What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-04-25 compared with 2024-10-25 · 229 added, 307 removed, 414 unchanged (56% of the section changed)

9 unchanged sentences

• Adverse changes in the economy or business conditions, either nationally or in our markets including, without limitation, inflation, economic downturn, labor shortages, wage pressures, and the adverse effects of public health events on the global, national, and local economy.

• Uncertainty created by potential federal government actions relating to the authority of regulatory agencies (including bank regulators), international trade policy, and other significant policy matters.

• Competitive pressures among depository and other financial institutions nationally and in our markets.

• Increases in defaults by borrowers and other delinquencies.

• Our ability to manage growth effectively, including the successful expansion of our client support, administrative infrastructure, and internal management systems.

• Our ability to manage growth effectively includes the successful expansion of our client support, administrative infrastructure, and internal management systems.

• Fluctuations in interest rates and market prices.

11 unchanged sentences

These factors could affect our financial performance and could cause actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods.

Where any such forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, we caution that, while our management believes such assumptions or bases are reasonable and are made in good faith, assumed facts or bases can vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances.

Where, in any forward-looking statement, an expectation or belief is expressed as to future

results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will be achieved or accomplished.

material, depending on the circumstances.

Where, in any forward-looking statement, an expectation or belief is expressed as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will be achieved or accomplished.

We do not intend to, and specifically disclaim any obligation to, update any forward-looking statements.

4 unchanged sentences

We operate as a business bank focusing on delivering a full line of commercial banking products and services tailored to meet the specific needs of small and medium-sized businesses, business owners, executives, professionals, and high net worth individuals.

Our products and services include those for business banking, private wealth, and bank consulting.

Our products and services include those for business banking, private wealth management services, and bank consulting.

Within business banking, we offer commercial lending, asset-based lending, accounts receivable financing, equipment financing, floorplan financing, vendor financing, SBA lending and servicing, treasury management services, and company retirement plans.

5 unchanged sentences

Financial Performance Summary

Results as of and for the three and nine months ended September 30, 2024 include:

• Net income available to common shareholders totaled $10.3 million, or diluted earnings per share of $1.24, for the three months ended September 30, 2024, compared to $9.7 million, or diluted earnings per share of $1.17, for the same period in 2023.

Net income available to common shareholders totaled $29.2 million, or diluted earnings per share of $3.50, for the nine months ended September 30, 2024, compared to $26.6 million, or diluted earnings per share of $3.19, for the same period in 2023.

• Annualized return on average assets (“ROAA”) for the three months ended September 30, 2024 measured 1.13% compared to 1.19% for the same period in 2023.

Annualized ROAA for the nine months ended September 30, 2024 measured 1.08% compared to 1.13% for the same period in 2023.

• Return on average common equity (“ROACE”) is defined as net income available to common shareholders divided by average equity less average preferred stock.

ROACE was 13.83% for the three months ended September 30, 2024, compared to 14.62% for the same period in 2023.

ROACE was 13.41% for the nine months ended September 30, 2024, compared to 13.72% for the same period in 2023.

• Pre-tax, pre-provision (“PTPP”) adjusted earnings, which excludes certain one-time and discrete items, and PTPP ROAA for the three months ended September 30, 2024 were $15.4 million and 1.70%, respectively, compared to $14.1 million and 1.72% in the same period in 2023.

PTPP and PTPP ROAA for the nine months ended September 30, 2024 were $42.7 million and 1.59%, respectively, compared to $40.9 million and 1.74% in the same period in 2023.

• Fees in lieu of interest, defined as prepayment fees, asset-based loan fees, non-accrual interest, and loan fee amortization, totaled $942,000 for the three months ended September 30, 2024, compared to $582,000 for the same period in 2023.

Fees in lieu of interest totaled $3.0 million for the nine months ended September 30, 2024, compared to $2.2 million for the same period in 2023.

• Net interest margin was 3.64% for the three months ended September 30, 2024 compared to 3.76% for the same period in 2023.

Adjusted net interest margin, which excludes the impact of fees in lieu of interest, and other recurring, but volatile, components of net interest margin, was 3.51% for the three months ended September 30, 2024, compared to 3.66% for the

same period in 2023.

Net interest margin was 3.62% for the nine months ended September 30, 2024 compared to 3.81% for the same period in 2023.

Adjusted net interest margin, which excludes certain one-time and volatile items including fees in lieu of interest, was 3.47% for the nine months ended September 30, 2024, compared to 3.68% for the same period in 2023.

• Top line revenue, defined as net interest income plus non-interest income, totaled $38.1 million for the three months ended September 30, 2024, compared to $37.0 million in the same period in 2023.

Top line revenue totaled $112.3 million for the nine months ended September 30, 2024, compared to $107.3 million in the same period in 2023.

• Effective tax rate, including the benefit from Low-Income Housing Tax Credits, was 16.8% for the nine months ended September 30, 2024 compared to 21.4% for the same period in 2023.

• Provision for credit loss expense was $2.1 million for the three months ended September 30, 2024 compared to $1.8 million for the same period in 2023.

Provision for credit loss expense was $6.1 million for the nine months ended September 30, 2024 compared to $5.6 million for the same period in 2023.

• Total assets at September 30, 2024 increased $207.9 million, or 7.9% annualized, to $3.716 billion from $3.508 billion at December 31, 2023.

• Period-end gross loans and leases receivable increased $200.3 million, or 9.4% annualized, to $3.050 billion as of September 30, 2024 compared to $2.850 billion as of December 31, 2023.

Average gross loans and leases of $2.961 billion increased $368.1 million, or 14.2%, for the nine months ended September 30, 2024, compared to $2.593 billion for the same period in 2023.

• Non-performing assets were $19.4 million and 0.52% of total assets as of September 30, 2024, compared to $20.8 million and 0.59% of total assets as of December 31, 2023.

• The allowance for credit losses, including reserve for unfunded credit commitments, increased $2.5 million compared to December 31, 2023.

Results as of and for the three months ended March 31, 2025 include:

• Net income available to common shareholders totaled $11.0 million, or diluted earnings per share of $1.32, for the three months ended March 31, 2025, compared to $8.6 million, or diluted earnings per share of $1.04, for the same period in 2024.

• Annualized return on average assets (“ROAA”) for the three months ended March 31, 2025 measured 1.14% compared to 0.98% for the same period in 2024.

• Return on average tangible common equity (“ROATCE”) is defined as net income available to common shareholders divided by average equity less average intangible assets and average preferred stock.

ROATCE was 14.12% for the three months ended March 31, 2025, compared to 12.79% for the same period in 2024.

• Pre-tax, pre-provision (“PTPP”) adjusted earnings, which excludes certain one-time and discrete items, for the three months ended March 31, 2025 was $16.2 million, compared to $13.1 million in the same period in 2024.

• Fees in lieu of interest, defined as prepayment fees, asset-based loan fees, non-accrual interest, and loan fee amortization, totaled $2.1 million for the three months ended March 31, 2025, compared to $849,000 for the same period in 2024.

• Net interest margin was 3.69% for the three months ended March 31, 2025 compared to 3.58% for the same period in 2024.

Adjusted net interest margin, which excludes the impact of fees in lieu of interest, and other recurring, but volatile, components of net interest margin, was 3.46% for the three months ended March 31, 2025, compared to 3.43% for the same period in 2024.

• Top line revenue, defined as net interest income plus non-interest income, totaled $40.8 million for the three months ended March 31, 2025, compared to $36.3 million in the same period in 2024.

• Effective tax rate, including the benefit from Low-Income Housing Tax Credits, was 17.0% for the three months ended March 31, 2025 compared to 16.5% for the same period in 2024.

• Provision for credit losses was $2.7 million for the three months ended March 31, 2025 compared to $2.3 million for the same period in 2024.

• Total assets at March 31, 2025 increased $91.7 million, or 9.5% annualized, to $3.945 billion from $3.853 billion at December 31, 2024.

• Period-end gross loans and leases receivable increased $71.4 million, or 9.2% annualized, to $3.185 billion as of March 31, 2025 compared to $3.114 billion as of December 31, 2024.

Average gross loans and leases of $3.186 billion increased $298.3 million, or 10.3%, for the three months ended March 31, 2025, compared to $2.887 billion for the same period in 2024.

• Non-performing assets were $24.1 million and 0.61% of total assets as of March 31, 2025, compared to $28.4 million and 0.74% of total assets as of December 31, 2024.

• The allowance for credit losses, including reserve for unfunded credit commitments, decreased $753,000 compared to December 31, 2024.

The allowance for credit losses, including reserve for unfunded credit commitments, was 1.15% of total loans, compared to 1.20% at December 31, 2024.

• Period-end core deposits at September 30, 2024 increased $43.7 million, or 2.5% annualized, to $2.383 billion from $2.339 billion as of December 31, 2023.

Average core deposits of $2.366 billion increased $317.8 million, or 15.5%, for the nine months ended September 30, 2024, compared to $2.048 billion for the same period in 2023.

• Private wealth and trust assets under management and administration increased by $276.4 million, or 11.1% annualized, to $3.398 billion at September 30, 2024, compared to $3.122 billion at December 31, 2023.

• Period-end core deposits at March 31, 2025 increased $66.3 million, or 11.1% annualized, to $2.463 billion from $2.396 billion as of December 31, 2024.

Average core deposits of $2.363 billion increased $16.4 million or 0.7%, for the three months ended March 31, 2025, compared to $2.346 billion for the same period in 2024.

• Private wealth and trust assets under management and administration increased by $5.9 million, or 0.7% annualized, to $3.425 billion at March 31, 2025, compared to $3.419 billion at December 31, 2024.

Private wealth trust assets under management and administration increased $104.4 million, or 3.1%, compared to the same period in 2024.

1 unchanged sentence

Top Line Revenue

Top line revenue, comprised of net interest income and non-interest income, increased $1.0 million, or 2.8%, for the three months ended September 30, 2024, compared to the same period in 2023, due to a 8.4% increase in net interest income, partially offset by a 16.2% decrease in non-interest income.

The increase in net interest income primarily reflects an increase in average gross loans and leases and an increase in fees in lieu of interest, partially offset by net interest margin compression.

The decrease in non-interest income was due to decreases in returns on investments in Small Business Investment Company ("SBIC") mezzanine funds, commercial loan swap fee income, and gains on the sale of SBA loans.

Top line revenue increased $5.0 million, or 4.7%, for the nine months ended September 30, 2024, compared to the same period in 2023, due to a 9.6% increase in net interest income partially offset by a 12.3% decrease in non-interest income.

The increase in net interest income was driven by an increase in average loans and leases outstanding.

The decrease in non-interest income was due to decreases in returns on investments in SBIC mezzanine funds, commercial loan swap fee income, and gains on the sale of SBA loans;

partially offset by increases in Private wealth fee income.

Top line revenue, comprised of net interest income and non-interest income, increased $4.6 million, or 12.6%, for the three months ended March 31, 2025, compared to the same period in 2024, due to a 12.7% increase in net interest income and a 12.2% increase in non-interest income.

The increase in net interest income was driven by an increase in average loans and leases outstanding as well as an increase in fees in lieu of interest.

The increase in non-interest income was due to increases in gains on the sale of SBA loans and private wealth fee income, partially offset by decreases in loan fees.

The components of top line revenue were as follows:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(Dollars in Thousands)

2 unchanged sentences

Top line revenue

Annualized Return on Average Assets (“ROAA”) and Annualized Return on Average Common Equity (“ROACE”)

ROAA for the three and nine months ended September 30, 2024 was 1.13% and 1.08%, respectively, compared to 1.19% and 1.13% for the three and nine months ended September 30, 2023.

The decrease in ROAA for the three and the nine months ended was due to the decrease in non-interest income, partially offset by an increase in net interest income and decrease in the effective tax rate.

Annualized Return on Average Assets (“ROAA”) and Annualized Return on Average Tangible Common Equity (“ROATCE”)

ROAA for the three months ended March 31, 2025 was 1.14%, compared to 0.98% for the three months ended March 31, 2024.

The increase in ROAA for the three months ended was due to increases in net interest income and non-interest income, partially offset by an increase in operating expenses and income tax expense.

We consider ROAA a critical metric to measure the profitability of our organization and how efficiently our assets are deployed.

ROAA also allows us to better benchmark our profitability to our peers without the need to consider different degrees of leverage which can ultimately influence return on equity measures.

ROACE for the three and nine months ended September 30, 2024 was 13.8% and 13.4% respectively, compared to 14.6% and 13.7% for the three and nine months ended September 30, 2023.

The reasons for the change in ROACE are consistent with the net income variance explanation as discussed under ROAA above.

We view ROACE as an important measurement for monitoring profitability and continue to focus on improving our return to our shareholders by enhancing the overall profitability of our client relationships, controlling our expenses, and minimizing our costs of credit.

ROATCE for the three months ended March 31, 2025 was 14.1%, compared to 12.8% for the three months ended March 31, 2024.

The reasons for the change in ROATCE are consistent with the net income variance explanation as discussed under ROAA above.

We view ROATCE as an important measurement for monitoring profitability and continue to focus on improving our return to our shareholders by enhancing the overall profitability of our client relationships, controlling our expenses, and minimizing our costs of credit.

Efficiency Ratio and Pre-Tax, Pre-Provision Adjusted Earnings

Efficiency ratio measured 59.4% and 62.0% for the three and nine months ended September 30, 2024, compared to 62.0% and 61.9% for the three and nine months ended September 30, 2023, respectively.

For the three month period comparison, the percentage increase in top line revenue exceeded the percentage increase in operating expenses, resulting in positive quarterly operating leverage.

Revenue increased for the reasons stated above in the Top Line Revenue section, while operating expenses remained relatively consistent in the periods of comparison.

For the nine month period comparison, the efficiency ratio was relatively consistent as revenue and expenses grew commensurately.

Efficiency ratio measured 60.3% for the three months ended March 31, 2025, compared to 63.8% for the three months ended March 31, 2024.

The percentage increase in top line revenue exceeded the percentage increase in operating expenses, resulting in positive quarterly operating leverage.

Revenue increased for the reasons stated above in the Top Line Revenue section, while operating expenses increased at a slower rate in the periods of comparison as described in the Non-Interest Expense section.

Efficiency ratio is a non-GAAP measure representing operating expense, which is non-interest expense excluding the effects of the SBA recourse benefit or provision, net gains or losses on repossessed assets, amortization of other intangible assets, and other discrete items, if any, divided by operating revenue, which is equal to net interest income plus non-interest income less realized net gains or losses on securities, if any.

PTPP adjusted earnings for three and nine months ended September 30, 2024 were $15.4 million and $42.7 million, respectively, compared to $14.1 million and $40.9 million for the three and nine months ended September 30, 2023, respectively.

PTPP adjusted earnings for three months ended March 31, 2025 were $16.2 million, compared to $13.1 million for the three months ended March 31, 2024, an increase of 23.4%.

PTPP adjusted earnings is defined as operating revenue less operating expense.

The increase in PTPP adjusted earnings for both periods was primarily driven by an increase in net interest income partially offset by a decrease in non-interest income.

The increase in PTPP adjusted earnings was primarily driven by increases in both net interest income and non-interest income, partially offset by an increase in operating expenses.

In the judgment of the Corporation’s management, the adjustments made to non-interest expense and non-interest income allow investors and analysts to better assess the Corporation’s operating expenses in relation to its core operating revenue by removing the volatility associated with certain one-time items and other discrete items.

PTPP adjusted earnings allows management to benchmark performance of our model to our peers without the influence of the provision for credit losses and tax considerations, which will ultimately influence other traditional financial measurements, including ROAA and ROACE.

PTPP adjusted earnings is a non-GAAP measure that allows management to benchmark performance of our model to our peers without the influence of the provision for credit losses and tax considerations, which will ultimately influence other traditional financial measurements, including ROAA and ROATCE.

The information provided below reconciles the efficiency ratio to its most comparable GAAP measure.

Please refer to the Non-Interest Income and Non-Interest Expense sections below for discussion on additional drivers of the year-over-year change in the efficiency ratio and PTPP adjusted earnings.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

(Dollars in Thousands)

1 unchanged sentence

Net (gain) loss on repossessed assets

Impairment of tax credit investments

SBA recourse provision

8 unchanged sentences

Average total assets

Pre-tax, pre-provision adjusted return on average assets

The Corporation's atypically high net interest margin in 2023 creates a temporary, positive operating leverage headwind as net interest margin returns to normalized levels in 2024.

We believe the Corporation will generate positive operating leverage on an annual basis and progress towards enhancing the long-term efficiency ratio at a measured pace as we focus on strategic initiatives directed toward revenue growth, process improvement, and automation.

Net Interest Income

1 unchanged sentence

Net interest income is sensitive to changes in market rates of interest and the asset/liability management processes to prepare for and respond to such changes.

The following table provides information with respect to (1) the change in net interest income attributable to changes in rate (changes in rate multiplied by prior volume) and (2) the change in net interest income attributable to changes in volume (changes in volume multiplied by prior rate) for the three and nine months ended September 30, 2024 compared to the same period in 2023.

The following table provides information with respect to (1) the change in net interest income attributable to changes in rate (changes in rate multiplied by prior volume) and (2) the change in net interest income attributable to changes in volume (changes in volume multiplied by prior rate) for the three months ended March 31, 2025 compared to the same period in 2024.

The change in net interest income attributable to changes in rate and volume (changes in rate multiplied by changes in volume) has been allocated to the rate and volume changes in proportion to the relationship of the absolute dollar amounts of the change in each.

Increase (Decrease) for the Three Months

Ended September 30,

Increase (Decrease) for the Nine Months

Ended September 30,

2024 Compared to 2023

Ended March 31,

2025 Compared to 2024

(In Thousands)

Interest-earning assets

19 unchanged sentences

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

The tables below show our average balances, interest, average yields/rates, net interest margin, and the spread between the combined average yields earned on interest-earning assets and average rates on interest-bearing liabilities for the three and nine months ended September 30, 2024 and 2023.

The average balances are derived from average daily balances.

For the Three Months Ended September 30,

Yield/Rate (4)

(Dollars in Thousands)

Interest-earning assets

Commercial real estate and other

mortgage loans (1)

Commercial and industrial loans (1)

Consumer and other loans (1)

Total loans and leases receivable (1)

Mortgage-related securities (2)

Other investment securities (3)

FHLB and FRB stock

Short-term investments

Total interest-earning assets

Non-interest-earning assets

Interest-bearing liabilities

Transaction accounts

Money market accounts

Certificates of deposit

Wholesale deposits

Total interest-bearing deposits

FHLB advances

Other borrowings

Total interest-bearing liabilities

Non-interest-bearing demand

deposit accounts

Other non-interest-bearing liabilities

Total liabilities

Stockholders’ equity

Total liabilities and stockholders’

Net interest income

Interest rate spread

Net interest-earning assets

Net interest margin

Average interest-earning assets to

average interest-bearing liabilities

Return on average assets (4)

Return on average common equity (4)

Average equity to average assets

Non-interest expense to average

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Yield/Rate (4)

35 unchanged sentences

Return on average assets (4)

Return on average common equity (4)

Return on average tangible common equity (4)

Average equity to average assets

6 unchanged sentences

(4) Represents annualized yields/rates.

Comparison of Net Interest Income for the Three and Nine Months Ended September 30, 2024 and 2023

Net interest income increased $2.4 million, or 8.4%, and $8.0 million, or 9.6% during the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023.

The increase in net interest income reflected an increase in average gross loans and leases and an increase in fees in lieu of interest, partially offset by net interest margin compression.

Fees in lieu of interest, which vary from quarter to quarter, totaled $942,000 and $3.0 million for the three and nine months ended September 30, 2024, compared to $582,000 and $2.2 million for the same periods in 2023.

Excluding fees in lieu of interest, net interest income for the three and nine months ended September 30, 2024 increased $2.1 million, or 7.32%, and $7.2 million, or 8.92%, respectively.

Average gross loans and leases for the three and nine months ended September 30, 2024 increased

$320.0 million, or 11.8%, and $368.1 million, or 14.2%, respectively, compared to the three and nine months ended September 30, 2023.

The yield on average loans and leases for the three and nine months ended September 30, 2024 was 7.32% and 7.25%, respectively, compared to 7.06% and 6.79% for the three and nine months ended September 30, 2023.

Excluding the impact of loan fees in lieu of interest, the yield on average loans and leases for the three and nine months ended September 30, 2024 was 7.20% and 7.11%, respectively, compared to 6.97% and 6.67% for the three and nine months ended September 30, 2023.

The yield on average interest-earning assets for the three and nine months ended September 30, 2024 measured 6.97% and 6.89%, respectively, compared to 6.71% and 6.43% for the three and nine months ended September 30, 2023.

Excluding loan fees in lieu of interest, the yield on average interest-earning assets for the three and nine months ended September 30, 2024 was 6.86% and 6.77%, respectively, compared to 6.63% and 6.33% for the three and nine months ended September 30, 2023.

The increase in yields was primarily due to the reinvestment of cash flows from fixed-rate loan portfolios and securities in a higher rate environment.

Compared to the prior year quarter, the quarter's daily average effective federal funds rate for the remained flat at 5.26%.

The daily average effective federal funds rate for the nine months ended September 30, 2024 increased 39 basis points.

The rate paid on average interest-bearing core deposits for the three and nine months ended September 30, 2024 increased to 4.10% and 4.07%, respectively, from 3.74% and 3.27% for the three and nine months ended September 30, 2023.

The average rate paid on total interest-bearing liabilities for the three and nine months ended September 30, 2024 increased to 4.05% and 3.97%, respectively, from 3.64% and 3.30% for the three and nine months ended September 30, 2023.

Total interest-bearing liabilities may include interest-bearing deposits, federal funds purchased, FHLB advances, subordinated and junior subordinated notes and debentures payable, and other borrowings.

The average rates paid increased due to the increase in short-term market rates, the replacement of maturing wholesale funds at higher fixed rates, and client movement from non-interest bearing to interest bearing core deposit products.

The daily average effective federal funds rate for the three months ended September 30, 2024 remained flat.

Net interest margin decreased to 3.64% and 3.62%, respectively, for the three and nine months ended September 30, 2024, compared to 3.76% and 3.81% for the three and nine months ended September 30, 2023.

The primary driver of the reduction in net interest margin was increased funding costs, partially offset by an increase in earning asset yields.

Adjusted net interest margin measured 3.51% and 3.47% for the three and nine months ended September 30, 2024, compared to 3.66% and 3.68% for the three and nine months ended September 30, 2023.

The change in yield of the respective interest-earning asset or the rate paid on interest-bearing liability compared to the change in short-term market rates is commonly referred to as a beta.

The table below displays the beta calculations for loans and leases, total interest earning assets, core deposits, interest-bearing deposits and total interest-bearing liabilities for the three months ended March 31, 2025 and 2024.

Additionally, adjusted total loans and leases and total interest-earning assets excludes the volatile impact of fees in lieu of interest.

For the Three Months Ended March 31,

Asset and Liability Beta Analysis

Average Yield/Rate (4)

Total loans and leases receivable (a)

Total interest-earning assets (b)

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

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

Total core deposits (e)

Total bank funding (f)

Net interest margin (g)

Adjusted net interest margin (h)

Effective fed funds rate (3)(i)

Beta Calculations:

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

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

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

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

Total core deposits (e)/(i)

Total bank funding (2)(f)/(i)

Comparison of Net Interest Income for the Three Months Ended March 31, 2025 and 2024

Net interest income increased $3.7 million, or 12.7%, during the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

The increase in net interest income reflected an increase in average gross loans and leases, an increase in fees in lieu of interest, and net interest margin improvement.

Fees in lieu of interest, which vary from quarter to quarter, totaled $2.1 million for the three months ended March 31, 2025, compared to $849,000 for the same period in 2024.

FILOI was elevated due to reclassification of loan fees that were previously classified as non-interest income to interest income.

Excluding fees in lieu of interest, net interest income for the three months ended March 31, 2025 increased $2.5 million, or 8.88%.

Average gross loans and leases for the three months ended March 31, 2025 increased $298.3 million, or 10.3%, compared to the three months ended March 31, 2024.

The yield on average loans and leases for the three months ended March 31, 2025 was 6.94%, compared to 7.14% for the three months ended March 31, 2024.

Excluding the impact of loan fees in lieu of interest, the yield on average loans and leases for the three months ended March 31, 2025 was 6.68%, compared to 7.02% for the three months ended March 31, 2024.

The yield on average interest-earning assets for the three months ended March 31, 2025 measured 6.61%, compared to 6.77% for the three months ended March 31, 2024.

Excluding loan fees in lieu of interest, the yield on average interest-earning assets for the three months ended March 31, 2025 was 6.38%, compared to 6.67% for the three months ended March 31, 2024.

The decrease in yield was primarily due to the decrease in short-term market rates partially offset by the reinvestment of cash flows from the securities and fixed-rate loan portfolios.

Compared to the prior year quarter, the quarter's daily average effective federal funds rate was 4.33%.

The daily average effective federal funds rate for the three months ended March 31, 2025 decreased 100 basis points compared to the prior year quarter.

The rate paid on average interest-bearing core deposits for the three months ended March 31, 2025 decreased to 3.29%, from 4.04% for the three months ended March 31, 2024.

The average rate paid on total interest-bearing liabilities for the three months ended March 31, 2025 decreased to 3.50%, from 3.90% for the three months ended March 31, 2024.

Total interest-bearing liabilities may include interest-bearing deposits, FHLB advances, subordinated and junior subordinated notes and debentures payable, federal funds purchased, and other borrowings.

The average rates paid decreased primarily due to the decrease in short-term market rates.

The daily average effective federal funds rate for the three months ended March 31, 2025 decreased by 100 basis points compared to the prior year quarter.

Net interest margin increased to 3.69% for the three months ended March 31, 2025, compared to 3.58% for the three months ended March 31, 2024.

The primary driver of the increase in net interest margin was lower funding costs, partially offset by a decrease in earning asset yields.

Adjusted net interest margin measured 3.46% for the three months ended March 31, 2025, compared to 3.43% for the three months ended March 31, 2024.

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

8 unchanged sentences

Refer to Allowance for Credit Losses , below, for further information regarding our allowance for credit loss methodology.

The Corporation recognized $2.1 million and $6.1 million of provision expense for the three and nine months ended September 30, 2024, respectively, compared to expense of $1.8 million and $5.6 million for the three and nine months ended September 30, 2023.

The provision expense for the three months ended September 30, 2024 of $2.1 million consisted of $1.5 million of net charge-offs, $616,000 due to loan growth, and a $757,000 net increase in specific reserves, partially offset by decreases of $444,000 and $330,000 due to quantitative and qualitative factor changes, respectively.

The following table shows the components of the provision for credit losses for the three and nine months ended September 30, 2024 compared to the same periods in 2023.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(In Thousands)

The following table shows the components of the provision for credit losses for the three months ended March 31, 2025 compared to the same period in 2024.

For the Three Months Ended March 31,

(In Thousands)

5 unchanged sentences

Total provision for credit losses

The addition of specific reserves on individually evaluated loans represents new specific reserves established when collateral shortfalls or government guaranty deficiencies are present, while the release of specific reserves represents the reduction of previously established reserves that are no longer required.

Qualitative factor changes reflect management’s evaluation of the level of risk within the portfolio based upon several factors for each portfolio segment.

The current period benefit is primarily due to lower growth rates in certain loan pools.

Quantitative factor changes reflect the change in the reasonable and supportable forecast as well as other model assumptions.

1 unchanged sentence

This amount is net of the release of any specific reserve that may have already been provided.

Refer to Asset Quality , below, for further information regarding the overall credit quality of our loan and lease portfolio.

Comparison of Non-Interest Income for the Three and Nine Months Ended September 30, 2024 and 2023

Comparison of Non-Interest Income for the Three Months Ended March 31, 2025 and 2024

Non-Interest Income

Non-interest income decreased $1.4 million, or 16.2%, to $7.1 million for the three months ended September 30, 2024 compared to $8.4 million for the same period in 2023.

The decrease in total non-interest income for the three months ended September 30, 2024 was primarily due to decreases in returns on investments of SBIC mezzanine funds and commercial loan swap fee income, offset by an increase in Private wealth fee income.

Non-interest income for the nine months ended September 30, 2024 decreased $3.0 million, or 12.3%, to $21.2 million compared to $24.2 million for the same period in 2023.

The decrease in total non-interest income for the nine months ended September 30, 2024 was driven by decreases in returns on investments in SBIC mezzanine funds, commercial loan swap fee income, and gains on the sale of SBA loans, partially offset by an increase in Private Wealth fee income and service charges on deposits.

Non-interest income for the three months ended March 31, 2025 increased $822,000, or 12.2%, to $7.6 million compared to $6.8 million for the same period in 2024.

The increase in total non-interest income was primarily driven by higher gains on the sale of SBA loans and private wealth fee income, partially offset by a decrease in loan fees.

Management continues to focus on revenue growth from multiple non-interest income sources to maintain a diversified revenue stream.

Contribution from fee-based revenue sources can be variable and driven by changes in the interest rate environment, client activity, and the value of underlying investments.

Total non-interest income accounted for 18.6% and 18.9% of total revenues for the three and nine months ended September 30, 2024, respectively, compared to 22.8% and 22.6% for the three and nine months ended September 30, 2023.

Total non-interest income accounted for 18.6% of total revenues for both the three months ended March 31, 2025 and March 31, 2024.

The components of non-interest income were as follows:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(Dollars in Thousands)

For the Three Months Ended March 31,

(Dollars in Thousands)

8 unchanged sentences

(1) Fee income ratio is fee income, per the above table, divided by top line revenue (defined as net interest income plus non-interest income).

Private wealth fee income increased $319,000, or 10.8%, and $1.3 million, or 15.8%, for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023.

Private wealth fee income is up compared to prior year primarily due to an increase in assets under management and administration, increases in fee rates across the client base, and non-recurring transaction fees in the 2024 period.

Gain on sale of SBA loans increased $768,000, or 393.8%, for the three months ended March 31, 2025, compared to the same period in 2024.

Management expects the SBA production to continue to grow year-over-year.

Private wealth fee income increased $381,000, or 12.2% for the three months ended March 31, 2025, compared to the same period in 2024.

Private wealth fee income is up compared to the prior year primarily due to an increase in assets under management and administration, increases in fee rates across the client base, and non-recurring transaction fees in the 2025 period.

Private wealth fee income can vary due to the mix of business at different fee structures and can be positively or negatively influenced by the timing and magnitude of volatility within the capital markets.

As of September 30, 2024, Private wealth and trust assets under management and administration totaled $3.398 billion, increasing $483.3 million, or 16.6%, compared to $2.915 billion as of September 30, 2023, due to an increase in market values, new clients, and new money from existing clients.

Service charges on deposits increased $85,000, or 10.2%, and $527,000, or 23.1%, for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023.

As of March 31, 2025, private wealth and trust assets under management and administration totaled $3.425 billion, increasing $104.4 million, or 3.1%, compared to $3.320 billion as of March 31, 2024, due to an increase in market values, new clients, and new money from existing clients.

Service charges on deposits increased $108,000, or 11.5% for the three months ended March 31, 2025, compared to the same period in 2024.

The increase is primarily driven by new and expanded core deposit relationships.

Treasury management business development efforts remain robust as gross treasury management service charges increased $145,000, or 9.9%, and $473,000, or 11.0%, for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023.

Treasury management business

development efforts remain robust as gross treasury management service charges increased $108,000, or 6.7%, for the three months ended March 31, 2025, compared to the same period in 2024.

Management believes growth in gross analyzed service charges is a strong indicator of success for the Corporation given the direct correlation to adding and expanding core business relationships.

Commercial loan interest rate swap fee income decreased $532,000, or 53.6%, and $1.7 million, or 67.7%, for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023.

We originate commercial real estate loans in which we offer clients a floating rate and an interest rate swap.

The client’s swap is then offset with a counter-party dealer.

The execution of these transactions generates swap fee income.

The aggregate amortizing notional value of interest rate swaps with various borrowers was $975.8 million as of September 30, 2024, compared to $939.2 million and $908.6 million as of December 31, 2023 and September 30, 2023, respectively.

Interest rate swaps can be an attractive product for our commercial borrowers, although associated fee income varies from period to period based on loan activity and the interest rate environment.

Gain on sale of SBA loans decreased $391,000, or 45.9%, and $767,000, or 43.3%, for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023.

Management expects the SBA loan sales to increase as production increases and previously closed commitments fully fund and become eligible for sale, due to additions to the business development team.

Other non-interest income decreased $913,000, or 55.5%, and $2.5 million, or 45.0%, for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023.

The decreases for the three and nine months ended September 30, 2024, was primarily due to the lower returns on the Corporation's investments in SBIC mezzanine funds.

SBIC mezzanine funds varies from period to period based on changes in the realized and unrealized fair value of underlying investments.

Comparison of Non-Interest Expense for the Three and Nine Months Ended September 30, 2024 and 2023

Loan fee income decreased $459,000 or 54.2%, for the three months ended March 31, 2025, compared to the same period in 2024.

The change is primarily due to the re-classification of certain types of C&I loan fees from non-interest income to interest income made on a prospective basis.

Excluding this reclassification, loan fee income increased $67,000.

Comparison of Non-Interest Expense for the Three Months Ended March 31, 2025 and 2024

Non-Interest Expense

Non-interest expense for the three and nine months ended September 30, 2024 decreased by $82,000, or 0.4% and increased $3.3 million, or 5.0%, respectively, compared to the same period in 2023.

Operating expense, which excludes certain one-time and discrete items as defined in the Efficiency Ratio table above, decreased $313,000, or 1.4%, and increased $3.2 million, or 4.8%, for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023.

For the three month period, the decrease in operating expense was primarily due to decreases in compensation, other non-interest expense, and professional fees;

partially offset by increases in computer software expense, marketing expense, and FDIC insurance.

For the nine month period, the increase in operating expense was primarily due to an increase in compensation expense, computer software expense, and FDIC insurance.

Non-interest expense for the three months ended March 31, 2025 increased $1.4 million, or 5.9%, compared to the same period in 2024.

Operating expense, which excludes certain one-time and discrete items as defined in the Efficiency Ratio table above, increased $1.5 million, or 6.4%, for the three months ended March 31, 2025, compared to the same period in 2024.

The increase in operating expense was primarily due to an increase in compensation expense, other expenses, computer software expense, and FDIC insurance.

The components of non-interest expense were as follows :

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(Dollars in Thousands)

For the Three Months Ended March 31,

Professional fees

7 unchanged sentences

(1) Total operating expense represents total non-interest expense, adjusted to exclude the impact of discrete items as previously defined in the non-GAAP efficiency ratio calculation, above.

Compensation expense for the three and nine months ended September 30, 2024 decreased $375,000, or 2.4%, and increased $960,000, or 2.1%, respectively, compared to the same periods in 2023.

For the three month period, the decrease in compensation expense was primarily due to a cash bonus accrual adjustment decrease and an increase in capitalized software development compensation.

For the nine month period, the increase in compensation expense was primarily due to an increase in average FTEs, annual merit increases, and promotions.

These increases were partially offset by decreases in incentive compensation and share-based compensation.

Successful hiring efforts to secure talent resulted in average full-time equivalent employees for the three months ended September 30, 2024 increasing to 355, up 1.7%, compared to 349 for the three months ended September 30, 2023.

Computer software expense increased $319,000, or 24.7%, and $913,000, or 24.9%, for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023.

Compensation expense for the three months ended March 31, 2025 increased $590,000, or 3.7%, compared to the same period in 2024.

The increase in compensation expense was primarily due to annual merit increases, promotions, and increases in headcount.

Successful hiring efforts to secure talent resulted in average full-time equivalent employees for the three months ended March 31, 2025 increasing to 354, up 2%, compared to 348 for the three months ended March 31, 2024.

Computer software expense increased $185,000, or 13.0%, for the three months ended March 31, 2025, compared to the same period in 2024.

The increase was primarily due to our commitment to innovative technology to support growth initiatives, enhance productivity, and improve the client experience.

Marketing expense increased $164,000, or 21.6%, and $426,000, or 19.7%, for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023.

The increase was primarily due to an increase in business development efforts and advertising projects related to the Company’s growth initiatives.

FDIC insurance for the three and nine months ended September 30, 2024 increased $130,000, or 19.1%, and $379,000, or 22.9%, respectively, compared to the same period in 2023.

The increase was primarily due to an increase in total assets and use of brokered deposits.

Data processing expense increased $92,000, or 9.7%, and $356,000, or 12.3%, for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023, primarily due to an increase in core processing costs due to loan and deposit account growth, private wealth asset growth, and various project implementations.

Professional fees decreased $124,000, or 8.7%, and increased $336,000, or 8.4%, for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023.

For the three month period, the decrease was primarily due to a decrease in recruiting expense and professional consulting services for various projects.

For the nine month period, the increase was primarily due to an increase in recruiting expense and professional consulting services for various projects.

Other non-interest expense for the three and nine months ended September 30, 2024 decreased $282,000, or 17.8%, and $17,000, or 0.5%, respectively, compared to the same period in 2023.

The decrease was primarily due to a decrease in liquidation expenses.

Income tax expense totaled $6.0 million for the nine months ended September 30, 2024 compared to $7.4 million for the same period in 2023.

Income tax expense included a $1.1 million net benefit from tax credit investments in both periods.

The effective tax rate for the nine months ended September 30, 2024 was 16.8% compared to 21.4% for the same period in 2023.

The decrease in effective tax rate is primarily due to a change in Wisconsin state tax legislation which reduced the Corporation's state taxable income.

FDIC insurance expense increased $170,000, or 27.9%, for the three months ended March 31, 2025, compared to the same period in 2024, primarily due increase in assessment rate and assessable base.

Marketing expense increased $150,000, or 18.3%, for the three months ended March 31, 2025, compared to the same period in 2024.

The increase was primarily due to an increase in business development efforts and advertising projects related to the Corporation’s growth initiatives.

Other non-interest expense for the three months ended March 31, 2025 increased $316,000, or 39.6%, compared to the same period in 2024.

The increase was primarily due to an increase in collateral liquidation expenses and early stage expenses related to SBIC investments costs.

Income tax expense totaled $2.3 million for the three months ended March 31, 2025 compared to $1.8 million for the same period in 2024.

Income tax expense included a $459,000 net benefit from tax credit investments compared to $376,000 for the same period in 2024.

The effective tax rate for the three months ended March 31, 2025 was 17.00% compared to 16.5% for the same period in 2024.

The increase in effective tax rate is primarily due to higher state income taxes.

The Corporation expects to report an effective tax rate between 16% and 18% for 2025.

5 unchanged sentences

Financial Condition

Total assets increased by $207.9 million, or 7.9%, to $3.716 billion as of September 30, 2024 compared to $3.508 billion at December 31, 2023.

The increase in total assets was primarily driven by an increase in loans and leases receivable and available-for-sale securities, partially offset by a reduction in short-term investments.

Total liabilities increased by $185.5 million, or 7.7%, to $3.404 billion at September 30, 2024 compared to $3.218 billion at December 31, 2023.

The increase in total liabilities was principally due to an increase in deposits.

Total stockholders’ equity increased by $22.4 million, or 10.3%, to $312.0 million at September 30, 2024 compared to $289.6 million at December 31, 2023.

The increase in total stockholders’ equity was due to retention of earnings and unrealized gains on available-for-sale securities, partially offset by dividends paid to common and preferred stockholders and unrealized losses on interest rate swaps.

Total assets increased by $91.7 million, or 9.5%, to $3.945 billion as of March 31, 2025 compared to $3.853 billion at December 31, 2024.

The increase in total assets was primarily driven by increases in loans and leases receivable, available-for-sale securities, and short-term investments.

Total liabilities increased by $84.2 million, or 9.6%, to $3.609 billion at March 31, 2025 compared to $3.525 billion at December 31, 2024.

The increase in total liabilities was primarily due to an increase in deposits.

Total stockholders’ equity increased by $7.5 million, or 9.1%, to $336.1 million at March 31, 2025 compared to $328.6 million at December 31, 2024.

The increase in total stockholders’ equity was primarily due to retention of earnings partially offset by dividends paid to common and preferred stockholders.

Cash and Cash Equivalents

Cash and cash equivalents include short-term investments and cash and due from banks.

Cash and due from banks increased $13.0 million to $45.3 million at September 30, 2024 from $32.3 million at December 31, 2023.

Short-term investments decreased by $20.5 million to $86.7 million at September 30, 2024 from $107.2 million at December 31, 2023.

Cash and due from banks increased $5.1 million to $34.6 million at March 31, 2025 from $29.5 million at December 31, 2024.

Short-term investments increased by $7.8 million to $136.0 million at March 31, 2025 from $128.2 million at December 31, 2024.

Our short-term investments primarily consist of interest-bearing deposits held at the FRB.

We value the safety and soundness provided by the FRB, and therefore, we incorporate short-term investments in our readily accessible liquidity program.

As of September 30, 2024 and December 31, 2023, interest-bearing deposits held at the FRB were $85.7 million and $106.8 million, respectively.

Total securities, including available-for-sale and held-to-maturity, increased by $14.7 million, or 6.4%, to $320.2 million, or 8.6% of total assets at September 30, 2024 compared to $305.5 million or 8.7% of total assets at December 31, 2023.

During the nine months ended September 30, 2024, the Corporation recognized unrealized gains of $5.6 million before income taxes through other comprehensive income, compared to unrealized losses of $6.4 million for the same period in 2023.

As of March 31, 2025 and December 31, 2024, interest-bearing deposits held at the FRB were $135.0 million and $127.8 million, respectively.

Total securities, including available-for-sale and held-to-maturity, increased by $17.9 million, or 20.5%, to $366.0 million, or 9.3% of total assets at March 31, 2025 compared to $348.1 million or 9.0% of total assets at December 31, 2024.

During the three months ended March 31, 2025, the Corporation recognized unrealized gains of $4.7 million before income taxes through other comprehensive income, compared to unrealized losses of $2.9 million for the same period in 2024.

The unrealized gains in the current period were driven by the decrease in market interest rates.

As of September 30, 2024 and December 31, 2023, our overall securities portfolio, including available-for-sale securities and held-to-maturity securities, had an estimated weighted-average expected maturity of 5.1 years and 5.6 years, respectively.

As of March 31, 2025 and December 31, 2024, our overall securities portfolio, including available-for-sale securities and held-to-maturity securities, had an estimated weighted-average expected maturity of 5.1 years and 5.2 years, respectively.

Our investment philosophy remains as stated in our most recent Annual Report on Form 10-K.

1 unchanged sentence

On a quarterly basis, we validate the reasonableness of prices received from this source through independent verification, data integrity validation primarily through comparison of current price to an expectation-based analysis of movement in prices based upon the changes in the related yield curves, and other market factors.

We did not recognize any credit losses in the securities portfolio as of September 30, 2024.

We did not recognize any credit losses in the securities portfolio as of March 31, 2025.

Loans and Leases Receivable

Period-end loans and leases receivable, net of allowance for credit losses, increased by $197.4 million, or 9.3% annualized, to $3.016 billion at September 30, 2024 from $2.819 billion at December 31, 2023 primarily driven by commercial loan growth.

Period-end loans and leases receivable, net of allowance for credit losses, increased by $71.8 million, or 9.3% annualized, to $3.149 billion at March 31, 2025 from $3.077 billion at December 31, 2024 primarily driven by commercial loan growth.

Management expects to manage loan growth towards our long term target of 10%.

Total commercial real estate (“CRE”) loans increased $129.5 million, or 10.2% annualized, to $1.829 billion.

The increase was primarily due to an increase in the construction and multifamily loan portfolios.

CRE loans represented 60.0% and 59.6% of our total loans as of September 30, 2024 and December 31, 2023, respectively.

As of September 30, 2024, 14.2% of the CRE loans were owner-occupied CRE, compared to 15.1% as of December 31, 2023.

Total commercial real estate (“CRE”) loans decreased $7.2 million to $1.910 billion.

The decrease was primarily due to payoffs and lighter demand.

CRE loans represented 59.9% and 61.6% of our total loans as of March 31, 2025 and December 31, 2024, respectively.

As of March 31, 2025, 13.5% of the CRE loans were owner-occupied CRE, compared to 14.3% as of December 31, 2024.

We consider owner-occupied CRE more characteristic of the Corporation’s C&I portfolio as, in general, the client’s primary source of repayment is the cash flow from the operating entity occupying the commercial real estate property.

Commercial and Industrial ("C&I") loans increased $68.5 million, or 8.3% annualized, to $1.174 billion.

Commercial and Industrial ("C&I") loans increased $77.4 million, or 26.9% annualized, to $1.229 billion compared to December 31, 2024.

The increase was due to growth in traditional commercial lending, Equipment Finance, and Floorplan Financing loan portfolios.

3 unchanged sentences

To monitor the ongoing credit quality of our loans and leases, each credit is evaluated for proper risk rating using a nine grade risk rating system at the time of origination, subsequent renewal, evaluation of updated financial information from our borrowers, or as other circumstances dictate.

While we continue to experience competition from banks operating in our primary geographic areas, we remain committed to our underwriting standards and will not deviate from those standards for the sole purpose of growing our loan and lease portfolio.

While we continue to experience competition from banks and non-banks operating in our primary geographic areas, we remain committed to our underwriting standards and will not deviate from those standards for the sole purpose of growing our loan and lease portfolio.

We continue to expect our new loan and lease activity to be adequate to replace normal amortization, allowing us to continue growing in future years.

1 unchanged sentence

The following table presents information concerning the composition of the Bank’s consolidated loans and leases receivable.

As of September 30,

As of March 31,

As of December 31,

10 unchanged sentences

Loans and leases receivable, net

Below is a view of selected loan portfolios disaggregated by North American Industry Classification (“NAICs”) code as of September 30, 2024:

Below is a view of selected loan portfolios disaggregated by North American Industry Classification (“NAICs”) code as of March 31, 2025:

Manufacturing

9 unchanged sentences

September 30,

Non-interest-bearing transaction accounts

9 unchanged sentences

% of total deposits

As of September 30, 2024, total period-end deposits increased by $173.2 million to $2.970 billion from $2.797 billion at December 31, 2023, primarily due to increases of $129.5 million, $105.9 million, and $34.9 million in wholesale deposits, money market accounts, and interest-bearing transaction accounts, respectively.

These increases were partially offset by decreases of $79.8 million and $17.4 million in certificates of deposits and non-interest-bearing transaction accounts, respectively.

As of September 30, 2024, total period-end core deposits increased $43.7 million, or 2.5% annualized, to $2.383 billion, compared to $2.339 billion at December 31, 2023.

The increase in period-end balances is due to increases of $105.9 million and $34.9 million in money market accounts and interest bearing transaction accounts, respectively, offset by decreases of $79.8 million and $17.4 million in certificates of deposit and non-interest-bearing transaction accounts, respectively.

As of March 31, 2025, total period-end deposits increased by $135.9 million, or 4.3%, to $3.243 billion from $3.107 billion at December 31, 2024.

As of March 31, 2025, total period-end core deposits increased $66.3 million, or 11.1% annualized, to $2.463 billion, compared to $2.396 billion at December 31, 2024.

The increase in period-end balances is due to increases of $50.2 million and $22.2 million in interest bearing transaction accounts and money market accounts, respectively, offset by decreases of $3.2 million and $2.9 million in certificates of deposit and non-interest-bearing transaction accounts, respectively.

Management believes the Bank’s deposit-centric sales strategy, led by treasury management sales, will continue to contribute to a net increase in deposits;

3 unchanged sentences

We measure the success of core deposit gathering efforts based on the number and average balances of our deposit accounts as compared to ending balances due to the variability of some of our larger relationships.

The Bank’s average core deposits, consisting of all transaction accounts, money market accounts, and certificates of deposit, increased $317.8 million, or 15.5%, to $2.366 billion for the nine months ended September 30, 2024 compared to $2.048 billion for the nine months ended September 30, 2023.

The Bank’s average core deposits, consisting of all transaction accounts, money market accounts, and certificates of deposit, increased $16.4 million, or 0.7%, to $2.363 billion for the three months ended March 31, 2025 compared to $2.346 billion for the three months ended March 31, 2024.

FHLB Advances and Other Borrowings

As of September 30, 2024, FHLB advances and other borrowings increased by $18.2 million, or 7.3%, to $349.1 million from $330.9 million at December 31, 2023.

As of March 31, 2025, FHLB advances and other borrowings decreased by $33.5 million, or 41.8%, to $286.6 million from $320.0 million at December 31, 2024.

As average deposit balances have increased, we have been able to reduce our usage of FHLB advances as a percentage of total funding.

In addition, we have strategically reduced our usage of FHLB advances in favor of wholesale deposits to increase the Bank’s readily accessible liquidity.

We will continue to utilize FHLB advances and wholesale deposits to manage interest rate risk, liquidity, and contingency funding.

As of September 30, 2024, the Corporation has no other borrowings.

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

As of August 15, 2024, the $15.0 million subordinated notes payable that bore a fixed interest rate of 5.5% were redeemed.

The Corporation issued new subordinated notes payable on September 13, 2024.

The aggregate principal amount of the newly issued subordinated notes payable was $20.0 million.

The subordinated notes payable bear a fixed interest rate of 7.5% with a maturity date of September 13, 2034.

Consistent with our funding philosophy to manage interest rate risk, we will use the most efficient and cost effective source of wholesale funds.

3 unchanged sentences

Preferred Stock

The Corporation has 12,500 shares, or $12.5 million in aggregate liquidation preference, of 7.0% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, with a liquidation preference of $1,000 per share (the “Series A Preferred Stock”) outstanding as of September 30, 2024 and December 31, 2023.

The Corporation expects to pay dividends on the Series A Preferred Stock when and if declared by its Board, at a fixed rate of 7.0% per annum, payable quarterly, in arrears, on March 15, June 15, September 15 and December 15 of each year up to, but excluding, March 15, 2027.

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 and nine months ended September 30, 2024, the Corporation paid $218,000 and $656,000, respectively, in cash dividends with respect to the Series A Preferred Stock.

During the three months ended March 31, 2025, the Corporation paid $219,000 in cash dividends with respect to the Series A Preferred Stock.

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

3 unchanged sentences

The Corporation’s derivative financial instruments, under which the Corporation is required to either receive cash from or pay cash to counterparties depending on changes in interest rates applied to notional amounts, are carried at fair value on the consolidated balance sheets.

As of September 30, 2024, the aggregate amortizing notional value of interest rate swaps with various commercial borrowers was approximately $975.8 million, compared to $939.2 million as of December 31, 2023.

As of March 31, 2025, the aggregate amortizing notional value of interest rate swaps with various commercial borrowers was approximately $1.059 billion, compared to $1.022 billion as of December 31, 2024.

We receive fixed rates and pay floating rates based upon designated benchmark interest rates on the swaps with commercial borrowers.

1 unchanged sentence

Commercial borrower swaps are completed independently with each borrower and are not subject to master netting arrangements.

As of September 30, 2024, the commercial borrower swaps were reported on the Consolidated Balance Sheet as a derivative asset of $11.4 million and liability of $39.8 million compared to a derivative asset of $7.9 million and liability of $51.1 million as of December 31, 2023.

As of March 31, 2025, the commercial borrower swaps were reported on the Consolidated Balance Sheet as a derivative asset of $6.0 million and liability of $44.8 million compared to a derivative asset of $2.0 million and liability of $56.6 million as of December 31, 2024.

On the offsetting swap contracts with dealer counterparties, we pay fixed rates and receive floating rates based upon designated benchmark interest rates.

These interest rate swaps also have maturity dates between June 2025 and July 2041.

Dealer counterparty swaps are subject to master netting agreements among the contracts within our Bank and were reported on the Consolidated Balance Sheet as a net derivative asset of $28.4 million as of September 30, 2024, compared to a net derivative asset of $43.2 million as of December 31, 2023.

The gross amount of dealer counterparty swaps as of September 30, 2024, without regard to the enforceable master netting agreement, was a gross derivative liability of $11.4 million and gross derivative asset of $39.8 million, compared to a gross derivative liability of $7.9 million and gross derivative asset of $51.1 million as of December 31, 2023.

Dealer counterparty swaps are subject to master netting agreements among the contracts within our Bank and were reported on the Consolidated Balance Sheet as a net derivative asset of $38.9 million as of March 31, 2025, compared to a net derivative asset of $54.5 million as of December 31, 2024.

The gross amount of dealer counterparty swaps as of March 31, 2025, without regard to the enforceable master netting agreement, was a gross derivative liability of $6.0 million and gross derivative asset of $44.8 million, compared to a gross derivative liability of $2.0 million and gross derivative asset of $56.6 million as of December 31, 2024.

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.

As of September 30, 2024, the aggregate notional value of interest

rate swaps designated as cash flow hedges was $499.7 million.

These interest rate swaps mature between October 2024 and February 2041.

A pre-tax unrealized loss of $11.6 million and $6.5 million was recognized in other comprehensive income for the three and nine months ended September 30, 2024, respectively, and there was no ineffective portion of these hedges.

As of March 31, 2025, the aggregate notional value of interest rate swaps designated as cash flow hedges was $539.7 million.

These interest rate swaps mature between April 2025 and February 2041.

A pre-tax unrealized loss of $5.7 million was recognized in other comprehensive income for the three months ended March 31, 2025, and there was no ineffective portion of these 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.

As of September 30, 2024, the aggregate notional value of interest rate swaps designated as fair value hedges was $12.5 million.

As of March 31, 2025, the aggregate notional value of interest rate swaps designated as fair value hedges was $12.5 million.

These interest rate swaps mature between February 2031 and October 2034.

A pre-tax unrealized loss of $246,000 and $24,000 was recognized in other comprehensive income for the three and nine months ended September 30, 2024, respectively, and there was no ineffective portion of these hedges.

A pre-tax unrealized loss of $165,000 was recognized in other comprehensive income for the three months ended March 31, 2025, and there was no ineffective portion of these hedges.

For further information and discussion of our derivatives, see Note 13 — Derivative Financial Instruments of the Consolidated Financial Statements.

1 unchanged sentence

Non-performing Assets

Total non-performing assets consisted of the following at September 30, 2024 and December 31, 2023, respectively:

September 30,

Total non-performing assets consisted of the following at March 31, 2025 and December 31, 2024, respectively:

(Dollars in Thousands)

14 unchanged sentences

Allowance for credit losses to non-accrual loans and leases

Non-accrual loans decreased $1.2 million, to $19.4 million at September 30, 2024, compared to $20.6 million at December 31, 2023.

The Corporation’s non-accrual loans as a percentage of total gross loans and leases measured 0.63% and 0.72% at September 30, 2024 and December 31, 2023, respectively.

The change in non-accrual loans was driven by charge-offs in the Equipment Finance pool and a paydown in the Asset-Based Lending ("ABL") pool both within the C&I portfolio segment, partially offset by newly defaulted loans in Equipment Finance and SBA lending pools.

While we continue to expect full repayment of the one ABL loan that defaulted during the second quarter of 2023, the liquidation process has transitioned into Chapter 7 bankruptcy, likely delaying final resolution until late 2024 or 2025.

Through our collections efforts, the current balance of this loan is $6.2 million, down from $10.9 million in the prior year quarter.

Excluding this credit, non-performing assets totaled $13.2 million, or 0.36% of total assets in the current quarter and $12.6 million, or 0.35% of total assets in the prior quarter.

Non-accrual loans decreased $4.3 million, to $24.1 million at March 31, 2025, compared to $28.4 million at December 31, 2024.

The Corporation’s non-accrual loans as a percentage of total gross loans and leases measured 0.76% and 0.91% at March 31, 2025 and December 31, 2024, respectively.

The change in non-accrual loans and leases is primarily driven by charge-offs of Equipment Finance loans in the C&I portfolio.

Charge-offs on Equipment Finance loans were higher this quarter due to a change in calculation which accelerated charge-offs by approximately one quarter.

Management believes this change better reflects the impact of an accelerated collection and liquidation process.

We continue to expect full repayment of the one ABL loan that defaulted during the second quarter of 2023.

The liquidation process under Chapter 7 bankruptcy and related litigation has delayed final resolution.

The current balance of this loan is $6.2 million, unchanged from the prior quarter.

Excluding this credit, non-performing assets totaled $17.9 million, or 0.45% of total assets in the current quarter and $22.2 million, or 0.58% of total assets at December 31, 2024.

We use a wide variety of available metrics to assess the overall asset quality of the portfolio and no one metric is used independently to make a final conclusion as to the asset quality of the portfolio.

Non-performing assets as a percentage of total assets was 0.52% and 0.59% at September 30, 2024 and December 31, 2023, respectively.

As of September 30, 2024 and December 31, 2023, the payment performance of our loans and leases did not point to any new areas of concern, as approximately 99.4% and 99.2%, respectively, of the total portfolio at the end of each period was in a current payment status.

Non-performing assets as a percentage of total assets was 0.61% and 0.74% at March 31, 2025 and December 31, 2024, respectively.

As of March 31, 2025 and December 31, 2024, the payment performance of our loans and leases did not point to any new areas of concern, as approximately 99.2% and 99.1%, respectively, of the total portfolio at the end of each period was in a current payment status.

We reviewed loans and leases with exposure to certain industries:

10 unchanged sentences

9% of total loans - Management considered the following:

office exposure is concentrated in the Wisconsin markets where local market vacancy rates are below national rates, a majority of the loan maturity dates are beyond 2031 with the borrower paying a fixed rate, either directly or through an interest rate swap, and there are no non-accrual loans in the portfolio.

office exposure is concentrated in the Wisconsin markets where local market vacancy rates are below national rates;

repricing risk of this portfolio is lower due to a majority of loans having a maturity date in 2030 and beyond and all of these loans are conventional fixed rate or fixed to the client via an interest rate swap;

and there are no non-accrual loans in the portfolio.

Based on our reserve methodology for individually and collectively evaluated loans, we believe our reserves related to this loan category to be appropriate.

1 unchanged sentence

16% of total loans - Management considered the following:

multifamily exposure is concentrated in the Wisconsin markets where local market vacancy rates are below national rates, a majority of the loan maturity dates are beyond 2031 with the borrower paying a fixed rate, either directly or through an interest rate swap, and there are no non-accrual loans in the portfolio.

multifamily exposure is concentrated in the Wisconsin markets where local market vacancy rates are below national rates, repricing risk is lower through use of fix rate terms including all multi-family loans with maturities beyond 2030 are conventional fixed rate or fixed to the client via an interest rate swap:

there are no non-accrual loans in the portfolio.

Based on our reserve methodology for individually and collectively evaluated loans, we believe our reserves related to this loan category to be appropriate.

2 unchanged sentences

We proactively work with our loan borrowers experiencing financial difficulty to find meaningful solutions to difficult situations that are in the best interests of the Bank.

As of September 30, 2024, as well as in all previous reporting periods, there were no loans over 90 days past due and still accruing interest.

As of March 31, 2025, as well as in all previous reporting periods, there were no loans over 90 days past due and still accruing interest.

Loans and leases greater than 90 days past due are placed on non-accrual status and individually evaluated for reserve requirement.

2 unchanged sentences

The following represents additional information regarding our non-accrual loans and leases:

As of and for the Nine Months

Ended September 30,

As of and for the Three Months

Ended March 31,

(In Thousands)

6 unchanged sentences

Allowance for Credit Losses

The allowance for credit losses, including unfunded commitment reserves, increased $2.5 million, or 10.2% annualized, to $35.5 million as of September 30, 2024 from $33.0 million as of December 31, 2023.

The allowance for credit losses as a percentage of gross loans and leases was 1.16% as of September 30, 2024 compared to 1.16% as of December 31, 2023.

During the nine months ended September 30, 2024, we recorded net charge-offs of $3.6 million, comprised of $4.1 million of charge-offs and $509,000 of recoveries.

The allowance for credit losses, including unfunded commitment reserves, decreased $753,000, or 2.0%, to $36.5 million as of March 31, 2025 from $37.3 million as of December 31, 2024.

The allowance for credit losses as a percentage of gross loans and leases was 1.15% as of March 31, 2025 compared to 1.20% as of December 31, 2024.

During the three months ended March 31, 2025, we recorded net charge-offs of $3.4 million, comprised of $3.8 million of charge-offs and $398,000 of recoveries.

Charge-offs on Equipment Finance loans were higher this quarter due to a change in policy which accelerated charge-offs by approximately one quarter.

Management believes this change better reflects the impact of an accelerated collection and liquidation process.

We will continue to experience some level of periodic charge-offs in the future as exit strategies are considered and executed.

Loans and leases with previously established specific reserves may ultimately result in a charge-off under a variety of scenarios.

As of September 30, 2024 and December 31, 2023, our ratio of allowance for credit losses to total non-accrual loans and leases was 183.38% and 160.21%, respectively.

This ratio increased because of paydowns on non-accrual loans and an increase in general reserves primarily due to loan growth.

As of March 31, 2025 and December 31, 2024, our ratio of allowance for credit losses to total non-accrual loans and leases was 151.79% and 131.38%, respectively.

This ratio increased primarily due to an increase in general reserves and a decrease in non-accrual loans.

Non-accrual loans and leases exhibit weaknesses that inhibit repayment in compliance with the original terms of the note or lease;

however, the evaluation of non-accrual loans and leases may not always result in a specific reserve included in the allowance for credit losses.

As part of the underwriting process, as well as our ongoing monitoring efforts, we try to ensure that we have sufficient collateral to protect our interest in the related loan or lease.

As a result of this practice, a significant portion of our outstanding balance of non-accrual loans or leases may not require additional specific reserves or require only a minimal amount of required specific reserve.

Management is proactive in recording charge-offs to bring loans to their net realizable value in situations where it is determined with certainty that we will not recover the entire amount of our principal.

This practice may lead to a lower allowance for credit loss to non-accrual loans and leases ratio as compared to our peers or industry expectations.

As asset quality strengthens, our allowance for credit losses is measured more through collective characteristics of our portfolio rather than through specific identification and we would therefore expect this ratio to rise.

Conversely, if we identify further non-accrual loans, this ratio could fall if the non-accrual loans are adequately collateralized and therefore require no specific or general reserve.

Given our business practices and evaluation of our existing loan and lease portfolio, we believe this coverage ratio is appropriate for the probable losses inherent in our loan and lease portfolio as of September 30, 2024.

To determine the level and composition of the allowance for credit losses, we break out the portfolio by segments with similar risk characteristics.

First, we evaluate loans and leases for non-accrual classification.

We analyze each loan and lease identified as non-accrual on an individual basis to determine a specific reserve based upon the estimated value of the underlying collateral for collateral-dependent loans, or alternatively, the present value of expected cash flows.

For efficiency, smaller dollar value loans within the Equipment Finance pool are reserved based on a past-due criteria.

Accruing loans may be evaluated individually.

All loans not evaluated individually are evaluated collectively as part of a portfolio segment or portfolio segment and class.

These collective evaluations utilized a reasonable and supportable forecast which includes projections of credit losses based on one of two established methods:

discounted cash flow or weighted average remaining maturity.

Each model includes a set of assumptions which are evaluated not less than annually by management.

The methodology also focuses on evaluation of several qualitative factors for each portfolio segment or portfolio segment and class, including but not limited to:

product growth rates, management’s ongoing review and grading of the loan and lease portfolios, consideration of delinquency experience, changes in the size of the loan and lease

portfolios, level of loans and leases subject to more frequent review by management, changes in underlying collateral, concentrations in specific industries, and other qualitative factors that could affect credit losses.

When it is determined that we will not receive our entire contractual principal or the loss is confirmed, we record a charge against the allowance for credit loss reserve to bring the loan or lease to its net realizable value.

1 unchanged sentence

As we complete new appraisals and/or market evaluations, in specific situations current fair values collateralizing certain collateral-dependent loans are inadequate to support the entire amount of the outstanding debt.

As a result of our review process, we have concluded an appropriate allowance for credit losses for the funded loan and lease portfolio was $33.7 million, or 1.1% of gross loans and leases, at September 30, 2024.

As a result of our review process, we have concluded an appropriate allowance for credit losses for the funded loan and lease portfolio was $36.5 million, or 1.15% of gross loans and leases, at March 31, 2025.

Given ongoing complexities with current workout situations and the uncertainty surrounding future economic conditions, further charge-offs, and increased provisions for credit losses may be recorded if additional facts and circumstances lead us to a different conclusion.

1 unchanged sentence

These agencies could require certain loan and lease balances to be classified differently or charged off when their credit evaluations differ from those of management, based on their judgments about information available to them at the time of their examination.

A summary of the activity in the allowance for credit losses follows:

The following represents additional information regarding our allowance for credit losses:

(in thousands)

% of total loans

(in thousands)

% of total loans

Allowance for credit losses:

Loans collectively evaluated

Loans individually evaluated

Unfunded commitments reserve

Loans and lease receivables:

The following is a summary of the activity in the allowance for credit losses:

As of and for the Three

Months Ended September 30,

As of and for the Nine

Months Ended September 30,

Months Ended March 31,

(Dollars in Thousands)

Allowance at beginning of period

Impact of adoption of ASC 326

Commercial real estate:

15 unchanged sentences

Allowance for credit losses on unfunded credit commitments

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

Annualized net charge offs (recoveries) as a percentage of average gross loans and leases

Liquidity and Capital Resources

1 unchanged sentence

While the Bank is subject to certain generally applicable regulatory limitations regarding its ability to pay dividends to the Corporation, we do not believe that the Corporation will be adversely affected by these dividend limitations.

The Corporation’s principal liquidity requirements at September 30, 2024 were the interest payments due on subordinated notes and debentures and cash dividends payable to both common and preferred stockholders.

The capital ratios of the Bank met all applicable regulatory capital adequacy requirements in effect on September 30, 2024, and continue to meet the heightened requirements imposed by Basel III, including the capital conservation buffer.

The Corporation’s principal liquidity requirements at March 31, 2025 were the interest payments due on subordinated notes and debentures and cash dividends payable to both common and preferred stockholders.

The capital ratios of the Bank met all applicable regulatory capital adequacy requirements in effect on March 31, 2025, and continue to meet the heightened requirements imposed by Basel III, including the capital conservation buffer.

The Corporation’s Board and management teams adhere to the appropriate regulatory guidelines on decisions which affect their capital positions, including but not limited to, decisions relating to the payment of dividends and increasing indebtedness.

6 unchanged sentences

September 30,

Short-term investments

11 unchanged sentences

Our readily accessible liquidity increased quarter over quarter.

At September 30, 2024 and December 31, 2023, the Bank had $85.7 million and $106.8 million on deposit with the FRB recorded in short-term investments, respectively.

At March 31, 2025 and December 31, 2024, the Bank had $135.0 million and $127.8 million on deposit with the FRB recorded in short-term investments, respectively.

Any excess funds not used for loan funding or satisfying other cash obligations were maintained as part of our readily accessible liquidity in our interest-bearing accounts with the FRB, as we value the safety and soundness provided by the FRB.

We plan to utilize excess liquidity to fund loan and lease portfolio growth, pay down maturing debt, allow run off of maturing wholesale certificates of deposit or invest in securities to maintain adequate liquidity at an improved margin.

We had $881.7 million of outstanding wholesale funds at September 30, 2024, compared to $739.2 million of wholesale funds as of December 31, 2023, which represented 27.0% and 24.0%, respectively, of ending balance total bank funding.

We had $1.012 billion of outstanding wholesale funds at March 31, 2025, compared to $976.1 million of wholesale funds as of December 31, 2024, which represented 29.1% and 28.9%, respectively, of ending balance total bank funding.

Wholesale funds include FHLB advances and brokered certificates of deposit.

4 unchanged sentences

The administrative costs associated with wholesale funds are considerably lower than those that would be incurred to administer a similar level of local deposits with a similar maturity structure.

Wholesale funds are also stable as each issuance has a structured maturity date and may only be redeemed in

certain limited circumstances.

Wholesale funds are also stable as each issuance has a structured maturity date and may only be redeemed in certain limited circumstances.

During the time frames necessary to accumulate wholesale funds in an orderly manner, we will use short-term FHLB advances to meet our temporary funding needs.

The short-term FHLB advances will typically have terms of one week to one month to cover the overall expected funding demands.

Period-end core deposits increased $43.7 million as of September 30, 2024, compared to December 31, 2023.

The increase was primarily due to increases of $105.9 million and $34.9 million in money market accounts and interest bearing transaction accounts, respectively.

Period-end core deposits increased $66.3 million as of March 31, 2025, compared to December 31, 2024 from $2,396 million at December 31, 2024 to $2,462 million at March 31, 2025.

The increase was primarily due to increases of $50.2 million and $22.2 million in interest-bearing transaction accounts and money market accounts, respectively.

These increases were partially offset by a $3.2 million and $2.9 million decrease in certificates of deposit and non-interest-bearing transaction accounts, respectively.

1 unchanged sentence

In order to provide for ongoing liquidity and funding, none of our wholesale certificates of deposit allow for withdrawal at the option of the depositor before the stated maturity date and FHLB advances have contractual maturity terms.

The Bank limits the percentage of wholesale funds to total bank funds in accordance with liquidity policies approved by its Board.

The Bank was in compliance with its policy limits as of September 30, 2024.

The Bank was able to access the wholesale funding market as needed at rates and terms comparable to market standards during the quarter ended September 30, 2024.

The Bank limits the percentage of

wholesale funds to total bank funds in accordance with liquidity policies approved by its Board.

The Bank was in compliance with its policy limits as of March 31, 2025.

The Bank was able to access the wholesale funding market as needed at rates and terms comparable to market standards during the quarter ended March 31, 2025.

In the event that there is a disruption in the availability of wholesale funds at maturity, the Bank has managed the maturity structure, in compliance with our approved liquidity policy, so at least one year of maturities could be funded through readily accessible liquidity.

These potential funding sources include deposits maintained at the FRB or Federal Reserve Discount Window utilizing currently unencumbered securities and acceptable loans as collateral.

As of September 30, 2024, the accessible liquidity was in excess of the stated policy minimum.

As of March 31, 2025, the accessible liquidity was in excess of the stated policy minimum.

We believe the Bank will also have access to the unused federal funds lines, cash flows from borrower repayments, and cash flows from security maturities.

2 unchanged sentences

The Corporation has in recent years, and may from time to time in the future, raise capital through the sale of debt or equity securities in private placements exempt from registration under federal securities laws.

During the nine months ended September 30, 2024, operating activities resulted in a net cash inflow of $35.5 million, which included net income of $29.8 million.

Net cash used by investing activities for the nine months ended September 30, 2024 was $226.4 million primarily due to net loan disbursements, investments made in securities available for sale, and additional investments in federal home loan bank stock.

Net cash provided by financing activities was $183.3 million for the nine months ended September 30, 2024 primarily due to a net increase in deposits.

During the three months ended March 31, 2025, operating activities resulted in a net cash inflow of $11.3 million, which included net income of $11.2 million.

Net cash used by investing activities for the three months ended March 31, 2025 was $97.4 million primarily due to net loan disbursements, investments made in securities available for sale, and additional investments in tax credit investments.

Net cash provided by financing activities was $99.0 million for the three months ended March 31, 2025 primarily due to a net increase in deposits.

Please refer to the Consolidated Statements of Cash Flows included in PART I., Item 1 for further details regarding significant sources of cash flow for the Corporation.

Contractual Obligations and Off-Balance Sheet Arrangements

As of September 30, 2024, there were no material changes to our contractual obligations and off-balance sheet arrangements disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

As of March 31, 2025, there were no material changes to our contractual obligations and off-balance sheet arrangements disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

We continue to believe that we have adequate capital and liquidity accessible from various sources to fund projected contractual obligations and commitments.

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 2. Management’s Discussion and Analysis