FIRST BUSINESS FINANCIAL SERVICES, INC.

Previous wording

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.

Current wording

Adverse changes in the economy or business conditions, either nationally or in our markets including, without limitation, inflation, economic downturn, labor shortages, wage pressures, the adverse effects of public health events on the global, national, and local economy, and geopolitical instability and international conflicts that may affect energy prices or otherwise result in market volatility.

Previous wording

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

Current wording

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

Previous wording

We are a registered bank holding company incorporated under the laws of the State of Wisconsin and are engaged in the commercial banking business through our wholly-owned banking subsidiary, FBB. All of our operations are conducted through FBB and First Business Specialty Finance, LLC, a wholly-owned subsidiary of FBB. 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 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. Our private wealth management services include trust and estate administration, financial planning, investment management, and private banking for executives and owners of our business banking clients and others. Our bank consulting experts provide investment portfolio administrative services, asset liability management services, and asset liability management process validation for other financial institutions. We do not utilize a branch network to attract retail clients. Our operating model is predicated on deep client relationships, financial expertise, and an efficient, centralized administration function delivering best in class client satisfaction. Our focused model allows experienced staff to provide the level of financial expertise needed to develop and maintain long-term relationships with our clients.

Current wording

We are a registered bank holding company incorporated under the laws of the State of Wisconsin and are engaged in the commercial banking business through our wholly-owned banking subsidiary, FBB. All of our operations are conducted through FBB and First Business Specialty Finance, LLC, a wholly-owned subsidiary of FBB. 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 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. Our private wealth management services include trust and estate administration, financial planning, investment management, and private banking for executives and owners of our business banking clients and others. Our bank consulting experts provide investment portfolio administrative services and asset liability management services. We are not a retail bank and do not rely on a traditional branch network to gather deposits or attract clients. Instead, our operating model is built on deep client relationships, specialized financial expertise, and an efficient, centralized administrative structure designed to deliver best-in-class client satisfaction. This focused approach enables our experienced professionals to provide the level of insight and service required to develop and sustain long-term client relationships. We conduct our commercial banking operations through one operating segment.

Previous wording

Results as of and for the three and nine months ended September 30, 2025 include:

Current wording

Results as of and for the three months ended March 31, 2026 include:

Previous wording

Net income available to common shareholders totaled $14.2 million, or diluted earnings per share of $1.70, for the three months ended September 30, 2025, compared to $10.3 million, or diluted earnings per share of $1.24, for the same period in 2024. Net income available to common shareholders totaled $36.3 million, or diluted earnings per share of $4.37, for the nine months ended September 30, 2025, compared to $29.2 million, or diluted earnings per share of $3.50, for the same period in 2024.

Current wording

Net income available to common shareholders totaled $12.0 million, or diluted earnings per share of $1.44, for the three months ended March 31, 2026, compared to $11.0 million, or diluted earnings per share of $1.32, for the same period in 2025.

Previous wording

Annualized return on average assets (“ROAA”) for the three months ended September 30, 2025 measured 1.40% compared to 1.13% for the same period in 2024. Annualized ROAA for the nine months ended September 30, 2025 measured 1.23% compared to 1.08% for the same period in 2024.

Current wording

Annualized return on average assets (“ROAA”) for the three months ended March 31, 2026 measured 1.13% compared to 1.14% for the same period in 2025.

Previous wording

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 17.29% for the three months ended September 30, 2025, compared to 14.40% for the same period in 2024. ROATCE was 15.23% for the nine months ended September 30, 2025, compared to 13.98% for the same period in 2024.

Current wording

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 13.55% for the three months ended March 31, 2026, compared to 14.12% for the same period in 2025.

Previous wording

Pre-tax, pre-provision (“PTPP”) adjusted earnings, which excludes certain one-time and discrete items, for the three months ended September 30, 2025 was $18.9 million, compared to $15.4 million in the same period in 2024. PTPP for the nine months ended September 30, 2025 was $51.1 million, compared to $42.7 million in the same period in 2024.

Current wording

Pre-tax, pre-provision (“PTPP”) adjusted earnings, which excludes certain one-time and discrete items, for the three months ended March 31, 2026 was $17.2 million, compared to $16.2 million in the same period in 2025.

Previous wording

Top line revenue, defined as net interest income plus non-interest income, totaled $44.5 million for the three months ended September 30, 2025, compared to $38.1 million in the same period in 2024. Top line revenue totaled $126.4 million for the nine months ended September 30, 2025, compared to $112.3 million in the same period in 2024.

Current wording

Top line revenue, defined as net interest income plus non-interest income, totaled $44.3 million for the three months ended March 31, 2026, compared to $40.8 million in the same period in 2025.

Previous wording

Effective tax rate, including the benefit from Low-Income Housing Tax Credits, was 16.3% for the nine months ended September 30, 2025 compared to 16.8% for the same period in 2024.

Current wording

Effective tax rate, including the benefit from Low-Income Housing Tax Credits, was 15.16% for the three months ended March 31, 2026 compared to 17.00% for the same period in 2025.

Previous wording

Period-end gross loans and leases receivable increased $222.8 million, or 9.5% annualized, to $3.337 billion as of September 30, 2025 compared to $3.114 billion as of December 31, 2024. Average gross loans and leases of $3.241 billion increased $279.9 million, or 9.5%, for the nine months ended September 30, 2025, compared to $2.961 billion for the same period in 2024.

Current wording

Period-end gross loans and leases receivable increased $125.9 million, or 14.9% annualized, to $3.501 billion as of March 31, 2026 compared to $3.375 billion as of December 31, 2025. Average gross loans and leases of $3.426 billion increased $240.0 million, or 7.5%, for the three months ended March 31, 2026, compared to $3.186 billion for the same period in 2025.

Previous wording

Non-performing assets were $23.5 million and 0.58% of total assets as of September 30, 2025, compared to $28.4 million and 0.74% of total assets as of December 31, 2024.

Current wording

Non-performing assets were $40.5 million and 0.94% of total assets as of March 31, 2026, compared to $43.9 million and 1.07% of total assets as of December 31, 2025.

Previous wording

The allowance for credit losses, including reserve for unfunded credit commitments, increased $1.1 million 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.

Current wording

The allowance for credit losses, including reserve for unfunded credit commitments, increased $797,000 compared to December 31, 2025. The allowance for credit losses, including reserve for unfunded credit commitments, was 1.10% of total loans, compared to 1.12% at December 31, 2025.

Previous wording

Period-end core deposits at September 30, 2025 increased $195.7 million, or 10.9% annualized, to $2.592 billion from $2.396 billion as of December 31, 2024. Average core deposits of $2.453 billion increased $87.5 million or 3.7%, for the nine months ended September 30, 2025, compared to $2.366 billion for the same period in 2024.

Current wording

Period-end core deposits at March 31, 2026 increased $123.1 million, or 18.4% annualized, to $2.796 billion from $2.673 billion as of December 31, 2025. Average core deposits of $2.849 billion increased $485.7 million or 20.6%, for the three months ended March 31, 2026, compared to $2.363 billion for the same period in 2025.

Previous wording

Private wealth and trust assets under management and administration increased by $395.1 million, or 15.4% annualized, to $3.814 billion at September 30, 2025, compared to $3.419 billion at December 31, 2024. Private wealth trust assets under management and administration increased $415.9 million, or 12.2%, compared to September 30, 2024.

Current wording

Private wealth and trust assets under management and administration increased by $66.1 million, or 6.9% annualized, to $3.881 billion at March 31, 2026, compared to $3.815 billion at December 31, 2025. Private wealth trust assets under management and administration increased $456.2 million, or 13.3%, compared to March 31, 2025.

Previous wording

Top line revenue increased $14.1 million, or 12.6%, for the nine months ended September 30, 2025, compared to the same period in 2024, due to an 11.9% increase in net interest income and a 15.2% 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 FILOI. The increase in non-interest income was due to increases in gains on the sale of SBA loans, private wealth fee income, and nonrecurring fee income in accounts receivable financing, partially offset by decreases in loan fees and income from SBIC funds.

Current wording

Top line revenue, comprised of net interest income and non-interest income, increased $3.5 million, or 8.5%, for the three months ended March 31, 2026, compared to the same period in 2025, due to a 6.8% increase in net interest income and a 15.8% increase in non-interest income. The increase in net interest income was primarily driven by increases in average loans and leases outstanding, partially offset by a decrease in net interest margin. The increase in non-interest income was due primarily to increases in commercial loan swap income, private wealth income, bank-owned life insurance income, and service charges on deposits, partially offset by decreases in gains on sale of SBA loans.

Previous wording

ROAA for the three and nine months ended September 30, 2025 was 1.40% and 1.23%, respectively, compared to 1.13% and 1.08% for the three and nine months ended September 30, 2024, respectively. The increase in ROAA for the nine months 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.

Current wording

ROAA for the three months ended March 31, 2026 was 1.13%, compared to 1.14% for the three months ended March 31, 2025. The decrease in ROAA was due to a decrease in net interest margin and an increase in operating expense, partially offset by an improved fee income ratio as non-interest income grew at a faster rate than net interest income. 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.

Previous wording

ROATCE for the three and nine months ended September 30, 2025 was 17.3% and 15.2%, respectively, compared to 14.4% and 14.0% for the three and nine months ended September 30, 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.

Current wording

ROATCE for the three months ended March 31, 2026 was 13.6%, compared to 14.1% for the three months ended March 31, 2025. The explanation of the decrease in ROATCE is consistent with the ROAA discussion 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.

Previous wording

Efficiency ratio measured 57.4% and 59.5% for the three and nine months ended September 30, 2025, compared to 59.4% and 62.0% for the three and nine months ended September 30, 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.

Current wording

Efficiency ratio measured 61.1% for the three months ended March 31, 2026, compared to 60.3% for the three months ended March 31, 2025. The increase in efficiency ratio was primarily due to a decrease in net interest margin and an increase in compensation expense, partially offset by a volume-driven increase in net interest income and an increase in non-interest income. 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.

Previous wording

PTPP adjusted earnings for three and nine months ended September 30, 2025 were $18.9 million, up 22.1%, and $51.1 million, up 19.6%, compared to $15.4 million and $42.7 million for the three and nine months ended September 30, 2024. PTPP adjusted earnings is defined as operating revenue less operating expense. 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 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 measures, including ROAA and ROATCE. The information provided below reconciles the efficiency ratio to its most comparable GAAP measure.

Current wording

PTPP adjusted earnings for three months ended March 31, 2026 were $17.2 million, up 6.1%, compared to $16.2 million for the three months ended March 31, 2025. The increase in PTPP is primarily due to an increase in net interest income and non-interest income. This increase in total revenue was partially offset by an increase in non-interest expense primarily due to an increase in compensation expense. 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 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 measures, including ROAA and ROATCE. The information provided below reconciles the efficiency ratio to its most comparable GAAP measure.

Previous wording

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, 2025 compared to the same periods 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.

Current wording

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, 2026 compared to the same period in 2025. 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.

Previous wording

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, 2025 and 2024. The average balances are derived from average daily balances.

Current wording

The table below shows 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 months ended March 31, 2026 and 2025. The average balances are derived from average daily balances.

Previous wording

The change in yield of the respective interest-earning assets 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 and nine months ended September 30, 2025 and 2024. Additionally, adjusted total loans and leases receivable and adjusted total interest-earning assets excludes the volatile impact of FILOI.

Current wording

The change in yield of the respective interest-earning assets 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, 2026 and 2025. Additionally, adjusted total loans and leases receivable and adjusted total interest-earning assets exclude the volatile impact of fees in lieu of interest ("FILOI").

Previous wording

Board of Governors of the Federal Reserve System (US), Effective Federal Funds Rates (DFF) retried from FRED, Federal Reserve Bank of St. Louis.

Current wording

Board of Governors of the Federal Reserve System (US), Effective Federal Funds Rates (DFF) from FRED, Federal Reserve Bank of St. Louis.

Previous wording

Comparison of Net Interest Income for the Three and Nine Months Ended September 30, 2025 and 2024

Current wording

Comparison of Net Interest Income for the Three Months Ended March 31, 2026 and 2025

Previous wording

Management believes its success in growing core deposits, disciplined loan pricing, and increased production in existing higher-yielding commercial lending products will allow the Corporation to achieve a net interest margin that supports our long-term profitability goals. The collection of FILOI is an expected source of volatility to quarterly net interest income and net interest margin. In addition, net interest margin may also experience volatility due to events such as the collection of interest on loans previously in non-accrual status or the accumulation of significant short-term deposit inflows. The Corporation maintains a long-term target for net interest margin in the range of 3.60% - 3.65%. Performance in future quarters will vary due to factors such as the level of FILOI and the timing, pace, and scale of future interest rate changes.

Current wording

Management believes its success in growing core deposits, disciplined loan pricing, and increased production in existing higher-yielding commercial lending products will allow the Corporation to achieve a net interest margin that supports its long-term profitability goals. The collection of fees in lieu of interest (e.g. prepayment fees and asset-based loan fees) is an expected source of volatility to quarterly net interest income and net interest margin. In addition, net interest margin may also experience volatility due to events such as the collection of interest on loans previously in non-accrual status or the accumulation of significant short-term deposit inflows.

Previous wording

The following table shows the components of the provision for credit losses for the three and nine months ended September 30, 2025 compared to the same period in 2024.

Current wording

The following table shows the components of the provision for credit losses for the three months ended March 31, 2026 compared to the same period in 2025.

Previous wording

Comparison of Non-Interest Income for the Three and Nine Months Ended September 30, 2025 and 2024

Current wording

Comparison of Non-Interest Income for the Three Months Ended March 31, 2026 and 2025

Previous wording

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 21.7% and 19.4% of total revenues for the three and nine months ended September 30, 2025, respectively, compared to 18.6% and 18.9% for the three and nine months ended September 30, 2024.

Current wording

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 19.8% of total revenues for the three months ended March 31, 2026, compared to 18.6% for the three months ended March 31, 2025.

Previous wording

Private wealth fee income increased $423,000, or 13.0%, and $1.1 million, or 11.1% for the three and nine months ended September 30, 2025, respectively, 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 and increases in fee rates across the client base. 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, 2025, private wealth and trust assets under management and administration increased $415.9 million, or 12.2%, totaling $3.814 billion compared to $3.398 billion as of September 30, 2024, due to an increase in market values, new clients, and new money from existing clients.

Current wording

Private wealth fee income increased $385,000, or 11.0% for the three months ended March 31, 2026, compared to the same period in 2025. Private wealth fee income was up compared to the prior year primarily due to an increase in assets under management and administration. 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 in the capital markets. As of March 31, 2026, private wealth and trust assets under management and administration increased $456.2 million, or 13.3%, totaling $3.881 billion compared to $3.425 billion as of March 31, 2025, due to an increase in market values, new clients, and new money from existing clients.

Previous wording

Bank-owned life insurance income increased $549,000, or 132.0%, and $785,000, or 63.8%, for the three and nine months ended September 30, 2025, respectively, compared to the same period in 2024. The increase is primarily due to the purchase of new policies, totaling $24.5 million in the second quarter of 2025 and an insurance claim of $234,000 in the third quarter.

Current wording

Bank-owned life insurance policy income increased $320,000, or 73.2%, for the three months ended March 31, 2026, compared to the same period in 2025. This increase was primarily due to the purchase of new policies in the second quarter of 2025, with an aggregate cash surrender value of $24.5 million.

Previous wording

Service charges on deposits increased $231,000, or 25.1%, and $493,000, or 17.5% for the three and nine months ended September 30, 2025, respectively, compared to the same periods 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 $148,000, or 9.1%, and $284,000, or 5.9%, for the three and nine months ended September 30, 2025, respectively, 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.

Current wording

Service charges on deposits increased $270,000, or 25.8% for the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily driven by new and expanded core deposit relationships and a reduction in earnings credit rates. Treasury management business development efforts remain robust as gross treasury management service charges increased $148,000, or 9.1%, for the three months ended March 31, 2026, compared to the same period in 2025. 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.

Previous wording

Gain on sale of SBA loans decreased $78,000, or 17.0%, and increased $738,000, or 73.5%, for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024. Gain on sale of SBA loans varies period to period based on the amount of closed and fully funded loans. While quarterly gains may vary, management expects SBA loan production to continue growing year-over-year.

Current wording

Gain on sale of SBA loans decreased $371,000, or 38.5%, for the three months ended March 31, 2026, compared to the same period in 2025. Gain on sale of SBA loans varies period to period based on the amount of closed and fully funded loans.

Previous wording

Non-interest expense for the three and nine months ended September 30, 2025 increased $2.6 million, or 11.2%, and $5.1 million, or 7.2%, respectively, compared to the same periods in 2024. Operating expense, which excludes certain one-time and discrete items as defined in the Efficiency Ratio table above, increased $2.8 million, or 12.4%, and $5.5 million, or 7.9%, for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024. The increase in operating expense was primarily due to an increase in compensation expense.

Current wording

Non-interest expense for the three months ended March 31, 2026 increased $2.2 million, or 9.0%, compared to the same periods in 2025. Operating expense, which excludes certain one-time and discrete items as defined in the Efficiency Ratio and Pre-Tax, Pre-Provision Adjusted Earnings section above, increased $2.5 million, or 10.0%, for the three months ended March 31, 2026, compared to the same periods in 2025. The increase in operating expense was primarily due to an increase in compensation expense.

Previous wording

Compensation expense for the three and nine months ended September 30, 2025 increased $2.2 million, or 14.8%, and $3.2 million, or 6.6%, respectively, compared to the same periods in 2024. The increase in compensation expense was primarily due to an increase in average full-time equivalent employees, annual merit increases and promotions, an increase in cash bonus accrual adjustment, and a decrease in capitalized labor related to software development. Successful hiring efforts to secure talent resulted in average full-time equivalent employees for the three months ended September 30, 2025 increasing to 361, up 1.7%, compared to 355 for the three months ended September 30, 2024.

Current wording

Compensation expense for the three months ended March 31, 2026 increased $1.8 million, or 10.7%, compared to the same period in 2025. Growth reflects increases in average FTEs, salaries, individual incentive compensation, and the acceleration of deferred compensation related to the CEO retirement. Successful hiring efforts to secure talent resulted in average full-time equivalent employees for the three months ended March 31, 2026 increasing to 373, up 5.7%, compared to 353 for the three months ended March 31, 2025.

Previous wording

Computer software expense increased $218,000, or 13.6%, and $504,000, or 11.0%, for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024. The overall increase was primarily due to our commitment to innovative technology to support growth initiatives, enhance productivity, and improve the client experience.

Current wording

Computer software expense increased $318,000, or 19.8%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily due to our commitment to innovative technology to support growth initiatives, enhance productivity, and improve the client experience.

Previous wording

FDIC insurance expense increased $7,000, or 0.9%, and $400,000, or 19.7%, for the three and nine months ended September 30, 2025, respectively, compared to the same period in 2024. The increase for the nine months ended was primarily due to an increase in assessment rate and assessable base.

Current wording

FDIC insurance expense increased $129,000, or 16.5%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily due to an increase in assessment rate related to an increase in non-performing assets and wholesale deposits.

Previous wording

Income tax expense totaled $7.2 million for the nine months ended September 30, 2025 compared to $6.0 million for the same period in 2024. Income tax expense included a $1.2 million net benefit from tax credit investments compared to $1.1 million for the same period in 2024. The effective tax rate for the nine months ended September 30, 2025 and 2024 was 16.3%. The Corporation expects to report an effective tax rate between 16% and 18% for 2025.

Current wording

Income tax expense totaled $2.2 million for the three months ended March 31, 2026 compared to $2.3 million for the same period in 2025. Income tax expense included a $578,000 net benefit from tax credit investments compared to $459,000 for the same period in 2025. The effective tax rate for the three months ended March 31, 2026 was 15.2%, compared to 17.0% for the same period in 2025. The change in tax expense reflects updated tax credit partnership estimates and timing of stock compensation vesting activity. The Corporation expects to report an effective tax rate between 16% and 18% for 2026.

Previous wording

Generally, the provision for income taxes is determined by applying an estimated annual effective income tax rate to income before taxes and adjusting for discrete items. The rate is based on the most recent annualized forecast of pre-tax income, book versus tax differences and tax credits, if any. If we conclude that a reliable estimated annual effective tax rate cannot be determined, the actual effective tax rate for the year-to-date period may be used. We re-evaluate the income tax rates each quarter. Therefore, the current projected effective tax rate for the entire year may change.

Current wording

The provision for income taxes is determined by applying an estimated annual effective income tax rate to income before taxes and adjusting for discrete items. The rate is based on the most recent annualized forecast of pre-tax income, book versus tax differences, and tax credits, if any. If we conclude that a reliable estimated annual effective tax rate cannot be determined, the actual effective tax rate for the year-to-date period may be used. We re-evaluate the income tax rates each quarter and the current projected effective tax rate for the entire year may change.

Previous wording

Total assets increased by $181.6 million, or 6.3%, to $4.035 billion as of September 30, 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 and available-for-sale securities partially offset by a decrease in short-term investments. Total liabilities increased by $151.9 million, or 5.7%, to $3.677 billion at September 30, 2025 compared to $3.525 billion at December 31, 2024. The increase in total liabilities was primarily due to an increase in core deposits. Total stockholders’ equity increased by $29.7 million, or 12.1%, to $358.3 million at September 30, 2025 compared to $328.6 million at December 31, 2024. The increase in total stockholders’ equity was primarily due to the retention of earnings partially offset by dividends paid to common and preferred stockholders.

Current wording

Total assets increased by $239.0 million, or 5.9%, to $4.321 billion as of March 31, 2026 compared to $4.082 billion at December 31, 2025. The increase in total assets was primarily driven by increases in loans and leases receivable and short-term investments. Total liabilities increased by $230.5 million, or 6.2%, to $3.941 billion at March 31, 2026 compared to $3.710 billion at December 31, 2025. The increase in total liabilities was primarily due to an increase in core deposits. Total stockholders’ equity increased by $8.5 million, or 2.3%, to $380.1 million at March 31, 2026 compared to $371.6 million at December 31, 2025. The increase in total stockholders’ equity was primarily due to the retention of earnings partially offset by dividends paid to common and preferred stockholders.