10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑		Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2026


☐		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 001-34095

FIRST BUSINESS FINANCIAL SERVICES, INC.

(Exact name of registrant as specified in its charter)


Wisconsin		39-1576570
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


401 Charmany Drive		53719
Madison	Wisconsin
(Address of Principal Executive Offices)		(Zip Code)

(608) 238-8008

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	FBIZ	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	¨	Accelerated filer	þ	Non-accelerated filer	¨	Smaller reporting company	¨	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

The number of shares outstanding of the registrant’s sole class of common stock, par value $0.01 per share, on April 20, 2026 was 8,362,166 shares.

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FIRST BUSINESS FINANCIAL SERVICES, INC.

INDEX — FORM 10-Q


PART I. Financial Information	1
Item 1. Financial Statements	1
Consolidated Balance Sheets (Unaudited)	1
Consolidated Statements of Income (Unaudited)	2
Consolidated Statements of Comprehensive Income (Unaudited)	3
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)	4
Consolidated Statements of Cash Flows (Unaudited)	5
Notes to Unaudited Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3. Quantitative and Qualitative Disclosures about Market Risk	56
Item 4. Controls and Procedures	56
PART II. Other Information	57
Item 1. Legal Proceedings	57
Item 1A. Risk Factors	57
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 5. Other Information	57
Item 6. Exhibits	58
Signatures	59

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PART I. Financial Information

Item 1. Financial Statements

First Business Financial Services, Inc.

Consolidated Balance Sheets (Unaudited)


	March 31, 2026			December 31, 2025
	(Unaudited)
	(In Thousands, Except Share Data)
Assets
Cash and due from banks	$	32,560		$	30,771
Short-term investments		104,565			8,714
Cash and cash equivalents		137,125			39,485
Securities available-for-sale, at fair value		420,325			422,087
Securities held-to-maturity, at amortized cost		4,797			5,210
Loans held for sale		23,700			18,849
Loans and leases receivable, net of allowance for credit losses of $36,631 and $35,877, respectively		3,462,272			3,337,364
Premises and equipment, net		4,500			4,669
Right-of-use assets, net		5,053			5,317
Bank-owned life insurance		84,776			83,994
Federal Home Loan Bank stock, at cost		11,242			8,940
Goodwill and other intangible assets		12,011			11,985
Derivatives		38,198			36,515
Accrued interest receivable and other assets		116,856			107,472
Total assets	$	4,320,855		$	4,081,887
Liabilities and Stockholders’ Equity
Deposits	$	3,566,002		$	3,380,415
Federal Home Loan Bank advances and other borrowings		303,451			252,051
Lease liabilities		7,032			7,361
Derivatives		35,857			36,926
Accrued interest payable and other liabilities		28,433			33,549
Total liabilities		3,940,775			3,710,302
Stockholders’ equity:
Preferred stock, $0.01 par value, 2,500,000 shares authorized, 12,500 shares of 7% non-cumulative perpetual preferred stock, Series A, outstanding at March 31, 2026 and December 31, 2025		11,992			11,992
Common stock, $0.01 par value, 25,000,000 shares authorized, 9,525,323 and 9,493,274 shares issued, 8,343,519 and 8,325,376 shares outstanding at March 31, 2026 and December 31, 2025, respectively		96			96
Additional paid-in capital		97,167			96,487
Retained earnings		314,618			305,536
Accumulated other comprehensive loss		(10,196	)		(9,740	)
Treasury stock, 1,181,804 and 1,167,898 shares at March 31, 2026 and December 31, 2025, respectively, at cost		(33,597	)		(32,786	)
Total stockholders’ equity		380,080			371,585
Total liabilities and stockholders’ equity	$	4,320,855		$	4,081,887

See accompanying Notes to Unaudited Consolidated Financial Statements.

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First Business Financial Services, Inc.

Consolidated Statements of Income (Unaudited)


	For the Three Months Ended March 31,
	2026		2025
	(In Thousands, Except Per Share Data)
Interest income
Loans and leases	$	56,308	$	55,274
Securities		4,245		3,404
Short-term investments		1,343		852
Total interest income		61,896		59,530
Interest expense
Deposits		23,928		23,016
Federal Home Loan Bank advances and other borrowings		2,450		3,256
Total interest expense		26,378		26,272
Net interest income		35,518		33,258
Provision for credit losses		2,960		2,659
Net interest income after provision for credit losses		32,558		30,599
Non-interest income
Private wealth management service fees		3,877		3,492
Gain on sale of Small Business Administration loans		592		963
Service charges on deposits		1,318		1,048
Loan fees		436		388
Bank-owned life insurance policy income		757		437
Swap fees		628		113
Other non-interest income		1,167		1,138
Total non-interest income		8,775		7,579
Non-interest expense
Compensation		18,541		16,747
Occupancy		588		590
Professional fees		1,446		1,459
Data processing		1,270		1,082
Marketing		711		968
Equipment		407		376
Computer software		1,921		1,603
FDIC insurance		909		780
Other non-interest expense		1,160		1,114
Total non-interest expense		26,953		24,719
Income before income tax expense		14,380		13,459
Income tax expense		2,180		2,288
Net income		12,200		11,171
Preferred stock dividend		219		219
Net income available to common shareholders	$	11,981	$	10,952
Earnings per common share
Basic	$	1.44	$	1.32
Diluted		1.44		1.32
Dividends declared per share		0.34		0.29

See accompanying Notes to Unaudited Consolidated Financial Statements.

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First Business Financial Services, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)


	For the Three Months Ended March 31,
	2026			2025
	(In Thousands)
Net income	$	12,200		$	11,171
Other comprehensive income (loss)
Securities available-for-sale:
Unrealized securities (losses) gains arising during the period		(3,181	)		4,685
Interest rate swaps:
Unrealized gains (losses) on interest rate swaps arising during the period		2,751			(5,901	)
Income tax (expense) benefit		(26	)		270
Total other comprehensive loss		(456	)		(946	)
Comprehensive income	$	11,744		$	10,225

See accompanying Notes to Unaudited Consolidated Financial Statements.

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First Business Financial Services, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)


	Common Shares Outstanding			Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total
	(In Thousands, Except Share Data)
Balance at December 31, 2024		8,293,928		$	11,992	$	95	$	93,545	$	265,778		$	(11,425	)	$	(31,396	)	$	328,589
Net income		—			—		—		—		11,171			—			—			11,171
Other comprehensive loss		—			—		—		—		—			(946	)		—			(946	)
Share-based compensation - restricted shares and employee stock purchase plan		21,914			—		1		650		—			—			—			651
Issuance of common stock under the employee stock purchase plan		841			—		—		36		—			—			—			36
Preferred stock dividends		—			—		—		—		(219	)		—			—			(219	)
Cash dividends ($0.29 per share)		—			—		—		—		(2,442	)		—			—			(2,442	)
Treasury stock purchased		(14,716	)		—		—		—		—			—			(777	)		(777	)
Balance at March 31, 2025		8,301,967		$	11,992	$	96	$	94,231	$	274,288		$	(12,371	)	$	(32,173	)	$	336,063


	Common Shares Outstanding			Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total
	(In Thousands, Except Share Data)
Balance at December 31, 2025		8,325,376		$	11,992	$	96	$	96,487	$	305,536		$	(9,740	)	$	(32,786	)	$	371,585
Net income		—			—		—		—		12,200			—			—			12,200
Other comprehensive loss		—			—		—		—		—			(456	)		—			(456	)
Share-based compensation - restricted shares and employee stock purchase plan		31,357			—		—		647		—			—			—			647
Issuance of common stock under the employee stock purchase plan		692			—		—		33		—			—			—			33
Preferred stock dividends		—			—		—		—		(219	)		—			—			(219	)
Cash dividends ($0.34 per share)		—			—		—		—		(2,899	)		—			—			(2,899	)
Treasury stock purchased		(13,906	)		—		—		—		—			—			(811	)		(811	)
Balance at March 31, 2026		8,343,519		$	11,992	$	96	$	97,167	$	314,618		$	(10,196	)	$	(33,597	)	$	380,080

See accompanying Notes to Unaudited Consolidated Financial Statements.

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First Business Financial Services, Inc.

Consolidated Statements of Cash Flows (Unaudited)


	For the Three Months Ended March 31,
	2026			2025
	(In Thousands)
Operating activities
Net income	$	12,200		$	11,171
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes, net		(68	)		153
Provision for credit losses		2,960			2,659
Depreciation, amortization and accretion, net		929			871
Share-based compensation		647			651
Net (gain) loss on sale of tax credit investments		(7	)		110
Amortization of tax credit investments		1,891			1,592
Bank-owned life insurance policy income		(757	)		(437	)
Origination of loans for sale		(52,483	)		(51,542	)
Sale of loans originated for sale		48,224			55,479
Gain on sale of loans originated for sale		(592	)		(963	)
Net loss on repossessed assets		—			(8	)
Return on investment in limited partnerships		295			—
Excess tax benefit from share-based compensation		187			379
Net payments on operating lease liabilities		(402	)		(398	)
Net (decrease) increase in accrued interest receivable and other assets		(5,745	)		(6,098	)
Net (increase) decrease in accrued interest payable and other liabilities		(4,228	)		(2,318	)
Net cash provided by operating activities		3,051			11,301
Investing activities
Proceeds from maturities, redemptions, and paydowns of available-for-sale securities		20,237			11,433
Proceeds from maturities, redemptions, and paydowns of held-to-maturity securities		411			148
Purchases of available-for-sale securities		(21,514	)		(24,789	)
Proceeds from sale of repossessed assets		—			23
Net increase in loans and leases		(127,825	)		(74,683	)
Investments in limited partnerships		(910	)		(1,212	)
Returns of investments in limited partnerships		8			14
Investment in tax credit investments		(6,656	)		(9,783	)
Distributions from tax credit investments		140			—
Proceeds from sale of tax credit investments		69			319
Investment in Federal Home Loan Bank stock		(3,465	)		(9,782	)
Proceeds from the sale of Federal Home Loan Bank stock		1,163			10,964
Purchases of leasehold improvements and equipment, net		(135	)		(80	)
Purchases of bank owned life insurance policies		(25	)		—
Net cash used in investing activities		(138,502	)		(97,428	)
Financing activities
Net increase in deposits		185,587			135,903
Repayment of Federal Home Loan Bank advances		(85,979	)		(578,724	)
Proceeds from Federal Home Loan Bank advances		137,349			545,238
Net increase in long-term borrowed funds		30			27
Cash dividends paid		(2,899	)		(2,442	)
Preferred stock dividends paid		(219	)		(219	)
Proceeds from issuance of common stock under ESPP		33			36
Purchase of treasury stock		(811	)		(777	)
Net cash provided by financing activities		233,091			99,042
Net increase in cash and cash equivalents		97,640			12,915
Cash and cash equivalents at the beginning of the period		39,485			157,702
Cash and cash equivalents at the end of the period	$	137,125		$	170,617
Supplementary cash flow information
Cash paid during the period for:
Interest paid on deposits and borrowings	$	26,920		$	26,432
Net income taxes received		(305	)		(20	)

See accompanying Notes to Unaudited Consolidated Financial Statements

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Notes to Unaudited Consolidated Financial Statements

Note 1 — Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

The accounting and reporting practices of First Business Financial Services, Inc. (“FBFS” or the “Corporation”), through our wholly-owned subsidiary, First Business Bank (“FBB” or the “Bank”), have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). FBB operates as a commercial banking institution primarily in Wisconsin and the greater Kansas City metropolitan area. The Bank provides a full range of financial services to businesses, business owners, executives, professionals, and high net worth individuals. FBB also offers bank consulting services to community financial institutions. The Bank is subject to competition from other financial institutions and service providers and is also subject to state and federal regulations.

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements were prepared in accordance with GAAP and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Corporation’s Consolidated Financial Statements and footnotes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2025. The unaudited Consolidated Financial Statements include the accounts of the Corporation and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Management of the Corporation is required to make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that could significantly change in the near-term include the value of securities and interest rate swaps, level of the allowance for credit losses, lease residuals, property under operating leases, goodwill, and income taxes. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of results that may be expected for any other interim period or the entire fiscal year ending December 31, 2026. Certain amounts in prior periods may have been reclassified to conform to the current presentation. Subsequent events have been evaluated through the date of the issuance of the unaudited Consolidated Financial Statements. No significant subsequent events have occurred through this date requiring adjustment to the financial statements or disclosures.

The Corporation has not changed its significant accounting and reporting policies from those disclosed in the Corporation’s Form 10-K for the year ended December 31, 2025.

Recent Accounting Pronouncements

In November 2024, the FASB issued ASU No. 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40).” This update improves the transparency and usefulness of financial statements by requiring companies to break down certain expense line items. This update is effective for fiscal years beginning after December 15, 2026. The Corporation will implement this standard when it becomes effective. The adoption of the standard only requires additional disclosures and therefore will not affect net income, stockholders' equity or cash flows.

In September 2025, the FASB issued ASU No. 2025-06, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software.” This update modernizes the accounting for internal-use software. This update is effective for fiscal years beginning after December 15, 2027. The Corporation is assessing the impact of this standard.

In November 2025, the FASB issued ASU No. 2025-09, "Derivatives and Hedging (Subtopic 815): Hedge Accounting Improvements." This update clarifies and improves hedge accounting requirements. This update is effective for fiscal years beginning after December 15, 2026. The Corporation is assessing the impact of this standard.

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Note 2 — Earnings per Common Share

Earnings per common share are computed using the two-class method. Basic earnings per common share are computed by dividing net income allocated to common shares by the weighted-average number of shares outstanding during the applicable period, excluding outstanding participating securities. Participating securities include unvested restricted shares. Unvested restricted shares are considered participating securities because holders of these securities receive non-forfeitable dividends, or dividend equivalents, at the same rate as holders of the Corporation’s common stock. Diluted earnings per share are computed by dividing net income allocated to common shares adjusted for reallocation of undistributed earnings of unvested restricted shares by the weighted average number of shares determined for the basic earnings per common share computation plus the dilutive effect of common stock equivalents using the treasury stock method.


	For the Three Months Ended March 31,
	2026		2025
	(Dollars in Thousands, Except Share Data)
Basic earnings per common share
Net income	$	12,200	$	11,171
Less: preferred stock dividends		219		219
Less: earnings allocated to participating securities		220		237
Basic earnings allocated to common shareholders	$	11,761	$	10,715
Weighted-average common shares outstanding, excluding participating securities		8,186,174		8,130,743
Basic earnings per common share	$	1.44	$	1.32
Diluted earnings per common share
Earnings allocated to common shareholders, diluted	$	11,761	$	10,715
Weighted-average diluted common shares outstanding, excluding participating securities		8,186,174		8,130,743
Diluted earnings per common share	$	1.44	$	1.32

Note 3 — Share-Based Compensation

The Corporation initially adopted the 2019 Equity Incentive Plan (the “Plan”) during the quarter ended June 30, 2019. The Plan is administered by the Compensation Committee of the Board of Directors (the “Board”) of the Corporation and provides for the grant of equity ownership opportunities through incentive stock options and nonqualified stock options, restricted stock, restricted stock units, dividend equivalent units, and any other type of award permitted by the Plan. As of March 31, 2026, 144,687 shares were available for future grants under the Plan, as amended. Shares covered by awards that expire, terminate, or lapse will again be available for the grant of awards under the Plan.

Restricted Stock

Under the Plan, the Corporation may grant restricted stock awards (“RSA”), restricted stock units (“RSU”), and other stock-based awards to plan participants, subject to forfeiture upon the occurrence of certain events until the dates specified in the participant’s award agreement. While restricted stock is subject to forfeiture, RSA participants may exercise full voting rights and will receive all dividends and other distributions paid with respect to the restricted shares. RSUs do not have voting rights. RSUs granted prior to 2023 are provided dividend equivalents concurrent with dividends paid to shareholders while RSUs granted in 2023 and after will accrue dividend equivalents payable upon vesting. The restricted stock granted under the Plan is typically subject to a vesting period. Compensation expense for restricted stock is recognized over the requisite service period of generally three or four years for the entire award on a straight-line basis. Upon vesting of restricted stock, the benefit of tax deductions in excess of recognized compensation expense is reflected as an income tax benefit in the unaudited Consolidated Statements of Income.

The Corporation may also issue performance-based restricted stock units (“PRSU”). Vesting of the PRSU will be measured on the relative Total Shareholder Return (“TSR”) and relative Return on Average Tangible Common Equity ("ROATCE"), and will cliff-vest after a three-year measurement period based on the Corporation’s TSR performance and ROATCE performance compared to a broad peer group of over 100 banks. At the end of the performance period, the number of actual shares to be awarded varies between 0% and 200% of target amounts. The restricted stock awards and units issued to executive officers will vest ratably over a three-year period. Compensation expense is recognized for PRSU over the requisite service and performance period of generally three years for the entire expected award on a straight-line basis. The compensation expense for the awards expected to vest for the percentage of

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performance-based restricted stock units subject to the ROATCE metric will be adjusted if there is a change in the expectation of ROATCE. The compensation expense for the awards expected to vest for the percentage of PRSU subject to the TSR metric are never adjusted and are amortized utilizing the fair value provided using a Monte Carlo pricing model.

Restricted stock activity for the year ended December 31, 2025 and the three months ended March 31, 2026 was as follows:


	RSA	Weighted Average Grant Price	PRSU	Weighted Average Grant Price	RSU	Weighted Average Grant Price	Total	Weighted Average Grant Price
Nonvested balance as of December 31, 2024	28,896	$30.09	49,630	$42.24	80,161	$36.04	158,687	$36.77
Granted (1)	—	—	12,195	63.61	45,789	51.39	57,984	53.92
Vested	(20,280)	28.74	(15,825)	42.70	(32,376)	37.56	(68,481)	37.21
Forfeited	(976)	33.60	—	—	(2,468)	41.48	(3,444)	40.79
Nonvested balance as of December 31, 2025	7,640	33.76	46,000	47.31	91,106	43.03	144,746	43.87
Granted (1)	—	—	9,575	63.60	34,035	57.84	43,610	59.09
Vested	(6,665)	33.60	—	—	(31,357)	40.93	(38,022)	39.65
Forfeited	—	—	—	—	(1,721)	50.26	(1,721)	50.26
Nonvested balance as of March 31, 2026	975	$34.85	55,575	$50.12	92,063	$49.17	148,613	$49.43
Unrecognized compensation cost (in thousands)	$9		$1,340		$4,247		$5,596
Weighted average remaining recognition period (in years)	0.40		2.13		2.44		2.42

(1)

The number of restricted shares/units shown includes the shares that would be granted if the target level of performance is achieved related to the PRSU. The number of shares actually issued may vary.

Employee Stock Purchase Plan

The Corporation is authorized to issue up to 250,000 shares of common stock under the employee stock purchase plan ("ESPP"). The plan qualifies as an employee stock purchase plan under section 423 of the Internal Revenue Code of 1986. Under the ESPP, eligible employees may enroll in a three month offer period that begins January, April, July, and October of each year. Employees may elect to purchase a limited number of shares of the Corporation's common stock at 90% of the fair market value on the last day of the offering period. The ESPP is treated as a compensatory item for purposes of share-based compensation expense.

The Corporation issued 692 and 841 shares of common stock under the ESPP during the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026 and 2025, 222,999 and 225,965, respectively, shares remained available for issuance under the ESPP.

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


	For the Three Months Ended March 31,
	2026		2025
	(In Thousands)
Share-based compensation expense	$	647	$	651

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Note 4 — Securities

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


	As of March 31, 2026
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In Thousands)
Available-for-sale:
U.S. treasuries	$	4,997	$	—	$	(68	)	$	4,929
U.S. government agency securities - government-sponsored enterprises		2,500		—		(189	)		2,311
Municipal securities		46,882		187		(4,083	)		42,986
Residential mortgage-backed securities - government issued		168,591		502		(2,188	)		166,905
Residential mortgage-backed securities - government-sponsored enterprises		168,694		457		(7,490	)		161,661
Commercial mortgage-backed securities - government issued		2,362		—		(309	)		2,053
Commercial mortgage-backed securities - government-sponsored enterprises		42,100		43		(2,663	)		39,480
	$	436,126	$	1,189	$	(16,990	)	$	420,325


	As of December 31, 2025
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In Thousands)
Available-for-sale:
U.S. treasuries	$	4,995	$	—	$	(94	)	$	4,901
U.S. government agency securities - government-sponsored enterprises		2,500		—		(186	)		2,314
Municipal securities		46,993		328		(3,429	)		43,892
Residential mortgage-backed securities - government issued		166,933		1,279		(1,577	)		166,635
Residential mortgage-backed securities - government-sponsored enterprises		168,544		929		(6,930	)		162,543
Commercial mortgage-backed securities - government issued		2,416		—		(302	)		2,114
Commercial mortgage-backed securities - government-sponsored enterprises		42,326		71		(2,709	)		39,688
	$	434,707	$	2,607	$	(15,227	)	$	422,087

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


	As of March 31, 2026
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
	(In Thousands)
Held-to-maturity:
Municipal securities	$	1,858	$	—	$	(3	)	$	1,855
Residential mortgage-backed securities - government issued		481		—		(26	)		455
Residential mortgage-backed securities - government-sponsored enterprises		457		—		(19	)		438
Commercial mortgage-backed securities - government-sponsored enterprises		2,001		—		(26	)		1,975
	$	4,797	$	—	$	(74	)	$	4,723

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	As of December 31, 2025
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
	(In Thousands)
Held-to-maturity:
Municipal securities	$	2,144	$	—	$	(3	)	$	2,141
Residential mortgage-backed securities - government issued		546		—		(26	)		520
Residential mortgage-backed securities - government-sponsored enterprises		518		—		(18	)		500
Commercial mortgage-backed securities - government-sponsored enterprises		2,002		—		(22	)		1,980
	$	5,210	$	—	$	(69	)	$	5,141

U.S. Treasuries contain treasury bonds issued by the United States Treasury. U.S. government agency securities - government-sponsored enterprises represent securities issued by Federal National Mortgage Association (“FNMA”) and the Small Business Administration ("SBA"). Municipal securities include securities issued by various municipalities and are primarily general obligation bonds that are primarily tax-exempt. Residential and commercial mortgage-backed securities - government issued represent securities guaranteed by the Government National Mortgage Association. Residential and commercial mortgage-backed securities - government-sponsored enterprises include securities guaranteed by the Federal Home Loan Mortgage Corporation, FNMA, and the FHLB. The Corporation sold no available-for-sale securities during the three months ended March 31, 2026 and 2025.

At March 31, 2026 and December 31, 2025, securities with a fair value of $37.3 million and $38.8 million, respectively, were pledged to secure various obligations, including interest rate swap contracts and municipal deposits.

The amortized cost and fair value of securities by contractual maturity at March 31, 2026 are shown below. Actual maturities may differ from contractual maturities because issuers have the right to call or prepay certain obligations with or without call or prepayment penalties.


	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)
Due in one year or less	$	5,929	$	5,860	$	460	$	460
Due in one year through five years		12,875		12,349		1,398		1,395
Due in five through ten years		10,757		9,991		—		—
Due in over ten years		24,818		22,026		—		—
		54,379		50,226		1,858		1,855
Residential mortgage-backed securities		337,285		328,566		938		893
Commercial mortgage-backed securities		44,462		41,533		2,001		1,975
	$	436,126	$	420,325	$	4,797	$	4,723

The tables below show the Corporation’s gross unrealized losses and fair value of available-for-sale investments aggregated by investment category and length of time that individual investments were in a continuous loss position at March 31, 2026 and December 31, 2025. At March 31, 2026, the Corporation held 188 available-for-sale securities that were in an unrealized loss position, 147 of which have been in a continuous unrealized loss position for twelve months or greater.

The Corporation has not specifically identified available-for-sale securities in a loss position that it intends to sell in the near term and does not believe that it will be required to sell any such securities. The Corporation reviews its securities on a quarterly basis to assess declines in fair value for credit losses. Consideration is given to such factors as the credit rating of the borrower, market conditions such as current interest rates, any adverse conditions specific to the security, and delinquency status on contractual payments. For the three months ended March 31, 2026 and 2025, management concluded that in all instances securities with fair value less than carrying value was due to market factors; thus, no credit loss provision was required.

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


	As of March 31, 2026
	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Available-for-sale:
U.S. treasuries	$	—	$	—	$	4,929	$	68	$	4,929	$	68
U.S. government agency securities - government- sponsored enterprises		—		—		2,311		189		2,311		189
Municipal securities		4,002		1,038		29,497		3,045		33,499		4,083
Residential mortgage-backed securities - government issued		76,384		650		10,574		1,538		86,958		2,188
Residential mortgage-backed securities - government-sponsored enterprises		33,730		369		73,857		7,121		107,587		7,490
Commercial mortgage-backed securities - government issued		—		—		2,053		309		2,053		309
Commercial mortgage-backed securities - government-sponsored enterprises		2,823		147		35,647		2,516		38,470		2,663
	$	116,939	$	2,204	$	158,868	$	14,786	$	275,807	$	16,990


	As of December 31, 2025
	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Available-for-sale:
U.S. treasuries	$	—	$	—	$	4,901	$	94	$	4,901	$	94
U.S. government agency securities - government- sponsored enterprises		—		—		2,314		186		2,314		186
Municipal securities		—		—		34,660		3,429		34,660		3,429
Residential mortgage-backed securities - government issued		25,970		85		17,454		1,492		43,424		1,577
Residential mortgage-backed securities - government-sponsored enterprises		14,002		73		72,481		6,857		86,483		6,930
Commercial mortgage-backed securities - government issued		—		—		2,114		302		2,114		302
Commercial mortgage-backed securities - government-sponsored enterprises		5,971		44		27,575		2,665		33,546		2,709
	$	45,943	$	202	$	161,499	$	15,025	$	207,442	$	15,227

The tables below show the Corporation’s gross unrealized losses and fair value of held-to-maturity investments, aggregated by investment category and length of time that individual investments were in a continuous loss position at March 31, 2026 and December 31, 2025. At March 31, 2026, the Corporation held 19 held-to-maturity securities that were in an unrealized loss position, 15 of which have been in a continuous loss position for twelve months or greater. Management assesses held-to-maturity securities for credit losses on a quarterly basis. The assessment includes review of credit ratings, identification of delinquency and evaluation of market factors. Based on this analysis, management concludes the decline in fair value is due to market factors, specifically changes in interest rates. Accordingly, no credit loss provision was recorded in the unaudited Consolidated Statements of Income for the three months ended March 31, 2026 and 2025.

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


	As of March 31, 2026
	Less than 12 Months		12 Months or Longer		Total
	Fair Value	Unrecognized Losses	Fair Value	Unrecognized Losses	Fair Value	Unrecognized Losses
	(In Thousands)
Held-to-maturity:
Municipal securities	$1,855	$3	$—	$—	$1,855	$3
Residential mortgage-backed securities - government issued	—	—	455	26	455	26
Residential mortgage-backed securities - government-sponsored enterprises	—	—	438	19	438	19
Commercial mortgage-backed securities - government-sponsored enterprises	—	—	1,975	26	1,975	26
	$1,855	$3	$2,868	$71	$4,723	$74


	As of December 31, 2025
	Less than 12 Months		12 Months or Longer		Total
	Fair Value	Unrecognized Losses	Fair Value	Unrecognized Losses	Fair Value	Unrecognized Losses
	(In Thousands)
Held-to-maturity:
Municipal securities	$959	$1	$680	$2	$1,639	$3
Residential mortgage-backed securities - government issued	—	—	520	26	520	26
Residential mortgage-backed securities - government-sponsored enterprises	—	—	500	18	500	18
Commercial mortgage-backed securities - government-sponsored enterprises	—	—	1,980	22	1,980	22
	$959	$1	$3,680	$68	$4,639	$69

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

Loan and lease receivables consist of the following:


	March 31, 2026		December 31, 2025
	(In Thousands)
Commercial real estate:
Commercial real estate — owner occupied	$	306,593	$	293,706
Commercial real estate — non-owner occupied		925,425		885,870
Construction and land development		224,866		248,560
Multi-family		577,271		571,468
1-4 family		61,332		60,661
Total commercial real estate		2,095,487		2,060,265
Commercial and industrial		1,358,413		1,273,997
Consumer and other		47,223		40,965
Total gross loans and leases receivable		3,501,123		3,375,227
Less:
Allowance for credit losses		36,631		35,877
Deferred loan fees and costs, net		2,220		1,986
Loans and leases receivable, net	$	3,462,272	$	3,337,364

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


March 31, 2026
(In Thousands)	Owner Occupied		Non-Owner Occupied		Construction and Land Development		Multi- Family		1-4 Family		Commercial and Industrial		Consumer and Other		Total
SBA
Loans transferred to third parties	$	—	$	—	$	—	$	—	$	—	$	4,593	$	—	$	4,593
Outstanding balance of loans serviced		—		—		—		—		—		82,689		—		82,689
Ownership of transferred loans		—		—		—		—		—		24,522		—		24,522
Non-SBA
Loans transferred to third parties	$	—	$	—	$	9,515	$	539	$	—	$	32,985	$	—	$	43,039
Outstanding balance of loans serviced		11,958		157,698		47,081		151,750		—		40,111		—		408,598
Ownership of transferred loans		6,833		218,069		75,309		137,887		—		40,933		—		479,031
Loan participations purchased		—		—		—		9,774		—		6,400		—		16,174


March 31, 2025
(In Thousands)	Owner Occupied		Non-Owner Occupied		Construction and Land Development		Multi- Family		1-4 Family		Commercial and Industrial		Consumer and Other		Total
SBA
Loans transferred to third parties	$	—	$	—	$	—	$	—	$	—	$	8,652	$	—	$	8,652
Outstanding balance of loans serviced		—		—		—		—		—		86,584		—		86,584
Ownership of transferred loans		—		—		—		—		—		25,543		—		25,543
Non-SBA
Loans transferred to third parties	$	—	$	16,016	$	23,287	$	280	$	—	$	6,282	$	—	$	45,865
Outstanding balance of loans serviced		18,225		165,479		56,399		127,614		—		18,205		—		385,922
Ownership of transferred loans		10,169		232,000		50,032		128,057		—		22,977		—		443,235
Loan participations purchased		—		—		7,023		—		—		—		—		7,023

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


March 31, 2026	Term Loans Amortized Cost Basis by Origination Year
(In Thousands)	2026	2025	2024	2023	2022	Prior	Revolving Loans Amortized Cost Basis	Total	Category as a % of total portfolio
Commercial real estate — owner occupied
Category
I	$20,596	$64,201	$16,650	$31,653	$34,208	$119,274	$295	286,877	93.6%
II	—	—	—	8,924	—	—	—	8,924	2.9%
III	—	—	2,180	—	—	8,612	—	10,792	3.5%
IV	—	—	—	—	—	—	—	—	0.0%
Total	$20,596	$64,201	$18,830	$40,577	$34,208	$127,886	$295	$306,593	100.0%
Commercial real estate — non-owner occupied
Category
I	$45,547	$96,425	$80,847	$98,950	$88,556	$442,708	$33,992	$887,025	95.9%
II	—	—	—	—	—	6,863	—	6,863	0.7%
III	—	—	—	9,216	—	22,321	—	31,537	3.4%
IV	—	—	—	—	—	—	—	—	0.0%
Total	$45,547	$96,425	$80,847	$108,166	$88,556	$471,892	$33,992	$925,425	100.0%
Construction and land development
Category
I	$5,648	$39,423	$60,615	$63,239	$10,410	$5,018	$23,354	$207,707	92.3%
II	—	—	—	—	—	—	—	—	0.0%
III	—	—	—	5,735	—	—	—	5,735	2.6%
IV	—	—	—	—	454	10,970	—	11,424	5.1%
Total	$5,648	$39,423	$60,615	$68,974	$10,864	$15,988	$23,354	$224,866	100.0%
Multi-family
Category
I	$430	$56,909	$18,323	$119,670	$92,955	$271,548	$2,640	$562,475	97.4%
II	—	—	—	1,527	7,277	776	—	9,580	1.7%
III	—	—	—	—	—	1,012	—	1,012	0.2%
IV	—	—	—	1,678	—	2,526	—	4,204	0.7%
Total	$430	$56,909	$18,323	$122,875	$100,232	$275,862	$2,640	$577,271	100.0%
1-4 family
Category
I	$1,929	$18,032	$7,019	$1,403	$4,194	$5,212	$23,543	$61,332	100.0%
II	—	—	—	—	—	—	—	—	0.0%
III	—	—	—	—	—	—	—	—	0.0%
IV	—	—	—	—	—	—	—	—	0.0%
Total	$1,929	$18,032	$7,019	$1,403	$4,194	$5,212	$23,543	$61,332	100.0%
Commercial and industrial
Category
I	$93,147	$234,188	$157,990	$113,623	$45,005	$65,858	$497,758	$1,207,569	88.9%
II	—	659	14,375	6,596	5,041	2,659	12,139	41,469	3.1%
III	—	217	8,689	17,800	4,368	2,590	50,836	84,500	6.2%
IV	—	789	2,123	3,027	7,454	3,720	7,762	24,875	1.8%
Total	$93,147	$235,853	$183,177	$141,046	$61,868	$74,827	$568,495	$1,358,413	100.0%
Consumer and other
Category
I	$11,626	$7,563	$5,147	$2,450	$4,273	$10,162	$6,002	$47,223	100.0%
II	—	—	—	—	—	—	—	—	0.0%
III	—	—	—	—	—	—	—	—	0.0%
IV	—	—	—	—	—	—	—	—	0.0%
Total	$11,626	$7,563	$5,147	$2,450	$4,273	$10,162	$6,002	$47,223	100.0%
Total Loans
Category
I	$178,923	$516,741	$346,591	$430,988	$279,601	$919,780	$587,584	$3,260,208	93.1%
II	—	659	14,375	17,047	12,318	10,298	12,139	66,836	1.9%
III	—	217	10,869	32,751	4,368	34,535	50,836	133,576	3.8%
IV	—	789	2,123	4,705	7,908	17,216	7,762	40,503	1.2%
Total	$178,923	$518,406	$373,958	$485,491	$304,195	$981,829	$658,321	$3,501,123	100.0%

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December 31, 2025	Term Loans Amortized Cost Basis by Origination Year
(In Thousands)	2025	2024	2023	2022	2021	Prior	Revolving Loans Amortized Cost Basis	Total	Category as a % of total portfolio
Commercial real estate — owner occupied
Category
I	$65,752	$20,422	$39,698	$32,186	$30,251	$92,981	$295	$281,585	95.9%
II	—	—	2,011	—	—	—	—	2,011	0.7%
III	—	2,197	—	—	—	7,913	—	10,110	3.4%
IV	—	—	—	—	—	—	—	—	0.0%
Total	$65,752	$22,619	$41,709	$32,186	$30,251	$100,894	$295	$293,706	100.0%
Commercial real estate — non-owner occupied
Category
I	$85,103	$81,087	$108,308	$89,226	$63,803	$392,720	$34,236	$854,483	96.4%
II	—	—	—	—	—	6,863	—	6,863	0.8%
III	—	—	—	—	716	23,808	—	24,524	2.8%
IV	—	—	—	—	—	—	—	—	0.0%
Total	$85,103	$81,087	$108,308	$89,226	$64,519	$423,391	$34,236	$885,870	100.0%
Construction and land development
Category
I	$35,887	$73,179	$78,264	$10,278	$91	$5,043	$25,482	$228,224	91.8%
II	—	—	—	—	—	—	—	—	0.0%
III	—	—	5,755	—	—	—	—	5,755	2.3%
IV	—	—	—	454	8,155	5,972	—	14,581	5.9%
Total	$35,887	$73,179	$84,019	$10,732	$8,246	$11,015	$25,482	$248,560	100.0%
Multi-family
Category
I	$57,113	$18,231	$103,795	$93,280	$61,620	$211,473	$2,644	$548,156	95.9%
II	—	—	1,530	7,309	—	782	—	9,621	1.7%
III	—	—	—	—	8,380	1,019	—	9,399	1.6%
IV	—	—	1,714	—	2,578	—	—	4,292	0.8%
Total	$57,113	$18,231	$107,039	$100,589	$72,578	$213,274	$2,644	$571,468	100.0%
1-4 family
Category
I	$18,249	$7,043	$1,416	$4,432	$2,036	$3,470	$24,015	$60,661	100.0%
II	—	—	—	—	—	—	—	—	0.0%
III	—	—	—	—	—	—	—	—	0.0%
IV	—	—	—	—	—	—	—	—	0.0%
Total	$18,249	$7,043	$1,416	$4,432	$2,036	$3,470	$24,015	$60,661	100.0%
Commercial and industrial
Category
I	$240,914	$178,507	$138,504	$52,149	$35,514	$31,754	$452,160	$1,129,502	88.6%
II	568	14,119	10,997	5,948	25	2,797	24,140	58,594	4.6%
III	499	8,617	10,409	4,656	787	1,745	34,206	60,919	4.8%
IV	447	1,845	3,384	7,644	302	4,083	7,277	24,982	2.0%
Total	$242,428	$203,088	$163,294	$70,397	$36,628	$40,379	$517,783	$1,273,997	100.0%
Consumer and other
Category
I	$7,790	$5,715	$4,167	$4,926	$1,717	$10,423	$6,227	$40,965	100.0%
II	—	—	—	—	—	—	—	—	0.0%
III	—	—	—	—	—	—	—	—	0.0%
IV	—	—	—	—	—	—	—	—	0.0%
Total	$7,790	$5,715	$4,167	$4,926	$1,717	$10,423	$6,227	$40,965	100.0%
Total Loans
Category
I	$510,808	$384,184	$474,152	$286,477	$195,032	$747,864	$545,059	$3,143,576	93.1%
II	568	14,119	14,538	13,257	25	10,442	24,140	77,089	2.3%
III	499	10,814	16,164	4,656	9,883	34,485	34,206	110,707	3.3%
IV	447	1,845	5,098	8,098	11,035	10,055	7,277	43,855	1.3%
Total	$512,322	$410,962	$509,952	$312,488	$215,975	$802,846	$610,682	$3,375,227	100.0%

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

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nine grade risk rating system to monitor the ongoing credit quality of its loans and leases. The risk rating grades follow a consistent definition and are then applied to specific loan types based on the nature of the loan. Each risk rating is determined based on various quantitative and qualitative factors and is subject to various levels of review and concurrence on the stated risk rating. In addition to its nine grade risk rating system, the Corporation groups loans into four loan and related risk categories which determine the level and nature of review by management.

Category I — Loans and leases in this category are performing in accordance with the terms of the contract and generally exhibit no immediate concerns regarding the security and viability of the underlying collateral, financial stability of the borrower, integrity or strength of the borrowers’ management team, or the industry in which the borrower operates.

Category II — Loans and leases in this category are beginning to show signs of deterioration in one or more of the Corporation’s core underwriting criteria such as financial stability, management strength, industry trends, or collateral values. Management will place credits in this category to allow for proactive monitoring and resolution with the borrower to possibly mitigate the area of concern and prevent further deterioration or risk of loss to the Corporation.

Category III — Loans and leases in this category are identified by management as warranting special attention. However, the balance in this category is not intended to represent the amount of adversely classified assets held by the Bank. Category III loans and leases generally exhibit undesirable characteristics, such as evidence of adverse financial trends and conditions, managerial problems, deteriorating economic conditions within the related industry, or evidence of adverse public filings and may exhibit collateral shortfall positions. Management continues to believe that it will collect all contractual principal and interest in accordance with the original terms of the contracts relating to the loans and leases in this category, and therefore Category III loans are considered performing with no specific reserves established for this category.

Category IV — Loans and leases in this category are non-accrual loans. Management has determined that it is unlikely that the Bank will receive the contractual principal and interest in accordance with the original terms of the agreement. Non-accrual loans are individually evaluated to assess the need for the establishment of specific reserves or charge-offs. When analyzing the adequacy of collateral, the Corporation obtains external appraisals at least annually. External appraisals are obtained from the Corporation’s approved appraiser listing and are independently reviewed to monitor the quality of such appraisals. To the extent a collateral shortfall position is present, a specific reserve or charge-off will be recorded.

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


	March 31, 2026
	30-59 Days Past Due			60-89 Days Past Due			Greater Than 90 Days Past Due			Total Past Due			Current			Total Loans and Leases
	(Dollars in Thousands)
Total loans and leases
Commercial real estate:
Owner occupied	$	—		$	—		$	—		$	—		$	306,593		$	306,593
Non-owner occupied		—			—			—			—			925,425			925,425
Construction and land development		—			—			11,424			11,424			213,442			224,866
Multi-family		—			—			—			—			577,271			577,271
1-4 family		211			—			—			211			61,121			61,332
Commercial and industrial		2,745			519			16,277			19,541			1,338,872			1,358,413
Consumer and other		5			—			—			5			47,218			47,223
Total	$	2,961		$	519		$	27,701		$	31,181		$	3,469,942		$	3,501,123
Percent of portfolio		0.08	%		0.01	%		0.79	%		0.88	%		99.12	%		100.00	%

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	December 31, 2025
	30-59 Days Past Due			60-89 Days Past Due			Greater Than 90 Days Past Due			Total Past Due			Current			Total Loans and Leases
	(Dollars in Thousands)
Total loans and leases
Commercial real estate:
Owner occupied	$	—		$	—		$	—		$	—		$	293,706		$	293,706
Non-owner occupied		—			—			—			—			885,870			885,870
Construction and land development		14,581			—			—			14,581			233,979			248,560
Multi-family		—			—			—			—			571,468			571,468
1-4 family		—			—			—			—			60,661			60,661
Commercial and industrial		3,116			963			15,229			19,308			1,254,689			1,273,997
Consumer and other		50			—			—			50			40,915			40,965
Total	$	17,747		$	963		$	15,229		$	33,939		$	3,341,288		$	3,375,227
Percent of portfolio		0.53	%		0.03	%		0.45	%		1.01	%		98.99	%		100.00	%

The following tables provide additional detail on loans on non-accrual status and loans past due over 89 days still accruing as of:


	March 31, 2026
	Non-accrual With No Allowance for Credit Loss		Non-accrual With Allowance for Credit Loss		Loans Past Due Over 89 Days Still Accruing
	(In Thousands)
Commercial real estate:
Commercial real estate — owner occupied	$	—	$	—	$	—
Commercial real estate — non-owner occupied		—		—		—
Construction and land development		11,424		—		—
Multi-family		4,204		—		—
1-4 family		—		—		—
Total commercial real estate		15,628		—		—
Commercial and industrial		9,788		15,087		—
Consumer and other		—		—		—
Total non-accrual loans and leases	$	25,416	$	15,087	$	—


	December 31, 2025
	Non-accrual With No Allowance for Credit Loss		Non-accrual With Allowance for Credit Loss		Loans Past Due Over 89 Days Still Accruing
	(In Thousands)
Commercial real estate:
Commercial real estate — owner occupied	$	—	$	—	$	—
Commercial real estate — non-owner occupied		—		—		—
Construction and land development		14,581		—		—
Multi-family		4,292		—		—
1-4 family		—		—		—
Total commercial real estate		18,873		—		—
Commercial and industrial		10,652		14,330		—
Consumer and other		—		—		—
Total non-accrual loans and leases	$	29,525	$	14,330	$	—


	March 31, 2026			December 31, 2025
Total non-accrual loans and leases to gross loans and leases		1.16	%		1.30	%
Allowance for credit losses to gross loans and leases		1.10			1.12
Allowance for credit losses to non-accrual loans and leases		95.03			85.95

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


	March 31, 2026		December 31, 2025
	(In Thousands)
Equipment	$	16,799	$	14,615
Real Estate		17,674		21,595
Accounts Receivable		6,057		7,277
Other		68		473
Total	$	40,598	$	43,960

Occasionally, the Corporation modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay, or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

The following table presents the amortized cost basis of loans at March 31, 2026 that were both experiencing financial difficulty and modified during the three months ended March 31, 2026 and 2025, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized costs basis of each class of financing receivable is also presented below.


	For the Three Months Ended March 31, 2026
	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Payment Delay and Term Extension		Total		Total Class of Financing Receivable
	(In Thousands)
Commercial real estate	$	—	$	—	$	—	$	—	$	—	$	—		0.00	%
Commercial and industrial		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	—		0.00	%


	For the Three Months Ended March 31, 2025
	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Payment Delay and Term Extension		Total		Total Class of Financing Receivable
	(In Thousands)
Commercial real estate	$	—	$	—	$	—	$	—	$	—	$	—		0.00	%
Commercial and industrial		—		—		151		—		—		151		0.01
Total	$	—	$	—	$	151	$	—	$	—	$	151		0.00	%

The Corporation closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified in the last 12 months:

          
         For the Three Months Ended March 31, 2026

          
         30-59
Days Past
Due

         60-89
Days Past
Due

         Greater
Than 90
Days Past
Due

         Total Past
Due

          
         (Dollars in Thousands)

Commercial real estate

—

—

—

—

Commercial and industrial

—

—

—

—

Total

—

—

—

—

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	For the Three Months Ended March 31, 2025
	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due
	(Dollars in Thousands)
Commercial real estate	$	—	$	—	$	—	$	—
Commercial and industrial		—		—		45		45
Total	$	—	$	—	$	45	$	45

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended March 31, 2026 and 2025:


	For the Three Months Ended March 31, 2026
(Dollars in Thousands)	Principal Forgiveness		Weighted Average Interest Rate Reduction			Weighted Average Term Extension (years)		Weighted Average Payment Delay (years)
Commercial real estate	$	—		0.00	%		0.00		0.00
Commercial and industrial		—		0.00			0.00		0.00
Total	$	—		0.00	%		0.00		0.00


	For the Three Months Ended March 31, 2025
(Dollars in Thousands)	Principal Forgiveness		Weighted Average Interest Rate Reduction			Weighted Average Term Extension (years)		Weighted Average Payment Delay (years)
Commercial real estate	$	—		0.00	%		0.00		0.00
Commercial and industrial		—		0.00			2.33		0.00
Total	$	—		0.00	%		2.33		0.00

The following table presents the amortized cost basis of loans that had a payment default during the three months ended March 31, 2026 and 2025 and were modified in the 12 months prior to that default to borrowers experience financial difficulty:

          
         For the Three Months Ended March 31, 2026

          
         Principal Forgiveness

         Payment Delay

         Term Extension

         Interest Rate Reduction

          
         (In Thousands)

Commercial real estate

—

—

—

—

Commercial and industrial

—

—

—

—

Total

—

—

—

—

          
         For the Three Months Ended March 31, 2025

          
         Principal Forgiveness

         Payment Delay

         Term Extension

         Interest Rate Reduction

          
         (In Thousands)

Commercial real estate

—

—

—

—

Commercial and industrial

—

—

—

—

Total

—

—

—

—

Allowance for Credit Losses

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for credit losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors as discussed within Note 1 – Nature of Operations and Summary of Significant Accounting Policies included in the Corporation’s Form 10-K for the year ended December 31, 2025.

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Quantitative Considerations

The ACL is primarily calculated utilizing a Discounted Cash Flow (“DCF”) model. Key inputs and assumptions used in this model are discussed below:

•

Forecast model - For each portfolio segment, a Loss Driver Analysis (“LDA”) was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA analysis utilized peer FFIEC Call Report data for all DCF pools. The Corporation updates the LDA annually.

•

Probability of Default ("PD") – PD is the probability that an asset will be in default within a given time frame. The Corporation has defined default as when a charge-off has occurred, a loan goes to non-accrual status, or a loan is greater than 90 days past due. The forecast model is utilized to estimate PDs.

•

Loss Given Default ("LGD") – LGD is the percentage of the asset not expected to be collected due to default. The LGD is derived from using a method referred to as Frye Jacobs which uses industry data.

•

Prepayments and curtailments – Prepayments and curtailments are calculated based on the Corporation’s own data. This analysis is updated semi-annually.

•

Forecast and reversion – The Corporation has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.

•

Economic forecast – The Corporation utilizes a third party to provide economic forecasts under various scenarios, which are assessed against economic indicators and management’s observations in the market. As of December 31, 2025, the Corporation selected a forecast which estimates unemployment between 4.48% and 4.78% and GDP year-over-year percentage change between 1.75% and 2.42% over the next four quarters. As of March 31, 2026, the Corporation selected a forecast which estimates unemployment between 4.52% and 4.61% and GDP year-over-year percentage change between 1.76% and 2.89% over the next four quarters. Following the forecast period, the model reverts to long-term averages over four quarters. Management believes that the resulting quantitative reserve appropriately balances economic indicators with identified risks.

Qualitative Considerations

In addition to the quantitative model, management considers the need for qualitative adjustment for risks not considered in the DCF. Factors that are considered by management in determining loan collectability and the appropriate level of the ACL are listed below:

•

The Corporation’s lending policies and procedures, including changes in lending strategies, underwriting standards and practices for collections, write-offs, and recoveries;

•

Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the Corporation operates that affect the collectability of financial assets;

•

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

•

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

•

The existence and effect of industry concentrations of credit;

•

The nature and volume of the portfolio segment or class;

•

The quality of the Corporation’s credit function; and

•

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

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ACL Activity

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


	As of and for the Three Months Ended March 31, 2026
	Owner Occupied		Non-Owner Occupied		Construction and Land Development			Multi- Family			1-4 Family		Commercial and Industrial			Consumer and Other		Total
	(In Thousands)
Beginning balance	$	1,908	$	6,381	$	2,752		$	4,926		$	557	$	20,754		$	414	$	37,692
Charge-offs		—		—		—			—			—		(2,331	)		—		(2,331	)
Recoveries		—		—		—			—			7		161			—		168
Net recoveries (charge-offs)		—		—		—			—			7		(2,170	)		—		(2,163	)
Provision (credit) for credit losses		62		318		(48	)		(532	)		38		3,001			121		2,960
Ending balance	$	1,970	$	6,699	$	2,704		$	4,394		$	602	$	21,585		$	535	$	38,489
Components:
Allowance for credit losses on loans	$	1,966	$	6,617	$	1,678		$	4,335		$	562	$	20,987		$	486	$	36,631
Allowance for credit losses on unfunded credit commitments		4		82		1,026			59			40		598			49		1,858
Total ACL	$	1,970	$	6,699	$	2,704		$	4,394		$	602	$	21,585		$	535	$	38,489


	As of and for the Three Months Ended March 31, 2025
	Owner Occupied		Non-Owner Occupied		Construction and Land Development			Multi- Family		1-4 Family			Commercial and Industrial			Consumer and Other			Total
	(In Thousands)
Beginning balance	$	1,629	$	5,892	$	2,826		$	4,613	$	523		$	21,470		$	315		$	37,268
Charge-offs		—		—		—			—		—			(3,800	)		(10	)		(3,810	)
Recoveries		2		—		—			—		6			390			—			398
Net recoveries (charge-offs)		2		—		—			—		6			(3,410	)		(10	)		(3,412	)
Provision (credit) for credit losses		51		125		(335	)		860		(35	)		1,886			107			2,659
Ending balance	$	1,682	$	6,017	$	2,491		$	5,473	$	494		$	19,946		$	412		$	36,515
Components:
Allowance for credit losses on loans	$	1,667	$	5,961	$	1,900		$	5,453	$	464		$	19,421		$	370		$	35,236
Allowance for credit losses on unfunded credit commitments		15		56		591			20		30			525			42			1,279
Total ACL	$	1,682	$	6,017	$	2,491		$	5,473	$	494		$	19,946		$	412		$	36,515

ACL Summary

Loans collectively evaluated for credit losses in the following tables include all performing loans at March 31, 2026 and December 31, 2025. Loans individually evaluated for credit losses include all non-accrual loans.

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


	As of March 31, 2026
	Owner Occupied		Non-Owner Occupied		Construction and Land Development		Multi- Family		1-4 Family		Commercial and Industrial		Consumer and Other		Total
	(In Thousands)
Allowance for credit losses:
Collectively evaluated for credit losses	$	1,966	$	6,617	$	1,678	$	4,335	$	562	$	15,056	$	486	$	30,700
Individually evaluated for credit loss		—		—		—		—		—		5,931		—		5,931
Total	$	1,966	$	6,617	$	1,678	$	4,335	$	562	$	20,987	$	486	$	36,631
Loans and lease receivables:
Collectively evaluated for credit losses	$	306,593	$	925,425	$	213,442	$	573,067	$	61,332	$	1,333,538	$	47,223	$	3,460,620
Individually evaluated for credit loss		—		—		11,424		4,204		—		24,875		—		40,503
Total	$	306,593	$	925,425	$	224,866	$	577,271	$	61,332	$	1,358,413	$	47,223	$	3,501,123

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	As of December 31, 2025
	Owner Occupied		Non-Owner Occupied		Construction and Land Development		Multi- Family		1-4 Family		Commercial and Industrial		Consumer and Other		Total
	(In Thousands)
Allowance for credit losses:
Collectively evaluated for credit losses	$	1,902	$	6,306	$	1,871	$	4,915	$	521	$	14,439	$	373	$	30,327
Individually evaluated for credit loss		—		—		—		—		—		5,550		—		5,550
Total	$	1,902	$	6,306	$	1,871	$	4,915	$	521	$	19,989	$	373	$	35,877
Loans and lease receivables:
Collectively evaluated for credit losses	$	293,706	$	885,870	$	233,979	$	567,176	$	60,661	$	1,249,015	$	40,965	$	3,331,372
Individually evaluated for credit loss		—		—		14,581		4,292		—		24,982		—		43,855
Total	$	293,706	$	885,870	$	248,560	$	571,468	$	60,661	$	1,273,997	$	40,965	$	3,375,227

Note 6 — Leases

The Corporation leases various office spaces and specialized lending production offices under non-cancellable operating leases which expire on various dates through 2033. The Corporation also leases office equipment. The Corporation recognizes a right-of-use asset and an operating lease liability for all leases, with the exception of short-term leases. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term.

The components of total lease expense were as follows:


	For the Three Months Ended March 31,
	2026		2025
	(In Thousands)
Operating lease cost	$	336	$	344
Short-term lease cost		51		54
Variable lease cost		151		141
Total lease cost, net	$	538	$	539

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


	March 31, 2026			December 31, 2025
Weighted-average remaining lease term (in years)		5.81			6.00
Weighted-average discount rate		4.05	%		4.04	%

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


(In Thousands)
2026	$	1,221
2027		1,647
2028		1,285
2029		933
2030		841
Thereafter		2,002
Total undiscounted cash flows		7,929
Discount on cash flows		(897	)
Total lease liability	$	7,032

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Note 7 — Other Assets

The Corporation has invested in a number of limited partnerships that provide income tax, financial, and regulatory benefits due to the nature of the partnerships. Our investment in and unfunded commitments to these partnerships are as follows:


	March 31, 2026		December 31, 2025
Investment:	(In Thousands)
Low-Income Housing Tax Credit	$	53,237	$	48,472
Small Business Investment Company		15,301		14,797
Other Limited Partnerships		3,497		3,128
Historic Rehabilitation Tax Credit		1,769		1,970
Total limited partnership investments	$	73,804	$	68,367
Unfunded commitment:
Small Business Investment Company	$	12,973	$	10,973
Other Limited Partnerships		1,243		1,542
Total limited partnership commitments	$	14,216	$	12,515

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


	March 31, 2026		December 31, 2025
	(In Thousands)
Accrued interest receivable	$	13,229	$	13,100
Net deferred tax asset		13,194		13,176
Investment in limited partnerships		73,804		68,367
Prepaid expenses		5,441		4,791
Other assets		11,188		8,038
Total accrued interest receivable and other assets	$	116,856	$	107,472

For the three months ended March 31, 2026 and 2025, the Corporation amortized tax credit investments of $1.9 million and $1.6 million, respectively, and recognized tax credits and other benefits for the three months ended March 31, 2026 and 2025 of $2.5 million and $2.1 million, respectively, within the income tax expense line on the unaudited Consolidated Statements of Income.

Note 8 — Deposits

The composition of deposits is shown below. Average balances represent year-to-date averages.


	March 31, 2026				December 31, 2025
	Balance		Average Balance		Balance		Average Balance
	(Dollars in Thousands)
Non-interest-bearing transaction accounts	$	405,281	$	428,739	$	378,770	$	419,691
Interest-bearing transaction accounts		1,170,271		1,220,945		1,103,696		1,018,736
Money market accounts		960,052		925,282		905,773		856,554
Certificates of deposit		260,455		273,635		284,764		236,848
Wholesale deposits		769,943		682,138		707,412		737,253
Total deposits	$	3,566,002	$	3,530,739	$	3,380,415	$	3,269,082

A summary of annual maturities of core and wholesale certificates of deposit at March 31, 2026 is as follows:


(In Thousands)
Maturities during the year ended December 31,
2026	$	492,823
2027		136,744
2028		32,095
2029		19,813
2030		7,635
Thereafter		1,022
	$	690,132

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Wholesale deposits include $429.7 million and $340.3 million of wholesale certificates of deposit and non-reciprocal interest-bearing transaction accounts, respectively, at March 31, 2026, compared to $537.1 million and $170.3 million of wholesale certificates of deposit and non-reciprocal interest-bearing transaction accounts, respectively, at December 31, 2025. The Corporation has entered into derivative contracts hedging a portion of the certificates of deposit included above. As of March 31, 2026, the notional amount of derivatives designated as cash flow hedges totaled $444.1 million with a weighted average remaining maturity of 3.04 years and a weighted average rate of 3.66%.

Certificates of deposit and wholesale deposits denominated in amounts greater than $250,000 were $93.1 million at March 31, 2026 and $113.0 million at December 31, 2025.

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

The composition of borrowed funds is shown below. Average balances represent year-to-date averages.


	March 31, 2026							December 31, 2025
	Balance		Weighted Average Balance		Weighted Average Rate			Balance		Weighted Average Balance		Weighted Average Rate
	(Dollars in Thousands)
FHLB advances	$	248,616	$	200,132		3.13	%	$	197,246	$	246,486		3.20	%
Line of credit		—		—		—			—		1		4.25
Other borrowings		—		—		—			—		4		—
Subordinated notes and debentures		54,835		54,815		6.42			54,805		54,742		6.43
	$	303,451	$	254,947		3.84		$	252,051	$	301,233		3.79

A summary of annual maturities of borrowings at March 31, 2026 is as follows:


(In Thousands)
Maturities during the year ended December 31,
2026	$	177,099
2027		10,000
2028		10,450
2029		23,902
2030		20,000
Thereafter		62,000
	$	303,451

The Corporation has entered into derivative contracts hedging a portion of the borrowings included above. As of March 31, 2026, the notional amount of derivatives designated as cash flow hedges totaled $48.4 million with a weighted average remaining maturity of 1.87 years and a weighted average rate of 2.52%.

As of March 31, 2026 and December 31, 2025, the Corporation was in compliance with its debt covenants under its third-party secured senior line of credit. On February 18, 2026, the credit line was renewed for one additional year with pricing terms of 1-month term SOFR + 2.36% and a maturity date of February 17, 2027.

Note 10 — Preferred Stock

On March 4, 2022, the Corporation issued 12,500 shares, or $12.5 million in aggregate liquidation preference, of 7.0% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, with a liquidation preference of $1,000 per share (the “Series A Preferred Stock”) in a private placement to institutional investors. The net proceeds received from the issuance of the Series A Preferred Stock were $12.0 million.

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The Corporation expects to pay dividends on the Series A Preferred Stock when and if declared by the Board, at a fixed rate of 7.0% per annum, payable quarterly, in arrears, on March 15, June 15, September 15 and December 15 of each year up to, but excluding, March 15, 2027. For each dividend period from and including March 15, 2027, dividends will be paid at a floating rate of Three-Month Term SOFR plus a spread of 539 basis points per annum. During the three months ended March 31, 2026, the Board of Directors declared an aggregate preferred stock dividend of $219,000. The Series A Preferred Stock is perpetual and has no stated maturity. The Corporation may redeem the Series A Preferred Stock at its option at a redemption price equal to $1,000 per share, plus any declared and unpaid dividends (without regard to any undeclared dividends), subject to regulatory approval, on or after March 15, 2027 or within 90 days following a regulatory capital treatment event, in accordance with the terms of the Series A Preferred Stock.

Note 11 — Commitments and Contingencies

In the normal course of business, various legal proceedings involving the Corporation are pending. Management, based upon advice from legal counsel, does not anticipate any significant losses as a result of these actions. Management believes that any liability arising from any such proceedings currently existing or threatened will not have a material adverse effect on the Corporation’s financial position, results of operations, and cash flows.

The Corporation sells the guaranteed portions of SBA 7(a) and 504 loans, as well as participation interests in other, non-SBA originated, loans to third parties. The Corporation has a continuing involvement in each of the transferred lending arrangements by way of relationship management and servicing the loans, as well as being subject to normal and customary requirements of the SBA loan program and standard representations and warranties related to sold amounts. In the event of a loss resulting from default and a determination by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the Corporation, the SBA may require the Corporation to repurchase the loan, deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of the principal loss related to the deficiency from the Corporation. The Corporation must comply with applicable SBA regulations in order to maintain the guaranty. In addition, the Corporation retains the option to repurchase the sold guaranteed portion of an SBA loan if the loan defaults.

Management has assessed estimated losses inherent in the outstanding guaranteed portions of SBA loans sold in accordance with ASC 450, Contingencies, and determined a recourse reserve based on the probability of future losses for these loans to be $381,000 and $502,000 at March 31, 2026 and December 31, 2025, respectively, which is reported in accrued interest payable and other liabilities on the unaudited Consolidated Balance Sheets.

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


	As of and for the Three Months Ended March 31,
	2026			2025
	(In Thousands)
Balance at the beginning of the period	$	502		$	645
SBA recourse (benefit) expense		(121	)		—
Charge-offs, net		—			(79	)
Balance at the end of the period	$	381		$	566

Note 12 — Fair Value Disclosures

The Corporation determines the fair values of its financial instruments based on the fair value hierarchy established in ASC Topic 820, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date and is based on exit prices. Fair value includes assumptions about risk, such as nonperformance risk in liability fair values, and is a market-based measurement, not an entity-specific measurement. The standard describes three levels of inputs that may be used to measure fair value.

Level 1 — Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to access at the measurement date.

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Level 2 — Level 2 inputs are inputs, other than quoted prices included with Level 1, that are observable for the asset or liability either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Corporation’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

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


	March 31, 2026
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Assets:
Securities available-for-sale:
U.S. treasuries	$	—	$	4,929	$	—	$	4,929
U.S. government agency securities - government-sponsored enterprises		—		2,311		—		2,311
Municipal securities		—		42,986		—		42,986
Residential mortgage-backed securities - government issued		—		166,905		—		166,905
Residential mortgage-backed securities - government- sponsored enterprises		—		161,661		—		161,661
Commercial mortgage-backed securities - government issued		—		2,053		—		2,053
Commercial mortgage-backed securities - government- sponsored enterprises		—		39,480		—		39,480
Interest rate swaps		—		38,198		—		38,198
Liabilities:
Interest rate swaps		—		35,857		—		35,857


	December 31, 2025
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Assets:
Securities available-for-sale:
U.S. treasuries	$	—	$	4,901	$	—	$	4,901
U.S. government agency securities - government-sponsored enterprises		—		2,314		—		2,314
Municipal securities		—		43,892		—		43,892
Residential mortgage-backed securities - government issued		—		166,635		—		166,635
Residential mortgage-backed securities - government- sponsored enterprises		—		162,543		—		162,543
Commercial mortgage-backed securities - government issued		—		2,114		—		2,114
Commercial mortgage-backed securities - government- sponsored enterprises		—		39,688		—		39,688
Interest rate swaps		—		36,515		—		36,515
Liabilities:
Interest rate swaps		—		36,926		—		36,926

For assets and liabilities measured at fair value on a recurring basis, there were no transfers between the levels during the three months ended March 31, 2026 or the year ended December 31, 2025 related to the above measurements.

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


	March 31, 2026
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Collateral-dependent loans	$	—	$	—	$	9,156	$	9,156
Loan servicing rights		—		—		1,344		1,344


	December 31, 2025
	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Collateral-dependent loans	$	—	$	—	$	8,796	$	8,796
Loan servicing rights		—		—		1,317		1,317

Collateral-dependent loans were written down to the fair value of their underlying collateral less costs to sell of $9.2 million and $8.8 million at March 31, 2026 and December 31, 2025, respectively, through the establishment of specific reserves or by recording charge-offs when the carrying value exceeded the fair value of the underlying collateral of individually evaluated loans. Valuation techniques consistent with the market approach, income approach, or cost approach were used to measure fair value. These techniques included observable inputs for the collateral dependent loans being evaluated, such as current appraisals, recent sales of similar assets, or other observable market data, and unobservable inputs, typically when discounts are applied to appraisal values to adjust such values to current market conditions or to reflect net realizable values. The quantification of unobservable inputs for Level 3 individually evaluated loan values range from 25% - 90% as of the measurement date of March 31, 2026. The weighted average of those unobservable inputs was 51%. The majority of the individually evaluated loans are considered collateral dependent loans or are supported by an SBA guaranty.

Repossessed assets are measured and reported at fair value through a charge-off to the allowance for credit losses, if deemed necessary. The fair value of a repossessed asset, upon initial recognition, is estimated using a market approach or based on observable market data, such as a current appraisal, recent sale price of similar assets, or based upon assumptions specific to the individual property or equipment, such as management applied discounts used to further reduce values to a net realizable value when observable inputs become stale.

Loan servicing rights represent the asset retained upon sale of the guaranteed portion of certain SBA loans. When SBA loans are sold, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. The servicing rights are subsequently measured using the amortization method, which requires amortization into interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

The Corporation periodically reviews this portfolio for impairment and engages a third-party valuation firm to assess the fair value of the overall servicing rights portfolio. Loan servicing rights do not trade in an active, open market with readily observable prices. While sales of loan servicing rights do occur, the precise terms and conditions typically are not readily available to allow for a “quoted price for similar assets” comparison. Accordingly, the Corporation utilizes an independent valuation from a third party which uses a discounted cash flow model to estimate the fair value of its loan servicing rights. The valuation model incorporates prepayment assumptions to project loan servicing rights cash flows based on the current interest rate scenario, which is then discounted to estimate an expected fair value of the loan servicing rights. The valuation model considers portfolio characteristics of the underlying serviced portion of the SBA loans and uses the following significant unobservable inputs: (1) constant prepayment rate (“CPR”) assumptions based on the SBA sold pools historical CPR as quoted in Bloomberg and (2) a discount rate. Due to the nature of the valuation inputs, loan servicing rights are classified in Level 3 of the fair value hierarchy.

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Fair Value of Financial Instruments

The Corporation is required to disclose estimated fair values for its financial instruments. Fair value estimates, methods, and assumptions, consistent with exit price concepts for fair value measurements, are set forth below:


	March 31, 2026
	Carrying Amount		Fair Value
			Total		Level 1		Level 2		Level 3
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	137,125	$	137,125	$	137,125	$	—	$	—
Securities available-for-sale		420,325		420,325		—		420,325		—
Securities held-to-maturity		4,797		4,723		—		4,723		—
Loans held for sale		23,700		25,596		—		25,596		—
Loans and lease receivables, net		3,462,272		3,456,676		—		—		3,456,676
Federal Home Loan Bank stock		11,242	N/A		N/A		N/A		N/A
Accrued interest receivable		13,229		13,229		13,229		—		—
Interest rate swaps		38,198		38,198		—		38,198		—
Financial liabilities:
Deposits		3,566,002		3,567,589		2,882,209		685,380		—
Federal Home Loan Bank advances and other borrowings		303,451		302,412		—		302,412		—
Accrued interest payable		8,875		8,875		8,875		—		—
Interest rate swaps		35,857		35,857		—		35,857		—
Off-balance sheet items:
Standby letters of credit		196		196		—		—		196

N/A = The fair value is not applicable due to restrictions placed on transferability


	December 31, 2025
	Carrying Amount		Fair Value
			Total		Level 1		Level 2		Level 3
	(In Thousands)
Financial assets:
Cash and cash equivalents	$	39,485	$	39,485	$	39,485	$	—	$	—
Securities available-for-sale		422,087		422,087		—		422,087		—
Securities held-to-maturity		5,210		5,141		—		5,141		—
Loans held for sale		18,849		20,357		—		20,357		—
Loans and lease receivables, net		3,337,364		3,330,756		—		—		3,330,756
Federal Home Loan Bank stock		8,940	N/A		N/A		N/A		N/A
Accrued interest receivable		13,100		13,100		13,100		—		—
Interest rate swaps		36,515		36,515		—		36,515		—
Financial liabilities:
Deposits		3,380,415		3,382,348		2,575,431		806,917		—
Federal Home Loan Bank advances and other borrowings		252,051		251,312		—		251,312		—
Accrued interest payable		9,417		9,417		9,417		—		—
Interest rate swaps		36,926		36,926		—		36,926		—
Off-balance sheet items:
Standby letters of credit		197		197		—		—		197

N/A = The fair value is not applicable due to restrictions placed on transferability

Disclosure of fair value information about financial instruments, for which it is practicable to estimate that value, is required whether or not recognized in the unaudited Consolidated Balance Sheets. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Certain financial instruments and all non-financial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not necessarily represent the underlying value of the Corporation.

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Securities: The fair value measurements of investment securities are determined by a third-party pricing service which considers observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, trade execution data, market consensus prepayment speeds, credit information, and the securities’ terms and conditions, among other things. The fair value measurements are subject to independent verification by another pricing source on a quarterly basis to review for reasonableness. Any significant differences in pricing are reviewed with appropriate members of management who have the relevant technical expertise to assess the results. The Corporation has determined that these valuations are classified in Level 2 of the fair value hierarchy. When the independent pricing service does not provide a fair value measurement for a particular security, the Corporation will estimate the fair value based on specific information about each security. Fair values derived in this manner are classified in Level 3 of the fair value hierarchy.

Loans Held for Sale: Loans held for sale, which consist of the guaranteed portions of SBA 7(a) loans, are carried at the lower of cost or estimated fair value. The estimated fair value is based on what secondary markets are currently offering for portfolios with similar characteristics.

Derivatives: The carrying amount and fair value of existing derivative financial instruments are based upon independent valuation models, which use widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative contract. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Corporation incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Corporation considers the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Limitations: Fair value estimates are made at a discrete point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Corporation’s entire holding of a particular financial instrument. Because no market exists for a significant portion of the Corporation’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and are not considered in the estimates.

Note 13 — Derivative Financial Instruments

The Corporation offers interest rate swap products directly to qualified commercial borrowers. The Corporation economically hedges client derivative transactions by entering into offsetting interest rate swap contracts executed with a third party. Derivative transactions executed as part of this program are not considered hedging instruments and are marked-to-market through earnings each period. The derivative contracts have mirror-image terms, which results in the positions’ changes in fair value offsetting through earnings each period. The credit risk and risk of non-performance embedded in the fair value calculations is different between the dealer counterparties and the commercial borrowers which may result in a difference in the changes in the fair value of the mirror-image swaps. The Corporation incorporates credit valuation adjustments to appropriately reflect both its own non-performance risk and the counterparty’s risk in the fair value measurements. When evaluating the fair value of its derivative contracts for the effects of non-performance and credit risk, the Corporation considered the impact of netting and any applicable credit enhancements such as collateral postings, thresholds, and guarantees. As of March 31, 2026 and December 31, 2025, the credit valuation allowance was $116,000.

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The Corporation receives fixed rates and pays floating rates based upon designated benchmark interest rates used on the swaps with commercial borrowers. Commercial borrower swaps are completed independently with each borrower and are not subject to master netting arrangements. The Corporation pays fixed rates and receives floating rates based upon designated benchmark interest rates used on the swaps with dealer counterparties. Dealer counterparty swaps are subject to master netting agreements among the contracts within our Bank and are reported on the unaudited Consolidated Balance Sheets. The gross amount of the fair value of the dealer counterparty swaps, without regard to the enforceable master netting agreement, was a gross derivative asset of $35.5 million and gross derivative liability of $6.2 million as of March 31, 2026.

All changes in fair value of these instruments are recorded in other non-interest income. Given the mirror-image terms of the outstanding derivative portfolio, the change in fair value for the three months ended March 31, 2026 and 2025 had an insignificant impact on the unaudited Consolidated Statements of Income.

The Corporation also enters into interest rate swaps to manage interest rate risk and reduce the cost of match-funding certain long-term fixed rate loans. These derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for the Corporation making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional value. The instruments are designated as cash flow hedges as the receipt of floating rate interest from the counterparty is used to manage interest rate risk related to cash outflows attributable to future wholesale deposit or short-term FHLB advance borrowings. The change in the fair value of these hedging instruments is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged transactions affect earnings. A pre-tax unrealized gain of $2.7 million was recognized in other comprehensive income for the three months ended March 31, 2026, and there were no ineffective portions of the hedges. A pre-tax unrealized loss of $5.7 million was recognized in other comprehensive income for the three months ended March 31, 2025, and there were no ineffective portions of the hedges.

The Corporation also enters into interest rate swaps to mitigate market value volatility on certain long-term fixed securities. The objective of the hedge is to protect the Corporation against changes in fair value due to changes in benchmark interest rates. The instruments are designated as fair value hedges as the changes in the fair value of the interest rate swap are expected to offset changes in the fair value of the hedged item attributable to changes in the SOFR swap rate, the designated benchmark interest rate. These derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for the Corporation making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional value. The change in the fair value of these hedging instruments is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged transactions affect earnings. A pre-tax unrealized gain of $39,000 was recognized in other comprehensive income for the three months ended March 31, 2026, and there was no ineffective portion of the hedges. A pre-tax unrealized loss of $165,000 was recognized in other comprehensive income for the three months ended March 31, 2025, and there was no ineffective portion of the hedges.


	As of March 31, 2026
	Number of Instruments		Notional Amount		Weighted Average Maturity (In Years)		Fair Value
	(Dollars in Thousands)
Included in Derivative assets
Derivatives not designated as hedging instruments
Interest rate swap agreements on loans with commercial loan clients		58	$	614,688		3.41	$	6,191
Interest rate swap agreements on loans with third-party counterparties		127		1,207,144		4.17		29,299
Derivatives designated as hedging instruments
Interest rate swap related to AFS securities		11	$	12,500		6.03	$	878
Interest rate swap related to wholesale funding		42		439,489		3.18		1,830
Included in Derivative liabilities
Derivatives not designated as hedging instruments
Interest rate swap agreements on loans with commercial loan clients		69	$	592,456		4.95	$	35,490
Derivatives designated as hedging instruments
Interest rate swap related to wholesale funding		5	$	53,000		0.87	$	367

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	As of December 31, 2025
	Number of Instruments		Notional Amount		Weighted Average Maturity (In Years)		Fair Value
	(Dollars in Thousands)
Included in Derivative assets
Derivatives not designated as hedging instruments
Interest rate swap agreements on loans with commercial loan clients		62	$	662,325		3.64	$	9,704
Interest rate swap agreements on loans with third-party counter parties		124		1,166,859		4.36		24,854
Derivatives designated as hedging instruments
Interest rate swap related to AFS securities		11	$	12,500		6.28	$	839
Interest rate swap related to wholesale funding		4		48,400		2.12		1,118
Included in Derivative liabilities
Derivatives not designated as hedging instruments
Interest rate swap agreements on loans with commercial loan clients		62	$	504,535		5.31	$	34,558
Derivatives designated as hedging instruments
Interest rate swap related to wholesale funding		45	$	449,089		3.29	$	2,368

Note 14 — Regulatory Capital

The Corporation and the Bank are subject to various regulatory capital requirements administered by Federal and Wisconsin agencies that regulate financial institutions and financial service providers agencies. Failure to meet minimum capital requirements can result in certain mandatory, and possibly additional discretionary actions on the part of regulators, that if undertaken, could have a direct material effect on the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory practices. The Corporation’s and the Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. The Corporation regularly reviews and updates, when appropriate, its capital and liquidity action plans, which are designed to help ensure appropriate capital adequacy, to plan for future capital needs, and to ensure that the Corporation serves as a source of financial strength to the Bank. The Corporation’s and the Bank’s Board and management teams adhere to the appropriate regulatory guidelines on decisions which affect their respective capital positions, including but not limited to, decisions relating to the payment of dividends and increasing indebtedness.

As a bank holding company, the Corporation’s ability to pay dividends is affected by the policies and enforcement powers of the Board of Governors of the Federal Reserve system (the “Federal Reserve”). Federal Reserve guidance urges financial institutions to strongly consider eliminating, deferring, or significantly reducing dividends if: (i) net income available to common shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividend; (ii) the prospective rate of earnings retention is not consistent with the bank holding company’s capital needs and overall current and prospective financial condition; or (iii) the bank holding company will not meet, or is in danger of not meeting, its minimum regulatory capital ratios. Management intends, when appropriate under regulatory guidelines, to consult with the Federal Reserve Bank (“FRB”) of Chicago and provide it with information on the Corporation’s then-current and prospective earnings and capital position in advance of declaring any cash dividends. As a Wisconsin corporation, the Corporation is subject to the limitations of the Wisconsin Business Corporation Law, which prohibit the Corporation from paying dividends if such payment would: (i) render the Corporation unable to pay its debts as they become due in the usual course of business, or (ii) result in the Corporation’s assets being less than the sum of its total liabilities plus the amount needed to satisfy the preferential rights upon dissolution of any shareholders with preferential rights superior to those shareholders receiving the dividend.

The Bank is also subject to certain legal, regulatory, and other restrictions on their ability to pay dividends to the Corporation. As a bank holding company, the payment of dividends by the Bank to the Corporation is one of the sources of funds the Corporation could use to pay dividends, if any, in the future and to make other payments. Future dividend decisions by the Bank and the Corporation will continue to be subject to compliance with various legal, regulatory, and other restrictions as defined from time to time.

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Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum amounts and ratios of Total Common Equity Tier 1 and Tier 1 capital to risk-weighted assets and of Tier 1 capital to adjusted total assets. These risk-based capital requirements presently address credit risk related to both recorded and off-balance sheet commitments and obligations.

As of March 31, 2026, the Corporation’s capital levels exceeded the regulatory minimums and the Bank’s capital levels remained characterized as well capitalized under the regulatory framework. The following tables summarize both the Corporation’s and the Bank’s capital ratios and the ratios required by their federal regulators:


	As of March 31, 2026
	Actual (1)		Minimum Required for Capital Adequacy Purposes		For Capital Adequacy Purposes Plus Capital Conservation Buffer		Minimum Required to Be Well Capitalized Under Prompt Corrective Action Requirements
	Amount	Ratio	Amount	Ratio	Amount	Ratio	Amount	Ratio
	(Dollars in Thousands)
Total capital (to risk-weighted assets)
Consolidated	$473,237	12.15%	$311,645	8.00%	$409,034	10.50%	N/A	N/A
First Business Bank	469,147	12.04	311,657	8.00	409,050	10.50	$389,571	10.00%
Tier 1 capital (to risk-weighted assets)
Consolidated	$379,416	9.74%	$233,734	6.00%	$331,123	8.50%	N/A	N/A
First Business Bank	430,161	11.04	233,743	6.00	331,135	8.50	$311,657	8.00%
Common equity tier 1 capital (to risk-weighted assets)
Consolidated	$367,424	9.43%	$175,300	4.50%	$272,689	7.00%	N/A	N/A
First Business Bank	430,161	11.04	175,307	4.50	272,700	7.00	$253,221	6.50%
Tier 1 leverage capital (to adjusted assets)
Consolidated	$379,416	8.93%	$169,962	4.00%	$169,962	4.00%	N/A	N/A
First Business Bank	430,161	10.16	169,423	4.00	169,423	4.00	$211,779	5.00%

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	As of December 31, 2025
	Actual (1)		Minimum Required for Capital Adequacy Purposes		For Capital Adequacy Purposes Plus Capital Conservation Buffer		Minimum Required to Be Well Capitalized Under Prompt Corrective Action Requirements
	Amount	Ratio	Amount	Ratio	Amount	Ratio	Amount	Ratio
	(Dollars in Thousands)
Total capital (to risk-weighted assets)
Consolidated	$463,447	12.24%	$302,917	8.00%	$397,578	10.50%	N/A	N/A
First Business Bank	460,423	12.16	302,929	8.00	397,594	10.50	$378,661	10.00%
Tier 1 capital (to risk-weighted assets)
Consolidated	$370,786	9.79%	$227,188	6.00%	$321,849	8.50%	N/A	N/A
First Business Bank	422,567	11.16	227,197	6.00	321,862	8.50	$302,929	8.00%
Common equity tier 1 capital (to risk-weighted assets)
Consolidated	$358,794	9.48%	$170,391	4.50%	$265,052	7.00%	N/A	N/A
First Business Bank	422,567	11.16	170,398	4.50	265,063	7.00	$246,130	6.50%
Tier 1 leverage capital (to adjusted assets)
Consolidated	$370,786	8.86%	$167,376	4.00%	$167,376	4.00%	N/A	N/A
First Business Bank	422,567	10.11	167,237	4.00	167,237	4.00	$209,046	5.00%

(1)

2025 capital amounts include $338,000 of additional stockholders’ equity as elected by the Corporation and permitted by federal banking regulatory agencies related to the adoption of ASC 326. Risk-weighted assets were also adjusted accordingly.

Note 15 — Segment Information

The Corporation’s reportable segment is determined by the Chief Executive Officer, who is the designated chief operating decision maker, based upon information provided by the Corporation’s products and services offered, primarily banking operations. The segment is also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review the performance of various components of the business. These components are then aggregated if operating performance, products and services and customers are similar. The chief operating decision maker will evaluate the financial performance of the Corporation’s business components such as by evaluating revenue streams, significant expenses, and budget to actual results in assessing the Corporation’s segment and in the determination of allocating resources. The chief operating decision maker uses revenue streams to evaluate product pricing and significant expenses to assess performance and return on assets. The chief operating decision maker uses consolidated net income to benchmark the Corporation against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results is used in assessment performance and in establishing compensation. Loans, investments, and deposits provide the revenues in the banking operation. Interest expense, compensation expense, and provision for credit losses provide significant expenses in the banking operations. All operations are domestic.

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	As of and for the Three Months Ended March 31,
	2026		2025
	(In Thousands)
Interest income	$	61,896	$	59,530
Reconciliation of revenue
Other revenues		8,775		7,579
Total consolidated revenues		70,671		67,109
Less: interest expense		26,378		26,272
Segment net interest and non-interest income		44,293		40,837
Less:
Provision for credit losses		2,960		2,659
Compensation expense		18,541		16,747
Other segment items		8,412		7,972
Income tax expense		2,180		2,288
Segment and consolidated net income	$	12,200	$	11,171

Other segment disclosures:
Interest income	$	61,896	$	59,530
Interest expense		26,378		26,272
Depreciation, amortization, and accretion		929		871
Other significant noncash item:
Provision for credit losses		2,960		2,659
Segment assets		4,320,855		3,944,879
Expenses for segment assets		26,953		24,719

Reconciliation of assets:
Total assets for reportable segments	$	4,320,855	$	3,944,879
Other assets		—		—
Total consolidated assets	$	4,320,855	$	3,944,879

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Unless otherwise indicated or unless the context requires otherwise, all references in this Report to the “Corporation,” “we,” “us,” “our,” or similar references mean First Business Financial Services, Inc. together with our subsidiary. “FBB” or the “Bank” refers to our subsidiary, First Business Bank.

Forward-Looking Statements

This report may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which reflect our 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. 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, 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.

•

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

•

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

•

Increases in defaults by borrowers and other delinquencies.

•

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

•

Fluctuations in interest rates and market prices.

•

Changes in legislative or regulatory requirements applicable to us and our 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 our internet banking activities.

•

Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portions of SBA loans.

•

Ongoing volatility in the banking sector may result in new legislation, regulations or policy changes that could subject the Corporation and the Bank to increased government regulation and supervision.

•

The proportion of the Corporation’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk.

•

The Corporation may be subject to increases in FDIC insurance assessments.

These risks could cause actual results to differ materially from what we have anticipated or projected. These risk factors and uncertainties should be carefully considered by our shareholders and potential investors. See Part I, Item 1A — Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025, and in this report, below, for discussion relating to risk factors impacting us. Investors should not place undue reliance on any such forward-looking statements, which speak only as of the date made. These factors could affect our financial performance and could cause actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods.

Where any such forward-looking statement includes a statement of the assumptions or bases underlying such forward-looking statement, we caution that, while our management believes such assumptions or bases are reasonable and are made in good

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faith, assumed facts or bases can vary from actual results, and the differences between assumed facts or bases and actual results can be material, depending on the circumstances. Where, in any forward-looking statement, an expectation or belief is expressed as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will be achieved or accomplished.

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

The following discussion and analysis is intended as a review of significant events and factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with the unaudited Consolidated Financial Statements and the Notes thereto presented in this Form 10-Q.

Overview

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.

Financial Performance Summary

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

•

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.

•

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.

•

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.

•

Efficiency ratio measured 61.14% for the three months ended March 31, 2026, compared to 60.28% for the same period in 2025.

•

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.

•

Net interest margin was 3.56% for the three months ended March 31, 2026 compared to 3.69% for the same period in 2025.

•

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.

•

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.

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•

Provision for credit losses was $3.0 million for the three months ended March 31, 2026 compared to $2.7 million for the same period in 2025.

•

Total assets at March 31, 2026 increased $239.0 million, or 5.9%, to $4.321 billion from $4.082 billion at December 31, 2025.

•

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.

•

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.

•

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.

•

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.

•

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.

Results of Operations

Top Line Revenue

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.

The components of top line revenue were as follows:


	For the Three Months Ended March 31,
	2026	2025	$ Change	% Change
	(Dollars in Thousands)
Net interest income	$35,518	$33,258	$2,260	6.8%
Non-interest income	8,775	7,579	1,196	15.8
Top line revenue	$44,293	$40,837	$3,456	8.5

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

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.

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.

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

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.

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.

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


	For the Three Months Ended March 31,
	2026	2025	$ Change	% Change
	(Dollars in Thousands)
Total non-interest expense	$26,953	$24,719	$2,234	9.0%
Less:
Net gain on repossessed assets	—	(8)	8	NM
(Recovery) impairment of tax credit investments	(7)	110	(117)	NM
SBA recourse benefit	(121)	—	(121)	NM
Total operating expense (a)	$27,081	$24,617	$2,464	10.0
Net interest income	$35,518	$33,258	$2,260	6.8
Total non-interest income	8,775	7,579	1,196	15.8
Operating revenue (b)	$44,293	$40,837	$3,456	8.5
Efficiency ratio	61.14%	60.28%

Pre-tax, pre-provision adjusted earnings (b-a)	$17,212	$16,220	$992	6.1
Average total assets	$4,248,641	$3,842,368	$406,273	10.6

Net Interest Income

Net interest income levels depend on the amount of and yield on interest-earning assets as compared to the amount of and rate paid on interest-bearing liabilities. Net interest income is sensitive to changes in market rates of interest and the asset/liability management processes to prepare for and respond to such changes.

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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.


	Increase (Decrease) for the Three Months Ended March 31,
	2026 Compared to 2025
	Rate			Volume			Net
	(In Thousands)
Interest-earning assets
Commercial real estate and other mortgage loans(1)	$	(1,853	)	$	2,183		$	330
Commercial and industrial loans(1)		(1,185	)		1,867			682
Consumer and other loans(1)		21			1			22
Total loans and leases receivable		(3,017	)		4,051			1,034
Mortgage-related securities		61			709			770
Other investment securities		34			37			71
FHLB and FRB Stock		133			(216	)		(83	)
Short-term investments		(128	)		702			574
Total net change in income on interest-earning assets		(2,917	)		5,283			2,366
Interest-bearing liabilities
Transaction accounts		(1,174	)		2,116			942
Money market accounts		(1,108	)		711			(397	)
Certificates of deposit		(178	)		764			586
Wholesale deposits		(96	)		(123	)		(219	)
Total deposits		(2,556	)		3,468			912
FHLB advances		127			(934	)		(807	)
Other borrowings		(1	)		2			1
Total net change in expense on interest-bearing liabilities		(2,430	)		2,536			106
Net change in net interest income	$	(487	)	$	2,747		$	2,260

(1)

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

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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.


	For the Three Months Ended March 31,
	2026								2025
	Average Balance			Interest		Average Yield/Rate(4)			Average Balance			Interest		Average Yield/Rate(4)
	(Dollars in Thousands)
Interest-earning assets
Commercial real estate and other mortgage loans(1)	$	2,071,202		$	30,216		5.84	%	$	1,925,661		$	29,886		6.21	%
Commercial and industrial loans(1)		1,306,970			25,409		7.78			1,212,656			24,727		8.16
Consumer and other loans(1)		47,579			683		5.74			47,479			661		5.57
Total loans and leases receivable(1)		3,425,751			56,308		6.57			3,185,796			55,274		6.94
Mortgage-related securities(2)		375,989			3,965		4.22			308,656			3,195		4.14
Other investment securities(3)		50,146			280		2.23			43,145			209		1.94
FHLB and FRB stock		9,067			211		9.31			13,623			294		8.63
Short-term investments		128,649			1,132		3.52			51,072			558		4.37
Total interest-earning assets		3,989,602			61,896		6.21			3,602,292			59,530		6.61
Non-interest-earning assets		259,039								240,076
Total assets	$	4,248,641							$	3,842,368
Interest-bearing liabilities
Transaction accounts	$	1,220,945		$	8,354		2.74	%	$	927,250		$	7,412		3.20	%
Money market accounts		925,282			6,354		2.75			831,598			6,751		3.25
Certificates of deposit		273,635			2,447		3.58			189,547			1,861		3.93
Wholesale deposits		682,138			6,773		3.97			694,431			6,992		4.03
Total interest-bearing deposits		3,102,000			23,928		3.09			2,642,826			23,016		3.48
FHLB advances		200,132			1,567		3.13			305,549			2,374		3.11
Other borrowings		54,815			883		6.44			54,708			882		6.45
Total interest-bearing liabilities		3,356,947			26,378		3.14			3,003,083			26,272		3.50
Non-interest-bearing demand deposit accounts		428,739								414,499
Other non-interest-bearing liabilities		85,304								90,683
Total liabilities		3,870,990								3,508,265
Stockholders’ equity		377,651								334,103
Total liabilities and stockholders’ equity	$	4,248,641							$	3,842,368
Net interest income				$	35,518							$	33,258
Interest rate spread							3.06	%							3.11	%
Net interest-earning assets	$	632,655							$	599,209
Net interest margin							3.56	%							3.69	%
Average interest-earning assets to average interest-bearing liabilities		118.85	%							119.95	%
Return on average assets(4)		1.13	%							1.14	%
Return on average tangible common equity(4)		13.55	%							14.12	%
Average equity to average assets		8.89	%							8.70	%
Non-interest expense to average assets(4)		2.54	%							2.57	%

(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 in lieu of interest.

(2)

Includes amortized cost basis of assets available-for-sale and held-to-maturity.

(3)

Yields on tax-exempt municipal securities are not presented on a tax-equivalent basis in this table.

(4)

Represents annualized yields/rates.

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

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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").


	For the Three Months Ended March 31,
	2026	2025	Increase
Asset and Liability Beta Analysis	Average Yield/Rate (4)		(Decrease)
Total loans and leases receivable (a)	6.57%	6.94%	(0.37)%
Total interest-earning assets (b)	6.21%	6.61%	(0.40)%
Total core deposits (e)	2.41%	2.71%	(0.30)%
Total bank funding (f)	2.73%	3.02%	(0.29)%
Net interest margin (g)	3.56%	3.69%	(0.13)%

Effective fed funds rate (3)(i)	3.64%	4.33%	(0.69)%

Beta Calculations:
Total loans and leases receivable (a)/(i)			53.6%
Total interest-earning assets (b)/(i)			58.0%
Total core deposits (e)/(i)			43.5%
Total bank funding (2)(f)/(i)			42.0%

(1)

Excluding fees in lieu of interest.

(2)

Total bank funding represents total deposits plus FHLB advances.

(3)

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

(4)

Represents annualized yields/rates.

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

Net interest income increased $2.3 million, or 6.8%, during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase in net interest income primarily reflected increases in average gross loans and leases, partially offset by lower net interest margin. Average gross loans and leases for the three months ended March 31, 2026 increased $240.0 million, or 7.5%, compared to the three months ended March 31, 2025.

The yield on average interest-earning assets for the three months ended March 31, 2026, was 6.21%, compared to 6.61% for the three months ended March 31, 2025. The decrease in yield was primarily due to the decrease in short-term market rates.

The average rate paid on total interest-bearing liabilities was 3.14% for the period ended March 31, 2026, a decrease from 3.50% for the period ended March 31, 2025. Total interest-bearing liabilities includes interest-bearing deposits, FHLB advances, subordinated and junior subordinated notes and debentures payable, federal funds purchased, and other borrowings. The average rates paid decreased due to lower short-term interest rates and the replacement of maturing wholesale funds which were at higher fixed rates.

Net interest margin decreased to 3.56% for the three months ended March 31, 2026, compared to 3.69% for the three months ended March 31, 2025. The decrease in net interest margin was primarily due to the decline in short-term earning asset yields outpacing the decline in total bank funding costs. Additionally, the year-over-year increase in non-performing assets contributed to three basis points of decline in net interest margin.

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.

The Corporation maintains a target for net interest margin in the range of 3.60% - 3.65%. Performance in future periods will vary due to factors such as the level of fees in lieu of interest and the timing, pace, and scale of future interest rate changes.

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Provision for Credit Losses

We determine our provision for credit losses pursuant to our allowance for credit loss methodology. It is based on a reasonable and supportable forecast as well as considerations for composition, risk, and performance indicators in our credit portfolio. Refer to Allowance for Credit Losses, below, for further information regarding our allowance for credit loss methodology.

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.


	For the Three Months Ended March 31,
	2026			2025
	(In Thousands)
Change in qualitative factors	$	(706	)	$	(355	)
Change in quantitative factors		10			1,560
Charge-offs		2,331			3,810
Recoveries		(168	)		(398	)
Change in reserves on individually evaluated loans, net		382			(2,495	)
Change due to loan growth, net		1,068			741
Change in unfunded credit commitment reserves		43			(204	)
Total provision for credit losses	$	2,960		$	2,659

Qualitative factor changes reflect management’s evaluation of the level of risk within the portfolio based upon several factors for each portfolio segment. Quantitative factor changes reflect the change in the reasonable and supportable forecast as well as other model assumptions. Charge-offs in excess of previously established specific reserves require an additional provision for credit losses to maintain the allowance for credit losses at a level deemed appropriate by management. This amount is net of the release of any specific reserve that may have already been provided. The addition of specific reserves on individually evaluated loans represents new specific reserves established when collateral shortfalls or government guaranty deficiencies are present, while the release of specific reserves represents the reduction of previously established reserves that are no longer required. Refer to Asset Quality, below, for further information regarding the overall credit quality of our loan and lease portfolio.

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

Non-Interest Income

Non-interest income for the three months ended March 31, 2026 increased $1.2 million, or 15.8%, to $8.8 million compared to $7.6 million for the same period in 2025. The increase in total non-interest income was primarily driven by increases in commercial loan swap fees, private wealth fee income, bank-owned life insurance income, and service charges on deposits, offset by a decrease in gains on sale of SBA loans.

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.

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The components of non-interest income were as follows:


	For the Three Months Ended March 31,
	2026	2025	$ Change	% Change
	(Dollars in Thousands)
Private wealth management services fee income	$3,877	$3,492	$385	11.0%
Gain on sale of SBA loans	592	963	(371)	(38.5)
Service charges on deposits	1,318	1,048	270	25.8
Loan fees	436	388	48	12.4
Bank-owned life insurance policy income	757	437	320	73.2
Swap fees	628	113	515	455.8
Other non-interest income	1,167	1,138	29	2.5
Total non-interest income	$8,775	$7,579	$1,196	15.8
Fee income ratio(1)	19.8%	18.6%

(1)

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

Commercial loan swap fee income increased $515,000 for the three months ended March 31, 2026, compared to the same period in 2025. Swap fee income varies period to period based on loan activity and the interest rate environment.

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.

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.

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.

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.

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

Non-Interest Expense

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.

The components of non-interest expense were as follows:


	For the Three Months Ended March 31,
	2026	2025	$ Change	% Change
	(Dollars in Thousands)
Compensation	$18,541	$16,747	$1,794	10.7%
Occupancy	588	590	(2)	(0.3)
Professional fees	1,446	1,459	(13)	(0.9)
Data processing	1,270	1,082	188	17.4
Marketing	711	968	(257)	(26.5)
Equipment	407	376	31	8.2
Computer software	1,921	1,603	318	19.8
FDIC insurance	909	780	129	16.5
Other non-interest expense	1,160	1,114	46	4.1
Total non-interest expense	$26,953	$24,719	$2,234	9.0
Total operating expense(1)	$27,081	$24,617	$2,464	10.0
Actual full-time equivalent employees	378	354

(1)

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

Compensation expense for the three 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.

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.

Data processing expense increased $188,000, or 17.4%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily due to a change in credit card vendor and core provider costs commensurate with an increase in transactions, accounts, and clients.

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.

Marketing expense decreased $257,000, or 26.5%, for the three months ended March 31, 2026, compared to the same period in 2025. The decrease was primarily due to timing of projects. Management expects marketing spend for full year 2026 to be in line with prior year spend.

Income Taxes

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

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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.

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.

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Financial Condition

General

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.

Cash and Cash Equivalents

Cash and cash equivalents include short-term investments and cash and due from banks. Cash and due from banks increased $1.8 million to $32.6 million at March 31, 2026 from $30.8 million at December 31, 2025. Short-term investments increased by $95.9 million to $104.6 million at March 31, 2026 from $8.7 million at December 31, 2025. Our short-term investments primarily consist of interest-bearing deposits held at the FRB. We value the safety and soundness provided by the FRB, and therefore, we incorporate short-term investments in our readily accessible liquidity program. The increase compared to prior year-end is primarily due to cash management activity, including loan funding and deposit activity. As of March 31, 2026 and December 31, 2025, interest-bearing deposits held at the FRB were $103.6 million and $7.7 million, respectively. In general, the level of our cash and short-term investments will be influenced by the timing of deposit gathering, scheduled maturities of wholesale deposits, funding of loan and lease growth when opportunities are presented, and the level of our securities portfolio. Please refer to the section entitled Liquidity and Capital Resources for further discussion.

Securities

Total securities, including available-for-sale and held-to-maturity, decreased by $2.2 million, or 0.5%, to $425.1 million, or 9.8% of total assets at March 31, 2026 compared to $427.3 million or 10.5% of total assets at December 31, 2025. During the three months ended March 31, 2026, the Corporation recognized unrealized losses of $3.2 million before income taxes through other comprehensive income, compared to unrealized gains of $4.7 million for the same period in 2025. The unrealized losses in the current period were driven by changes in market interest rates. As of March 31, 2026 and December 31, 2025, our overall securities portfolio, including available-for-sale securities and held-to-maturity securities, had an estimated weighted-average expected maturity of 4.6 and 4.7 years, respectively. Our investment philosophy remains as stated in our most recent Annual Report on Form 10-K.

We use a third-party pricing service as our primary source of market prices for our securities portfolio. On a quarterly basis, we validate the reasonableness of prices received from this source through independent verification, data integrity validation primarily through comparison of current price to an expectation-based analysis of movement in prices based upon the changes in the related yield curves, and other market factors. We did not recognize any credit losses in the securities portfolio as of March 31, 2026.

Loans and Leases Receivable

Period-end loans and leases receivable, net of allowance for credit losses, increased by $124.9 million, or 15.0% annualized, to $3.462 billion at March 31, 2026 from $3.337 billion at December 31, 2025 primarily driven by commercial and industrial loan growth. Management expects to continue to manage loan growth towards our long term target of 10%.

Commercial and Industrial ("C&I") loans increased $84.4 million, or 26.5% annualized, to $1.358 billion compared to December 31, 2025. The increase was due to growth across our bank markets and in asset based lending.

Total commercial real estate (“CRE”) loans increased $35.2 million to $2.095 billion. The increase was primarily due to growth across our bank markets.

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CRE loans represented 59.9% and 61.0% of our total loans as of March 31, 2026 and December 31, 2025, respectively. As of March 31, 2026, 14.6% of the CRE loans were owner-occupied CRE, compared to 14.3% as of December 31, 2025. We consider the owner-occupied CRE more characteristic of the Corporation’s C&I portfolio as, in general, the client’s primary source of repayment is the cash flow from the operating entity occupying the commercial real estate property.

We continue to actively pursue C&I loans across the Corporation as this segment of our loan and lease portfolio provides an attractive yield commensurate with an appropriate level of credit risk and creates more opportunities for core deposit, treasury management, and private wealth management relationships which generate additional fee revenue.

Underwriting of new credit is primarily through approval from a serial sign-off or committee process and is a key component of our operating philosophy. Business development officers have no individual lending authority. To monitor the ongoing credit quality of our loans and leases, each credit is evaluated for proper risk rating using a nine grade risk rating system at the time of origination, subsequent renewal, evaluation of updated financial information from our borrowers, or as other circumstances dictate.

While we continue to experience competition from banks and non-banks operating in our primary geographic areas, we remain committed to our underwriting standards and will not deviate from those standards for the sole purpose of growing our loan and lease portfolio. We continue to expect our new loan and lease activity to be adequate to replace normal amortization, allowing us to continue growing in future years. The types of loans and leases we originate and the various risks associated with these originations remain consistent with information previously outlined in our most recent Annual Report on Form 10-K.

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


	As of March 31,					As of December 31,
	2026					2025
	Amount Outstanding		% of Total Loans and Leases			Amount Outstanding		% of Total Loans and Leases
	(Dollars in Thousands)
Commercial real estate:
Commercial real estate — owner occupied	$	306,593		8.8	%	$	293,706		8.7	%
Commercial real estate — non-owner occupied		925,425		26.4			885,870		26.2
Construction and land development		224,866		6.4			248,560		7.4
Multi-family		577,271		16.5			571,468		16.9
1-4 family		61,332		1.8			60,661		1.8
Total commercial real estate		2,095,487		59.9			2,060,265		61.0
Commercial and industrial		1,358,413		38.8			1,273,997		37.8
Consumer and other		47,223		1.3			40,965		1.2
Total gross loans and leases receivable		3,501,123		100.0	%		3,375,227		100.0	%
Less:
Allowance for credit losses		36,631					35,877
Deferred loan fees and costs, net		2,220					1,986
Loans and leases receivable, net	$	3,462,272				$	3,337,364

Below is a view of selected loan portfolios disaggregated by North American Industry Classification (“NAICs”) code as of March 31, 2026:


	Real Estate	Wholesale and Manufacturing	Retail and Hospitality	Transportation and Warehousing	Other	Total
Commercial real estate — owner occupied	5%	30%	21%	11%	33%	100%
Commercial real estate — non- owner occupied	78% (1)	—%	9%	2%	11%	100%
Commercial and industrial	5%	28%	18%	6%	43%	100%

(1)

Includes approximately $302.6 million of office real estate, or 8.6% of gross loans.

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See Asset Quality for further discussion of industry-specific risks.

Deposits

Deposit composition


	As of March 31,		As of December 31,
	2026		2025
	Amount Outstanding	% of Total Deposits	Amount Outstanding	% of Total Deposits
	(Dollars in Thousands)
Non-interest-bearing transaction accounts	$405,281	11.4%	$378,770	11.2%
Interest-bearing transaction accounts	1,170,271	32.8	1,103,696	32.7
Money market accounts	960,052	26.9	905,773	26.8
Certificates of deposit	260,455	7.3	284,764	8.4
Wholesale deposits	769,943	21.6	707,412	20.9
Total deposits	$3,566,002	100.0%	$3,380,415	100.0%

Uninsured deposits	$1,237,344		$1,220,177
Less: uninsured deposits collateralized by pledged assets or letters of credit	59,613		68,656
Total uninsured, net of collateralized deposits	$1,177,731	33.0%	$1,151,521	34.1%

As of March 31, 2026, total period-end deposits increased by $185.6 million, or 22.0% annualized, to $3.566 billion from $3.380 billion at December 31, 2025. As of March 31, 2026, total period-end core deposits increased $123.1 million, or 18.4% annualized, to $2.796 billion, compared to $2.673 billion at December 31, 2025. Core deposits are considered all deposits that are not wholesale deposits. Management believes the Bank’s deposit-centric sales strategy, led by treasury management sales, will continue to contribute to a net increase in core deposits; however, period-end deposit balances associated with core relationships will fluctuate based upon maturity of time deposits, client demands for the use of their cash, and our ability to maintain existing and acquire new client relationships. Therefore, we believe average balances are a better indicator of our deposit growth.

Our strategic efforts remain focused on adding core deposit relationships. We measure the success of core deposit gathering efforts based on the number and average balances of our deposit accounts as compared to ending balances due to the variability of some of our larger relationships. The Bank’s average core deposits increased $485.7 million, or 20.6%, to $2.849 billion for the three months ended March 31, 2026 compared to $2.363 billion for the three months ended March 31, 2025.

FHLB Advances and Other Borrowings

As of March 31, 2026, FHLB advances and other borrowings increased by $51.4 million, or 20.4%, to $303.5 million from $252.1 million at December 31, 2025. The increase was primarily driven by liquidity management considerations. The increase also supported interest rate risk management through match-funding of fixed-rate assets to enhance funding flexibility and help stabilize net interest margin. Average FHLB advances and other borrowings decreased by $105.3 million, or 29.2%, to $254.9 million from $360.2 million at March 31, 2025. The decrease is primarily due to funding needs being met by growth in deposits.

We may utilize FHLB advances to the extent we maintain an adequate level of excess borrowing capacity for liquidity and contingency funding purposes and pricing remains favorable in comparison to the wholesale deposit alternative. We will use FHLB advances and/or brokered certificates of deposit in specific maturity periods needed, typically three to five years, to match-fund fixed rate loans and effectively mitigate the interest rate risk measured through our asset/liability management process and to support asset growth initiatives while taking into consideration our operating goals and desired level of usage of wholesale funds. Please refer to the section entitled Liquidity and Capital Resources, below, for further information regarding our use and monitoring of wholesale funds.

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Preferred Stock

The Corporation has 12,500 shares, or $12.5 million in aggregate liquidation preference, of 7.0% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, par value $0.01 per share, with a liquidation preference of $1,000 per share (the “Series A Preferred Stock”) outstanding as of March 31, 2026 and December 31, 2025.

The Corporation expects to pay dividends on the Series A Preferred Stock when and if declared by its Board, at a fixed rate of 7.0% per annum, payable quarterly, in arrears, on March 15, June 15, September 15 and December 15 of each year up to, but excluding, March 15, 2027. For each dividend period from and including March 15, 2027, dividends will be paid at a floating rate of Three-Month Term SOFR plus a spread of 539 basis points per annum. During the three months ended March 31, 2026, the Corporation paid $219,000 in cash dividends with respect to the Series A Preferred Stock. The Series A Preferred Stock is perpetual and has no stated maturity. The Corporation may redeem the Series A Preferred Stock at its option at a redemption price equal to $1,000 per share, plus any declared and unpaid dividends (without regard to any undeclared dividends), subject to regulatory approval, on or after March 15, 2027 or within 90 days following a regulatory capital treatment event, in accordance with the terms of the Series A Preferred Stock.

Derivatives

The Board approved Bank policies allow the Bank to participate in hedging strategies or to use financial futures, options, forward commitments, or interest rate swaps. The Bank utilizes, from time to time, derivative instruments in the course of its asset/liability management. The Bank’s derivative financial instruments, under which the Bank is required to either receive cash from or pay cash to counterparties depending on changes in interest rates applied to notional amounts, are carried at fair value on the consolidated balance sheets.

As of March 31, 2026, the aggregate amortizing notional value of interest rate swaps with various commercial borrowers was approximately $1.207 billion, compared to $1.167 billion as of December 31, 2025. We receive fixed rates and pay floating rates based upon designated benchmark interest rates on the swaps with commercial borrowers. These swaps mature between June 2026 and July 2041. Commercial borrower swaps are completed independently with each borrower and are not subject to master netting arrangements. As of March 31, 2026, the commercial borrower swaps were reported on the Unaudited Consolidated Balance Sheets as a derivative asset of $6.2 million and liability of $35.5 million compared to a derivative asset of $9.7 million and liability of $34.6 million as of December 31, 2025. On the offsetting swap contracts with dealer counterparties, we pay fixed rates and receive floating rates based upon designated benchmark interest rates. These interest rate swaps also have maturity dates between June 2026 and July 2041. Dealer counterparty swaps are subject to master netting agreements among the contracts within our Bank and were reported on the Unaudited Consolidated Balance Sheets as a net derivative asset of $29.3 million as of March 31, 2026, compared to a net derivative asset of $24.9 million as of December 31, 2025. The gross amounts of the fair value of the dealer counterparty swaps as of March 31, 2026, without regard to the enforceable master netting agreement, was a gross derivative liability of $6.2 million and gross derivative asset of $35.5 million, compared to a gross derivative liability of $9.7 million and gross derivative asset of $34.6 million as of December 31, 2025.

The Bank also enters into interest rate swaps to manage interest rate risk and reduce the cost of match-funding certain long-term fixed rate loans. These derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for the Bank making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional value. The instruments are designated as cash flow hedges as the receipt of floating rate interest from the counterparty is used to manage interest rate risk associated with forecasted interest payments on short-term FHLB advances or wholesale deposits. The change in the fair value of these hedging instruments is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged transactions affect earnings. As of March 31, 2026, the aggregate notional value of interest rate swaps designated as cash flow hedges was $492.5 million. These interest rate swaps mature between April 2026 and February 2041. A pre-tax unrealized gain of $2.7 million was recognized in other comprehensive income for the three months ended March 31, 2026, and there was no ineffective portion of these hedges.

The Bank also enters into interest rate swaps to mitigate market value volatility on certain long-term fixed securities. The objective of the hedge is to protect the Corporation against changes in fair value due to changes in benchmark interest rates. The instruments are designated as fair value hedges as the changes in the fair value of the interest rate swap are expected to offset changes in the fair value of the hedged item attributable to changes in the SOFR swap rate, the designated benchmark interest rate. These

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derivative contracts involve the receipt of floating rate interest from a counterparty in exchange for the Bank making fixed-rate payments over the life of the agreement, without the exchange of the underlying notional value. The change in the fair value of these hedging instruments is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged transactions affect earnings. As of March 31, 2026, the aggregate notional value of interest rate swaps designated as fair value hedges was $12.5 million. These interest rate swaps mature between February 2031 and October 2034. A pre-tax unrealized gain of $39,000 was recognized in other comprehensive income for the three months ended March 31, 2026, and there was no ineffective portion of these hedges.

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

Asset Quality

Non-performing Assets

Total non-performing assets consisted of the following at March 31, 2026 and December 31, 2025, respectively:


	March 31, 2026			December 31, 2025
	(Dollars in Thousands)
Non-accrual loans and leases
Commercial real estate:
Commercial real estate - owner occupied	$	—		$	—
Commercial real estate - non-owner occupied		—			—
Construction and land development		11,424			14,581
Multi-family		4,204			4,292
1-4 family		—			—
Total non-accrual commercial real estate		15,628			18,873
Commercial and industrial		24,875			24,982
Consumer and other		—			—
Total non-accrual loans and leases		40,503			43,855
Repossessed assets, net		—			—
Total non-performing assets	$	40,503		$	43,855

Total non-accrual loans and leases to gross loans and leases		1.16	%		1.30	%
Total non-accrual loans to gross loans and leases plus repossessed assets, net		1.16			1.30
Total non-performing assets to total assets		0.94			1.07
Allowance for credit losses to gross loans and leases		1.10			1.12
Allowance for credit losses to non-accrual loans and leases		95.03			85.95

Non-performing assets decreased $3.4 million, to $40.5 million at March 31, 2026, compared to $43.9 million at December 31, 2025. The Corporation’s non-accrual loans as a percentage of total gross loans and leases measured 1.16% and 1.30% at March 31, 2026 and December 31, 2025, respectively. The decline was primarily due to the sale at par of a land development CRE non-accrual loan within a previously identified southeast Wisconsin-based client relationship.

We use a wide variety of available metrics to assess the overall asset quality of the portfolio and no one metric is used independently to make a final conclusion as to the asset quality of the portfolio. Non-performing assets as a percentage of total assets were 0.94% and 1.07% at March 31, 2026 and December 31, 2025, respectively. As of March 31, 2026 and December 31, 2025, the payment performance of our loans and leases did not indicate any new areas of concern, as 98.8% and 98.7%, respectively, of the total portfolio at the end of each period was in current payment status.

We reviewed loans and leases with exposure to certain industries as of March 31, 2026:

•

Transportation, Equipment Finance: $18.1 million, or 0.5%, of total loans - Management considered the following: $1.5 million, or 8.5%, of Equipment Finance Transportation loans are rated Category IV. Due to our experience and forecast of continued sector stress, we are not currently originating new loans to this borrower profile in this lending niche. Based on our reserve methodology for individually and collectively evaluated loans, we believe our reserves related to this industry to be

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appropriate.

•

Transportation, excluding Equipment Finance: $44.1 million or 1.3% of total loans - Management considered the following: One borrower with a balance of $5.7 million, or 13.0%, of the loan balance in this category is rated Category IV. Collateral on these loans includes commercial real estate, business assets, and equipment. Based on our reserve methodology for individually and collectively evaluated loans, we believe our reserves related to this industry to be appropriate.

•

Office, Commercial Real Estate: $302.6 million, or 8.6%, of total loans - Management considered the following: office exposure is concentrated in the Wisconsin markets where local market vacancy rates are below national rates and none of the loans in this category are rated Category IV. Based on our reserve methodology for individually and collectively evaluated loans, we believe our reserves related to this loan category to be appropriate.

•

Multifamily, Commercial Real Estate: $568.9 million, or 16.2%, of total loans - Management considered the following: multifamily exposure is concentrated in the Wisconsin markets where local market vacancy rates are below national rates and none of the loans in this category are rated Category IV. Based on our reserve methodology for individually and collectively evaluated loans, we believe our reserves related to this loan category to be appropriate.

We also monitor asset quality through our established categories as defined in Note 5 – Loans, Lease Receivables, and Allowance for Credit Losses of the Consolidated Financial Statements. As we continue to actively monitor the credit quality of our loan and lease portfolios, we may identify additional loans and leases for which the borrowers or lessees are having difficulties making the required principal and interest payments based upon factors including, but not limited to, the inability to sell the underlying collateral, inadequate cash flow from the operations of the underlying businesses, liquidation events, or bankruptcy filings. We proactively work with our loan borrowers experiencing financial difficulty to find meaningful solutions to difficult situations that are in the best interests of the Bank.

As of March 31, 2026, as well as in all previous reporting periods, there were no loans over 90 days past due and still accruing interest. Loans and leases greater than 90 days past due are placed on non-accrual status and individually evaluated for reserve requirement. Cash received while a loan or a lease is on non-accrual status is generally applied solely against the outstanding principal. If collectability of the contractual principal and interest is not in doubt, payments received may be applied to both interest and principal.

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


	As of and for the Three Months Ended March 31,				As of and for the Year Ended December 31,
	2026		2025		2025
	(In Thousands)
Individually evaluated loans and leases with no specific reserves required	$	25,416	$	10,570	$	29,525
Individually evaluated loans and leases with specific reserves required		15,087		13,486		14,330
Total individually evaluated loans and leases		40,503		24,056		43,855
Less: Specific reserves (included in allowance for credit losses)		5,931		6,423		5,550
Net carrying value of non-accrual loans and leases	$	34,572	$	17,633	$	38,305
Average non-accrual loans and leases	$	45,198	$	27,228	$	26,567

Allowance for Credit Losses

The allowance for credit losses, including unfunded commitment reserves, increased $797,000, or 2.1%, to $38.5 million as of March 31, 2026 from $37.7 million as of December 31, 2025. The allowance for credit losses as a percentage of gross loans and leases was 1.10% as of March 31, 2026 compared to 1.12% as of December 31, 2025.

During the three months ended March 31, 2026, we recorded net charge-offs of $2.2 million, comprised of $2.3 million of charge-offs and $168,000 of recoveries, compared to net charge-offs of $3.4 million, comprised of $3.8 million of charge-offs and $398,000 of recoveries during the three months ended March 31, 2025. Charge-offs on Equipment Finance loans were higher in the

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three months ended March 31, 2025 due to a change in policy which accelerated charge-offs by approximately one quarter. Management believes this change better reflects the impact of an accelerated collection and liquidation process. We will continue to experience some level of periodic charge-offs in the future as exit strategies are considered and executed. Loans and leases with previously established specific reserves may ultimately result in a charge-off under a variety of scenarios.

As of March 31, 2026 and December 31, 2025, our ratio of allowance for credit losses to total non-accrual loans and leases was 95.0% and 86.0%, respectively. This ratio increased primarily due to a decrease in non-accrual loans primarily driven by the sale of a non-accrual loan and increase in ACL reserves primarily driven by an increase in general reserves due to loan growth. Non-accrual loans and leases exhibit weaknesses that inhibit repayment in compliance with the original terms of the note or lease; however, the evaluation of non-accrual loans and leases may not always result in a specific reserve included in the allowance for credit losses.

When it is determined that we will not receive our entire contractual principal or the loss is confirmed, we record a charge against the allowance for credit loss reserve to bring the loan or lease to its net realizable value. It is typically part of our process to obtain appraisals on individually evaluated loans and leases that are primarily secured by real estate. As we complete new appraisals and/or market evaluations, in specific situations current fair values collateralizing certain collateral-dependent loans are inadequate to support the entire amount of the outstanding debt.

As a result of our review process, we have concluded an appropriate allowance for credit losses for the funded and unfunded loan and lease portfolio was $38.5 million, or 1.10% of gross loans and leases, at March 31, 2026 compared to $37.7 million, or 1.12% of gross loans and leases, at December 31, 2025. The decrease in this ratio is due to lower general reserves as a percentage of total loans primarily due to lower qualitative factors. Given the ongoing complexities with current workout situations and the uncertainty surrounding future economic conditions, further charge-offs, and increased provisions for credit losses may be recorded if additional facts and circumstances lead us to a different conclusion. Various federal and state regulatory agencies review the allowance for credit losses. These agencies could require certain loan and lease balances to be classified differently or charged off when their credit evaluations differ from those of management, based on their judgments about information available to them at the time of their examination.

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


	As of
	March 31, 2026		December 31, 2025		September 30, 2025		June 30, 2025
	(In Thousands)	% of Total Loans and Leases	(In Thousands)	% of Total Loans and Leases	(In Thousands)	% of Total Loans and Leases	(In Thousands)	% of Total Loans and Leases
Allowance for credit losses:
Loans collectively evaluated	$30,700	0.88%	$30,327	0.90%	$31,065	0.93%	$30,685	0.94%
Loans individually evaluated	5,931	0.17%	5,550	0.16%	5,625	0.17%	6,176	0.19%
Unfunded commitments reserve	1,858		1,815		1,692		1,349
Total	38,489	1.10%	37,692	1.12%	38,382	1.15%	38,210	1.18%
Loans and lease receivables:	$3,498,903		$3,373,241		$3,334,956		$3,250,925

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


	As of and for the Three Months Ended March 31,
	2026			2025
	(Dollars in Thousands)
Allowance at beginning of period	$	37,692		$	37,268
Charge-offs:
Commercial real estate:
Commercial real estate — owner occupied		—			—
Commercial real estate — non-owner occupied		—			—
Construction and land development		—			—
Multi-family		—			—
1-4 family		—			—
Commercial and industrial		(2,331	)		(3,800	)
Consumer and other		—			(10	)
Total charge-offs		(2,331	)		(3,810	)
Recoveries:
Commercial real estate:
Commercial real estate — owner occupied		—			2
Commercial real estate — non-owner occupied		—			—
Construction and land development		—			—
Multi-family		—			—
1-4 family		7			6
Commercial and industrial		161			390
Consumer and other		—			—
Total recoveries		168			398
Net charge-offs		(2,163	)		(3,412	)
Provision for credit losses		2,960			2,659
Allowance at end of period	$	38,489		$	36,515
Components:
Allowance for credit losses on loans	$	36,631		$	35,236
Allowance for credit losses on unfunded credit commitments		1,858			1,279
Total ACL	$	38,489		$	36,515
Annualized net charge offs (recoveries) as a percentage of average gross loans and leases		0.25	%		0.43	%

Liquidity and Capital Resources

The Corporation expects to meet its liquidity needs through existing cash on hand, established cash flow sources, its third-party senior line of credit, and dividends received from the Bank. While the Bank is subject to certain generally applicable regulatory limitations regarding its ability to pay dividends to the Corporation, we do not believe that the Corporation will be adversely affected by these dividend limitations. The Corporation’s principal liquidity requirements at March 31, 2026 were the interest payments due on subordinated notes and debentures and cash dividends payable to both common and preferred stockholders. The capital ratios of the Bank met all applicable regulatory capital adequacy requirements in effect on March 31, 2026. The Corporation’s Board and management teams adhere to the appropriate regulatory guidelines on decisions which affect their capital positions, including but not limited to, decisions relating to the payment of dividends and increasing indebtedness.

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The Bank maintains liquidity by obtaining funds from several sources. The Bank’s primary sources of funds are principal and interest payments on loans receivable and mortgage-related securities, deposits, and other borrowings, such as federal funds, and FHLB advances. The scheduled payments of loans and mortgage-related securities are generally a predictable source of funds. Deposit flows and loan prepayments, however, are influenced by market interest rates, economic and industry conditions, and competition.

Sources of liquidity


	As of
(in thousands)	March 31, 2026		December 31, 2025		September 30, 2025		June 30, 2025		March 31, 2025
Short-term investments	$	104,565	$	8,714	$	8,074	$	72,520	$	136,033
Collateral value of unencumbered pledged loans		968,320		992,398		906,042		893,499		973,494
Market value of unencumbered securities		387,700		388,474		376,783		347,196		324,365
Readily accessible liquidity		1,460,585		1,389,586		1,290,899		1,313,215		1,433,892

Fed fund lines		45,000		45,000		45,000		45,000		45,000
Excess brokered CD capacity1		806,268		775,851		732,951		645,843		477,468
Total liquidity	$	2,311,853	$	2,210,437	$	2,068,850	$	2,004,058	$	1,956,360
Total uninsured deposits, net of collateralized deposits		1,177,731		1,151,521		1,028,307		1,001,519		1,046,003

(1)

Bank internal policy limits brokered CDs to 50% of total bank funding when combined with value of unencumbered pledged loans.

We view readily accessible liquidity as a critical measure of our ability to meet our cash and collateral obligations. We define our readily accessible liquidity as the total of our short-term investments, our unencumbered securities available-for-sale, and our unencumbered pledged loans. Our readily accessible liquidity increased $71.0 million from December 31, 2025 due primarily to an increase in short-term investments. Any excess funds not used for loan funding or satisfying other cash obligations were maintained as part of our readily accessible liquidity in our interest-bearing accounts with the FRB, as we value the safety and soundness provided by the FRB. We plan to utilize excess liquidity to fund loan and lease portfolio growth, pay down maturing debt, allow run off of maturing wholesale certificates of deposit or invest in securities to maintain adequate liquidity.

We had $1.019 billion of outstanding wholesale funds at March 31, 2026, compared to $904.7 million of wholesale funds as of December 31, 2025, which represented 26.7% and 25.3%, respectively, of ending balance total bank funding. Wholesale funds include FHLB advances and brokered deposits. Total bank funding is defined as total deposits plus FHLB advances. We are committed to raising core deposits while utilizing wholesale funds to mitigate interest rate risk. Wholesale funds continue to be an efficient and cost effective source of funding for the Bank and allows it to gather funds across a larger geographic base at price levels and maturities that are more attractive than local time deposits when required to raise a similar level of core deposits within a short time period. Access to such deposits and borrowings allows us the flexibility to refrain from pursuing single service deposit relationships in markets that have experienced unfavorable pricing levels. The administrative costs associated with wholesale funds are considerably lower than those that would be incurred to administer a similar level of core deposits with a similar maturity structure. Term wholesale funds are stable as each issuance has a structured maturity date and may only be redeemed in certain limited circumstances. Non-maturity wholesale deposits are also stable as the Bank has developed relationships with reliable providers and the term of the deposit is typically agreed upon by both parties. During the time frames necessary to accumulate wholesale funds in an orderly manner, we will use short-term FHLB advances to meet our temporary funding needs. The short-term FHLB advances will typically have terms of one week to one month to cover the overall expected funding demands.

We will continue to use term wholesale funds in specific maturity periods, typically three to five years, needed to effectively mitigate the interest rate risk measured through our asset/liability management process or in shorter time periods if core deposit balances decline. In order to provide for ongoing liquidity and funding, none of our wholesale certificates of deposit allow for withdrawal at the option of the depositor before the stated maturity date and FHLB advances have contractual maturity terms. The Bank limits the percentage of wholesale funds to total bank funds in accordance with liquidity policies approved by its Board. The Bank was in compliance with its policy limits as of March 31, 2026.

The Bank was able to access the wholesale funding market as needed at rates and terms comparable to market standards during the quarter ended March 31, 2026. In the event that there is a disruption in the availability of wholesale funds at maturity, the

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Bank has managed the maturity structure, in compliance with our approved liquidity policy, so at least one year of maturities could be funded through readily accessible liquidity. These potential funding sources include deposits maintained at the FRB or Federal Reserve Discount Window utilizing currently unencumbered securities and acceptable loans as collateral. As of March 31, 2026, the accessible liquidity was in excess of the stated policy minimum. We believe the Bank will also have access to the unused federal funds lines, cash flows from borrower repayments, and cash flows from security maturities. The Bank also has the ability to raise local market deposits by offering attractive rates to generate the level required to fulfill its liquidity needs.

The Corporation has a shelf registration statement on file with the Securities and Exchange Commission that would allow the Corporation to offer and sell, from time to time and in one or more offerings, up to $100.0 million in aggregate initial offering price of common and preferred stock, debt securities, warrants, units, or depository shares, or any combination thereof. The Corporation has in recent years, and may from time to time in the future, raise capital through the sale of debt or equity securities in private placements exempt from registration under federal securities laws.

During the three months ended March 31, 2026, operating activities resulted in a net cash inflow of $3.1 million, which included net income of $12.2 million. Net cash used by investing activities for the three months ended March 31, 2026 was $138.5 million primarily due to net loan disbursements, investments made in securities available for sale, and additional investments in tax credit investments. Net cash provided by financing activities was $233.1 million for the three months ended March 31, 2026 primarily due to a net increase in deposits and FHLB advances. Please refer to the Unaudited Consolidated Statements of Cash Flows included in PART I., Item 1 for further details regarding significant sources of cash flow for the Corporation.

Contractual Obligations and Off-Balance Sheet Arrangements

As of March 31, 2026, there were no material changes to our contractual obligations and off-balance sheet arrangements disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025. We continue to believe that we have adequate capital and liquidity accessible from various sources to fund projected contractual obligations and commitments.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our primary market risk is interest rate risk, which arises from exposure of our financial position to changes in interest rates. It is our strategy to reduce the impact of interest rate risk on net interest margin by maintaining a largely match-funded position between the maturities and repricing dates of interest-earning assets and interest-bearing liabilities. This strategy is monitored by the Bank’s Asset/Liability Management Committee, in accordance with policies approved by the Bank’s Board. The committee meets regularly to review the sensitivity of the Bank’s assets and liabilities to changes in interest rates, liquidity needs and sources, and pricing and funding strategies.

The primary technique we use to measure interest rate risk is simulation of earnings. In this measurement technique the balance sheet is modeled as an ongoing entity whereby future growth, pricing, and funding assumptions are utilized. These assumptions are modeled under different rate scenarios that include a simultaneous, instant, and sustained change in interest rates. The Bank updates its interest rate risk exposure model quarterly to reflect interest rate assumptions, including those for indeterminable maturity deposits (transaction accounts and money market accounts). With short-term rates changing, deposit pricing can vary by product and client. These assumptions have been developed through a combination of historical analysis and projection of future expected pricing behavior. This modeling indicated interest rate sensitivity as follows:


	Impact on Net Interest Income as of
Instantaneous Rate Change in Basis Points	March 31, 2026	December 31, 2025
Down 300	(1.58)%	(3.26)%
Down 200	(0.52)	(0.94)
Down 100	(0.31)	(0.47)
No Change	—	—
Up 100	0.25	0.72
Up 200	0.44	1.34
Up 300	0.61	1.95

Management believes market risk is well managed with minimal impact on net interest income in simulated instantaneous rate shock scenarios, and we will continually monitor and adjust the balance sheet for optimal positioning as new data becomes available. The simulations used to manage market risk are based on numerous assumptions regarding the effect of changes in interest rates on the timing and extent of repricing characteristics, future cash flows and client behavior. These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate net interest income or precisely predict the impact of higher or lower interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions, client behavior and management strategies, among other factors.

We manage the structure of interest-earning assets and interest-bearing liabilities by adjusting their mix, yield, maturity, and/or repricing characteristics based on market conditions. FHLB advances and wholesale deposits are a significant source of funds. We use a variety of maturities to augment our management of interest rate exposure. Management has the authorization, as permitted within applicable approved policies, and ability to utilize derivatives should they be appropriate to manage interest rate exposure.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Corporation’s management, with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, has evaluated the Corporation’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer have concluded that the Corporation’s disclosure controls and procedures were effective as of March 31, 2026.

Changes in Internal Control over Financial Reporting

There was no change in the Corporation’s internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during the quarter ended March 31, 2026 that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

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PART II. Other Information

Item 1. Legal Proceedings

From time to time, the Corporation and its subsidiaries are engaged in legal proceedings in the ordinary course of their respective businesses. Management believes that any liability arising from any such proceedings currently existing or threatened will not have a material adverse effect on the Corporation’s financial position, results of operations, or cash flows.

Item 1A. Risk Factors

There were no material changes to the risk factors previously disclosed in Item 1A. to Part I of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2025.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Securities

As previously announced, on April 26, 2024, the Corporation’s Board of Directors authorized the repurchase by the Corporation of shares of its common stock with a maximum aggregate purchase price of $5.0 million, in such quantities, at such prices and on such other terms and conditions as the Corporation’s Chief Executive Officer or Chief Financial Officer determine in their discretion to be in the best interests of the Corporation and its shareholders, any time with no expiration date. As of March 31, 2026, the Corporation has not repurchased any shares under this repurchase program.

The following table sets forth information about the Corporation's purchases of its common stock during the three months ended March 31, 2026.


Period	Total Number of Shares Purchased(1)		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Total Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2026 - January 31, 2026		—	$	—		—		—
February 1, 2026 - February 28, 2026		13,906		58.36		—		—
March 1, 2026 - March 31, 2026		—		—		—		—
Total		13,906	$	58.36		—		92,713

(1)

During the first quarter of 2026, the Corporation repurchased an aggregate 13,906 shares of the Corporation’s common stock in open-market transactions, all of which were surrendered to us to satisfy income tax withholding obligations in connection with the vesting of restricted awards.

(2)

Number of shares available to purchase under the April 26, 2024 share repurchase program was calculated by dividing the closing stock price on March 31, 2026 of $53.93 by the $5.0 million remaining capacity.

Item 5. Other Information

During the three months ended March 31, 2026, no director or “officer” of the Corporation adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits


31.1		Certification of the Chief Executive Officer

31.2		Certification of the Chief Financial Officer

32		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101		The following financial information from First Business Financial Services, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025, (ii) Consolidated Statements of Income for the three months ended March 31, 2026 and 2025, (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2026 and 2025, (iv) Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2026 and 2025, (v) Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025, and (vi) the Notes to Unaudited Consolidated Financial Statements

104		The cover page from First Business Financial Services, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 has been formatted in Inline XBRL and contained in Exhibit 101.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	FIRST BUSINESS FINANCIAL SERVICES, INC.
April 24, 2026	/s/ Corey A. Chambas
	Corey A. Chambas
	Chief Executive Officer

April 24, 2026	/s/ Brian D. Spielmann
	Brian D. Spielmann
	Chief Financial Officer
	(principal financial officer)