First Business Reports Second Quarter 2020 Financial Results

About this update from First Business Financial Services, Inc.

[{"type":"text","content":" \n-- Record operating performance partially offset by a 21% reserve build --\n \n MADISON, Wis. --(BUSINESS WIRE)--\n First Business Financial Services, Inc. (the “Company” or “ First Business”) (Nasdaq:FBIZ) reported record net interest income and strong non-interest income, resulting in net income of $3.3 million , or diluted earnings per share of $0.38 , in the second quarter 2020. First Business’s robust operating performance during the quarter was offset by a $5.5 million provision for loan and lease losses and related 20.7% increase in the allowance for loan and leases losses primarily due to the COVID-19 pandemic.\n \n \n“The effort and dedication of the entire First Business team to support our clients since March has been nothing short of exceptional and I’m incredibly proud,” said Corey Chambas , President and Chief Executive Officer. “To date, we have funded $328 million in loans through the Paycheck Protection Program to small- and mid-sized businesses in our markets, impacting more than 26,000 jobs. Through our ongoing focus on executing our strategic plan, even in these challenging times, we grew pre-tax, pre-provision adjusted earnings and total in-market deposits to record levels in the second quarter. With ample liquidity and appropriate reserve builds, First Business is well-positioned to continue providing the highest level of support to the entrepreneurs and investors we serve.”\n \n \nSummary results as of and for the quarter ended June 30, 2020 :\n \n \n \nNet income totaled $3.3 million , or diluted earnings per share of $0.38 , in the second quarter of 2020, compared to $3.3 million , or diluted earnings per share of $0.38 , in the first quarter of 2020 and $6.6 million , or diluted earnings per share of $0.75 , in the second quarter of 2019.\n \n \nDuring the second quarter of 2020, the Company disbursed $327.9 million in Paycheck Protection Program (“PPP”) loans and received processing fee income from the Small Business Administration (“SBA”) of $8.7 million . The processing fee income is deferred and recognized over the contractual life of the loan, or accelerated at forgiveness. During the second quarter of 2020, $859,000 was recognized in interest income.\n \n \nRecord pre-tax, pre-provision adjusted earnings, which excludes certain one-time and discrete items as defined in the Non-GAAP Reconciliations at the end of this release, totaled $9.8 million , up 29.1% from the first quarter of 2020 and 32.4% from the second quarter of 2019. Pre-tax, pre-provision adjusted return on average assets was 1.61% compared to 1.44% and 1.46% for the linked and prior year quarters, respectively.\n \n \nPeriod-end gross loans and leases receivable were $2.057 billion as of June 30, 2020 , up $313.5 million from the first quarter of 2020 and up $336.9 million from the second quarter of 2019. Line of credit utilization was significantly impacted by PPP loan proceeds and was $212.6 million as of June 30, 2020 , down from $297.1 million as of the first quarter of 2020 and $317.9 million as of the second quarter of 2019. Gross loans and leases receivable, excluding PPP loans and lines of credit, were $1.516 billion as of June 30, 2020 , up 19.4% annualized from the first quarter of 2020 and 8.1% from the second quarter of 2019.\n \n \nThe allowance for loan and lease losses increased $4.7 million , or 20.7%, compared to the first quarter of 2020 primarily due to a $2.4 million and $2.1 million increase in the general and specific reserves, respectively, driven by the COVID-19 pandemic. The allowance for loan and lease losses increased to 1.33% of total loans, compared to 1.30% and 1.15% in the first quarter of 2020 and second quarter of 2019, respectively. Excluding PPP loans, the allowance for loan and lease losses increased to 1.58% of total loans as of June 30, 2020 .\n \n \nProvision for loan and lease losses totaled $5.5 million in the second quarter of 2020, compared to $3.2 million in the first quarter of 2020 and a provision benefit of $784,000 in the second quarter of 2019.\n \n \nRobust liquidity position includes record in-market deposits of $1.621 billion , total deposits of $1.710 billion , and on-balance sheet liquidity of $611.6 million , defined as total short-term investments, unencumbered securities available-for-sale, and unencumbered pledged loans. In-market deposit balances were inflated due to PPP loan proceeds.\n \n \nNet interest margin was 3.34% in the second quarter of 2020, compared to 3.44% in the first quarter of 2020 and 3.52% in the second quarter of 2019. Adjusted net interest margin, which excludes certain one-time and discrete items as defined in the Non-GAAP Reconciliations at the end of this release, was 3.33% in the second quarter of 2020, compared to 3.32% in the first quarter of 2020 and 3.31% in the second quarter of 2019.\n \n \nFees in lieu of interest, defined as prepayment fees, asset-based loan fees, non-accrual interest, and loan fee amortization, totaled $2.3 million in the second quarter of 2020, compared to $798,000 in the first quarter of 2020 and $1.2 million in the second quarter of 2019.\n \n \nTop line revenue, defined as net interest income plus non-interest income, totaled $25.2 million , up 29.7% annualized from the first quarter of 2020 and 11.3% from the second quarter of 2019.\n \n \nNon-interest income totaled $6.3 million , or 25.1% of total revenue, in the second quarter of 2020, surpassing the Company’s goal of 25% for the fifth consecutive quarter.\n \n \nNon-interest expense was $18.3 million in the second quarter of 2020, compared to $16.1 million in the first quarter of 2020 and $17.5 million in the second quarter of 2019. Operating expense, which excludes certain one-time and discrete items as defined in the Non-GAAP Reconciliations at the end of this release, totaled $15.4 million in the second quarter of 2020, compared to $15.9 million in the first quarter of 2020 and $15.3 million in the second quarter of 2019.\n \n \nThe Company incurred a $744,000 loss on the early extinguishment of $59.5 million in Federal Home Loan Bank (“FHLB”) term advances late in the second quarter of 2020, as the Company lowered wholesale funding costs and improved the Company’s funding position with the expectation of a low interest rate environment for an extended period of time.\n \n \nThe efficiency ratio, which excludes certain one-time and discrete items as defined in the Non-GAAP Reconciliations at the end of this release, improved to 61.22% in the second quarter of 2020, down from 67.74% and 67.41% in the linked and prior year quarters, respectively.\n \n \nHistoric tax credit programs contributed $690,000 , or $0.08 per share, compared to $446,000 , or $0.05 per share in the second quarter of 2019. No historic tax credits were recognized in the first quarter of 2020.\n \n \n \n Financial Highlights \n \n \n \n \n (Unaudited) \n \n \n \n \n \n \n \n As of and for the Three Months Ended \n \n \n \n \n \n \n \n As of and for the Six Months Ended \n \n \n \n \n \n (Dollars in thousands, except per share amounts) \n \n \n \n \n \n \n \n June 30 ,\n2020 \n \n \n \n \n \n \n \n March 31 ,\n2020 \n \n \n \n \n \n \n \n June 30 ,\n2019 \n \n \n \n \n \n \n \n June 30 ,\n2020 \n \n \n \n \n \n \n \n June 30 ,\n2019 \n \n \n \n \n \nNet interest income\n \n \n \n \n \n \n \n$\n \n \n \n18,888\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n17,050\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n16,852\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n35,937\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n34,606\n \n \n \n \n \n \n \n \n \nAdjusted non-interest income (1)\n \n \n \n \n \n \n \n6,319\n \n \n \n \n \n \n \n \n \n \n \n6,418\n \n \n \n \n \n \n \n \n \n \n \n5,806\n \n \n \n \n \n \n \n \n \n \n \n12,737\n \n \n \n \n \n \n \n \n \n \n \n10,444\n \n \n \n \n \n \n \n \n \nOperating revenue (1)\n \n \n \n \n \n \n \n25,207\n \n \n \n \n \n \n \n \n \n \n \n23,468\n \n \n \n \n \n \n \n \n \n \n \n22,658\n \n \n \n \n \n \n \n \n \n \n \n48,674\n \n \n \n \n \n \n \n \n \n \n \n45,050\n \n \n \n \n \n \n \n \n \nOperating expense (1)\n \n \n \n \n \n \n \n15,431\n \n \n \n \n \n \n \n \n \n \n \n15,897\n \n \n \n \n \n \n \n \n \n \n \n15,273\n \n \n \n \n \n \n \n \n \n \n \n31,327\n \n \n \n \n \n \n \n \n \n \n \n30,510\n \n \n \n \n \n \n \n \n \nPre-tax, pre-provision adjusted earnings (1)\n \n \n \n \n \n \n \n9,776\n \n \n \n \n \n \n \n \n \n \n \n7,571\n \n \n \n \n \n \n \n \n \n \n \n7,385\n \n \n \n \n \n \n \n \n \n \n \n17,347\n \n \n \n \n \n \n \n \n \n \n \n14,540\n \n \n \n \n \n \n \n \n \nLess:\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nProvision (benefit) for loan and lease losses\n \n \n \n \n \n \n \n5,469\n \n \n \n \n \n \n \n \n \n \n \n3,182\n \n \n \n \n \n \n \n \n \n \n \n(784\n \n \n \n)\n \n \n \n \n \n \n \n8,651\n \n \n \n \n \n \n \n \n \n \n \n(736\n \n \n \n)\n \n \n \n \n \nNet loss (gain) on foreclosed properties\n \n \n \n \n \n \n \n348\n \n \n \n \n \n \n \n \n \n \n \n102\n \n \n \n \n \n \n \n \n \n \n \n(21\n \n \n \n)\n \n \n \n \n \n \n \n450\n \n \n \n \n \n \n \n \n \n \n \n(21\n \n \n \n)\n \n \n \n \n \nAmortization of other intangible assets\n \n \n \n \n \n \n \n9\n \n \n \n \n \n \n \n \n \n \n \n9\n \n \n \n \n \n \n \n \n \n \n \n11\n \n \n \n \n \n \n \n \n \n \n \n18\n \n \n \n \n \n \n \n \n \n \n \n21\n \n \n \n \n \n \n \n \n \nSBA recourse (benefit) provision\n \n \n \n \n \n \n \n(30\n \n \n \n)\n \n \n \n \n \n \n \n25\n \n \n \n \n \n \n \n \n \n \n \n113\n \n \n \n \n \n \n \n \n \n \n \n(5\n \n \n \n)\n \n \n \n \n \n \n \n594\n \n \n \n \n \n \n \n \n \nTax credit investment impairment\n \n \n \n \n \n \n \n1,841\n \n \n \n \n \n \n \n \n \n \n \n113\n \n \n \n \n \n \n \n \n \n \n \n2,088\n \n \n \n \n \n \n \n \n \n \n \n1,954\n \n \n \n \n \n \n \n \n \n \n \n4,102\n \n \n \n \n \n \n \n \n \nLoss on early extinguishment of debt\n \n \n \n \n \n \n \n744\n \n \n \n \n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n744\n \n \n \n \n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \nAdd:\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nNet loss on sale of securities\n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n(4\n \n \n \n)\n \n \n \n \n \n \n \n(1\n \n \n \n)\n \n \n \n \n \n \n \n(4\n \n \n \n)\n \n \n \n \n \n \n \n(1\n \n \n \n)\n \n \n \n \n \nIncome before income tax expense\n \n \n \n \n \n \n \n1,395\n \n \n \n \n \n \n \n \n \n \n \n4,136\n \n \n \n \n \n \n \n \n \n \n \n5,977\n \n \n \n \n \n \n \n \n \n \n \n5,531\n \n \n \n \n \n \n \n \n \n \n \n10,579\n \n \n \n \n \n \n \n \n \nIncome tax (benefit) expense\n \n \n \n \n \n \n \n(1,928\n \n \n \n)\n \n \n \n \n \n \n \n858\n \n \n \n \n \n \n \n \n \n \n \n(595\n \n \n \n)\n \n \n \n \n \n \n \n(1,070\n \n \n \n)\n \n \n \n \n \n \n \n(1,893\n \n \n \n)\n \n \n \n \n \nNet income\n \n \n \n \n \n \n \n$\n \n \n \n3,323\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n3,278\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n6,572\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n6,601\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n12,472\n \n \n \n \n \n \n \n \n \nEarnings per share, diluted\n \n \n \n \n \n \n \n$\n \n \n \n0.38\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n0.38\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n0.75\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n0.77\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1.43\n \n \n \n \n \n \n \n \n \nBook value per share\n \n \n \n \n \n \n \n$\n \n \n \n23.04\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n22.83\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n21.71\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n23.04\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n21.71\n \n \n \n \n \n \n \n \n \nTangible book value per share (1)\n \n \n \n \n \n \n \n$\n \n \n \n21.65\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n21.44\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n20.33\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n21.65\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n20.33\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nNet interest margin\n \n \n \n \n \n \n \n3.34\n \n \n \n%\n \n \n \n \n \n \n \n3.44\n \n \n \n%\n \n \n \n \n \n \n \n3.52\n \n \n \n%\n \n \n \n \n \n \n \n3.39\n \n \n \n%\n \n \n \n \n \n \n \n3.66\n \n \n \n%\n \n \n \n \n \nAdjusted net interest margin (1)\n \n \n \n \n \n \n \n3.33\n \n \n \n%\n \n \n \n \n \n \n \n3.32\n \n \n \n%\n \n \n \n \n \n \n \n3.31\n \n \n \n%\n \n \n \n \n \n \n \n3.33\n \n \n \n%\n \n \n \n \n \n \n \n3.33\n \n \n \n%\n \n \n \n \n \nEfficiency ratio (1)\n \n \n \n \n \n \n \n61.22\n \n \n \n%\n \n \n \n \n \n \n \n67.74\n \n \n \n%\n \n \n \n \n \n \n \n67.41\n \n \n \n%\n \n \n \n \n \n \n \n64.36\n \n \n \n%\n \n \n \n \n \n \n \n67.72\n \n \n \n%\n \n \n \n \n \nReturn on average assets\n \n \n \n \n \n \n \n0.55\n \n \n \n%\n \n \n \n \n \n \n \n0.62\n \n \n \n%\n \n \n \n \n \n \n \n1.30\n \n \n \n%\n \n \n \n \n \n \n \n0.58\n \n \n \n%\n \n \n \n \n \n \n \n1.25\n \n \n \n%\n \n \n \n \n \nPre-tax, pre-provision adjusted return on average assets (1)\n \n \n \n \n \n \n \n1.61\n \n \n \n%\n \n \n \n \n \n \n \n1.44\n \n \n \n%\n \n \n \n \n \n \n \n1.46\n \n \n \n%\n \n \n \n \n \n \n \n1.53\n \n \n \n%\n \n \n \n \n \n \n \n1.46\n \n \n \n%\n \n \n \n \n \nReturn on average equity\n \n \n \n \n \n \n \n6.70\n \n \n \n%\n \n \n \n \n \n \n \n7.14\n \n \n \n%\n \n \n \n \n \n \n \n14.09\n \n \n \n%\n \n \n \n \n \n \n \n6.92\n \n \n \n%\n \n \n \n \n \n \n \n13.89\n \n \n \n%\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nPeriod-end loans and leases receivable\n \n \n \n \n \n \n \n$\n \n \n \n2,056,863\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,743,399\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,719,976\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,056,863\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,719,976\n \n \n \n \n \n \n \n \n \nPeriod-end loans and leases receivable, excluding PPP loans\n \n \n \n \n \n \n \n$\n \n \n \n1,728,931\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,743,399\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,719,976\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,728,931\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,719,976\n \n \n \n \n \n \n \n \n \nAverage loans and leases receivable\n \n \n \n \n \n \n \n$\n \n \n \n1,983,121\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,733,742\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,694,294\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,858,432\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,669,511\n \n \n \n \n \n \n \n \n \nPeriod-end in-market deposits\n \n \n \n \n \n \n \n$\n \n \n \n1,620,616\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,383,299\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,290,258\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,620,616\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,290,258\n \n \n \n \n \n \n \n \n \nAverage in-market deposits\n \n \n \n \n \n \n \n$\n \n \n \n1,570,552\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,366,142\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,246,386\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,468,348\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,217,312\n \n \n \n \n \n \n \n \n \nAllowance for loan and lease losses\n \n \n \n \n \n \n \n$\n \n \n \n27,464\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n22,748\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n19,819\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n27,464\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n19,819\n \n \n \n \n \n \n \n \n \nNon-performing assets\n \n \n \n \n \n \n \n$\n \n \n \n25,484\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n29,566\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n28,524\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n25,484\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n28,524\n \n \n \n \n \n \n \n \n \nAllowance for loan and lease losses as a percent of total gross loans and leases\n \n \n \n \n \n \n \n1.33\n \n \n \n%\n \n \n \n \n \n \n \n1.30\n \n \n \n%\n \n \n \n \n \n \n \n1.15\n \n \n \n%\n \n \n \n \n \n \n \n1.33\n \n \n \n%\n \n \n \n \n \n \n \n1.15\n \n \n \n%\n \n \n \n \n \nAllowance for loan and lease losses as a percent of total gross loans and leases, excluding PPP loans\n \n \n \n \n \n \n \n1.58\n \n \n \n%\n \n \n \n \n \n \n \n1.30\n \n \n \n%\n \n \n \n \n \n \n \n1.15\n \n \n \n%\n \n \n \n \n \n \n \n1.58\n \n \n \n%\n \n \n \n \n \n \n \n1.15\n \n \n \n%\n \n \n \n \n \nNon-performing assets as a percent of total assets\n \n \n \n \n \n \n \n1.03\n \n \n \n%\n \n \n \n \n \n \n \n1.35\n \n \n \n%\n \n \n \n \n \n \n \n1.38\n \n \n \n%\n \n \n \n \n \n \n \n1.03\n \n \n \n%\n \n \n \n \n \n \n \n1.38\n \n \n \n%\n \n \n \n \n \nNon-performing assets as a percent of total assets, excluding PPP loans\n \n \n \n \n \n \n \n1.19\n \n \n \n%\n \n \n \n \n \n \n \n1.35\n \n \n \n%\n \n \n \n \n \n \n \n1.38\n \n \n \n%\n \n \n \n \n \n \n \n1.19\n \n \n \n%\n \n \n \n \n \n \n \n1.38\n \n \n \n%\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n(1) This is a non-GAAP financial measure. Management believes these measures are meaningful because they reflect adjustments commonly made by management, investors, regulators, and analysts to evaluate financial performance, provide greater understanding of ongoing operations, and enhance comparability of results with prior periods. See the section titled Non-GAAP Reconciliations at the end of this release for a reconciliation of GAAP financial measures to non-GAAP financial measures.\n \n \n \n \n \n COVID-19 Update \n \n \n Business Continuity \n \n \nThe Company continues to strictly adhere to COVID-19 health and safety-related requirements and best practices across all of our locations. During the second quarter of 2020, employees slowly resumed business travel, as necessary, while business development efforts have continued to be somewhat negatively affected by limitations on in-person appointments.\n \n \nPortions of the Company’s workforce started returning to the office, subject to local mandates and restrictions, on a rotating basis. Management will monitor the activity closely and adjust accordingly as the health and safety of our employees and clients remain our highest priority.\n \n \nThe Company had no furloughs or layoffs related to COVID-19 to date.\n \n \n Paycheck Protection Program \n \n \nDuring the second quarter of 2020, the Company processed over 700 applications from existing and new clients, disbursed $327.9 million in funds, and received processing fee income from the SBA of $8.7 million . The processing fee income is deferred and recognized over the contractual life of the loan, or accelerated at forgiveness, as an adjustment of yield using the interest method. During the second quarter of 2020, $859,000 was recognized in interest income. The SBA provides a guaranty to the lender of 100% of principal and interest, unless the lender violated an obligation under the agreement. As loan losses are expected to be immaterial, if any at all, due to the guaranty, management excluded the PPP loans from the allowance for loan and lease losses calculation. Management funded these short-term loans through a combination of excess cash held at the Federal Reserve and the increase in in-market deposits.\n \n \n Liquidity Sources \n \n \nManagement has reviewed all primary and secondary sources of liquidity in preparation for any unforeseen funding needs due to the COVID-19 pandemic and prioritized based on available capacity, term flexibility, and cost. As of June 30, 2020 , the Company had the following sources of liquidity, including the Company’s ability to participate in the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”):\n \n \n \n \n (Unaudited) \n \n \n \n \n \n \n \n As of \n \n \n \n \n \n (in thousands) \n \n \n \n \n \n \n \n June 30, 2020 \n \n \n \n \n \nShort-term investments\n \n \n \n \n \n \n \n$\n \n \n \n27,839\n \n \n \n \n \n \n \n \n \nPPPLF availability\n \n \n \n \n \n \n \n298,327\n \n \n \n \n \n \n \n \n \nCollateral value of unencumbered pledged loans (FHLB borrowing availability)\n \n \n \n \n \n \n \n178,587\n \n \n \n \n \n \n \n \n \nMarket value of unencumbered securities (Fed Discount Window and FHLB borrowing availability)\n \n \n \n \n \n \n \n106,808\n \n \n \n \n \n \n \n \n \nTotal sources of liquidity\n \n \n \n \n \n \n \n$\n \n \n \n611,561\n \n \n \n \n \n \n \n \n \nIn addition to the above primary sources of liquidity, as of June 30, 2020 , the Company also had access to $53.5 million in federal funds lines with various correspondent banks and significant experience accessing the highly liquid brokered certificate of deposit market.\n \n \n Capital Strength \n \n \nThe Company’s capital ratios continued to exceed the highest required regulatory benchmark levels.\n \n \n \nTotal capital to risk-weighted assets at June 30, 2020 , was 11.97%, tier 1 capital to risk-weighted assets was 9.57%, tier 1 leverage capital to adjusted average assets was 8.29%, and common equity tier 1 capital to risk-weighted assets was 9.08%. Tangible common equity to tangible assets was 7.56%. Excluding PPP loans, tier 1 leverage capital to adjusted average assets and tangible common equity to tangible assets were 9.19% and 8.72%, respectively.\n \n \nManagement suspended the Company’s stock repurchase program in March 2020 due to the uncertainty surrounding the COVID-19 pandemic. As of March 16, 2020 , the Company had repurchased 141,137 shares of its common stock at a weighted average price of $24.62 per share, for a total value of $3.5 million . The company has $1.5 million of buyback authority remaining.\n \n \nAs previously announced, during the second quarter of 2020, the Company’s Board of Directors declared a regular quarterly dividend of $0.165 per share. The dividend was paid on May 14, 2020 to stockholders of record at the close of business on May 4, 2020 . Measured against second quarter 2020 diluted earnings per share of $0.38 , the dividend represents a 43.4% payout ratio. The Board of Directors routinely considers dividend declarations as part of its normal course of business.\n \n \n \n Deferral Requests \n \n \nThe Company provided loan modifications up to six months to certain borrowers impacted by COVID-19 who were current in their payments at the inception of the Company’s loan modification program. As of June 30, 2020 , the Company had processed 448 deferral requests on loans totaling $323.2 million , or 18.6% of gross loans and leases. Loan deferrals of six months accounted for 60.2% of the total $323.2 million in deferral requests and the remaining balance were primarily for three months. Management anticipates the loan modifications may continue throughout 2020. The following tables represent a breakdown of the deferred loan balances by industry segment and collateral type:\n \n \n \n \n (Unaudited) \n \n \n \n \n \n \n \n As of \n \n \n \n \n \n (Dollars in thousands) \n \n \n \n \n \n \n \n June 30, 2020 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Collateral Type \n \n \n \n \n \n Industries Description \n \n \n \n \n \n \n \n Balance \n \n \n \n \n \n \n \n % of Deferred of Total Industry \n \n \n \n \n \n \n \n Real Estate \n \n \n \n \n \n \n \n Non Real Estate \n \n \n \n \n \nReal Estate and Rental and Leasing\n \n \n \n \n \n \n \n$\n \n \n \n147,584\n \n \n \n \n \n \n \n \n \n \n \n18.8%\n \n \n \n \n \n \n \n$\n \n \n \n142,519\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n5,065\n \n \n \n \n \n \n \n \n \nAccommodation and Food Services\n \n \n \n \n \n \n \n52,468\n \n \n \n \n \n \n \n \n \n \n \n52.7%\n \n \n \n \n \n \n \n49,198\n \n \n \n \n \n \n \n \n \n \n \n3,270\n \n \n \n \n \n \n \n \n \nManufacturing\n \n \n \n \n \n \n \n34,214\n \n \n \n \n \n \n \n \n \n \n \n17.5%\n \n \n \n \n \n \n \n20,253\n \n \n \n \n \n \n \n \n \n \n \n13,961\n \n \n \n \n \n \n \n \n \nHealth Care and Social Assistance\n \n \n \n \n \n \n \n19,552\n \n \n \n \n \n \n \n \n \n \n \n15.9%\n \n \n \n \n \n \n \n12,136\n \n \n \n \n \n \n \n \n \n \n \n7,416\n \n \n \n \n \n \n \n \n \nTransportation and Warehousing\n \n \n \n \n \n \n \n19,402\n \n \n \n \n \n \n \n \n \n \n \n21.3%\n \n \n \n \n \n \n \n422\n \n \n \n \n \n \n \n \n \n \n \n18,980\n \n \n \n \n \n \n \n \n \nRetail Trade\n \n \n \n \n \n \n \n14,851\n \n \n \n \n \n \n \n \n \n \n \n29.7%\n \n \n \n \n \n \n \n11,355\n \n \n \n \n \n \n \n \n \n \n \n3,496\n \n \n \n \n \n \n \n \n \nInformation\n \n \n \n \n \n \n \n11,228\n \n \n \n \n \n \n \n \n \n \n \n64.1%\n \n \n \n \n \n \n \n2,430\n \n \n \n \n \n \n \n \n \n \n \n8,798\n \n \n \n \n \n \n \n \n \nUtilities\n \n \n \n \n \n \n \n7,129\n \n \n \n \n \n \n \n \n \n \n \n96.4%\n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n7,129\n \n \n \n \n \n \n \n \n \nConstruction\n \n \n \n \n \n \n \n6,448\n \n \n \n \n \n \n \n \n \n \n \n6.7%\n \n \n \n \n \n \n \n6,359\n \n \n \n \n \n \n \n \n \n \n \n89\n \n \n \n \n \n \n \n \n \nWholesale Trade\n \n \n \n \n \n \n \n5,695\n \n \n \n \n \n \n \n \n \n \n \n5.7%\n \n \n \n \n \n \n \n569\n \n \n \n \n \n \n \n \n \n \n \n5,126\n \n \n \n \n \n \n \n \n \nOther Services (except Public Administration )\n \n \n \n \n \n \n \n1,673\n \n \n \n \n \n \n \n \n \n \n \n3.0%\n \n \n \n \n \n \n \n50\n \n \n \n \n \n \n \n \n \n \n \n1,623\n \n \n \n \n \n \n \n \n \nProfessional, Scientific, and Technical Services\n \n \n \n \n \n \n \n933\n \n \n \n \n \n \n \n \n \n \n \n2.3%\n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n933\n \n \n \n \n \n \n \n \n \nAdministrative and Support and Waste Management and Remediation Services\n \n \n \n \n \n \n \n831\n \n \n \n \n \n \n \n \n \n \n \n9.9%\n \n \n \n \n \n \n \n728\n \n \n \n \n \n \n \n \n \n \n \n103\n \n \n \n \n \n \n \n \n \nFinance and Insurance\n \n \n \n \n \n \n \n743\n \n \n \n \n \n \n \n \n \n \n \n1.8%\n \n \n \n \n \n \n \n715\n \n \n \n \n \n \n \n \n \n \n \n28\n \n \n \n \n \n \n \n \n \nArts, Entertainment, and Recreation\n \n \n \n \n \n \n \n300\n \n \n \n \n \n \n \n \n \n \n \n1.7%\n \n \n \n \n \n \n \n292\n \n \n \n \n \n \n \n \n \n \n \n8\n \n \n \n \n \n \n \n \n \nAgriculture, Forestry, Fishing and Hunting\n \n \n \n \n \n \n \n165\n \n \n \n \n \n \n \n \n \n \n \n1.3%\n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n165\n \n \n \n \n \n \n \n \n \nTotal deferred loan balances\n \n \n \n \n \n \n \n$\n \n \n \n323,216\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n247,026\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n76,190\n \n \n \n \n \n \n \n \n \n Exposure to Stressed Industries \n \n \nCertain industries are widely expected to be particularly impacted by social distancing, quarantines, and the economic impact of the COVID-19 pandemic, such as the following:\n \n \n \n \n (Unaudited) \n \n \n \n \n \n \n \n As of \n \n \n \n \n \n (Dollar in thousands) \n \n \n \n \n \n \n \n June 30, 2020 \n \n \n \n \n \n Industries: \n \n \n \n \n \n \n \n Balance \n \n \n \n \n \n \n \n % Gross Loans and Leases (1) \n \n \n \n \n \nRetail (2)\n \n \n \n \n \n \n \n$\n \n \n \n70,028\n \n \n \n \n \n \n \n \n \n \n \n4.0%\n \n \n \n \n \nHospitality\n \n \n \n \n \n \n \n73,502\n \n \n \n \n \n \n \n \n \n \n \n4.2%\n \n \n \n \n \nEntertainment\n \n \n \n \n \n \n \n16,675\n \n \n \n \n \n \n \n \n \n \n \n1.0%\n \n \n \n \n \nRestaurants & food service\n \n \n \n \n \n \n \n24,884\n \n \n \n \n \n \n \n \n \n \n \n1.4%\n \n \n \n \n \nTotal outstanding exposure\n \n \n \n \n \n \n \n$\n \n \n \n185,089\n \n \n \n \n \n \n \n \n \n \n \n10.7%\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n(1) Excluding PPP loans.\n(2) Includes $51.7 million in loans secured by commercial real estate.\n \n \n \n \n \nAs of June 30, 2020 , the Company had no meaningful direct exposure to the energy sector, airline industry or retail consumer, and does not participate in shared national credits.\n \n \nBecause of the significant uncertainties related to the ultimate duration of the COVID-19 pandemic and its effects on our clients and prospects, and on the national and local economy as a whole, there can be no assurances as to how the crisis may ultimately affect the Company’s loan portfolio.\n \n \n Second Quarter 2020 Compared to First Quarter 2020 \n \n \nNet interest income increased $1.8 million , or 10.8%, to $18.9 million .\n \n \n \nNet interest income reflected an increase in average loans and leases, increase in fees received in lieu of interest, and a significant reduction in interest expense. Fees in lieu of interest, which can vary from quarter to quarter based on client-driven activity, totaled $2.3 million , compared to $798,000 . Excluding fees in lieu of interest, net interest income increased $379,000 , or 2.3%.\n \n \nAverage loans and leases receivable increased $249.4 million to $1.983 billion . Excluding average PPP loans of $259.5 million and average line of credit utilization in both periods of comparison, average loans and leases receivable increased $39.9 million , or 10.8% annualized, to $1.513 billion .\n \n \nThe yield on average interest-earning assets decreased 69 basis points to 4.03% from 4.72%. Excluding average PPP loans, the PPP loan interest income of $647,000 , and the aforementioned fees in lieu of interest, the yield earned on average interest-earning assets decreased 59 basis points to 3.97% from 4.56%. The rate paid for average total bank funding decreased 63 basis points to 0.61% from 1.24%. Total bank funding is defined as total deposits plus FHLB advances, Federal Reserve Discount Window advances, and Federal Reserve PPPLF advances. The average effective federal funds rate decreased 119 basis points to 0.06% from 1.25%.\n \n \nNet interest margin decreased 10 basis points to 3.34% from 3.44%. Adjusted net interest margin, excluding fees in lieu of interest and other recurring but volatile components of net interest margin, increased one basis point to 3.33% from 3.32%.\n \n \nThe Company incurred a $744,000 loss on the early extinguishment of $59.5 million in FHLB term advances late in the second quarter of 2020, as the Company lowered wholesale funding costs and improved the Company’s funding position. Management believes this strategy will help stabilize net interest margin with the expectation of a low interest rate environment for an extended period of time.\n \n \n \nNon-interest income decreased $95,000 , or 1.5%, to $6.3 million .\n \n \n \nCommercial loan interest rate swap fee income was strong and consistent with the first quarter of 2020 at $1.7 million . Interest rate swaps continue to be an attractive product for the Company’s commercial borrowers, although associated fee income can vary from period to period based on client demand and the interest rate environment in any given quarter.\n \n \nGains on sale of SBA loans increased $309,000 , or 116.6%, to $574,000 compared to $265,000 . The Company’s pipeline continues to grow period over period and management believes the gain on sale of traditional SBA loans (i.e., SBA loans unrelated to PPP loans) will increase at a measured pace over time. Loans held for sale, consisting entirely of SBA loans closed but not fully funded, increased $7.3 million , or 116.0%, to $13.7 million .\n \n \nPrivate wealth management fee income increased $12,000 , or 0.6% to $2.1 million . Trust assets under management and administration measured $1.873 billion at June 30, 2020 , up $209.0 million , or 50.2% annualized, primarily due to increased equity market values.\n \n \nOther non-interest income decreased $371,000 , or 35.1%, to $686,000 primarily due to a $413,000 decrease in returns on the investment in mezzanine funds.\n \n \n \nNon-interest expense increased $2.2 million , or 13.6%, to $18.3 million . Operating expense decreased $466,000 , or 2.9%, to $15.4 million .\n \n \n \nCompensation expense decreased $256,000 , or 2.3%, to $10.8 million due to a reduction in payroll taxes as first quarter payroll taxes are typically elevated commensurate with payment of amounts earned under the annual corporate incentive compensation plans. Average full-time equivalent employees were 281 for the quarter ended June 30, 2020 , compared to 286 for the quarter ended March 31, 2020 .\n \n \nMarketing expense decreased $109,000 , or 23.6%, to $352,000 , due to a temporary reduction in meals, entertainment, and sponsorships following restrictions put in place during the COVID-19 pandemic.\n \n \nThe Company recognized $1.7 million in expense due to the impairment of federal historic tax credit investments, which corresponded with the recognition of a $2.5 million in tax credits during the quarter. No federal historic tax credit investments were recognized in the first quarter of 2020.\n \n \nThe Company incurred a $744,000 loss on the early extinguishment of $59.5 million in FHLB term advances late in the second quarter of 2020.\n \n \nOther non-interest expense decreased $271,000 , or 33.2%, to $545,000 as business travel related expenses remained low due to restrictions put in place during the COVID-19 pandemic.\n \n \n \nTotal period-end loans and leases receivable increased $313.5 million to $2.057 billion primarily due to an increase in PPP loans of $327.9 million , partially offset by a $84.5 million decrease in line of credit utilization. Excluding PPP loans and lines of credit in both periods of comparison, total period-end loans and leases receivable increased $70.0 million , or 19.4% annualized, to $1.516 billion .\n \n \n \nCommercial and industrial (“C&I”) loans, excluding PPP loans and lines of credit, increased $17.9 million , or 32.0% annualized.\n \n \nCommercial real estate loans increased $61.8 million , or 21.3% annualized, driven primarily by an increase in multi-family loans and non-owner occupied commercial real estate loans.\n \n \n \nTotal period-end in-market deposits increased $237.3 million to $1.621 billion and the average rate paid decreased 63 basis points to 0.33%.\n \n \n \nTransaction accounts and money market accounts increased $202.3 million and $46.9 million , respectively, as both existing and new clients received PPP loan funds.\n \n \nCertificates of deposits decreased $11.8 million as client preferences continued to shift towards more liquid products due to the low interest rate environment.\n \n \nTotal period-end in-market deposits represent 75.3% of total bank funding compared to 73.2%.\n \n \n \nPeriod-end wholesale funding, including FHLB advances, Federal Reserve Discount Window advances, Federal Reserve PPPLF advances, brokered certificates of deposit, and deposits gathered through internet deposit listing services, increased $25.0 million to $530.4 million .\n \n \n \nBrokered certificates of deposit decreased $27.1 million to $89.8 million , as the existing portfolio run off is replaced by in-market deposits and, as needed, lower cost FHLB advances to match fund long-term fixed-rate loans. The average rate paid on wholesale deposits decreased 15 basis points to 2.42% and the weighted average original maturity decreased to 4.6 years from 4.8 years.\n \n \nFHLB advances increased $22.5 million to $411.0 million . The average rate paid on FHLB advances decreased 66 basis points to 1.25% and the weighted average original maturity decreased to 5.3 years from 5.9 years.\n \n \nDuring the second quarter of 2020, management tested the availability of the Federal Reserve PPPLF due to the uncertainty of when PPP loans would be required to close and fund. As of June 30, 2020 , the Company had one $29.6 million PPPLF advance outstanding.\n \n \n \nNon-performing assets decreased $4.1 million to $25.5 million , or 1.03% of total assets, compared to $29.6 million , or 1.35% of total assets, principally due to the payoff of impaired legacy SBA loans. Excluding PPP loans, non-performing assets were 1.19% of total assets.\n \n \nThe allowance for loan and lease losses increased $4.7 million , or 20.7%, primarily due to a $1.7 million increase in general reserve that resulted from the economic conditions caused by the pandemic, including the increase in the unemployment rate, and an additional $680,000 stemmed from the other qualitative factors, such as management’s ongoing review and grading of the loan and lease portfolios, consideration of delinquency experience, and the level of loans and leases subject to more frequent review by management. Additionally, an increase in specific reserves of $2.1 million was driven by deterioration of two existing legacy SBA impaired relationships.\n \n \n \nThe allowance for loan and lease losses as a percent of total gross loans and leases was 1.33% compared to 1.30%.\n \n \nExcluding PPP loans, the allowance for loan and leases losses as a percent of total gross loans and leases was 1.58%.\n \n \n \n Second Quarter 2020 Compared to Second Quarter 2019 \n \n \nNet interest income increased $2.0 million , or 12.1%, to $18.9 million .\n \n \n \nNet interest income reflected an increase in average loans and leases, increase in fees received in lieu of interest, and significant reduction in interest expense paid on deposits. Fees in lieu of interest totaled $2.3 million , compared to $1.2 million . Excluding fees in lieu of interest, net interest income increased $1.0 million , or 6.3%.\n \n \nAverage loans and leases receivable increased $288.8 million , or 17.0%, to $1.983 billion . Excluding average PPP loans of $259.5 million and average line of credit utilization in both periods of comparison, average loans and leases receivable increased $113.0 million , or 8.1%, to $1.513 billion .\n \n \nThe yield earned on average interest-earning assets decreased 126 basis points to 4.03% from 5.29%. Excluding average PPP loans, related interest income of $647,000 , and the aforementioned fees in lieu of interest, the yield earned on average interest-earning assets decreased 106 basis points to 3.97% from 5.03%. The rate paid for average total bank funding decreased 115 basis points to 0.61% from 1.76%. The average effective federal funds rate decreased 234 basis points to 0.06% from 2.40%.\n \n \nNet interest margin decreased 18 basis points to 3.34% from 3.52%. Adjusted net interest margin increased two basis points to 3.33% from 3.31%.\n \n \n \nNon-interest income increased $514,000 , or 8.9%, to $6.3 million .\n \n \n \nCommercial loan interest rate swap fee income increased $604,000 , or 57.5%, to $1.7 million compared to $1.1 million .\n \n \nGains on sale of SBA loans increased $277,000 , or 93.3%, to $574,000 compared to $297,000 .\n \n \nPrivate wealth management fee income decreased $14,000 , or 0.7%, to $2.1 million primarily due to decreased values in equity markets during the second quarter 2020 compared to the prior year quarter. Trust assets under management and administration measured $1.873 billion at June 30, 2020 , up $118.4 million , or 6.7%.\n \n \nOther fee income decreased $427,000 , or 38.4%, to $686,000 compared to $1.1 million . The decrease is primarily due to $501,000 in gains recognized in the second quarter of 2019 on end-of-term buyout agreements related to the Company’s equipment financing business line.\n \n \n \nNon-interest expense increased $879,000 , or 5.0%, to $18.3 million . Operating expense increased $158,000 , or 1.0%, to $15.4 million .\n \n \n \nCompensation expense increased $293,000 , or 2.8%, to $10.8 million . Average full-time equivalent employees were 281 for the quarter ended June 30, 2020 , compared to 274 for the quarter ended June 30, 2019 .\n \n \nMarketing expense decreased $229,000 , or 39.4%, to $352,000 . The reasons for the decrease in marketing expense are consistent with the linked quarter variance discussed above.\n \n \nThe Company recognized $1.7 million in expense due to the impairment of federal historic tax credit investments, which corresponded with the recognition of a $2.5 million in tax credits during the quarter, compared to $2.0 million of impairment and $2.4 million in tax credits.\n \n \nThe Company incurred a $744,000 loss on the aforementioned early extinguishment of $59.5 million in FHLB term advances.\n \n \nOther non-interest expense decreased $133,000 , or 19.6%, to $545,000 . The reasons for the decrease in other non-interest expense are consistent with the linked quarter variance discussed above.\n \n \n \nTotal period-end loans and leases receivable increased $336.9 million , or 19.6%, to $2.057 billion primarily due to an increase in PPP loans of $327.9 million , partially offset by a $105.3 million decrease in line of credit utilization. Excluding PPP loans and lines of credit in both periods of comparison, total period-end loans and leases receivable increased $114.2 million , or 8.1%, to $1.516 billion .\n \n \n \nC&I loans, excluding PPP loans and lines of credit, increased $48.1 million , or 25.0%.\n \n \nCommercial real estate loans increased $72.6 million , or 6.3%, driven primarily by an increase in multi-family loans and non-owner occupied commercial real estate loans.\n \n \n \nTotal period-end in-market deposits increased $330.4 million , or 25.6%, to $1.621 billion and the average rate paid decreased 123 basis points to 0.33%.\n \n \n \nTransaction accounts increased $300.5 million and money market accounts decreased $60.2 million .\n \n \nCertificates of deposits decreased $30.3 million as client preferences continued to shift towards more liquid products due to the low interest rate environment.\n \n \nTotal period-end in-market deposits represent 75.3% of total bank funding compared to 71.6%.\n \n \n \nPeriod-end wholesale funding increased $17.5 million to $530.4 million .\n \n \n \nBrokered certificates of deposit decreased $149.6 million to $89.8 million , as the existing portfolio runs off and is replaced by in-market deposits and, as needed, lower cost FHLB advances to match fund long-term fixed-rate loans. The average rate paid on brokered certificates of deposit increased 20 basis points to 2.42% and the weighted average original maturity decreased to 4.6 years from 4.9 years.\n \n \nFHLB advances increased $137.5 million to $411.0 million . The average rate paid on FHLB advances decreased 102 basis points to 1.25% and the weighted average original maturity increased to 5.3 years from 3.9 years. The Company extended maturities during the first half of 2020 by entering into pay-fixed swaps, with terms to pay fixed rates and receive 3-month LIBOR, to partially pre-fund the Company’s loan originations with historically low cost funding.\n \n \n \nNon-performing assets decreased $3.0 million to $25.5 million , or 1.03% of total assets, compared to $28.5 million , or 1.38% of total assets, principally due to the payoff of impaired legacy SBA loans. Excluding PPP loans, non-performing assets were 1.19% of total assets.\n \n \nThe allowance for loan and lease losses increased 38.6% primarily due to an increase in the general and specific reserve driven by the COVID-19 pandemic.\n \n \n \nThe allowance for loan and lease losses as a percent of total gross loans and leases was 1.33% compared to 1.15%.\n \n \nExcluding PPP loans, the allowance for loan and leases losses as a percent of total gross loans and leases was 1.58%.\n \n \n \nAbout First Business Financial Services, Inc. \n \n \n First Business Financial Services, Inc. (Nasdaq:FBIZ) is a Wisconsin -based bank holding company focused on the unique needs of businesses, business executives, and high net worth individuals. First Business offers commercial banking, specialty finance, and private wealth management solutions, and because of its niche focus, is able to provide its clients with unmatched expertise, accessibility, and responsiveness. For additional information, visit www.firstbusiness.com or call 608-238-8008.\n \n \nThis release may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which reflect First Business’s current views with respect to future events and financial performance. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results, or other developments. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, uncertainties, and other factors that may cause actual results to differ materially from the views, beliefs, and projections expressed in such statements. Such statements are subject to risks and uncertainties, including among other things:\n \n \n \nAdverse changes in the economy or business conditions, either nationally or in our markets, including, without limitation, the adverse effects of the COVID-19 pandemic on the global, national, and local economy.\n \n \nThe effect of the COVID-19 pandemic on the Corporation’s credit quality, revenue, and business operations.\n \n \nCompetitive pressures among depository and other financial institutions nationally and in our markets.\n \n \nIncreases in defaults by borrowers and other delinquencies.\n \n \nOur ability to manage growth effectively, including the successful expansion of our client service, administrative infrastructure, and internal management systems.\n \n \nFluctuations in interest rates and market prices.\n \n \nChanges in legislative or regulatory requirements applicable to us and our subsidiaries.\n \n \nChanges in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations.\n \n \nFraud, including client and system failure or breaches of our network security, including our internet banking activities.\n \n \nFailure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portion of SBA loans.\n \n \n \nFor further information about the factors that could affect the Company’s future results, please see the Company’s annual report on Form 10-K for the year ended December 31, 2019 , the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2020 , and other filings with the Securities and Exchange Commission .\n \n \n SELECTED FINANCIAL CONDITION DATA \n \n \n \n \n (Unaudited) \n \n \n \n \n \n \n \n As of \n \n \n \n \n \n (in thousands) \n \n \n \n \n \n \n \n June 30 ,\n2020 \n \n \n \n \n \n \n \n March 31 ,\n2020 \n \n \n \n \n \n \n \n December 31 ,\n2019 \n \n \n \n \n \n \n \n September 30 ,\n2019 \n \n \n \n \n \n \n \n June 30 ,\n2019 \n \n \n \n \n \n Assets \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nCash and cash equivalents\n \n \n \n \n \n \n \n$\n \n \n \n42,391\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n94,986\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n67,102\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n60,958\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n45,875\n \n \n \n \n \n \n \n \n \nSecurities available-for-sale, at fair value\n \n \n \n \n \n \n \n171,680\n \n \n \n \n \n \n \n \n \n \n \n175,564\n \n \n \n \n \n \n \n \n \n \n \n173,133\n \n \n \n \n \n \n \n \n \n \n \n160,665\n \n \n \n \n \n \n \n \n \n \n \n158,933\n \n \n \n \n \n \n \n \n \nSecurities held-to-maturity, at amortized cost\n \n \n \n \n \n \n \n29,826\n \n \n \n \n \n \n \n \n \n \n \n30,774\n \n \n \n \n \n \n \n \n \n \n \n32,700\n \n \n \n \n \n \n \n \n \n \n \n33,400\n \n \n \n \n \n \n \n \n \n \n \n34,519\n \n \n \n \n \n \n \n \n \nLoans held for sale\n \n \n \n \n \n \n \n13,672\n \n \n \n \n \n \n \n \n \n \n \n6,331\n \n \n \n \n \n \n \n \n \n \n \n5,205\n \n \n \n \n \n \n \n \n \n \n \n3,070\n \n \n \n \n \n \n \n \n \n \n \n4,786\n \n \n \n \n \n \n \n \n \nLoans and leases receivable\n \n \n \n \n \n \n \n2,056,863\n \n \n \n \n \n \n \n \n \n \n \n1,743,399\n \n \n \n \n \n \n \n \n \n \n \n1,714,635\n \n \n \n \n \n \n \n \n \n \n \n1,720,542\n \n \n \n \n \n \n \n \n \n \n \n1,719,976\n \n \n \n \n \n \n \n \n \nAllowance for loan and lease losses\n \n \n \n \n \n \n \n(27,464\n \n \n \n)\n \n \n \n \n \n \n \n(22,748\n \n \n \n)\n \n \n \n \n \n \n \n(19,520\n \n \n \n)\n \n \n \n \n \n \n \n(20,170\n \n \n \n)\n \n \n \n \n \n \n \n(19,819\n \n \n \n)\n \n \n \n \n \nLoans and leases receivable, net\n \n \n \n \n \n \n \n2,029,399\n \n \n \n \n \n \n \n \n \n \n \n1,720,651\n \n \n \n \n \n \n \n \n \n \n \n1,695,115\n \n \n \n \n \n \n \n \n \n \n \n1,700,372\n \n \n \n \n \n \n \n \n \n \n \n1,700,157\n \n \n \n \n \n \n \n \n \nPremises and equipment, net\n \n \n \n \n \n \n \n2,266\n \n \n \n \n \n \n \n \n \n \n \n2,427\n \n \n \n \n \n \n \n \n \n \n \n2,557\n \n \n \n \n \n \n \n \n \n \n \n2,740\n \n \n \n \n \n \n \n \n \n \n \n2,866\n \n \n \n \n \n \n \n \n \nForeclosed properties\n \n \n \n \n \n \n \n1,389\n \n \n \n \n \n \n \n \n \n \n \n1,669\n \n \n \n \n \n \n \n \n \n \n \n2,919\n \n \n \n \n \n \n \n \n \n \n \n2,902\n \n \n \n \n \n \n \n \n \n \n \n2,660\n \n \n \n \n \n \n \n \n \nRight-of-use assets\n \n \n \n \n \n \n \n6,272\n \n \n \n \n \n \n \n \n \n \n \n6,590\n \n \n \n \n \n \n \n \n \n \n \n6,906\n \n \n \n \n \n \n \n \n \n \n \n7,524\n \n \n \n \n \n \n \n \n \n \n \n7,853\n \n \n \n \n \n \n \n \n \nBank-owned life insurance\n \n \n \n \n \n \n \n51,433\n \n \n \n \n \n \n \n \n \n \n \n51,056\n \n \n \n \n \n \n \n \n \n \n \n42,761\n \n \n \n \n \n \n \n \n \n \n \n42,432\n \n \n \n \n \n \n \n \n \n \n \n42,127\n \n \n \n \n \n \n \n \n \n Federal Home Loan Bank stock, at cost\n \n \n \n \n \n \n \n13,470\n \n \n \n \n \n \n \n \n \n \n \n9,733\n \n \n \n \n \n \n \n \n \n \n \n7,953\n \n \n \n \n \n \n \n \n \n \n \n8,315\n \n \n \n \n \n \n \n \n \n \n \n6,720\n \n \n \n \n \n \n \n \n \n Goodwill and other intangible assets\n \n \n \n \n \n \n \n11,925\n \n \n \n \n \n \n \n \n \n \n \n11,872\n \n \n \n \n \n \n \n \n \n \n \n11,922\n \n \n \n \n \n \n \n \n \n \n \n11,946\n \n \n \n \n \n \n \n \n \n \n \n12,000\n \n \n \n \n \n \n \n \n \nAccrued interest receivable and other assets\n \n \n \n \n \n \n \n95,091\n \n \n \n \n \n \n \n \n \n \n \n84,721\n \n \n \n \n \n \n \n \n \n \n \n48,506\n \n \n \n \n \n \n \n \n \n \n \n58,469\n \n \n \n \n \n \n \n \n \n \n \n51,808\n \n \n \n \n \n \n \n \n \nTotal assets\n \n \n \n \n \n \n \n$\n \n \n \n2,468,814\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,196,374\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,096,779\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,092,793\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,070,304\n \n \n \n \n \n \n \n \n \n Liabilities and Stockholders’ Equity \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nIn-market deposits\n \n \n \n \n \n \n \n$\n \n \n \n1,620,616\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,383,299\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,378,903\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,320,957\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,290,258\n \n \n \n \n \n \n \n \n \nWholesale deposits\n \n \n \n \n \n \n \n89,759\n \n \n \n \n \n \n \n \n \n \n \n116,827\n \n \n \n \n \n \n \n \n \n \n \n151,476\n \n \n \n \n \n \n \n \n \n \n \n187,859\n \n \n \n \n \n \n \n \n \n \n \n239,387\n \n \n \n \n \n \n \n \n \nTotal deposits\n \n \n \n \n \n \n \n1,710,375\n \n \n \n \n \n \n \n \n \n \n \n1,500,126\n \n \n \n \n \n \n \n \n \n \n \n1,530,379\n \n \n \n \n \n \n \n \n \n \n \n1,508,816\n \n \n \n \n \n \n \n \n \n \n \n1,529,645\n \n \n \n \n \n \n \n \n \n Federal Home Loan Bank advances and other borrowings\n \n \n \n \n \n \n \n465,007\n \n \n \n \n \n \n \n \n \n \n \n412,892\n \n \n \n \n \n \n \n \n \n \n \n319,382\n \n \n \n \n \n \n \n \n \n \n \n332,897\n \n \n \n \n \n \n \n \n \n \n \n297,972\n \n \n \n \n \n \n \n \n \nJunior subordinated notes\n \n \n \n \n \n \n \n10,054\n \n \n \n \n \n \n \n \n \n \n \n10,051\n \n \n \n \n \n \n \n \n \n \n \n10,047\n \n \n \n \n \n \n \n \n \n \n \n10,044\n \n \n \n \n \n \n \n \n \n \n \n10,040\n \n \n \n \n \n \n \n \n \nLease liabilities\n \n \n \n \n \n \n \n6,877\n \n \n \n \n \n \n \n \n \n \n \n7,211\n \n \n \n \n \n \n \n \n \n \n \n7,541\n \n \n \n \n \n \n \n \n \n \n \n7,866\n \n \n \n \n \n \n \n \n \n \n \n8,187\n \n \n \n \n \n \n \n \n \nAccrued interest payable and other liabilities\n \n \n \n \n \n \n \n78,939\n \n \n \n \n \n \n \n \n \n \n \n70,437\n \n \n \n \n \n \n \n \n \n \n \n35,274\n \n \n \n \n \n \n \n \n \n \n \n42,378\n \n \n \n \n \n \n \n \n \n \n \n35,605\n \n \n \n \n \n \n \n \n \nTotal liabilities\n \n \n \n \n \n \n \n2,271,252\n \n \n \n \n \n \n \n \n \n \n \n2,000,717\n \n \n \n \n \n \n \n \n \n \n \n1,902,623\n \n \n \n \n \n \n \n \n \n \n \n1,902,001\n \n \n \n \n \n \n \n \n \n \n \n1,881,449\n \n \n \n \n \n \n \n \n \nTotal stockholders’ equity\n \n \n \n \n \n \n \n197,562\n \n \n \n \n \n \n \n \n \n \n \n195,657\n \n \n \n \n \n \n \n \n \n \n \n194,156\n \n \n \n \n \n \n \n \n \n \n \n190,792\n \n \n \n \n \n \n \n \n \n \n \n188,855\n \n \n \n \n \n \n \n \n \nTotal liabilities and stockholders’ equity\n \n \n \n \n \n \n \n$\n \n \n \n2,468,814\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,196,374\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,096,779\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,092,793\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,070,304\n \n \n \n \n \n \n \n \n \n STATEMENTS OF INCOME \n \n \n \n \n (Unaudited) \n \n \n \n \n \n \n \n As of and for the Three Months Ended \n \n \n \n \n \n \n \n As of and for the Six Months Ended \n \n \n \n \n \n (Dollars in thousands, except per share amounts) \n \n \n \n \n \n \n \n June 30 ,\n2020 \n \n \n \n \n \n \n \n March 31 ,\n2020 \n \n \n \n \n \n \n \n December 31 ,\n2019 \n \n \n \n \n \n \n \n September 30 ,\n2019 \n \n \n \n \n \n \n \n June 30 ,\n2019 \n \n \n \n \n \n \n \n June 30 ,\n2020 \n \n \n \n \n \n \n \n June 30 ,\n2019 \n \n \n \n \n \nTotal interest income\n \n \n \n \n \n \n \n$\n \n \n \n22,761\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n23,372\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n25,613\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n25,438\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n25,309\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n46,132\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n50,989\n \n \n \n \n \n \n \n \n \nTotal interest expense\n \n \n \n \n \n \n \n3,873\n \n \n \n \n \n \n \n \n \n \n \n6,322\n \n \n \n \n \n \n \n \n \n \n \n7,139\n \n \n \n \n \n \n \n \n \n \n \n8,662\n \n \n \n \n \n \n \n \n \n \n \n8,457\n \n \n \n \n \n \n \n \n \n \n \n10,195\n \n \n \n \n \n \n \n \n \n \n \n16,383\n \n \n \n \n \n \n \n \n \nNet interest income\n \n \n \n \n \n \n \n18,888\n \n \n \n \n \n \n \n \n \n \n \n17,050\n \n \n \n \n \n \n \n \n \n \n \n18,474\n \n \n \n \n \n \n \n \n \n \n \n16,776\n \n \n \n \n \n \n \n \n \n \n \n16,852\n \n \n \n \n \n \n \n \n \n \n \n35,937\n \n \n \n \n \n \n \n \n \n \n \n34,606\n \n \n \n \n \n \n \n \n \nProvision for loan and lease losses\n \n \n \n \n \n \n \n5,469\n \n \n \n \n \n \n \n \n \n \n \n3,182\n \n \n \n \n \n \n \n \n \n \n \n1,472\n \n \n \n \n \n \n \n \n \n \n \n1,349\n \n \n \n \n \n \n \n \n \n \n \n(784\n \n \n \n)\n \n \n \n \n \n \n \n8,651\n \n \n \n \n \n \n \n \n \n \n \n(736\n \n \n \n)\n \n \n \n \n \nNet interest income after provision for loan and lease losses\n \n \n \n \n \n \n \n13,419\n \n \n \n \n \n \n \n \n \n \n \n13,868\n \n \n \n \n \n \n \n \n \n \n \n17,002\n \n \n \n \n \n \n \n \n \n \n \n15,427\n \n \n \n \n \n \n \n \n \n \n \n17,636\n \n \n \n \n \n \n \n \n \n \n \n27,286\n \n \n \n \n \n \n \n \n \n \n \n35,342\n \n \n \n \n \n \n \n \n \nPrivate wealth management service fees\n \n \n \n \n \n \n \n2,124\n \n \n \n \n \n \n \n \n \n \n \n2,112\n \n \n \n \n \n \n \n \n \n \n \n2,073\n \n \n \n \n \n \n \n \n \n \n \n2,060\n \n \n \n \n \n \n \n \n \n \n \n2,138\n \n \n \n \n \n \n \n \n \n \n \n4,235\n \n \n \n \n \n \n \n \n \n \n \n4,065\n \n \n \n \n \n \n \n \n \nGain on sale of SBA loans\n \n \n \n \n \n \n \n574\n \n \n \n \n \n \n \n \n \n \n \n265\n \n \n \n \n \n \n \n \n \n \n \n465\n \n \n \n \n \n \n \n \n \n \n \n454\n \n \n \n \n \n \n \n \n \n \n \n297\n \n \n \n \n \n \n \n \n \n \n \n839\n \n \n \n \n \n \n \n \n \n \n \n539\n \n \n \n \n \n \n \n \n \nService charges on deposits\n \n \n \n \n \n \n \n829\n \n \n \n \n \n \n \n \n \n \n \n818\n \n \n \n \n \n \n \n \n \n \n \n789\n \n \n \n \n \n \n \n \n \n \n \n795\n \n \n \n \n \n \n \n \n \n \n \n743\n \n \n \n \n \n \n \n \n \n \n \n1,647\n \n \n \n \n \n \n \n \n \n \n \n1,520\n \n \n \n \n \n \n \n \n \nLoan fees\n \n \n \n \n \n \n \n451\n \n \n \n \n \n \n \n \n \n \n \n485\n \n \n \n \n \n \n \n \n \n \n \n451\n \n \n \n \n \n \n \n \n \n \n \n439\n \n \n \n \n \n \n \n \n \n \n \n464\n \n \n \n \n \n \n \n \n \n \n \n936\n \n \n \n \n \n \n \n \n \n \n \n877\n \n \n \n \n \n \n \n \n \nNet loss on sale of securities\n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n(4\n \n \n \n)\n \n \n \n \n \n \n \n(42\n \n \n \n)\n \n \n \n \n \n \n \n(4\n \n \n \n)\n \n \n \n \n \n \n \n(1\n \n \n \n)\n \n \n \n \n \n \n \n(4\n \n \n \n)\n \n \n \n \n \n \n \n(1\n \n \n \n)\n \n \n \n \n \nSwap fees\n \n \n \n \n \n \n \n1,655\n \n \n \n \n \n \n \n \n \n \n \n1,681\n \n \n \n \n \n \n \n \n \n \n \n2,267\n \n \n \n \n \n \n \n \n \n \n \n374\n \n \n \n \n \n \n \n \n \n \n \n1,051\n \n \n \n \n \n \n \n \n \n \n \n3,336\n \n \n \n \n \n \n \n \n \n \n \n1,523\n \n \n \n \n \n \n \n \n \nOther non-interest income\n \n \n \n \n \n \n \n686\n \n \n \n \n \n \n \n \n \n \n \n1,057\n \n \n \n \n \n \n \n \n \n \n \n1,186\n \n \n \n \n \n \n \n \n \n \n \n1,674\n \n \n \n \n \n \n \n \n \n \n \n1,113\n \n \n \n \n \n \n \n \n \n \n \n1,744\n \n \n \n \n \n \n \n \n \n \n \n1,920\n \n \n \n \n \n \n \n \n \nTotal non-interest income\n \n \n \n \n \n \n \n6,319\n \n \n \n \n \n \n \n \n \n \n \n6,414\n \n \n \n \n \n \n \n \n \n \n \n7,189\n \n \n \n \n \n \n \n \n \n \n \n5,792\n \n \n \n \n \n \n \n \n \n \n \n5,805\n \n \n \n \n \n \n \n \n \n \n \n12,733\n \n \n \n \n \n \n \n \n \n \n \n10,443\n \n \n \n \n \n \n \n \n \nCompensation\n \n \n \n \n \n \n \n10,796\n \n \n \n \n \n \n \n \n \n \n \n11,052\n \n \n \n \n \n \n \n \n \n \n \n11,030\n \n \n \n \n \n \n \n \n \n \n \n10,324\n \n \n \n \n \n \n \n \n \n \n \n10,503\n \n \n \n \n \n \n \n \n \n \n \n21,848\n \n \n \n \n \n \n \n \n \n \n \n20,667\n \n \n \n \n \n \n \n \n \nOccupancy\n \n \n \n \n \n \n \n554\n \n \n \n \n \n \n \n \n \n \n \n572\n \n \n \n \n \n \n \n \n \n \n \n563\n \n \n \n \n \n \n \n \n \n \n \n580\n \n \n \n \n \n \n \n \n \n \n \n559\n \n \n \n \n \n \n \n \n \n \n \n1,126\n \n \n \n \n \n \n \n \n \n \n \n1,149\n \n \n \n \n \n \n \n \n \nProfessional fees\n \n \n \n \n \n \n \n859\n \n \n \n \n \n \n \n \n \n \n \n819\n \n \n \n \n \n \n \n \n \n \n \n957\n \n \n \n \n \n \n \n \n \n \n \n751\n \n \n \n \n \n \n \n \n \n \n \n784\n \n \n \n \n \n \n \n \n \n \n \n1,678\n \n \n \n \n \n \n \n \n \n \n \n1,994\n \n \n \n \n \n \n \n \n \nData processing\n \n \n \n \n \n \n \n710\n \n \n \n \n \n \n \n \n \n \n \n677\n \n \n \n \n \n \n \n \n \n \n \n639\n \n \n \n \n \n \n \n \n \n \n \n654\n \n \n \n \n \n \n \n \n \n \n \n689\n \n \n \n \n \n \n \n \n \n \n \n1,386\n \n \n \n \n \n \n \n \n \n \n \n1,269\n \n \n \n \n \n \n \n \n \nMarketing\n \n \n \n \n \n \n \n352\n \n \n \n \n \n \n \n \n \n \n \n461\n \n \n \n \n \n \n \n \n \n \n \n610\n \n \n \n \n \n \n \n \n \n \n \n548\n \n \n \n \n \n \n \n \n \n \n \n581\n \n \n \n \n \n \n \n \n \n \n \n813\n \n \n \n \n \n \n \n \n \n \n \n1,063\n \n \n \n \n \n \n \n \n \nEquipment\n \n \n \n \n \n \n \n304\n \n \n \n \n \n \n \n \n \n \n \n291\n \n \n \n \n \n \n \n \n \n \n \n292\n \n \n \n \n \n \n \n \n \n \n \n277\n \n \n \n \n \n \n \n \n \n \n \n272\n \n \n \n \n \n \n \n \n \n \n \n595\n \n \n \n \n \n \n \n \n \n \n \n661\n \n \n \n \n \n \n \n \n \nComputer software\n \n \n \n \n \n \n \n966\n \n \n \n \n \n \n \n \n \n \n \n889\n \n \n \n \n \n \n \n \n \n \n \n929\n \n \n \n \n \n \n \n \n \n \n \n859\n \n \n \n \n \n \n \n \n \n \n \n827\n \n \n \n \n \n \n \n \n \n \n \n1,856\n \n \n \n \n \n \n \n \n \n \n \n1,626\n \n \n \n \n \n \n \n \n \n FDIC insurance\n \n \n \n \n \n \n \n239\n \n \n \n \n \n \n \n \n \n \n \n208\n \n \n \n \n \n \n \n \n \n \n \n46\n \n \n \n \n \n \n \n \n \n \n \n1\n \n \n \n \n \n \n \n \n \n \n \n302\n \n \n \n \n \n \n \n \n \n \n \n448\n \n \n \n \n \n \n \n \n \n \n \n595\n \n \n \n \n \n \n \n \n \nCollateral liquidation cost (recovery)\n \n \n \n \n \n \n \n115\n \n \n \n \n \n \n \n \n \n \n \n121\n \n \n \n \n \n \n \n \n \n \n \n10\n \n \n \n \n \n \n \n \n \n \n \n110\n \n \n \n \n \n \n \n \n \n \n \n89\n \n \n \n \n \n \n \n \n \n \n \n236\n \n \n \n \n \n \n \n \n \n \n \n(1\n \n \n \n)\n \n \n \n \n \nNet loss (gain) on foreclosed properties\n \n \n \n \n \n \n \n348\n \n \n \n \n \n \n \n \n \n \n \n102\n \n \n \n \n \n \n \n \n \n \n \n(17\n \n \n \n)\n \n \n \n \n \n \n \n262\n \n \n \n \n \n \n \n \n \n \n \n(21\n \n \n \n)\n \n \n \n \n \n \n \n450\n \n \n \n \n \n \n \n \n \n \n \n(21\n \n \n \n)\n \n \n \n \n \nTax credit investment impairment (recovery)\n \n \n \n \n \n \n \n1,841\n \n \n \n \n \n \n \n \n \n \n \n113\n \n \n \n \n \n \n \n \n \n \n \n113\n \n \n \n \n \n \n \n \n \n \n \n(120\n \n \n \n)\n \n \n \n \n \n \n \n2,088\n \n \n \n \n \n \n \n \n \n \n \n1,954\n \n \n \n \n \n \n \n \n \n \n \n4,102\n \n \n \n \n \n \n \n \n \nSBA recourse (benefit) provision\n \n \n \n \n \n \n \n(30\n \n \n \n)\n \n \n \n \n \n \n \n25\n \n \n \n \n \n \n \n \n \n \n \n21\n \n \n \n \n \n \n \n \n \n \n \n(427\n \n \n \n)\n \n \n \n \n \n \n \n113\n \n \n \n \n \n \n \n \n \n \n \n(5\n \n \n \n)\n \n \n \n \n \n \n \n594\n \n \n \n \n \n \n \n \n \nLoss on early extinguishment of debt\n \n \n \n \n \n \n \n744\n \n \n \n \n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n744\n \n \n \n \n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \nOther non-interest expense\n \n \n \n \n \n \n \n545\n \n \n \n \n \n \n \n \n \n \n \n816\n \n \n \n \n \n \n \n \n \n \n \n1,580\n \n \n \n \n \n \n \n \n \n \n \n897\n \n \n \n \n \n \n \n \n \n \n \n678\n \n \n \n \n \n \n \n \n \n \n \n1,359\n \n \n \n \n \n \n \n \n \n \n \n1,508\n \n \n \n \n \n \n \n \n \nTotal non-interest expense\n \n \n \n \n \n \n \n18,343\n \n \n \n \n \n \n \n \n \n \n \n16,146\n \n \n \n \n \n \n \n \n \n \n \n16,773\n \n \n \n \n \n \n \n \n \n \n \n14,716\n \n \n \n \n \n \n \n \n \n \n \n17,464\n \n \n \n \n \n \n \n \n \n \n \n34,488\n \n \n \n \n \n \n \n \n \n \n \n35,206\n \n \n \n \n \n \n \n \n \nIncome before income tax (benefit) expense\n \n \n \n \n \n \n \n1,395\n \n \n \n \n \n \n \n \n \n \n \n4,136\n \n \n \n \n \n \n \n \n \n \n \n7,418\n \n \n \n \n \n \n \n \n \n \n \n6,503\n \n \n \n \n \n \n \n \n \n \n \n5,977\n \n \n \n \n \n \n \n \n \n \n \n5,531\n \n \n \n \n \n \n \n \n \n \n \n10,579\n \n \n \n \n \n \n \n \n \nIncome tax (benefit) expense\n \n \n \n \n \n \n \n(1,928\n \n \n \n)\n \n \n \n \n \n \n \n858\n \n \n \n \n \n \n \n \n \n \n \n1,650\n \n \n \n \n \n \n \n \n \n \n \n1,418\n \n \n \n \n \n \n \n \n \n \n \n(595\n \n \n \n)\n \n \n \n \n \n \n \n(1,070\n \n \n \n)\n \n \n \n \n \n \n \n(1,893\n \n \n \n)\n \n \n \n \n \nNet income\n \n \n \n \n \n \n \n$\n \n \n \n3,323\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n3,278\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n5,768\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n5,085\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n6,572\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n6,601\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n12,472\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nPer common share:\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nBasic earnings\n \n \n \n \n \n \n \n$\n \n \n \n0.38\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n0.38\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n0.67\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n0.59\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n0.75\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n0.77\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1.43\n \n \n \n \n \n \n \n \n \nDiluted earnings\n \n \n \n \n \n \n \n0.38\n \n \n \n \n \n \n \n \n \n \n \n0.38\n \n \n \n \n \n \n \n \n \n \n \n0.67\n \n \n \n \n \n \n \n \n \n \n \n0.59\n \n \n \n \n \n \n \n \n \n \n \n0.75\n \n \n \n \n \n \n \n \n \n \n \n0.77\n \n \n \n \n \n \n \n \n \n \n \n1.43\n \n \n \n \n \n \n \n \n \nDividends declared\n \n \n \n \n \n \n \n0.165\n \n \n \n \n \n \n \n \n \n \n \n0.165\n \n \n \n \n \n \n \n \n \n \n \n0.15\n \n \n \n \n \n \n \n \n \n \n \n0.15\n \n \n \n \n \n \n \n \n \n \n \n0.15\n \n \n \n \n \n \n \n \n \n \n \n0.34\n \n \n \n \n \n \n \n \n \n \n \n0.30\n \n \n \n \n \n \n \n \n \nBook value\n \n \n \n \n \n \n \n23.04\n \n \n \n \n \n \n \n \n \n \n \n22.83\n \n \n \n \n \n \n \n \n \n \n \n22.67\n \n \n \n \n \n \n \n \n \n \n \n22.09\n \n \n \n \n \n \n \n \n \n \n \n21.71\n \n \n \n \n \n \n \n \n \n \n \n23.04\n \n \n \n \n \n \n \n \n \n \n \n21.71\n \n \n \n \n \n \n \n \n \nTangible book value\n \n \n \n \n \n \n \n21.65\n \n \n \n \n \n \n \n \n \n \n \n21.44\n \n \n \n \n \n \n \n \n \n \n \n21.27\n \n \n \n \n \n \n \n \n \n \n \n20.71\n \n \n \n \n \n \n \n \n \n \n \n20.33\n \n \n \n \n \n \n \n \n \n \n \n21.65\n \n \n \n \n \n \n \n \n \n \n \n20.33\n \n \n \n \n \n \n \n \n \nWeighted-average common shares outstanding(1)\n \n \n \n \n \n \n \n8,392,197\n \n \n \n \n \n \n \n \n \n \n \n8,388,666\n \n \n \n \n \n \n \n \n \n \n \n8,442,675\n \n \n \n \n \n \n \n \n \n \n \n8,492,445\n \n \n \n \n \n \n \n \n \n \n \n8,569,581\n \n \n \n \n \n \n \n \n \n \n \n8,379,696\n \n \n \n \n \n \n \n \n \n \n \n8,584,444\n \n \n \n \n \n \n \n \n \nWeighted-average diluted common shares outstanding(1)\n \n \n \n \n \n \n \n8,392,197\n \n \n \n \n \n \n \n \n \n \n \n8,388,666\n \n \n \n \n \n \n \n \n \n \n \n8,442,675\n \n \n \n \n \n \n \n \n \n \n \n8,492,445\n \n \n \n \n \n \n \n \n \n \n \n8,569,581\n \n \n \n \n \n \n \n \n \n \n \n8,379,696\n \n \n \n \n \n \n \n \n \n \n \n8,584,444\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n(1) Excluding participating securities.\n \n \n \n \n \n NET INTEREST INCOME ANALYSIS \n \n \n \n \n (Unaudited) \n \n \n \n \n \n \n \n For the Three Months Ended \n \n \n \n \n \n (Dollars in thousands) \n \n \n \n \n \n \n \n June 30, 2020 \n \n \n \n \n \n \n \n March 31, 2020 \n \n \n \n \n \n \n \n June 30, 2019 \n \n \n \n \n \n \n \n \n \n \n \n \n \n Average \n \n \n Balance \n \n \n \n \n \n \n \n Interest \n \n \n \n \n \n \n \n Average \n \n \n Yield/Rate(4) \n \n \n \n \n \n \n \n Average\nBalance \n \n \n \n \n \n \n \n Interest \n \n \n \n \n \n \n \n Average \n \n \n Yield/Rate(4) \n \n \n \n \n \n \n \n Average \n \n \n Balance \n \n \n \n \n \n \n \n Interest \n \n \n \n \n \n \n \n Average \n \n \n Yield/Rate(4) \n \n \n \n \n \n Interest-earning assets \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nCommercial real estate and other mortgage loans(1)\n \n \n \n \n \n \n \n$\n \n \n \n1,192,530\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n12,450\n \n \n \n \n \n \n \n \n \n \n \n4.18%\n \n \n \n \n \n \n \n$\n \n \n \n1,153,972\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n13,523\n \n \n \n \n \n \n \n \n \n \n \n4.69%\n \n \n \n \n \n \n \n$\n \n \n \n1,139,036\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n14,755\n \n \n \n \n \n \n \n \n \n \n \n5.18%\n \n \n \n \n \nCommercial and industrial loans(1)\n \n \n \n \n \n \n \n726,862\n \n \n \n \n \n \n \n \n \n \n \n8,347\n \n \n \n \n \n \n \n \n \n \n \n4.59%\n \n \n \n \n \n \n \n515,935\n \n \n \n \n \n \n \n \n \n \n \n7,857\n \n \n \n \n \n \n \n \n \n \n \n6.09%\n \n \n \n \n \n \n \n493,093\n \n \n \n \n \n \n \n \n \n \n \n8,477\n \n \n \n \n \n \n \n \n \n \n \n6.88%\n \n \n \n \n \nDirect financing leases(1)\n \n \n \n \n \n \n \n27,115\n \n \n \n \n \n \n \n \n \n \n \n395\n \n \n \n \n \n \n \n \n \n \n \n5.83%\n \n \n \n \n \n \n \n27,961\n \n \n \n \n \n \n \n \n \n \n \n108\n \n \n \n \n \n \n \n \n \n \n \n1.55%\n \n \n \n \n \n \n \n31,610\n \n \n \n \n \n \n \n \n \n \n \n324\n \n \n \n \n \n \n \n \n \n \n \n4.10%\n \n \n \n \n \nConsumer and other loans(1)\n \n \n \n \n \n \n \n36,614\n \n \n \n \n \n \n \n \n \n \n \n356\n \n \n \n \n \n \n \n \n \n \n \n3.89%\n \n \n \n \n \n \n \n35,874\n \n \n \n \n \n \n \n \n \n \n \n361\n \n \n \n \n \n \n \n \n \n \n \n4.03%\n \n \n \n \n \n \n \n30,555\n \n \n \n \n \n \n \n \n \n \n \n348\n \n \n \n \n \n \n \n \n \n \n \n4.56%\n \n \n \n \n \nTotal loans and leases receivable(1)\n \n \n \n \n \n \n \n1,983,121\n \n \n \n \n \n \n \n \n \n \n \n21,548\n \n \n \n \n \n \n \n \n \n \n \n4.35%\n \n \n \n \n \n \n \n1,733,742\n \n \n \n \n \n \n \n \n \n \n \n21,849\n \n \n \n \n \n \n \n \n \n \n \n5.04%\n \n \n \n \n \n \n \n1,694,294\n \n \n \n \n \n \n \n \n \n \n \n23,904\n \n \n \n \n \n \n \n \n \n \n \n5.64%\n \n \n \n \n \nMortgage-related securities(2)\n \n \n \n \n \n \n \n174,113\n \n \n \n \n \n \n \n \n \n \n \n912\n \n \n \n \n \n \n \n \n \n \n \n2.10%\n \n \n \n \n \n \n \n180,590\n \n \n \n \n \n \n \n \n \n \n \n1,061\n \n \n \n \n \n \n \n \n \n \n \n2.35%\n \n \n \n \n \n \n \n161,827\n \n \n \n \n \n \n \n \n \n \n \n1,024\n \n \n \n \n \n \n \n \n \n \n \n2.53%\n \n \n \n \n \nOther investment securities(3)\n \n \n \n \n \n \n \n30,194\n \n \n \n \n \n \n \n \n \n \n \n158\n \n \n \n \n \n \n \n \n \n \n \n2.09%\n \n \n \n \n \n \n \n23,280\n \n \n \n \n \n \n \n \n \n \n \n127\n \n \n \n \n \n \n \n \n \n \n \n2.18%\n \n \n \n \n \n \n \n28,723\n \n \n \n \n \n \n \n \n \n \n \n151\n \n \n \n \n \n \n \n \n \n \n \n2.10%\n \n \n \n \n \nFHLB stock\n \n \n \n \n \n \n \n10,301\n \n \n \n \n \n \n \n \n \n \n \n127\n \n \n \n \n \n \n \n \n \n \n \n4.93%\n \n \n \n \n \n \n \n8,512\n \n \n \n \n \n \n \n \n \n \n \n205\n \n \n \n \n \n \n \n \n \n \n \n9.63%\n \n \n \n \n \n \n \n6,875\n \n \n \n \n \n \n \n \n \n \n \n86\n \n \n \n \n \n \n \n \n \n \n \n5.00%\n \n \n \n \n \nShort-term investments\n \n \n \n \n \n \n \n61,030\n \n \n \n \n \n \n \n \n \n \n \n16\n \n \n \n \n \n \n \n \n \n \n \n0.10%\n \n \n \n \n \n \n \n35,763\n \n \n \n \n \n \n \n \n \n \n \n130\n \n \n \n \n \n \n \n \n \n \n \n1.45%\n \n \n \n \n \n \n \n22,570\n \n \n \n \n \n \n \n \n \n \n \n144\n \n \n \n \n \n \n \n \n \n \n \n2.55%\n \n \n \n \n \nTotal interest-earning assets\n \n \n \n \n \n \n \n2,258,759\n \n \n \n \n \n \n \n \n \n \n \n22,761\n \n \n \n \n \n \n \n \n \n \n \n4.03%\n \n \n \n \n \n \n \n1,981,887\n \n \n \n \n \n \n \n \n \n \n \n23,372\n \n \n \n \n \n \n \n \n \n \n \n4.72%\n \n \n \n \n \n \n \n1,914,289\n \n \n \n \n \n \n \n \n \n \n \n25,309\n \n \n \n \n \n \n \n \n \n \n \n5.29%\n \n \n \n \n \nNon-interest-earning assets\n \n \n \n \n \n \n \n167,008\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n122,975\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n110,516\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTotal assets\n \n \n \n \n \n \n \n$\n \n \n \n2,425,767\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,104,862\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,024,805\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Interest-bearing liabilities \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTransaction accounts\n \n \n \n \n \n \n \n$\n \n \n \n368,844\n \n \n \n \n \n \n \n \n \n \n \n291\n \n \n \n \n \n \n \n \n \n \n \n0.32%\n \n \n \n \n \n \n \n$\n \n \n \n271,531\n \n \n \n \n \n \n \n \n \n \n \n647\n \n \n \n \n \n \n \n \n \n \n \n0.95%\n \n \n \n \n \n \n \n$\n \n \n \n234,241\n \n \n \n \n \n \n \n \n \n \n \n989\n \n \n \n \n \n \n \n \n \n \n \n1.69%\n \n \n \n \n \nMoney market\n \n \n \n \n \n \n \n637,714\n \n \n \n \n \n \n \n \n \n \n \n368\n \n \n \n \n \n \n \n \n \n \n \n0.23%\n \n \n \n \n \n \n \n669,482\n \n \n \n \n \n \n \n \n \n \n \n1,869\n \n \n \n \n \n \n \n \n \n \n \n1.12%\n \n \n \n \n \n \n \n593,431\n \n \n \n \n \n \n \n \n \n \n \n2,850\n \n \n \n \n \n \n \n \n \n \n \n1.92%\n \n \n \n \n \nCertificates of deposit\n \n \n \n \n \n \n \n123,581\n \n \n \n \n \n \n \n \n \n \n \n627\n \n \n \n \n \n \n \n \n \n \n \n2.03%\n \n \n \n \n \n \n \n134,000\n \n \n \n \n \n \n \n \n \n \n \n750\n \n \n \n \n \n \n \n \n \n \n \n2.24%\n \n \n \n \n \n \n \n164,537\n \n \n \n \n \n \n \n \n \n \n \n1,025\n \n \n \n \n \n \n \n \n \n \n \n2.49%\n \n \n \n \n \nWholesale deposits\n \n \n \n \n \n \n \n105,597\n \n \n \n \n \n \n \n \n \n \n \n638\n \n \n \n \n \n \n \n \n \n \n \n2.42%\n \n \n \n \n \n \n \n132,468\n \n \n \n \n \n \n \n \n \n \n \n850\n \n \n \n \n \n \n \n \n \n \n \n2.57%\n \n \n \n \n \n \n \n251,060\n \n \n \n \n \n \n \n \n \n \n \n1,394\n \n \n \n \n \n \n \n \n \n \n \n2.22%\n \n \n \n \n \nTotal interest-bearing deposits\n \n \n \n \n \n \n \n1,235,736\n \n \n \n \n \n \n \n \n \n \n \n1,924\n \n \n \n \n \n \n \n \n \n \n \n0.62%\n \n \n \n \n \n \n \n1,207,481\n \n \n \n \n \n \n \n \n \n \n \n4,116\n \n \n \n \n \n \n \n \n \n \n \n1.36%\n \n \n \n \n \n \n \n1,243,269\n \n \n \n \n \n \n \n \n \n \n \n6,258\n \n \n \n \n \n \n \n \n \n \n \n2.01%\n \n \n \n \n \nFHLB advances\n \n \n \n \n \n \n \n409,281\n \n \n \n \n \n \n \n \n \n \n \n1,283\n \n \n \n \n \n \n \n \n \n \n \n1.25%\n \n \n \n \n \n \n \n325,929\n \n \n \n \n \n \n \n \n \n \n \n1,559\n \n \n \n \n \n \n \n \n \n \n \n1.91%\n \n \n \n \n \n \n \n266,137\n \n \n \n \n \n \n \n \n \n \n \n1,511\n \n \n \n \n \n \n \n \n \n \n \n2.27%\n \n \n \n \n \nFederal Reserve PPPLF\n \n \n \n \n \n \n \n20,821\n \n \n \n \n \n \n \n \n \n \n \n18\n \n \n \n \n \n \n \n \n \n \n \n0.35%\n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n—%\n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n—%\n \n \n \n \n \nOther borrowings\n \n \n \n \n \n \n \n24,681\n \n \n \n \n \n \n \n \n \n \n \n371\n \n \n \n \n \n \n \n \n \n \n \n6.01%\n \n \n \n \n \n \n \n24,385\n \n \n \n \n \n \n \n \n \n \n \n370\n \n \n \n \n \n \n \n \n \n \n \n6.07%\n \n \n \n \n \n \n \n24,463\n \n \n \n \n \n \n \n \n \n \n \n411\n \n \n \n \n \n \n \n \n \n \n \n6.72%\n \n \n \n \n \nJunior subordinated notes\n \n \n \n \n \n \n \n10,052\n \n \n \n \n \n \n \n \n \n \n \n277\n \n \n \n \n \n \n \n \n \n \n \n11.02%\n \n \n \n \n \n \n \n10,048\n \n \n \n \n \n \n \n \n \n \n \n277\n \n \n \n \n \n \n \n \n \n \n \n11.03%\n \n \n \n \n \n \n \n10,038\n \n \n \n \n \n \n \n \n \n \n \n277\n \n \n \n \n \n \n \n \n \n \n \n11.04%\n \n \n \n \n \nTotal interest-bearing liabilities\n \n \n \n \n \n \n \n1,700,571\n \n \n \n \n \n \n \n \n \n \n \n3,873\n \n \n \n \n \n \n \n \n \n \n \n0.91%\n \n \n \n \n \n \n \n1,567,843\n \n \n \n \n \n \n \n \n \n \n \n6,322\n \n \n \n \n \n \n \n \n \n \n \n1.61%\n \n \n \n \n \n \n \n1,543,907\n \n \n \n \n \n \n \n \n \n \n \n8,457\n \n \n \n \n \n \n \n \n \n \n \n2.19%\n \n \n \n \n \nNon-interest-bearing demand deposit accounts\n \n \n \n \n \n \n \n440,413\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n291,129\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n254,177\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nOther non-interest-bearing liabilities\n \n \n \n \n \n \n \n86,504\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n62,367\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n40,110\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTotal liabilities\n \n \n \n \n \n \n \n2,227,488\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n1,921,339\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n1,838,194\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nStockholders’ equity\n \n \n \n \n \n \n \n198,279\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n183,523\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n186,611\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTotal liabilities and stockholders’ equity\n \n \n \n \n \n \n \n$\n \n \n \n2,425,767\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,104,862\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,024,805\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nNet interest income\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n18,888\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n17,050\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n16,852\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nInterest rate spread\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n3.12%\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n3.10%\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n3.10%\n \n \n \n \n \nNet interest-earning assets\n \n \n \n \n \n \n \n$\n \n \n \n558,188\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n414,044\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n370,382\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nNet interest margin\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n3.34%\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n3.44%\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n3.52%\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n(1) The average balances of loans and leases include non-accrual loans and leases and loans held for sale. Interest income related to non-accrual loans and leases is recognized when collected. Interest income includes net loan fees collected in lieu of interest.\n(2) Includes amortized cost basis of assets available for sale and held to maturity.\n(3) Yields on tax-exempt municipal obligations are not presented on a tax-equivalent basis in this table.\n(4) Represents annualized yields/rates.\n \n \n \n \n \n NET INTEREST INCOME ANALYSIS (CONTINUED) \n \n \n \n \n (Unaudited) \n \n \n \n \n \n \n \n For the Six Months Ended \n \n \n \n \n \n (Dollars in thousands) \n \n \n \n \n \n \n \n June 30, 2020 \n \n \n \n \n \n \n \n June 30, 2019 \n \n \n \n \n \n \n \n \n \n \n \n \n \n Average Balance \n \n \n \n \n \n \n \n Interest \n \n \n \n \n \n \n \n Average \n \n \n Yield/Rate(4) \n \n \n \n \n \n \n \n Average \n \n \n Balance \n \n \n \n \n \n \n \n Interest \n \n \n \n \n \n \n \n Average \n \n \n Yield/Rate(4) \n \n \n \n \n \n Interest-earning assets \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nCommercial real estate and other mortgage loans(1)\n \n \n \n \n \n \n \n$\n \n \n \n1,173,251\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n25,973\n \n \n \n \n \n \n \n \n \n \n \n4.43%\n \n \n \n \n \n \n \n$\n \n \n \n1,126,449\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n29,444\n \n \n \n \n \n \n \n \n \n \n \n5.23%\n \n \n \n \n \nCommercial and industrial loans(1)\n \n \n \n \n \n \n \n621,399\n \n \n \n \n \n \n \n \n \n \n \n16,204\n \n \n \n \n \n \n \n \n \n \n \n5.22%\n \n \n \n \n \n \n \n479,644\n \n \n \n \n \n \n \n \n \n \n \n17,315\n \n \n \n \n \n \n \n \n \n \n \n7.22%\n \n \n \n \n \nDirect financing leases(1)\n \n \n \n \n \n \n \n27,538\n \n \n \n \n \n \n \n \n \n \n \n503\n \n \n \n \n \n \n \n \n \n \n \n3.65%\n \n \n \n \n \n \n \n31,927\n \n \n \n \n \n \n \n \n \n \n \n651\n \n \n \n \n \n \n \n \n \n \n \n4.08%\n \n \n \n \n \nConsumer and other loans(1)\n \n \n \n \n \n \n \n36,244\n \n \n \n \n \n \n \n \n \n \n \n717\n \n \n \n \n \n \n \n \n \n \n \n3.96%\n \n \n \n \n \n \n \n31,491\n \n \n \n \n \n \n \n \n \n \n \n701\n \n \n \n \n \n \n \n \n \n \n \n4.45%\n \n \n \n \n \nTotal loans and leases receivable(1)\n \n \n \n \n \n \n \n1,858,432\n \n \n \n \n \n \n \n \n \n \n \n43,397\n \n \n \n \n \n \n \n \n \n \n \n4.67%\n \n \n \n \n \n \n \n1,669,511\n \n \n \n \n \n \n \n \n \n \n \n48,111\n \n \n \n \n \n \n \n \n \n \n \n5.76%\n \n \n \n \n \nMortgage-related securities(2)\n \n \n \n \n \n \n \n177,352\n \n \n \n \n \n \n \n \n \n \n \n1,973\n \n \n \n \n \n \n \n \n \n \n \n2.22%\n \n \n \n \n \n \n \n153,981\n \n \n \n \n \n \n \n \n \n \n \n1,963\n \n \n \n \n \n \n \n \n \n \n \n2.55%\n \n \n \n \n \nOther investment securities(3)\n \n \n \n \n \n \n \n26,737\n \n \n \n \n \n \n \n \n \n \n \n285\n \n \n \n \n \n \n \n \n \n \n \n2.13%\n \n \n \n \n \n \n \n29,423\n \n \n \n \n \n \n \n \n \n \n \n307\n \n \n \n \n \n \n \n \n \n \n \n2.09%\n \n \n \n \n \nFHLB and FRB stock\n \n \n \n \n \n \n \n9,407\n \n \n \n \n \n \n \n \n \n \n \n331\n \n \n \n \n \n \n \n \n \n \n \n7.04%\n \n \n \n \n \n \n \n6,965\n \n \n \n \n \n \n \n \n \n \n \n175\n \n \n \n \n \n \n \n \n \n \n \n5.03%\n \n \n \n \n \nShort-term investments\n \n \n \n \n \n \n \n48,396\n \n \n \n \n \n \n \n \n \n \n \n146\n \n \n \n \n \n \n \n \n \n \n \n0.60%\n \n \n \n \n \n \n \n33,818\n \n \n \n \n \n \n \n \n \n \n \n433\n \n \n \n \n \n \n \n \n \n \n \n2.56%\n \n \n \n \n \nTotal interest-earning assets\n \n \n \n \n \n \n \n2,120,324\n \n \n \n \n \n \n \n \n \n \n \n46,132\n \n \n \n \n \n \n \n \n \n \n \n4.35%\n \n \n \n \n \n \n \n1,893,698\n \n \n \n \n \n \n \n \n \n \n \n50,989\n \n \n \n \n \n \n \n \n \n \n \n5.39%\n \n \n \n \n \nNon-interest-earning assets\n \n \n \n \n \n \n \n144,991\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n103,196\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTotal assets\n \n \n \n \n \n \n \n$\n \n \n \n2,265,315\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,996,894\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Interest-bearing liabilities \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTransaction accounts\n \n \n \n \n \n \n \n$\n \n \n \n320,188\n \n \n \n \n \n \n \n \n \n \n \n938\n \n \n \n \n \n \n \n \n \n \n \n0.59%\n \n \n \n \n \n \n \n$\n \n \n \n224,873\n \n \n \n \n \n \n \n \n \n \n \n1,860\n \n \n \n \n \n \n \n \n \n \n \n1.65%\n \n \n \n \n \nMoney market\n \n \n \n \n \n \n \n653,598\n \n \n \n \n \n \n \n \n \n \n \n2,237\n \n \n \n \n \n \n \n \n \n \n \n0.68%\n \n \n \n \n \n \n \n574,666\n \n \n \n \n \n \n \n \n \n \n \n5,373\n \n \n \n \n \n \n \n \n \n \n \n1.87%\n \n \n \n \n \nCertificates of deposit\n \n \n \n \n \n \n \n128,791\n \n \n \n \n \n \n \n \n \n \n \n1,377\n \n \n \n \n \n \n \n \n \n \n \n2.14%\n \n \n \n \n \n \n \n162,082\n \n \n \n \n \n \n \n \n \n \n \n1,983\n \n \n \n \n \n \n \n \n \n \n \n2.45%\n \n \n \n \n \nWholesale deposits\n \n \n \n \n \n \n \n119,032\n \n \n \n \n \n \n \n \n \n \n \n1,488\n \n \n \n \n \n \n \n \n \n \n \n2.50%\n \n \n \n \n \n \n \n259,379\n \n \n \n \n \n \n \n \n \n \n \n2,838\n \n \n \n \n \n \n \n \n \n \n \n2.19%\n \n \n \n \n \nTotal interest-bearing deposits\n \n \n \n \n \n \n \n1,221,609\n \n \n \n \n \n \n \n \n \n \n \n6,040\n \n \n \n \n \n \n \n \n \n \n \n0.99%\n \n \n \n \n \n \n \n1,221,000\n \n \n \n \n \n \n \n \n \n \n \n12,054\n \n \n \n \n \n \n \n \n \n \n \n1.97%\n \n \n \n \n \nFHLB advances\n \n \n \n \n \n \n \n367,604\n \n \n \n \n \n \n \n \n \n \n \n2,842\n \n \n \n \n \n \n \n \n \n \n \n1.55%\n \n \n \n \n \n \n \n267,058\n \n \n \n \n \n \n \n \n \n \n \n2,955\n \n \n \n \n \n \n \n \n \n \n \n2.21%\n \n \n \n \n \nFederal Reserve PPPLF\n \n \n \n \n \n \n \n10,410\n \n \n \n \n \n \n \n \n \n \n \n18\n \n \n \n \n \n \n \n \n \n \n \n0.35%\n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n—\n \n \n \n \n \n \n \n \n \n \n \n—%\n \n \n \n \n \nOther borrowings\n \n \n \n \n \n \n \n24,533\n \n \n \n \n \n \n \n \n \n \n \n740\n \n \n \n \n \n \n \n \n \n \n \n6.03%\n \n \n \n \n \n \n \n24,456\n \n \n \n \n \n \n \n \n \n \n \n822\n \n \n \n \n \n \n \n \n \n \n \n6.72%\n \n \n \n \n \nJunior subordinated notes\n \n \n \n \n \n \n \n10,050\n \n \n \n \n \n \n \n \n \n \n \n555\n \n \n \n \n \n \n \n \n \n \n \n11.04%\n \n \n \n \n \n \n \n10,036\n \n \n \n \n \n \n \n \n \n \n \n552\n \n \n \n \n \n \n \n \n \n \n \n11.00%\n \n \n \n \n \nTotal interest-bearing liabilities\n \n \n \n \n \n \n \n1,634,206\n \n \n \n \n \n \n \n \n \n \n \n10,195\n \n \n \n \n \n \n \n \n \n \n \n1.25%\n \n \n \n \n \n \n \n1,522,550\n \n \n \n \n \n \n \n \n \n \n \n16,383\n \n \n \n \n \n \n \n \n \n \n \n2.15%\n \n \n \n \n \nNon-interest-bearing demand deposit accounts\n \n \n \n \n \n \n \n365,771\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n255,691\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nOther non-interest-bearing liabilities\n \n \n \n \n \n \n \n74,436\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n39,017\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTotal liabilities\n \n \n \n \n \n \n \n2,074,413\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n1,817,258\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nStockholders’ equity\n \n \n \n \n \n \n \n190,902\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n179,636\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nTotal liabilities and stockholders’ equity\n \n \n \n \n \n \n \n$\n \n \n \n2,265,315\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,996,894\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nNet interest income\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n35,937\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n34,606\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nInterest rate spread\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n3.10%\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n3.23%\n \n \n \n \n \nNet interest-earning assets\n \n \n \n \n \n \n \n$\n \n \n \n486,118\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n371,148\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nNet interest margin\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n3.39%\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n3.66%\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n(1) The average balances of loans and leases include non-accrual loans and leases and loans held for sale. Interest income related to non-accrual loans and leases is recognized when collected. Interest income includes net loan fees collected in lieu of interest.\n(2) Includes amortized cost basis of assets available for sale and held to maturity.\n(3) Yields on tax-exempt municipal obligations are not presented on a tax-equivalent basis in this table.\n(4) Represents annualized yields/rates.\n \n \n \n \n \n PERFORMANCE RATIOS \n \n \n \n \n \n \n \n \n \n \n \n \n For the Three Months Ended \n \n \n \n \n \n \n \n For the Six Months Ended \n \n \n \n \n \n (Unaudited) \n \n \n \n \n \n \n \n June 30 ,\n2020 \n \n \n \n \n \n \n \n March 31 ,\n2020 \n \n \n \n \n \n \n \n December 31 ,\n2019 \n \n \n \n \n \n \n \n September 30 ,\n2019 \n \n \n \n \n \n \n \n June 30 ,\n2019 \n \n \n \n \n \n \n \n June 30 ,\n2020 \n \n \n \n \n \n \n \n June 30 ,\n2019 \n \n \n \n \n \nReturn on average assets\n (annualized)\n \n \n \n \n \n \n \n0.55%\n \n \n \n \n \n \n \n0.62%\n \n \n \n \n \n \n \n1.09%\n \n \n \n \n \n \n \n0.97%\n \n \n \n \n \n \n \n1.30%\n \n \n \n \n \n \n \n0.58%\n \n \n \n \n \n \n \n1.25%\n \n \n \n \n \nReturn on average equity\n (annualized)\n \n \n \n \n \n \n \n6.70%\n \n \n \n \n \n \n \n7.14%\n \n \n \n \n \n \n \n11.93%\n \n \n \n \n \n \n \n10.68%\n \n \n \n \n \n \n \n14.09%\n \n \n \n \n \n \n \n6.92%\n \n \n \n \n \n \n \n13.89%\n \n \n \n \n \nEfficiency ratio\n \n \n \n \n \n \n \n61.22%\n \n \n \n \n \n \n \n67.74%\n \n \n \n \n \n \n \n64.77%\n \n \n \n \n \n \n \n66.41%\n \n \n \n \n \n \n \n67.41%\n \n \n \n \n \n \n \n64.36%\n \n \n \n \n \n \n \n67.72%\n \n \n \n \n \nInterest rate spread\n \n \n \n \n \n \n \n3.12%\n \n \n \n \n \n \n \n3.10%\n \n \n \n \n \n \n \n3.33%\n \n \n \n \n \n \n \n2.95%\n \n \n \n \n \n \n \n3.10%\n \n \n \n \n \n \n \n3.10%\n \n \n \n \n \n \n \n3.23%\n \n \n \n \n \nNet interest margin\n \n \n \n \n \n \n \n3.34%\n \n \n \n \n \n \n \n3.44%\n \n \n \n \n \n \n \n3.73%\n \n \n \n \n \n \n \n3.40%\n \n \n \n \n \n \n \n3.52%\n \n \n \n \n \n \n \n3.39%\n \n \n \n \n \n \n \n3.66%\n \n \n \n \n \nAverage interest-earning assets to average interest-bearing liabilities\n \n \n \n \n \n \n \n132.82%\n \n \n \n \n \n \n \n126.41%\n \n \n \n \n \n \n \n127.44%\n \n \n \n \n \n \n \n125.54%\n \n \n \n \n \n \n \n123.99%\n \n \n \n \n \n \n \n129.75%\n \n \n \n \n \n \n \n124.38%\n \n \n \n \n \n ASSET QUALITY RATIOS \n \n \n \n \n (Unaudited) \n \n \n \n \n \n \n \n As of \n \n \n \n \n \n (Dollars in thousands) \n \n \n \n \n \n \n \n June 30 ,\n2020 \n \n \n \n \n \n \n \n March 31 ,\n2020 \n \n \n \n \n \n \n \n December 31 ,\n2019 \n \n \n \n \n \n \n \n September 30 ,\n2019 \n \n \n \n \n \n \n \n June 30 ,\n2019 \n \n \n \n \n \nNon-accrual loans and leases\n \n \n \n \n \n \n \n$\n \n \n \n24,095\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n27,897\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n20,613\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n22,789\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n25,864\n \n \n \n \n \n \n \n \n \nForeclosed properties\n \n \n \n \n \n \n \n1,389\n \n \n \n \n \n \n \n \n \n \n \n1,669\n \n \n \n \n \n \n \n \n \n \n \n2,919\n \n \n \n \n \n \n \n \n \n \n \n2,902\n \n \n \n \n \n \n \n \n \n \n \n2,660\n \n \n \n \n \n \n \n \n \nTotal non-performing assets\n \n \n \n \n \n \n \n25,484\n \n \n \n \n \n \n \n \n \n \n \n29,566\n \n \n \n \n \n \n \n \n \n \n \n23,532\n \n \n \n \n \n \n \n \n \n \n \n25,691\n \n \n \n \n \n \n \n \n \n \n \n28,524\n \n \n \n \n \n \n \n \n \nPerforming troubled debt restructurings\n \n \n \n \n \n \n \n49\n \n \n \n \n \n \n \n \n \n \n \n134\n \n \n \n \n \n \n \n \n \n \n \n140\n \n \n \n \n \n \n \n \n \n \n \n146\n \n \n \n \n \n \n \n \n \n \n \n151\n \n \n \n \n \n \n \n \n \nTotal impaired assets\n \n \n \n \n \n \n \n$\n \n \n \n25,533\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n29,700\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n23,672\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n25,837\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n28,675\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nNon-accrual loans and leases as a percent of total gross loans and leases\n \n \n \n \n \n \n \n1.17%\n \n \n \n \n \n \n \n1.60%\n \n \n \n \n \n \n \n1.20%\n \n \n \n \n \n \n \n1.32%\n \n \n \n \n \n \n \n1.50%\n \n \n \n \n \nNon-performing assets as a percent of total gross loans and leases plus foreclosed properties\n \n \n \n \n \n \n \n1.23%\n \n \n \n \n \n \n \n1.69%\n \n \n \n \n \n \n \n1.37%\n \n \n \n \n \n \n \n1.49%\n \n \n \n \n \n \n \n1.66%\n \n \n \n \n \nNon-performing assets as a percent of total assets\n \n \n \n \n \n \n \n1.03%\n \n \n \n \n \n \n \n1.35%\n \n \n \n \n \n \n \n1.12%\n \n \n \n \n \n \n \n1.23%\n \n \n \n \n \n \n \n1.38%\n \n \n \n \n \nAllowance for loan and lease losses as a percent of total gross loans and leases\n \n \n \n \n \n \n \n1.33%\n \n \n \n \n \n \n \n1.30%\n \n \n \n \n \n \n \n1.14%\n \n \n \n \n \n \n \n1.17%\n \n \n \n \n \n \n \n1.15%\n \n \n \n \n \nAllowance for loan and lease losses as a percent of non-accrual loans and leases\n \n \n \n \n \n \n \n113.98%\n \n \n \n \n \n \n \n81.54%\n \n \n \n \n \n \n \n94.70%\n \n \n \n \n \n \n \n88.51%\n \n \n \n \n \n \n \n76.64%\n \n \n \n \n \n ASSET QUALITY RATIOS - EXCLUDING PPP LOANS (1) \n \n \n \n \n (Unaudited) \n \n \n \n \n \n \n \n As of \n \n \n \n \n \n \n \n \n \n \n \n \n \n June 30 ,\n2020 \n \n \n \n \n \n \n \n March 31 ,\n2020 \n \n \n \n \n \n \n \n December 31 ,\n2019 \n \n \n \n \n \n \n \n September 30 ,\n2019 \n \n \n \n \n \n \n \n June 30 ,\n2019 \n \n \n \n \n \nNon-accrual loans and leases as a percent of total gross loans and leases\n \n \n \n \n \n \n \n1.39%\n \n \n \n \n \n \n \n1.60%\n \n \n \n \n \n \n \n1.20%\n \n \n \n \n \n \n \n1.32%\n \n \n \n \n \n \n \n1.50%\n \n \n \n \n \nNon-performing assets as a percent of total gross loans and leases plus foreclosed properties\n \n \n \n \n \n \n \n1.47%\n \n \n \n \n \n \n \n1.69%\n \n \n \n \n \n \n \n1.37%\n \n \n \n \n \n \n \n1.49%\n \n \n \n \n \n \n \n1.66%\n \n \n \n \n \nNon-performing assets as a percent of total assets\n \n \n \n \n \n \n \n1.19%\n \n \n \n \n \n \n \n1.35%\n \n \n \n \n \n \n \n1.12%\n \n \n \n \n \n \n \n1.23%\n \n \n \n \n \n \n \n1.38%\n \n \n \n \n \nAllowance for loan and lease losses as a percent of total gross loans and leases\n \n \n \n \n \n \n \n1.58%\n \n \n \n \n \n \n \n1.30%\n \n \n \n \n \n \n \n1.14%\n \n \n \n \n \n \n \n1.17%\n \n \n \n \n \n \n \n1.15%\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n(1) PPP loans outstanding as of June 30, 2020 , were $327.9 million . The other periods presented did not have any PPP loans outstanding.\n \n \n \n \n \n NET CHARGE-OFFS (RECOVERIES) \n \n \n \n \n (Unaudited) \n \n \n \n \n \n \n \n For the Three Months Ended \n \n \n \n \n \n \n \n For the Six Months Ended \n \n \n \n \n \n (Dollars in thousands) \n \n \n \n \n \n \n \n June 30 ,\n2020 \n \n \n \n \n \n \n \n March 31 ,\n2020 \n \n \n \n \n \n \n \n December 31 ,\n2019 \n \n \n \n \n \n \n \n September 30 ,\n2019 \n \n \n \n \n \n \n \n June 30 ,\n2019 \n \n \n \n \n \n \n \n June 30 ,\n2020 \n \n \n \n \n \n \n \n June 30 ,\n2019 \n \n \n \n \n \nCharge-offs\n \n \n \n \n \n \n \n$\n \n \n \n817\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n131\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n2,194\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n1,099\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n15\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n948\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n63\n \n \n \n \n \n \n \n \n \nRecoveries\n \n \n \n \n \n \n \n(64\n \n \n \n)\n \n \n \n \n \n \n \n(177\n \n \n \n)\n \n \n \n \n \n \n \n(73\n \n \n \n)\n \n \n \n \n \n \n \n(101\n \n \n \n)\n \n \n \n \n \n \n \n(169\n \n \n \n)\n \n \n \n \n \n \n \n(241\n \n \n \n)\n \n \n \n \n \n \n \n(193\n \n \n \n)\n \n \n \n \n \nNet charge-offs (recoveries)\n \n \n \n \n \n \n \n$\n \n \n \n753\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n(46\n \n \n \n)\n \n \n \n \n \n \n \n$\n \n \n \n2,121\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n998\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n(154\n \n \n \n)\n \n \n \n \n \n \n \n$\n \n \n \n707\n \n \n \n \n \n \n \n \n \n \n \n$\n \n \n \n(130\n \n \n \n)\n \n \n \n \n \nNet charge-offs (recoveries) as a percent of average gross loans and leases (annualized)\n \n \n \n \n \n \n \n0.15\n \n \n \n%\n \n \n \n \n \n \n \n(0.01\n \n \n \n)%\n \n \n \n \n \n \n \n0.49\n \n \n \n%\n \n \n \n \n \n \n \n0.23\n \n \n \n%\n \n \n \n \n \n \n \n(0.04\n \n \n \n)%\n \n \n \n \n \n \n \n0.08\n \n \n \n%\n \n \n \n \n \n \n \n(0.02\n \n \n \n)%\n \n \n \n \n \nAnnualized net charge-offs (recoveries) as a percent of average gross loans and leases, excluding average PPP loans (1)\n \n \n \n \n \n \n \n0.17\n \n \n \n%\n \n \n \n \n \n \n \n(0.01\n \n \n \n)%\n \n \n \n \n \n \n \n0.49\n \n \n \n%\n \n \n \n \n \n \n \n0.23\n \n \n \n%\n \n \n \n \n \n \n \n(0.04\n \n \n \n)%\n \n \n \n \n \n \n \n0.08\n \n \n \n%\n \n \n \n \n \n \n \n(0.02\n \n \n \n)%\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n (1) Average PPP loans outstanding for the three and six months ended June 30, 2020 , were $259.5 million and $129.8 million , respectively. The other periods presented did not have any PPP loans outstanding. \n \n \n \n CAPITAL RATIOS \n \n \n \n \n \n \n \n \n \n \n \n \n As of and for the Three Months Ended \n \n \n \n \n \n (Unaudited) \n \n \n \n \n \n \n \n June 30 ,\n2020 \n \n \n \n \n \n \n \n March 31 ,\n2020 \n \n \n \n \n \n \n \n December 31 ,\n2019 \n \n \n \n \n \n \n \n September 30 ,\n2019 \n \n \n \n \n \n \n \n June 30 ,\n2019 \n \n \n \n \n \nTotal capital to risk-weighted assets\n \n \n \n \n \n \n \n11.97%\n \n \n \n \n \n \n \n11.74%\n \n \n \n \n \n \n \n12.01%\n \n \n \n \n \n \n \n11.90%\n \n \n \n \n \n \n \n11.92%\n \n \n \n \n \nTier I capital to risk-weighted assets\n \n \n \n \n \n \n \n9.57%\n \n \n \n \n \n \n \n9.45%\n \n \n \n \n \n \n \n9.77%\n \n \n \n \n \n \n \n9.62%\n \n \n \n \n \n \n \n9.60%\n \n \n \n \n \nCommon equity tier I capital to risk-weighted assets\n \n \n \n \n \n \n \n9.08%\n \n \n \n \n \n \n \n8.96%\n \n \n \n \n \n \n \n9.27%\n \n \n \n \n \n \n \n9.11%\n \n \n \n \n \n \n \n9.09%\n \n \n \n \n \nTier I capital to adjusted assets\n \n \n \n \n \n \n \n8.29%\n \n \n \n \n \n \n \n9.33%\n \n \n \n \n \n \n \n9.27%\n \n \n \n \n \n \n \n9.18%\n \n \n \n \n \n \n \n9.36%\n \n \n \n \n \nTangible common equity to tangible assets\n \n \...

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