31, 2024 and $ 120.2 million at December 31, 2023.

As of June 30, 2024, the notional amount of derivatives designated as cash flow hedges totaled $ 359.3 million with a weighted average remaining maturity of 3.83 years and a weighted average rate of 3.97 % .

Certificates of deposit and wholesale deposits denominated in amounts greater than $250,000 were $ 87.0 million at June 30, 2024 and $ 120.2 million at December 31, 2023 .

Note 9 — FHLB Advances, Other Borrowings and Subordinated Notes and Debentures

1 unchanged sentence

Average balances represent year-to-date averages.

March 31, 2024 December 31, 2023

Balance Weighted Average

Balance Weighted

Average Rate Balance Weighted Average

Balance Weighted

June 30, 2024

December 31, 2023

(Dollars in Thousands)

1 unchanged sentence

FHLB advances

332,250 287,307 2.39 281,500 351,990 2.52

Line of credit

1 unchanged sentence

Subordinated notes and debentures

49,458 49,438 5.78 49,396 38,250 5.16

$ 381,718 $ 336,765 2.89 $ 330,916 $ 390,881 2.79

A summary of annual maturities of borrowings at March 31, 2024 is as follows:

A summary of annual maturities of borrowings at June 30, 2024 is as follows:

(In Thousands)

Maturities during the year ended December 31,

2024 $ 160,810

Thereafter 69,458

As of March 31, 2024 and December 31, 2023, the Corporation had other borrowings of $ 10,000 and $ 20,000 , respectively, which consisted of sold tax credit investments accounted for as secured borrowings because they did not qualify for true sale accounting.

As of June 30, 2024 and December 31, 2023, the Corporation had other borrowings of $ 10,000 and $ 20,000 , respectively, which consisted of sold tax credit investments accounted for as secured borrowings because they did not qualify for true sale accounting.

The Corporation has entered into derivative contracts hedging a portion of the borrowings included in the 2024 maturities above.

As of March 31, 2024, the notional amount of derivatives designated as cash flow hedges totaled $ 88.4 million with a weighted average remaining maturity of 2.4 years and a weighted average rate of 1.66 %.

As of March 31, 2024 and December 31, 2023, the Corporation was in compliance with its debt covenants under its third-party secured senior line of credit.

As of June 30, 2024, the notional amount of derivatives designated as cash flow hedges totaled $ 78.4 million with a weighted average remaining maturity of 2.50 years and a weighted average rate of 1.80 % .

As of June 30, 2024 and December 31, 2023 , the Corporation was in compliance with its debt covenants under its third-party secured senior line of credit.

On February 20, 2024, the credit line was renewed for one additional year with pricing terms of 1-month term SOFR + 2.36% and a maturity date of February 19, 2025 .

During the third quarter 2024, the Corporation intends to redeem $ 15.0 million of 5.50 % fixed to floating rate subordinated notes payable originally issued August 15th, 2019 and reissue up to $ 20.0 million in subordinated notes payable.

Note 10 — Preferred Stock

3 unchanged sentences

For each dividend period from and including March 15, 2027, dividends will be paid at a floating rate of Three-Month Term SOFR plus a spread of 539 basis points per annum.

During the three months ended March 31, 2024, the Board of Directors declared an aggregate preferred stock dividend of $ 219,000 .

During the three and six months ended June 30, 2024, the Board of Directors declared an aggregate preferred stock dividend of $ 219,000 and $ 438,000 , respectively.

The Series A Preferred Stock is perpetual and has no stated maturity.

4 unchanged sentences

Management believes that any liability arising from any such proceedings currently existing or threatened will not have a material adverse effect on the Corporation’s financial position, results of operations, and cash flows.

As of March 31, 2024, the Corporation is obligated to fund $ 3.4 million related to an equity investment.

The funding took place in April 2024.

The Corporation sells the guaranteed portions of SBA 7(a) and 504 loans, as well as participation interests in other, non-SBA originated, loans to third parties.

3 unchanged sentences

In addition, the Corporation retains the option to repurchase the sold guaranteed portion of an SBA loan if the loan defaults.

Management has assessed estimated losses inherent in the outstanding guaranteed portions of SBA loans sold in accordance with ASC 450, Contingencies , and determined a recourse reserve based on the probability of future losses for these loans to be $ 1.1 million at March 31, 2024, which is reported in accrued interest payable and other liabilities on the unaudited Consolidated Balance Sheets.

Management has assessed estimated losses inherent in the outstanding guaranteed portions of SBA loans sold in accordance with ASC 450, Contingencies , and determined a recourse reserve based on the probability of future losses for these loans to be $ 906,000 at June 30, 2024, which is reported in accrued interest payable and other liabilities on the unaudited Consolidated Balance Sheets.

The summary of the activity in the SBA recourse reserve is as follows:

As of and for the Three Months Ended March 31,

As of and for the Three Months

Ended June 30,

As of and for the Six Months Ended June 30,

(In Thousands)

Balance at the beginning of the period

SBA recourse provision (benefit) 126 ( 18 )

SBA (benefit) recourse

Charge-offs, net

Balance at the end of the period

9 unchanged sentences

Level 3 — Level 3 inputs are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level

input that is significant to the fair value measurement in its entirety.

The Corporation’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Assets and liabilities measured at fair value on a recurring basis, segregated by fair value hierarchy level, are summarized below:

March 31, 2024

June 30, 2024

Fair Value Measurements Using

Level 1 Level 2 Level 3 Total

(In Thousands)

Securities available-for-sale:

treasuries $ — $ 13,829 $ — $ 13,829

government agency securities - government-sponsored enterprises — 15,438 — 15,438

government agency securities - government-sponsored

Municipal securities

Residential mortgage-backed securities - government issued

Residential mortgage-backed securities - government-sponsored enterprises — 116,232 — 116,232

Residential mortgage-backed securities - government-

sponsored enterprises

Commercial mortgage-backed securities - government issued

Commercial mortgage-backed securities - government-sponsored enterprises — 28,095 — 28,095

Commercial mortgage-backed securities - government-

sponsored enterprises

Interest rate swaps

2 unchanged sentences

Fair Value Measurements Using

Level 1 Level 2 Level 3 Total

(In Thousands)

Securities available-for-sale:

treasuries $ — $ 13,776 $ — $ 13,776

government agency securities - government-sponsored enterprises — 27,566 — 27,566

government agency securities - government-sponsored

Municipal securities

Residential mortgage-backed securities - government issued

Residential mortgage-backed securities - government-sponsored enterprises — 120,833 — 120,833

Residential mortgage-backed securities - government-

sponsored enterprises

Commercial mortgage-backed securities - government issued

Commercial mortgage-backed securities - government-sponsored enterprises — 28,369 — 28,369

Commercial mortgage-backed securities - government-

sponsored enterprises

Interest rate swaps

For assets and liabilities measured at fair value on a recurring basis, there were no transfers between the levels during the three months ended March 31, 2024 or the year ended December 31, 2023 related to the above measurements.

Assets and liabilities measured at fair value on a non-recurring basis, segregated by fair value hierarchy are summarized below:

March 31, 2024

For assets and liabilities measured at fair value on a recurring basis, there were no transfers between the levels during the three and six months ended June 30, 2024 or the year ended December 31, 2023 related to the above measurements.

Assets and liabilities measured at fair value on a no n-recurring basis, segregated by fair value hierarchy are summarized below:

June 30, 2024

Fair Value Measurements Using

Level 1 Level 2 Level 3 Total

(In Thousands)

4 unchanged sentences

Fair Value Measurements Using

Level 1 Level 2 Level 3 Total

(In Thousands)

2 unchanged sentences

Loan servicing rights

Collateral-dependent loans were written down to the fair value of their underlying collateral less costs to sell of $ 5.2 million and $ 4.9 million at March 31, 2024 and December 31, 2023, respectively, through the establishment of specific reserves or by recording charge-offs when the carrying value exceeded the fair value of the underlying collateral of individually evaluated loans.

Collateral-dependent loans were written down to the fair value of their underlying collateral less costs to sell of $ 5.1 million and $ 4.9 million at June 30, 2024 and December 31, 2023 , respectively, through the establishment of specific reserves or by recording charge-offs when the carrying value exceeded the fair value of the underlying collateral of individually evaluated loans.

Valuation techniques consistent with the market approach, income approach, or cost approach were used to measure fair value.

These techniques included observable inputs for the collateral dependent loans being evaluated, such as current appraisals, recent sales of similar assets, or other observable market data, and unobservable inputs, typically when discounts are applied to appraisal values to adjust such values to current market conditions or to reflect net realizable values.

The quantification of unobservable inputs for Level 3 individually evaluated loan values range from 10 % - 100 % as of the measurement date of March 31, 2024.

These techniques included observable inputs for the collateral dependent loans being evaluated, such as current appraisals, recent sales of similar assets, or other observable market data, and u no bservable inputs, typically when discounts are applied to appraisal values to adjust such values to current market conditions or to reflect net realizable values.

The quantification of unobservable inputs for Level 3 individually evaluated loan values range from 10 % - 100 % as of the measurement date of June 30, 2024.

The weighted average of those unobservable inputs was 42 % .

The majority of the individually evaluated loans are considered collateral dependent loans or are supported by an SBA guaranty.

Repossessed assets, upon initial recognition, are remeasured and reported at fair value through a charge-off to the allowance for credit losses, if deemed necessary, based upon the fair value of the repossessed asset.

Repossessed assets are measured and reported at fair value through a charge-off to the allowance for credit losses, if deemed necessary.

The fair value of a repossessed asset, upon initial recognition, is estimated using a market approach or based on observable market data, such as a current appraisal, recent sale price of similar assets, or based upon assumptions specific to the individual property or equipment, such as management applied discounts used to further reduce values to a net realizable value when observable inputs become stale.

13 unchanged sentences

Fair value estimates, methods, and assumptions, consistent with exit price concepts for fair value measurements, are set forth below:

March 31, 2024

Amount Fair Value

Total Level 1 Level 2 Level 3

June 30, 2024

(In Thousands)

6 unchanged sentences

Federal Home Loan Bank stock

13,326 N/A N/A N/A N/A

Accrued interest receivable

1 unchanged sentence

Financial liabilities:

Deposits 2,755,406 2,754,078 2,081,814 672,264 —

Federal Home Loan Bank advances and other borrowings

5 unchanged sentences

December 31, 2023

Amount Fair Value

Total Level 1 Level 2 Level 3

(In Thousands)

6 unchanged sentences

Federal Home Loan Bank stock

12,042 N/A N/A N/A N/A

Accrued interest receivable

1 unchanged sentence

Financial liabilities:

Deposits 2,796,779 2,795,463 2,101,939 693,524 —

Federal Home Loan Bank advances and other borrowings

330,916 320,287 — 320,287 —

Accrued interest payable

19 unchanged sentences

The estimated fair value is based on what secondary markets are currently offering for portfolios with similar characteristics.

Interest Rate Swaps:

The carrying amount and fair value of existing derivative financial instruments are based upon independent valuation models, which use widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative contract.

1 unchanged sentence

The Corporation incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.

In adjusting the fair value of its derivative

contracts for the effect of nonperformance risk, the Corporation considers the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Corporation considers the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Fair value estimates are made at a discrete point in time, based on relevant market information and information about the financial instrument.

13 unchanged sentences

When evaluating the fair value of its derivative contracts for the effects of non-performance and credit risk, the Corporation considered the impact of netting and any applicable credit enhancements such as collateral postings, thresholds, and guarantees.

As of March 31, 2024 and December 31, 2023, the credit valuation allowance was $ 117,000 .

As of June 30, 2024 and December 31, 2023, the credit valuation allowance was $ 38,000 and $ 117,000 , respectively.

The Corporation receives fixed rates and pays floating rates based upon designated benchmark interest rates used on the swaps with commercial borrowers.

2 unchanged sentences

Dealer counterparty swaps are subject to master netting agreements among the contracts within our Bank and are reported on the unaudited Consolidated Balance Sheet.

The gross amount of dealer counterparty swaps, without regard to the enforceable master netting agreement, was a gross derivative asset of $ 61.1 million and gross derivative liability of $ 2.8 million as of March 31, 2024.

No right of offset existed with the dealer counterparty swaps as of March 31, 2024.

The gross amount of dealer counterparty swaps, without regard to the enforceable master netting agreement, was a gross derivative asset of $ 61.8 million and gross derivative liability of $ 2.1 million as of June 30, 2024.

All changes in fair value of these instruments are recorded in other non-interest income.

Given the mirror-image terms of the outstanding derivative portfolio, the change in fair value for the three months ended March 31, 2024 and 2023 had an insignificant impact on the unaudited Consolidated Statements of Income.

Given the mirror-image terms of the outstanding derivative portfolio, the change in fair value for the three and six months ended June 30, 2024 and 2023 had an insignificant impact on the unaudited Consolidated Statements of Income.

The Corporation also enters into interest rate swaps to manage interest rate risk and reduce the cost of match-funding certain long-term fixed rate loans.

2 unchanged sentences

The change in the fair value of these hedging instruments is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged transactions affect earnings.

A pre-tax unrealized gain of $ 4.8 million was recognized in other comprehensive income for the three months ended March 31, 2024 and there were no ineffective portions of the hedges.

A pre-tax unrealized loss of $ 1.4 million was recognized in other comprehensive income for the three months ended March 31, 2023 and there were no ineffective portions of the hedges.

A pre-tax unrealized gain of $ 300,000 and $ 5.1 million was recognized in other comprehensive income for the three and six months ended June 30, 2024 , respectively, and there were no ineffective portions of the hedges.

A pre-tax unrealized gain of $ 3.6 million and $ 2.2 million was recognized in other comprehensive income for the three and six months ended June 30, 2023 , respectively, and there were no ineffective portions of the hedges.

The Corporation also enters into interest rate swaps to mitigate market value volatility on certain long-term fixed securities.

1 unchanged sentence

The instruments are designated as fair value hedges as the changes in the fair value of the interest rate swap are expected to offset changes in the fair value of the hedged item attributable to changes in the SOFR swap rate, the designated benchmark interest rate.

These derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for the Corporation

making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional value.

These derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for the Corporation making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional value.

A pre-tax unrealized gain of $ 140,000 was recognized in other comprehensive income for the three months ended March 31, 2024 and there was no ineffective portion of these hedges.

A pre-tax unrealized loss of $ 175,000 was recognized in other comprehensive income for the three months ended March 31, 2023 and there was no ineffective portion of these hedges.

As of March 31, 2024

Number of Instruments Notional Amount Weighted Average Maturity (In Years) Fair Value

A pre-tax unrealized gain of $ 82,000 and $ 223,000 was recognized in other comprehensive income for the three and six months ended June 30, 2024 , respectively, and there was no ineffective portion of these hedges.

A pre-tax unrealized gain of $ 107,000 and a pre-tax unrealized loss of $ 68,000 was recognized in other comprehensive income for the three and six months ended June 30, 2023 , respectively, and there was no ineffective portion of these hedges.

As of June 30, 2024

(Dollars in Thousands)

1 unchanged sentence

Derivatives not designated as hedging instruments

Interest rate swap agreements on loans with commercial loan clients 18 $ 143,915 6.28 $ 2,759

Interest rate swap agreements on loans with third-party counterparties 104 $ 938,679 5.77 $ 58,374

Interest rate swap agreements on loans with commercial

Interest rate swap agreements on loans with third-party

counterparties

Derivatives designated as hedging instruments

3 unchanged sentences

Derivatives not designated as hedging instruments

Interest rate swap agreements on loans with commercial loan clients 86 $ 794,764 5.68 $ 61,133

Interest rate swap agreements on loans with commercial

Derivatives designated as hedging instruments

Interest rate swap related to wholesale funding

As of December 31, 2023

Number of Instruments Notional Amount Weighted Average Maturity (In Years) Fair Value

(Dollars in Thousands)

1 unchanged sentence

Derivatives not designated as hedging instruments

Interest rate swap agreements on loans with commercial loan clients 25 $ 249,454 6.33 $ 7,904

Interest rate swap agreements on loans with third-party counter parties 106 939,156 6.06 43,234

Interest rate swap agreements on loans with commercial

Interest rate swap agreements on loans with third-party

counter parties

Derivatives designated as hedging instruments

3 unchanged sentences

Derivatives not designated as hedging instruments

Interest rate swap agreements on loans with commercial loan clients 81 $ 689,702 5.96 $ 51,138

Interest rate swap agreements on loans with commercial

Derivatives designated as hedging instruments

3 unchanged sentences

Failure to meet minimum capital requirements can result in certain mandatory, and possibly additional discretionary actions on the part of regulators, that if undertaken, could have a direct material effect on the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory practices.

The Corporation’s and the Bank’s capital

amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Corporation’s and the Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The Corporation regularly reviews and updates, when appropriate, its Capital and Liquidity Action Plans, which is designed to help ensure appropriate capital adequacy, to plan for future capital needs, and to ensure that the Corporation serves as a source of financial strength to the Bank.

11 unchanged sentences

Future dividend decisions by the Bank and the Corporation will continue to be subject to compliance with various legal, regulatory, and other restrictions as defined from time to time.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum amounts and ratios of Total Common Equity Tier 1 and Tier 1 capital to risk-weighted assets and of Tier 1 capital to adjusted total assets.

adjusted total assets.

These risk-based capital requirements presently address credit risk related to both recorded and off-balance sheet commitments and obligations.

As of March 31, 2024, the Corporation’s capital levels exceeded the regulatory minimums and the Bank’s capital levels remained characterized as well capitalized under the regulatory framework.

As of June 30, 2024 , the Corporation’s capital levels exceeded the regulatory minimums and the Bank’s capital levels remained characterized as well capitalized under the regulatory framework.

The following tables summarize both the Corporation’s and the Bank’s capital ratios and the ratios required by their federal regulators:

As of March 31, 2024

Minimum Required for Capital Adequacy Purposes For Capital Adequacy Purposes Plus Capital Conservation Buffer Minimum Required to Be Well

Capitalized Under Prompt Corrective Action Requirements

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

As of June 30, 2024

Minimum Required

Adequacy Purposes

Conservation Buffer

Minimum Required

Capitalized Under

Prompt Corrective

Action Requirements

(Dollars in Thousands)

1 unchanged sentence

(to risk-weighted assets)

Consolidated $ 384,083 11.36 % $ 270,485 8.00 % $ 355,011 10.50 % N/A N/A

First Business Bank

1 unchanged sentence

(to risk-weighted assets)

Consolidated $ 299,707 8.86 % $ 202,864 6.00 % $ 287,390 8.50 % N/A N/A

First Business Bank

1 unchanged sentence

(to risk-weighted assets)

Consolidated $ 287,715 8.51 % $ 152,148 4.50 % $ 236,674 7.00 % N/A N/A

First Business Bank

1 unchanged sentence

(to adjusted assets)

Consolidated $ 299,707 8.45 % $ 141,847 4.00 % $ 141,847 4.00 % N/A N/A

First Business Bank

As of December 31, 2023

Minimum Required for Capital Adequacy Purposes For Capital Adequacy Purposes Plus Capital Conservation Buffer Minimum Required to Be Well

Capitalized Under Prompt Corrective Action Requirements

Amount Ratio Amount Ratio Amount Ratio Amount Ratio

Minimum Required

Adequacy Purposes

Conservation Buffer

Minimum Required

Capitalized Under

Prompt Corrective

Action Requirements

(Dollars in Thousands)

1 unchanged sentence

(to risk-weighted assets)

Consolidated $ 375,440 11.19 % $ 268,500 8.00 % $ 352,406 10.50 % N/A N/A

First Business Bank

1 unchanged sentence

(to risk-weighted assets)

Consolidated $ 293,338 8.74 % $ 201,375 6.00 % $ 285,281 8.50 % N/A N/A

First Business Bank

1 unchanged sentence

(to risk-weighted assets)

Consolidated $ 281,346 8.38 % $ 151,031 4.50 % $ 234,937 7.00 % N/A N/A

First Business Bank

1 unchanged sentence

(to adjusted assets)

Consolidated $ 293,338 8.43 % $ 139,145 4.00 % $ 139,145 4.00 % N/A N/A

First Business Bank

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements