FBIZ — First Business Financial Services, Inc.

Summary of First Business Financial Services Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Net Income: Increased by over 9% year-over-year.
• Earnings Per Share (EPS): Grew by more than 9% compared to Q1 2025.
• Loan Growth: Up by $126 million or 15% year-over-year, with significant growth occurring in March.
• Core Deposits: Increased by 18% from the previous quarter and 14% year-over-year.
• Fee Income: Grew by nearly 16% year-over-year, with Private Wealth generating record revenues of $3.9 million.
• Net Interest Margin (NIM): Increased by 3 basis points to 3.56%, with expectations to stabilize around the targeted range of 3.60% to 3.65% for the year.
• Tangible Book Value per Share: Grew by 14% year-over-year.

2. Strategic Updates and Business Highlights

• The bank is focused on four key objectives: high-quality relationship-based growth, revenue diversification, positive operating leverage, and talent retention.
• The Private Wealth business continues to perform strongly, contributing significantly to fee income.
• The bank is actively hiring talent in treasury management and private wealth, which is expected to support ongoing growth.
• The company is seeing positive trends in Southern Wisconsin's economy, particularly in manufacturing and commercial real estate.

3. Forward Guidance and Outlook

• The bank expects to achieve its annual growth target of 10% for loans and core deposits, despite anticipating lighter growth in Q2 due to known payoffs and a lighter pipeline.
• Fee income is projected to grow by 10% for the full year, supported by strong performance in Private Wealth and service charges.
• The management remains optimistic about the impact of federal tax policy changes on business clients.

4. Bad News, Challenges, or Points of Concern

• The bank's loan growth in Q2 is expected to be softer than in Q1, with some pull-through of growth anticipated.
• There are ongoing concerns regarding geopolitical uncertainty and oil prices, which could impact business conditions.
• The bank is still working through a significant nonperforming asset from a Southeast Wisconsin client, with resolution expected to take time.
• Charge-offs were reported at 25 basis points for the quarter, slightly above the anticipated average of 20 basis points, indicating potential credit quality concerns.

5. Notable Q&A Insights

• Management confirmed that the first quarter's NIM was impacted by the timing of loan growth, with expectations for recovery in the second quarter.
• The bank's expense management strategy aims for annual expense growth to remain below the targeted 10% revenue growth.
• There was a discussion about the mix of loan growth, indicating that new client relationships are a significant driver of growth.
• The bank's leadership transition was acknowledged, with confidence expressed in the new CEO, Dave Seiler, to continue the strategic plan and maintain performance.

Overall, First Business Financial Services reported a strong start to 2026, with positive growth in loans, deposits, and fee income, while also navigating challenges related to credit quality and market conditions.