Exhibit 99.1
[FOR IMMEDIATE RELEASE]
First Business Financial Services, Inc.
401 Charmany Drive
Madison, WI 53719

FIRST BUSINESS BANK REPORTS RECORD SECOND QUARTER 2022 NET INCOME OF $11.0 MILLION
-- Strong top line revenue and provision benefit drive tangible book value growth --
MADISON, Wis., July 28, 2022 (BUSINESS WIRE) -- First Business Financial Services, Inc. (the “Company”, the “Bank”, or “First Business Bank”) (Nasdaq:FBIZ) reported quarterly net income available to common shareholders of $11.0 million, or $1.29 diluted earnings per share. This compares to net income of $8.7 million, or $1.02 per share, in the first quarter of 2022 and $8.2 million, or $0.95 per share, in the second quarter of 2021.
“Our record quarterly net income was driven by a notable increase in net interest income and exceptional commitment to asset quality resulting in a significant loan loss provision benefit,” President and Chief Executive Officer Corey Chambas said. “Despite above-average loan payoffs this year, we remain confident in our ability to produce 10% net loan growth. We believe this sustained loan growth and expanding net interest margin will continue to generate double-digit annual revenue growth.” Chambas added, “With an enhanced capital base, focus on diversified revenue streams, and relentless attention to credit quality, we believe we are well positioned to extend our track record of performance over the long term.”
Quarterly Highlights
•Robust Profitability Metrics. Pre-tax, pre-provision adjusted (“PTPP”) earnings, excluding Paycheck Protection Program (“PPP”) interest and fee income, increased $998,000, or 10.4%, from the linked quarter and $3.7 million, or 53.8%, from the prior year quarter. The improvement in profitability was driven by an increase in top line revenue, which rose $1.8 million, or 6.3%, from the linked quarter and $5.4 million, or 21.9%, from the prior year quarter. With revenue growth outpacing operating expense growth, the Company increased PTPP return on average assets to 1.57% in the second quarter of 2022, compared to 1.46% in linked quarter and 1.15% in the prior year quarter.
•Strong Asset Quality. The Bank continued its strong asset quality trend, highlighted by the team’s ability to proactively work through challenging loans to achieve positive outcomes for the Bank and its shareholders. Non-performing assets declined to $5.7 million, or 0.21% of total assets, improving from 0.40% of total assets on June 30, 2021. The Company recorded a provision benefit of $3.7 million, compared to a benefit of $855,000 in the first quarter of 2022 and $1.0 million in the second quarter of 2021. The provision benefit in the second quarter of 2022 was primarily due to a $4.1 million principal recovery on a legacy SBA relationship originated in May 2016 and fully charged-off in December 2020.
•Record Net Interest Income Reflecting Loan Growth and Net Interest Margin Expansion. Net interest income grew to a record $23.7 million, increasing $2.2 million, or 10.4%, from the linked quarter and $2.0 million, or 9.3%, from the prior year quarter. This increase was primarily due to a 32 and 22 basis point expansion in net interest margin compared to the linked and prior year quarters, respectively. This net interest expansion resulted from rising rates on variable-rate loans and low deposit betas on in-market deposits following the Federal Open Market Committee’s (“FOMC”) decision to raise the target Fed Funds rate 150 basis points during the first half of 2022.
•Increased Organic Loan Production. Loans, excluding net PPP loans, grew $48.9 million, or 8.8% annualized, from the first quarter of 2022 and $259.1 million, or 12.8%, from the second quarter of 2021, as the Company’s previous investments in both conventional and specialized lending continue to generate positive results.
•Compounding Tangible Book Value Growth. The Company’s demonstrated earnings power and diligent credit management more than offset the interest-rate-driven market value decline in the investment portfolio, providing a 9.4% annualized increase in tangible book value compared to the linked quarter and 9.7% compared to the prior year quarter.


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Quarterly Financial Results
(Unaudited)As of and for the Three Months EndedAs of and for the Six Months Ended
(Dollars in thousands, except per share amounts)June 30,
2022		March 31,
2022		June 30,
2021		June 30,
2022		June 30,
2021
Net interest income
$23,660 $21,426 $21,652 $45,087 $42,515 
Adjusted non-interest income (1)
6,872 7,386 6,292 14,258 13,487 
Operating revenue (1)
30,532 28,812 27,944 59,345 56,002 
Operating expense (1)
19,685 18,887 17,932 38,573 35,383 
Pre-tax, pre-provision adjusted earnings (1)
10,847 9,925 10,012 20,772 20,619 
Less:
Provision for loan and lease losses(3,727)(855)(958)(4,582)(3,026)
Net loss (gain) on foreclosed properties8 12 (1)20 1 
Amortization of other intangible assets
— — 8 — 15 
SBA recourse provision (benefit)114 (76)245 38 115 
Impairment (benefit) on tax credit investments(351)— — (351)— 
Add:
Net gain on sale of securities— — 29 — 29 
Income before income tax expense
14,803 10,844 10,747 25,647 23,543 
Income tax expense3,599 2,172 2,512 5,771 5,577 
Net income
$11,204 $8,672 $8,235 $19,876 $17,966 
Preferred stock dividends246 — — 246 — 
Net income available to common shareholders$10,958 $8,672 $8,235 $19,630 $17,966 
Earnings per share, diluted
$1.29 $1.02 $0.95 $2.31 $2.08 
Book value per share$28.08 $27.46 $25.70 $28.08 $25.70 
Tangible book value per share (1)
$26.63 $26.02 $24.28 $26.63 $24.28 
Net interest margin (2)
3.71 %3.39 %3.49 %3.55 %3.46 %
Adjusted net interest margin (1)(2)
3.45 %3.24 %3.20 %3.35 %3.20 %
Fee income ratio (non-interest income / total revenue)22.51 %25.64 %22.60 %24.03 %24.12 %
Efficiency ratio (1)
64.47 %65.55 %64.17 %65.00 %63.18 %
Return on average assets (2)
1.61 %1.30 %1.26 %1.46 %1.38 %
Pre-tax, pre-provision adjusted return on average assets (1)(2)
1.60 %1.49 %1.53 %1.54 %1.59 %
Return on average common equity (2)
18.79 %14.47 %15.09 %16.74 %16.75 %
Period-end loans and leases receivable
$2,290,100 $2,251,249 $2,143,561 $2,290,100 $2,143,561 
Specialized lending as a percent of total loans and leases20.68 %19.22 %17.59 %20.68 %17.59 %
Average loans and leases receivable
$2,272,946 $2,244,642 $2,223,353 $2,258,872 $2,203,267 
Period-end in-market deposits
$1,857,010 $2,011,373 $2,016,215 $1,857,010 $2,016,215 
Average in-market deposits
$1,900,842 $1,932,576 $1,735,393 $1,916,622 $1,728,787 
Allowance for loan and lease losses
$24,104 $23,669 $25,675 $24,104 $25,675 
Non-performing assets
$5,709 $5,734 $11,601 $5,709 $11,601 
Allowance for loan and lease losses as a percent of total gross loans and leases
1.05 %1.05 %1.20 %1.05 %1.20 %
Non-performing assets as a percent of total assets
0.21 %0.21 %0.40 %0.21 %0.40 %
(1)This is a non-GAAP financial measure. Management believes these measures are meaningful because they reflect adjustments commonly made by management, investors, regulators, and analysts to evaluate financial performance, provide greater understanding of ongoing operations, and enhance comparability of results with prior periods. See the section titled Non-GAAP Reconciliations at the end of this release for a reconciliation of GAAP financial measures to non-GAAP financial measures.
(2)Calculation is annualized.

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Quarterly Financial Results - Excluding PPP Loans, Interest Income, and Fees
(Unaudited)As of and for the Three Months EndedAs of and for the Six Months Ended
(Dollars in thousands, except per share amounts)June 30,
2022		March 31,
2022		June 30,
2021		June 30,
2022		June 30,
2021
Net interest income
$23,435 $21,125 $18,545 $44,561 $36,592 
Adjusted non-interest income (1)
6,872 7,386 6,292 14,258 13,487 
Operating revenue (1)
30,307 28,511 24,837 58,819 50,079 
Operating expense (1)
19,685 18,887 17,932 38,573 35,383 
Pre-tax, pre-provision adjusted earnings (1)
$10,622 $9,624 $6,905 $20,246 $14,696 
Net interest margin (2)
3.69 %3.37 %3.29 %3.53 %3.30 %
Fee income ratio (non-interest income / total revenue)22.67 %25.91 %25.42 %24.24 %26.97 %
Efficiency ratio (1)
64.95 %66.24 %72.20 %65.58 %70.65 %
Pre-tax, pre-provision adjusted return on average assets (1)(2)
1.57 %1.46 %1.15 %1.51 %1.24 %
Period-end loans and leases receivable
$2,281,928 $2,233,043 $2,022,839 $2,281,928 $2,022,839 
Specialized lending as a percent of total loans and leases20.76 %19.38 %18.67 %20.76 %18.67 %
Average loans and leases receivable
$2,261,296 $2,223,707 $1,994,188 $2,242,606 $1,967,599 
Allowance for loan and lease losses as a percent of total gross loans and leases
1.06 %1.06 %1.27 %1.06 %1.27 %
Non-performing assets as a percent of total assets
0.21 %0.21 %0.42 %0.21 %0.42 %
(1)This is a non-GAAP financial measure. Management believes these measures are meaningful because they reflect adjustments commonly made by management, investors, regulators, and analysts to evaluate financial performance, provide greater understanding of ongoing operations, and enhance comparability of results with prior periods. See the section titled Non-GAAP Reconciliations at the end of this release for a reconciliation of GAAP financial measures to non-GAAP financial measures.
(2)Calculation is annualized.

Second Quarter 2022 Compared to First Quarter 2022
Net interest income increased $2.2 million, or 10.4%, to $23.7 million.
•Net interest income growth was driven by an increase in average loans and leases, net interest margin expansion, and an increase in fees in lieu of interest, which included the recovery of $709,000 in interest from a previously charged-off legacy SBA loan relationship. Average loans and leases receivable increased $37.6 million, or 6.8% annualized, to $2.261 billion. Fees in lieu of interest, which can vary from quarter to quarter based on client-driven activity, totaled $1.9 million, compared to $1.3 million, and included $196,000 and $249,000 in PPP fees, respectively. Excluding fees in lieu of interest and interest income from PPP loans, net interest income increased $1.7 million, or 8.4%.
•Net interest margin was 3.71%, up 32 basis points compared to 3.39% in the linked quarter. Adjusted net interest margin was 3.45%, up 21 basis points compared to 3.24% in the linked quarter. The primary driver of improved net interest margin was a low deposit beta and higher earning asset yields in the current rising rate environment. The change in the 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. Management defines short-term market rates as the daily average effective federal funds rate for purposes of estimating interest-earning asset and interest-bearing liability betas. Adjusted net interest margin is a non-GAAP measure representing net interest income excluding fees in lieu of interest and other recurring, but volatile, components of net interest margin divided by average interest-earning assets less average net PPP loans and other recurring, but volatile, components of average interest-earning assets.
•The yield on average interest-earning assets increased 40 basis points to 4.24% from 3.84%. Excluding average net PPP loans, PPP loan interest income, and fees in lieu of interest, the yield earned on average interest-earning assets increased 30 basis points to 3.96% from 3.66%.
•The rate paid for average interest-bearing, in-market deposits increased 10 basis points to 0.29% from 0.19%. The rate paid for average total bank funding increased 15 basis points to 0.46% from 0.31%. Total bank funding is defined as total deposits plus Federal Home Loan Bank (“FHLB”) advances. The daily average effective federal
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funds rate increased 65 basis points compared to the linked quarter, which equates to an in-market, interest-bearing deposit beta of 15% for the three months ended June 30, 2022.
•The Bank continues to maintain an asset-sensitive balance sheet and ended the quarter appropriately positioned for net interest income to continue to benefit; however, the Bank anticipates deposit betas will rise at a greater rate with further increases in the federal funds rate during the second half of the year, slowing the pace of net interest margin expansion.
The Company reported a net benefit to provision for loan and lease losses of $3.7 million, compared to a $855,000 benefit in the first quarter of 2022.
•The provision benefit in the second quarter of 2022 was primarily due to net recoveries of $4.2 million, partially offset by a $527,000 increase in the general reserve due to loan growth.
Non-interest income decreased $514,000, or 7.0%, to $6.9 million.
•Other fee income decreased $1.2 million to $860,000, compared to $2.1 million in the first quarter. The decrease is primarily due to above-average returns on the Company’s investments in mezzanine funds in the first quarter, which returned to historical levels in the second quarter.
•Private Wealth management fee income increased $11,000, or 0.4% to $2.9 million, despite lower market values during the second quarter. Private Wealth and trust assets under management and administration measured $2.554 billion at June 30, 2022, down $280.3 million, primarily due to a decrease in market valuations, which was partially offset by new business development.
•Gains on sale of SBA loans increased $366,000 to $951,000.
•Commercial loan swap fee income increased $246,000 to $471,000. Swap fee income can vary from period to period based on loan activity and the interest rate environment.
Non-interest expense increased $633,000, or 3.4%, to $19.5 million, while operating expense increased $798,000, or 4.2%, to $19.7 million.
•Compensation expense was $14.0 million, reflecting an increase of $382,000, or 2.8%, from the linked quarter due to a $474,000 one-time increase to the annual cash incentive bonus program accrual, as well as expanded hiring to support the Bank’s growth plans. Management believes there will be upward pressure on compensation throughout the remainder of the year as the Bank continues to opportunistically invest in new talent and retain existing talent in the competitive market. Average FTEs for the second quarter of 2022 were 321, up eleven from 310 in the linked quarter as management continued to focus on talent acquisition to support the Bank’s growth initiatives.
•Marketing expense increased $170,000, or 34.0%, to $670,000 primarily due to the increase in client entertainment and sponsorships as business development activities continue to increase towards pre-pandemic levels.
•Professional fees increased $128,000, or 10.9%, to $1.3 million from the linked quarter primarily due to an increase in recruiting expense.
•Data processing expense increased $112,000, or 14.4%, to $892,000 primarily due to the recurring annual expense related to tax processing on behalf of the Bank’s Private Wealth clients.
Income tax expense increased $1.4 million, or 65.7%, to $3.6 million. The effective tax rate was 23.7% for the six months ended June 30, 2022, compared to 23.6% for the same period in 2021. For 2022, the Company expects to report an effective tax rate of approximately 23% as management intends to continue actively pursuing tax credit opportunities.
Total period-end loans and leases receivable increased $38.9 million, or 6.9% annualized, to $2.290 billion. Excluding net PPP loans, total period-end loans and leases receivable increased $48.9 million, or 8.8% annualized, to $2.282 billion.
•Commercial and industrial (“C&I”) loans increased $20.7 million, or 11.6% annualized, to $741.4 million, compared to $720.7 million. Excluding PPP loans, C&I loans increased $30.9 million, or 17.6% annualized, due to an increase in specialized lending.
•Commercial real estate (“CRE”) loans increased by $18.8 million, or 5.1% annualized, to $1.488 billion, compared to $1.470 billion. Increases in construction financing, owner-occupied CRE, multi-family, and land development were offset by a decrease in non-owner occupied CRE loans.
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Total period-end in-market deposits decreased $154.4 million, or 30.7% annualized, to $1.857 billion, compared to $2.011 billion. The average rate paid was 0.20%, up seven basis points from 0.13% in the first quarter. The decline in balances was due to movement of client deposits to investment alternatives, seasonality within the Bank’s municipality clients, tax payments, and normal course of business for continuing client relationships.
”On the deposit front, the second quarter is typically seasonally weaker, due to tax payments and other business cycle reasons – just as the first quarter was seasonally strong,” said Corey Chambas. “What was unusual this quarter was several clients moved large amounts of deposits into investments and there were some large client distributions to investors, as well. Importantly, we have not lost any meaningful client relationships associated with these decreases in deposits. We believe a better measure of our deposit picture is that average deposits are up 10% from a year ago, and due to our Treasury Management sales success, service charge fee income is up 11% from a year ago.”
Period-end wholesale funding, including FHLB advances, brokered deposits, and deposits gathered through internet deposit listing services, increased $192.7 million to $566.4 million.
•Wholesale deposits were $12.3 million in both periods. The average rate paid on wholesale deposits increased seven basis points to 2.98% and the weighted average original maturity was 4.8 years.
•FHLB advances increased $192.7 million to $554.1 million. The average rate paid on FHLB advances increased 40 basis points to 1.48% and the weighted average original maturity decreased to 3.2 years from 6.0 years.
Non-performing assets were $5.7 million, or 0.21% of total assets, in both periods of comparison.
The allowance for loan and lease losses increased $435,000, or 1.8%, as an increase in the general reserve from loan growth was partially offset by a decrease in general reserve driven by a change in qualitative risk factors.
•The allowance for loan and lease losses as a percent of total gross loans and leases was 1.05% in both periods of comparison (1.06% excluding net PPP loans).

Second Quarter 2022 Compared to Second Quarter 2021
Net interest income increased $2.0 million, or 9.3%, to $23.7 million.
•The increase in net interest income primarily reflects an increase in average gross loans and leases, partially offset by lower fees in lieu of interest. Fees in lieu of interest decreased from $3.5 million to $1.9 million, primarily due to a $2.3 million reduction in PPP loan fee amortization. Excluding fees in lieu of interest and interest income from PPP loans, net interest income increased $4.2 million, or 24.0%. Excluding net PPP loans, average gross loans and leases increased $267.1 million, or 13.4%.
•Net interest margin increased 22 basis points to 3.71% from 3.49%. Adjusted net interest margin increased 25 basis points to 3.45% from 3.20%.
•The yield on average interest-earning assets measured 4.24% compared to 3.96%. Excluding fees in lieu of interest, PPP loan interest income, and net PPP loans, the yield on average interest-earning assets measured 3.96%, compared to 3.64%. This increase in yield was primarily due to the increase in short-term market rates and the reinvestment of cash flows from the securities and fixed rate loan portfolios in a rising rate environment.
•The rate paid for average interest-bearing in-market deposits increased eight basis points to 0.29% from 0.21%. The rate paid for average total bank funding increased seven basis points to 0.46% from 0.39%.
The Company reported a net benefit to provision for loan and lease losses of $3.7 million, compared to provision benefit of $958,000 in the second quarter of 2021. The reasons for the provision benefit are consistent with the explanations discussed above in the linked quarter comparison.
Non-interest income of $6.9 million increased by $551,000, or 8.7%, from $6.3 million in the prior year period.
•Private Wealth management fee income increased $108,000, or 3.9%, to $2.9 million, despite a decline in market values, due to the addition of new money from existing clients. Private Wealth and trust assets under management and administration measured $2.554 billion at June 30, 2022, down $10.6 million, or 0.4%.
•Gains on sale of SBA loans decreased $252,000 to $951,000.
•Loan fees of $697,000 increased by $128,000, or 22.5%, primarily due to an increase in conventional, SBA, and Floorplan Financing activity generating additional service fee income.
•Commercial loan swap fee income was $471,000. There was no swap fee activity in the prior year quarter. Swap fee income varies from period to period based on loan activity and the interest rate environment in any given quarter.
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•Service charges on deposits increased $100,000, or 10.6%, to $1.0 million compared to $941,000, due to an increase in existing and new deposit client relationships.
Non-interest expense increased $1.3 million, or 7.0%, to $19.5 million. Operating expense increased $1.8 million, or 9.8%, to $19.7 million.
•Compensation expense increased $765,000, or 5.8%, to $14.0 million. Average FTEs were 321 in the second quarter of 2022, compared to 312 in the second quarter of 2021. The reasons for the increase in compensation expense are consistent with the explanations discussed above in the linked quarter analysis.                
•Professional fees increased $385,000, or 42.2%, to $1.3 million, primarily due to an increase in recruiting expense, audit expenses, and a general increase in other professional consulting services for various projects.
•Marketing expense increased $159,000, or 31.1%, to $670,000 mainly due to an increase in business development activities as the Company continues to return to pre-pandemic spending levels.
Total period-end loans and leases receivable increased $146.5 million, or 6.8%, to $2.290 billion. Excluding net PPP loans, total period-end loans and leases receivable increased $259.1 million, or 12.8%, to $2.282 billion.
•C&I loans increased $45.9 million, or 6.6% to $741.4 million. Excluding PPP loans, C&I loans increased $161.5 million, or 28.2%, to $733.1 million due to an increase in conventional and specialized Commercial Lending. Management believes this growth rate will moderate to lower double-digits as the Company’s specialized lending products scale over time.
•CRE loans increased $96.5 million, or 6.9%, primarily due to an increase in non-owner-occupied real estate and construction financing.
Total period-end in-market deposits decreased $159.2 million, or 7.9%, to $1.857 billion and the average rate paid increased five basis points to 0.20%. This decrease in deposits was principally due to a $274.7 million decrease in transaction accounts, partially offset by a $68.9 million and $46.6 million increase in certificates of deposit and money market accounts, respectively. The reasons for the decrease in deposits are consistent with the explanations discussed above in the linked quarter comparison.
Period-end wholesale funding increased $34.1 million to $566.4 million.
•Wholesale deposits decreased $132.2 million to $12.3 million, compared to $144.5 million, as the existing portfolio runoff was replaced by FHLB advances. The average rate paid on brokered certificates of deposit increased 224 basis points to 2.98% and the weighted average original maturity increased to 4.8 years from 3.5 years.
•FHLB advances increased $166.3 million to $554.1 million. The average rate paid on FHLB advances increased 21 basis points to 1.48% and the weighted average original maturity decreased to 3.2 years from 6.1 years.
Non-performing assets decreased to $5.7 million, or 0.21% of total assets, compared to $11.6 million, or 0.40% of total assets. Excluding net PPP loans, non-performing assets decreased to 0.21% of total assets compared to 0.42%.
The allowance for loan and lease losses decreased $1.6 million to $24.1 million, compared to $25.7 million.
•The allowance for loan and lease losses as a percent of total gross loans and leases was 1.05% compared to 1.20%.
•Excluding net PPP loans, the allowance for loan and leases losses as a percent of total gross loans and leases was 1.06% compared to 1.27%.

Paycheck Protection Program
As of June 30, 2022, the Company had $8.3 million in gross PPP loans outstanding and deferred processing fees outstanding of $113,000. The processing fees are deferred and recognized over the contractual life of the loan, or accelerated at forgiveness, as an adjustment of yield using the interest method. During the three months ended June 30, 2022, the Company recognized $196,000 of PPP processing fees in interest income. The SBA provides a guaranty to the lender of 100% of principal and interest, unless the lender violated an obligation under the agreement.
Share Repurchase Program Update
As previously announced, effective March 4, 2022, the Company’s Board of Directors authorized the repurchase by the Company of shares of its common stock with a maximum aggregate purchase price of $5.0 million, effective March 4, 2022 through March 4, 2023. For the six months ended June 30, 2022, the Company repurchased a total of 30,600 shares for approximately $1.0 million at an average cost of $33.28 per share.

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About First Business Financial Services, Inc.
First Business Financial Services, Inc., (Nasdaq: FBIZ) is the parent company of First Business Bank. First Business Bank specializes in Business Banking, including Commercial Banking and Specialized Lending, Private Wealth, and Bank Consulting services, and through its refined focus, delivers unmatched expertise, accessibility, and responsiveness. Specialized Lending solutions are delivered through First Business Bank’s wholly owned subsidiary First Business Specialty Finance, LLC. For additional information, visit www.firstbusiness.bank.
This release may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which reflect First Business Bank’s current views with respect to future events and financial performance. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results, or other developments. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, uncertainties, and other factors that may cause actual results to differ materially from the views, beliefs, and projections expressed in such statements. Such statements are subject to risks and uncertainties, including among other things:
•Adverse changes in the economy or business conditions, either nationally or in our markets including, without limitation, inflation, supply chain issues, labor shortages, and the adverse effects of the COVID-19 pandemic on the global, national, and local economy.
•Competitive pressures among depository and other financial institutions nationally and in the Company’s markets.
•Increases in defaults by borrowers and other delinquencies.
•Management’s ability to manage growth effectively, including the successful expansion of our client service, administrative infrastructure, and internal management systems.
•Fluctuations in interest rates and market prices.
•Changes in legislative or regulatory requirements applicable to the Company and its subsidiaries.
•Changes in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations.
•Fraud, including client and system failure or breaches of our network security, including the Company’s internet banking activities.
•Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portion of SBA loans.

For further information about the factors that could affect the Company’s future results, please see the Company’s annual report on Form 10-K for the year ended December 31, 2021 and other filings with the Securities and Exchange Commission.
CONTACT:First Business Financial Services, Inc.
Edward G. Sloane, Jr.
Chief Financial Officer
608-232-5970
esloane@firstbusiness.bank

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SELECTED FINANCIAL CONDITION DATA
(Unaudited)As of
(in thousands)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021
Assets
Cash and cash equivalents$95,484 $95,603 $57,110 $110,624 $389,977 
Securities available-for-sale, at fair value208,643 223,631 205,702 194,056 171,219 
Securities held-to-maturity, at amortized cost13,968 17,267 19,746 21,196 22,382 
Loans held for sale2,256 2,418 3,570 5,603 6,059 
Loans and leases receivable2,290,100 2,251,249 2,239,408 2,123,306 2,143,561 
Allowance for loan and lease losses(24,104)(23,669)(24,336)(24,676)(25,675)
Loans and leases receivable, net2,265,996 2,227,580 2,215,072 2,098,630 2,117,886 
Premises and equipment, net1,899 1,621 1,694 1,700 1,747 
Foreclosed properties124 117 164 172 179 
Right-of-use assets
5,772 6,118 4,910 5,263 5,472 
Bank-owned life insurance
54,324 53,974 53,600 53,244 52,887 
Federal Home Loan Bank stock, at cost
22,959 12,863 13,336 12,351 13,451 
Goodwill and other intangible assets12,262 12,184 12,268 12,229 12,178 
Derivatives44,461 26,890 26,343 28,678 32,377 
Accrued interest receivable and other assets48,868 43,816 39,390 40,664 39,855 
Total assets$2,777,016 $2,724,082 $2,652,905 $2,584,410 $2,865,669 
Liabilities and Stockholders’ Equity
In-market deposits$1,857,010 $2,011,373 $1,928,285 $1,829,644 $2,016,215 
Wholesale deposits12,321 12,321 29,638 74,638 144,492 
Total deposits1,869,331 2,023,694 1,957,923 1,904,282 2,160,707 
Federal Home Loan Bank advances and other borrowings
596,642 414,487 403,451 394,090 420,113 
Junior subordinated notes— — 10,076 10,072 10,069 
Lease liabilities7,207 7,580 5,406 5,780 6,005 
Derivatives40,357 24,961 28,283 31,890 36,109 
Accrued interest payable and other liabilities13,556 8,309 15,344 13,016 11,214 
Total liabilities2,527,093 2,479,031 2,420,483 2,359,130 2,644,217 
Total stockholders’ equity249,923 245,051 232,422 225,280 221,452 
Total liabilities and stockholders’ equity
$2,777,016 $2,724,082 $2,652,905 $2,584,410 $2,865,669 











8

STATEMENTS OF INCOME
(Unaudited)As of and for the Three Months EndedAs of and for the Year Ended
(Dollars in thousands, except per share amounts)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021		June 30,
2022		June 30,
2021
Total interest income$27,031 $24,235 $23,576 $24,014 $24,599 $51,266 $48,406 
Total interest expense3,371 2,809 2,652 2,791 2,947 6,179 5,891 
Net interest income23,660 21,426 20,924 21,223 21,652 45,087 42,515 
Provision for loan and lease losses
(3,727)(855)(508)(2,269)(958)(4,582)(3,026)
Net interest income after provision for loan and lease losses
27,387 22,281 21,432 23,492 22,610 49,669 45,541 
Private wealth management service fees
2,852 2,841 2,874 2,759 2,744 5,693 5,151 
Gain on sale of SBA loans
951 585 1,042 721 1,203 1,537 2,281 
Service charges on deposits
1,041 999 1,023 956 941 2,040 1,859 
Loan fees697 652 679 713 569 1,349 1,114 
Net gain on sale of securities— — — — 29 — 29 
Swap fees471 225 684 — — 697 684 
Other non-interest income860 2,084 1,267 1,866 835 2,942 2,398 
Total non-interest income
6,872 7,386 7,569 7,015 6,321 14,258 13,516 
Compensation14,020 13,638 12,447 13,351 13,255 27,658 25,912 
Occupancy568 555 551 544 533 1,123 1,085 
Professional fees
1,298 1,170 933 1,024 913 2,468 1,778 
Data processing
892 780 773 746 798 1,673 1,569 
Marketing
670 500 548 572 511 1,170 902 
Equipment
235 244 223 260 261 479 506 
Computer software
1,117 1,082 1,017 999 1,129 2,199 2,244 
FDIC insurance
296 313 210 291 280 610 642 
Other non-interest expense360 541 829 703 504 900 876 
Total non-interest expense
19,456 18,823 17,531 18,490 18,184 38,280 35,514 
Income before income tax expense14,803 10,844 11,470 12,017 10,747 25,647 23,543 
Income tax expense3,599 2,172 2,879 2,819 2,512 5,771 5,577 
Net income$11,204 $8,672 $8,591 $9,198 $8,235 $19,876 $17,966 
Preferred stock dividends246 — — — — 246 — 
Net income available to common shareholders$10,958 $8,672 $8,591 $9,198 $8,235 $19,630 $17,966 
Per common share:
Basic earnings$1.29 $1.02 $1.01 $1.07 $0.95 $2.31 $2.08 
Diluted earnings1.29 1.02 1.01 1.07 0.95 2.31 2.08 
Dividends declared0.1975 0.1975 0.18 0.18 0.18 0.395 0.36 
Book value28.08 27.46 27.48 26.56 25.70 28.08 25.70 
Tangible book value26.63 26.02 26.03 25.11 24.28 26.63 24.28 
Weighted-average common shares outstanding(1)
8,225,838 8,232,142 8,228,311 8,340,042 8,385,069 8,245,317 8,381,868 
Weighted-average diluted common shares outstanding(1)
8,225,838 8,232,142 8,228,311 8,340,042 8,385,069 8,245,317 8,381,868 
(1)Excluding participating securities.
9

NET INTEREST INCOME ANALYSIS
(Unaudited)For the Three Months Ended
(Dollars in thousands)June 30, 2022March 31, 2022June 30, 2021
Average
Balance		Interest
Average
Yield/Rate(4)
Average
Balance		Interest
Average
Yield/Rate(4)
Average
Balance		Interest
Average
Yield/Rate(4)
Interest-earning assets      
Commercial real estate and other mortgage loans(1)
$1,472,075 $15,343 4.17 %$1,459,891 $13,346 3.66 %$1,386,187 $13,087 3.78 %
Commercial and industrial loans(1)
734,299 9,710 5.29 %718,364 9,101 5.07 %772,257 9,875 5.11 %
Direct financing leases(1)
15,527 176 4.53 %16,540 189 4.57 %19,883 222 4.47 %
Consumer and other loans(1)
51,045 458 3.59 %49,847 436 3.50 %45,026 407 3.62 %
Total loans and leases receivable(1)
2,272,946 25,687 4.52 %2,244,642 23,072 4.11 %2,223,353 23,591 4.24 %
Mortgage-related securities(2)
176,747 804 1.82 %184,962 760 1.64 %149,253 631 1.69 %
Other investment securities(3)
54,591 260 1.91 %50,555 215 1.70 %41,569 185 1.78 %
FHLB stock17,355 226 5.21 %14,002 172 4.91 %14,172 176 4.97 %
Short-term investments29,541 54 0.73 %31,111 16 0.21 %55,100 16 0.12 %
Total interest-earning assets2,551,180 27,031 4.24 %2,525,272 24,235 3.84 %2,483,447 24,599 3.96 %
Non-interest-earning assets165,527   140,969   137,893   
Total assets$2,716,707   $2,666,241   $2,621,340   
Interest-bearing liabilities        
Transaction accounts$502,763 343 0.27 %$533,251 255 0.19 %$499,040 248 0.20 %
Money market767,433 509 0.27 %784,276 338 0.17 %662,919 282 0.17 %
Certificates of deposit73,560 114 0.62 %52,519 55 0.42 %45,993 112 0.97 %
Wholesale deposits
12,350 92 2.98 %16,236 118 2.91 %162,580 301 0.74 %
Total interest-bearing deposits
1,356,106 1,058 0.31 %1,386,282 766 0.22 %1,370,532 943 0.28 %
FHLB advances449,599 1,666 1.48 %385,080 1,036 1.08 %405,855 1,284 1.27 %
Other borrowings51,018 647 5.07 %40,311 503 4.99 %32,447 443 5.46 %
Junior subordinated notes(5)
— — — %9,850 504 20.47 %10,066 277 11.01 %
Total interest-bearing liabilities
1,856,723 3,371 0.73 %1,821,523 2,809 0.62 %1,818,900 2,947 0.65 %
Non-interest-bearing demand deposit accounts
557,086   562,530   527,441   
Other non-interest-bearing liabilities
57,615   42,537   56,691   
Total liabilities2,471,424   2,426,590   2,403,032   
Stockholders’ equity245,283   239,651   218,308   
Total liabilities and stockholders’ equity
$2,716,707   $2,666,241   $2,621,340   
Net interest income $23,660   $21,426   $21,652  
Interest rate spread 3.51 %  3.22 %  3.31 %
Net interest-earning assets$694,457  $703,749   $664,547 
Net interest margin 3.71 %  3.39 % 3.49 %
(1)The average balances of loans and leases include non-accrual loans and leases and loans held for sale. Interest income related to non-accrual loans and leases is recognized when collected. Interest income includes net loan fees collected in lieu of interest.
(2)Includes amortized cost basis of assets available for sale and held to maturity.
(3)Yields on tax-exempt municipal obligations are not presented on a tax-equivalent basis in this table.
(4)Represents annualized yields/rates.
(5)The calculation for the three months ended June 30, 2022 and March 31, 2022 includes $12,000 and $236,000, respectively, in accelerated amortization of debt issuance costs.

10

NET INTEREST INCOME ANALYSIS
(Unaudited)For the Six Months Ended
(Dollars in thousands)June 30, 2022June 30, 2021
Average
Balance		Interest
Average
Yield/Rate(4)
Average
Balance		Interest
Average
Yield/Rate(4)
Interest-earning assets      
Commercial real estate and other mortgage loans(1)
$1,466,017 $28,689 3.91 %$1,371,744 $25,615 3.73 %
Commercial and industrial loans(1)
726,376 18,811 5.18 %765,117 19,500 5.10 %
Direct financing leases(1)
16,030 365 4.55 %21,071 466 4.42 %
Consumer and other loans(1)
50,449 894 3.54 %45,335 805 3.55 %
Total loans and leases receivable(1)
2,258,872 48,759 4.32 %2,203,267 46,386 4.21 %
Mortgage-related securities(2)
180,832 1,564 1.73 %156,249 1,297 1.66 %
Other investment securities(3)
52,584 475 1.81 %41,871 372 1.78 %
FHLB stock15,688 398 5.07 %13,323 329 4.94 %
Short-term investments30,321 70 0.46 %39,922 22 0.11 %
Total interest-earning assets2,538,297 51,266 4.04 %2,454,632 48,406 3.94 %
Non-interest-earning assets153,316 144,741 
Total assets$2,691,613 $2,599,373 
Interest-bearing liabilities
Transaction accounts$517,923 597 0.23 %$510,024 498 0.20 %
Money market775,808 848 0.22 %660,319 557 0.17 %
Certificates of deposit63,098 169 0.54 %51,677 288 1.11 %
Wholesale deposits
14,282 210 2.94 %164,654 619 0.75 %
Total interest-bearing deposits
1,371,111 1,824 0.27 %1,386,674 1,962 0.28 %
FHLB advances417,518 2,702 1.29 %386,371 2,533 1.31 %
Other borrowings45,694 1,149 5.03 %29,886 844 5.65 %
Junior subordinated notes(5)
4,898 504 20.58 %10,064 552 10.97 %
Total interest-bearing liabilities
1,839,221 6,179 0.67 %1,812,995 5,891 0.65 %
Non-interest-bearing demand deposit accounts
559,793 506,767 
Other non-interest-bearing liabilities
50,117 65,146 
Total liabilities2,449,131 2,384,908 
Stockholders’ equity242,482 214,465 
Total liabilities and stockholders’ equity
$2,691,613 $2,599,373 
Net interest income$45,087 $42,515 
Interest rate spread3.37 %3.29 %
Net interest-earning assets$699,076 $641,637 
Net interest margin3.55 %3.46 %

(1)The average balances of loans and leases include non-accrual loans and leases and loans held for sale. Interest income related to non-accrual loans and leases is recognized when collected. Interest income includes net loan fees collected in lieu of interest.
(2)Includes amortized cost basis of assets available for sale and held to maturity.
(3)Yields on tax-exempt municipal obligations are not presented on a tax-equivalent basis in this table.
(4)Represents annualized yields/rates.
(5)The calculation for the six months ended June 30, 2022, 2022 includes $248,000 in accelerated amortization of debt issuance costs.














11

PROVISION FOR LOAN AND LEASE LOSS COMPOSITION
(Unaudited)For the Three Months EndedFor the Six Months Ended
(Dollars in thousands)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021		June 30,
2022		June 30,
2021
Change in general reserve due to subjective factor changes$(185)$(416)$(805)$(51)$(652)$(601)$430 
Change in general reserve due to historical loss factor changes64 (206)(862)(923)(1,687)(142)(2,671)
Charge-offs85 22 106 364 2,894 107 3,038 
Recoveries(4,247)(210)(274)(1,634)(545)(4,457)(3,218)
Change in specific reserves on impaired loans, net29 (280)(64)(451)(1,466)(251)(1,660)
Change due to loan growth, net527 235 1,391 426 498 762 1,055 
Total provision for loan and lease losses$(3,727)$(855)$(508)$(2,269)$(958)$(4,582)$(3,026)


PERFORMANCE RATIOS
 For the Three Months EndedFor the Six Months Ended
(Unaudited)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021		June 30,
2022		June 30,
2021
Return on average assets (annualized)
1.61 %1.30 %1.32 %1.41 %1.26 %1.46 %1.38 %
Return on average common equity (annualized)18.79 %14.47 %15.04 %16.39 %15.09 %16.74 %16.75 %
Efficiency ratio64.47 %65.55 %61.92 %65.68 %64.17 %65.00 %63.18 %
Interest rate spread
3.51 %3.22 %3.21 %3.27 %3.31 %3.37 %3.29 %
Net interest margin3.71 %3.39 %3.39 %3.45 %3.49 %3.55 %3.46 %
Average interest-earning assets to average interest-bearing liabilities
137.40 %138.64 %141.19 %139.19 %136.54 %138.01 %135.39 %


ASSET QUALITY RATIOS
(Unaudited)As of
(Dollars in thousands)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021
Non-accrual loans and leases
$5,585 $5,617 $6,358 $7,433 $11,422 
Foreclosed properties
124 117 164 172 179 
Total non-performing assets
5,709 5,734 6,522 7,605 11,601 
Performing troubled debt restructurings
188 203 217 53 56 
Total impaired assets
$5,897 $5,937 $6,739 $7,658 $11,657 
Non-accrual loans and leases as a percent of total gross loans and leases
0.24 %0.25 %0.28 %0.35 %0.53 %
Non-performing assets as a percent of total gross loans and leases plus foreclosed properties
0.25 %0.25 %0.29 %0.36 %0.54 %
Non-performing assets as a percent of total assets
0.21 %0.21 %0.25 %0.29 %0.40 %
Allowance for loan and lease losses as a percent of total gross loans and leases
1.05 %1.05 %1.09 %1.16 %1.20 %
Allowance for loan and lease losses as a percent of non-accrual loans and leases
431.58 %421.38 %382.76 %331.98 %224.79 %






12

ASSET QUALITY RATIOS - EXCLUDING NET PPP LOANS
(Unaudited)As of
(Dollars in thousands)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021
Non-accrual loans and leases as a percent of total gross loans and leases
0.24 %0.25 %0.29 %0.36 %0.56 %
Non-performing assets as a percent of total gross loans and leases plus foreclosed properties
0.25 %0.26 %0.29 %0.37 %0.57 %
Non-performing assets as a percent of total assets
0.21 %0.21 %0.25 %0.30 %0.42 %
Allowance for loan and lease losses as a percent of total gross loans and leases
1.06 %1.06 %1.10 %1.20 %1.27 %
PPP loans outstanding, net$8,172 $18,206 $27,297 $64,454 $120,723 

NET CHARGE-OFFS (RECOVERIES)
(Unaudited)For the Three Months EndedFor the Six Months Ended
(Dollars in thousands)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021		June 30,
2022		June 30,
2021
Charge-offs
$85 $22 $106 $364 $2,894 $107 $3,038 
Recoveries
(4,247)(210)(274)(1,634)(545)(4,457)(3,218)
Net (recoveries) charge-offs$(4,162)$(188)$(168)$(1,270)$2,349 $(4,350)$(180)
Net (recoveries) charge-offs as a percent of average gross loans and leases (annualized)
(0.73)%(0.03)%(0.03)%(0.24)%0.42 %(0.39)%(0.02)%
Annualized (recoveries) charge-offs as a percent of average gross loans and leases, excluding average net PPP loans(0.74)%(0.03)%(0.03)%(0.25)%0.47 %(0.39)%(0.02)%
Average PPP loans outstanding, net$11,650 $20,935 $52,923 $87,517 $229,165 $16,266 $235,668 

CAPITAL RATIOS
As of and for the Three Months Ended
(Unaudited)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021
Total capital to risk-weighted assets11.56 %11.87 %10.82 %11.14 %11.22 %
Tier I capital to risk-weighted assets9.34 %9.27 %8.94 %9.14 %9.14 %
Common equity tier I capital to risk-weighted assets8.90 %8.81 %8.55 %8.73 %8.72 %
Tier I capital to adjusted assets9.19 %9.09 %8.94 %8.69 %8.48 %
Tangible common equity to tangible assets8.16 %8.14 %8.34 %8.28 %7.33 %
Tangible common equity to tangible assets, excluding net PPP loans8.19 %8.20 %8.42 %8.50 %7.66 %













13

LOAN AND LEASE RECEIVABLE COMPOSITION
(Unaudited)As of
(in thousands)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021
Commercial real estate:  
Commercial real estate - owner occupied
$258,375 $254,237 $235,589 $241,977 $253,600 
Commercial real estate - non-owner occupied
651,920 656,185 661,423 639,423 614,289 
Land development42,545 40,092 42,792 39,119 45,056 
Construction203,913 200,472 179,841 139,933 139,943 
Multi-family314,392 302,494 320,072 313,787 319,351 
1-4 family17,335 16,198 14,911 13,487 19,769 
Total commercial real estate
1,488,480 1,469,678 1,454,628 1,387,726 1,392,008 
Commercial and industrial
741,363 720,695 730,819 681,065 695,442 
Direct financing leases, net13,718 14,551 15,743 16,810 18,142 
Consumer and other:     
Home equity and second mortgages
5,132 4,523 4,223 4,576 5,740 
Other42,387 43,066 35,518 35,645 36,567 
Total consumer and other
47,519 47,589 39,741 40,221 42,307 
Total gross loans and leases receivable
2,291,080 2,252,513 2,240,931 2,125,822 2,147,899 
Less:     
Allowance for loan and lease losses
24,104 23,669 24,336 24,676 25,675 
Deferred loan fees980 1,264 1,523 2,516 4,338 
Loans and leases receivable, net
$2,265,996 $2,227,580 $2,215,072 $2,098,630 $2,117,886 


DEPOSIT COMPOSITION
(Unaudited)As of
(in thousands)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021
Non-interest-bearing transaction accounts
$544,507 $600,987 $589,559 $526,047 $774,253 
Interest-bearing transaction accounts
466,785 539,492 530,225 517,248 511,698 
Money market accounts731,718 806,917 754,410 728,751 685,127 
Certificates of deposit114,000 63,977 54,091 57,598 45,137 
Wholesale deposits12,321 12,321 29,638 74,638 144,492 
Total deposits$1,869,331 $2,023,694 $1,957,923 $1,904,282 $2,160,707 

TRUST ASSETS COMPOSITION
(Unaudited)As of
(in thousands)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021
Trust assets under management
$2,386,637 $2,636,896 $2,711,760 $2,545,089 $2,362,257 
Trust assets under administration
167,095 197,160 208,954 202,657 202,116 
Total trust assets
$2,553,732 $2,834,056 $2,920,714 $2,747,746 $2,564,373 

14

NON-GAAP RECONCILIATIONS
Certain financial information provided in this release is determined by methods other than in accordance with generally accepted accounting principles (United States) (“GAAP”). Although the Company’s management believes that these non-GAAP financial measures provide a greater understanding of its business, these measures are not necessarily comparable to similar measures that may be presented by other companies.
 
TANGIBLE BOOK VALUE
“Tangible book value per share” is a non-GAAP measure representing tangible common equity divided by total common shares outstanding. “Tangible common equity” itself is a non-GAAP measure representing common stockholders’ equity reduced by intangible assets, if any. The Company’s management believes that this measure is important to many investors in the marketplace who are interested in period-to-period changes in book value per common share exclusive of changes in intangible assets. The information provided below reconciles tangible book value per share and tangible common equity to their most comparable GAAP measures.
(Unaudited)As of
(Dollars in thousands, except per share amounts)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021
Common stockholders’ equity$237,931 $233,059 $232,422 $225,280 $221,452 
Goodwill and other intangible assets(12,262)(12,184)(12,268)(12,229)(12,178)
Tangible common equity$225,669 $220,875 $220,154 $213,051 $209,274 
Common shares outstanding8,474,699 8,488,585 8,457,564 8,483,099 8,617,761 
Book value per share$28.08 $27.46 $27.48 $26.56 $25.70 
Tangible book value per share
26.63 26.02 26.03 25.11 24.28 

TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS
“Tangible common equity to tangible assets” is defined as the ratio of common stockholders’ equity reduced by intangible assets, if any, divided by total assets reduced by intangible assets, if any. The Company’s management believes that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. The information below reconciles tangible common equity and tangible assets to their most comparable GAAP measures.
(Unaudited)As of
(Dollars in thousands)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021
Common stockholders’ equity$237,931 $233,052 $232,422 $225,280 $221,452 
Goodwill and other intangible assets(12,262)(12,184)(12,268)(12,229)(12,178)
Tangible common equity$225,669 $220,875 $220,154 $213,051 $209,274 
Total assets$2,777,016 $2,724,082 $2,652,905 $2,584,410 $2,865,669 
Goodwill and other intangible assets(12,262)(12,184)(12,268)(12,229)(12,178)
Tangible assets
$2,764,754 $2,711,898 $2,640,637 $2,572,181 $2,853,491 
Tangible common equity to tangible assets
8.16 %8.14 %8.34 %8.28 %7.33 %
Period-end net PPP loans8,172 18,206 27,297 64,454 120,722 
Tangible assets, excluding net PPP loans$2,756,582 $2,693,692 $2,613,340 $2,507,727 $2,732,769 
Tangible common equity to tangible assets, excluding net PPP loans8.19 %8.20 %8.42 %8.50 %7.66 %









15

EFFICIENCY RATIO & PRE-TAX, PRE-PROVISION ADJUSTED EARNINGS
“Efficiency ratio” is a non-GAAP measure representing non-interest expense excluding the effects of the SBA recourse provision, impairment of tax credit investments, losses or gains on foreclosed properties, amortization of other intangible assets and other discrete items, if any, divided by operating revenue, which is equal to net interest income plus non-interest income less realized gains or losses on securities, if any. “Pre-tax, pre-provision adjusted earnings” is defined as operating revenue less operating expense. In the judgment of the Company’s management, the adjustments made to non-interest expense and non-interest income allow investors and analysts to better assess the Company’s operating expenses in relation to its core operating revenue by removing the volatility that is associated with certain one-time items and other discrete items. The information provided below reconciles the efficiency ratio and pre-tax, pre-provision adjusted earnings to its most comparable GAAP measure.
(Unaudited)For the Three Months EndedFor the Six Months Ended
(Dollars in thousands)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021		June 30,
2022		June 30,
2021
Total non-interest expense$19,456 $18,823 $17,531 $18,490 $18,184 $38,280 $35,514 
Less:
Net loss (gain) on foreclosed properties8 12 7 6 (1)20 1 
Amortization of other intangible assets
— — 2 7 8 — 15 
SBA recourse provision (benefit)114 (76)(122)(69)245 38 115 
Tax credit investment impairment recovery(351)— — — — (351)— 
Total operating expense (a)
$19,685 $18,887 $17,644 $18,546 $17,932 $38,573 $35,383 
Net interest income$23,660 $21,426 $20,924 $21,223 $21,652 $45,087 $42,515 
Total non-interest income6,872 7,386 7,569 7,015 6,321 14,258 13,516 
Less:
Net gain on sale of securities— — — — 29 — 29 
Adjusted non-interest income6,872 7,386 7,569 7,015 6,292 14,258 13,487 
Total operating revenue (b)
$30,532 $28,812 $28,493 $28,238 $27,944 $59,345 $56,002 
Efficiency ratio64.47 %65.55 %61.92 %65.68 %64.17 %65.00 %63.18 %
Pre-tax, pre-provision adjusted earnings (b - a)
$10,847 $9,925 $10,849 $9,692 $10,012 $20,772 $20,619 
Less:
PPP fee income196 249 892 1,666 2,541 445 4,754 
PPP loan interest income
29 52 134 221 566 81 1,169 
Pre-tax, pre-provision adjusted earnings, excluding PPP$10,622 $9,624 $9,823 $7,805 $6,905 $20,246 $14,696 
Average total assets$2,716,707 $2,666,241 $2,612,905 $2,608,198 $2,621,340 $2,691,613 $2,599,373 
Less:
Average net PPP loans11,650 20,935 52,923 87,517 229,165 16,266 235,668 
Adjusted average total assets$2,705,057 $2,645,306 $2,559,982 $2,520,681 $2,392,175 $2,675,347 $2,363,705 
Pre-tax, pre-provision adjusted return on average assets1.60 %1.49 %1.66 %1.49 %1.53 %1.54 %1.59 %
Pre-tax, pre-provision adjusted return on average assets, excluding PPP1.57 %1.46 %1.53 %1.24 %1.15 %1.51 %1.24 %










16

ADJUSTED NET INTEREST MARGIN
“Adjusted Net Interest Margin” is a non-GAAP measure representing net interest income excluding the fees in lieu of interest and other recurring, but volatile, components of net interest margin divided by average interest-earning assets less average net PPP loans, if any, and other recurring, but volatile, components of average interest-earning assets. Fees in lieu of interest are defined as prepayment fees, asset-based loan fees, non-accrual interest, and loan fee amortization. In the judgment of the Company’s management, the adjustments made to net interest income allow investors and analysts to better assess the Company’s net interest income in relation to its core client-facing loan and deposit rate changes by removing the volatility that is associated with these recurring but volatile components. The information provided below reconciles the net interest margin to its most comparable GAAP measure.
(Unaudited)For the Three Months EndedFor the Six Months Ended
(Dollars in thousands)June 30,
2022		March 31,
2022		December 31,
2021		September 30,
2021		June 30,
2021		June 30,
2022		June 30,
2021
Interest income$27,031 $24,235 $23,576 $24,014 $24,599 $51,266 $48,406 
Interest expense3,371 2,809 2,652 2,791 2,947 6,179 5,891 
Net interest income (a)
23,660 21,426 20,924 21,223 21,652 45,087 42,515 
Less:
Fees in lieu of interest
1,865 1,293 1,700 2,839 3,536 3,158 6,621 
PPP loan interest income
29 52 134 221 566 81 1,169 
FRB interest income and FHLB dividend income
279 188 179 212 192 467 350 
Adjusted net interest income (b)
$21,487 $19,893 $18,911 $17,951 $17,358 $41,381 $34,375 
Average interest-earning assets (c)
$2,551,180 $2,525,272 $2,472,013 $2,460,567 $2,483,447 $2,538,297 $2,454,632 
Less:
Average net PPP loans11,650 20,935 52,923 87,517 229,165 16,266 235,668 
Average FRB cash and FHLB stock
46,334 44,577 71,939 129,469 68,503 45,461 52,661 
Average non-accrual loans and leases
5,429 6,195 6,796 11,298 16,744 5,810 19,392 
Adjusted average interest-earning assets (d)
$2,487,767 $2,453,565 $2,340,355 $2,232,283 $2,169,035 $2,470,760 $2,146,911 
Net interest margin (a / c)
3.71 %3.39 %3.39 %3.45 %3.49 %3.55 %3.46 %
Adjusted net interest margin (b / d)
3.45 %3.24 %3.23 %3.22 %3.20 %3.35 %3.20 %
17