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 alongside net income.
• Loan Growth: Up by $126 million or 15% year-over-year, with significant growth occurring in March (72% of total loan growth).
• Core Deposits: Increased by 18% from the linked quarter and 14% year-over-year.
• Fee Income: Grew nearly 16% year-over-year, with Private Wealth contributing record revenues of $3.9 million (up 11% year-over-year).
• Net Interest Margin (NIM): Increased by 3 basis points to 3.56%, with an adjusted NIM of 3.61% when accounting for fewer accrual days.
• 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.
• Strong performance in asset-based lending and private wealth management, with a new president hired for the Private Wealth business.
• The bank is seeing positive trends in its Southern Wisconsin markets, particularly in manufacturing and distribution sectors.
• Continued efforts to enhance treasury management talent and maintain disciplined business development are yielding results.

3. Forward Guidance and Outlook

• The bank aims for 10% annual growth in loans and core deposits, with expectations of normalization in growth rates in Q2 due to known payoffs and lighter pipelines.
• Anticipated stable to modestly changing interest rates are expected to support NIM within the targeted range of $3.60 to $3.65 for the year.
• Fee income is projected to grow by 10% for the full year, supported by strong performance in private wealth and service charges.

4. Bad News, Challenges, or Points of Concern

• The bank anticipates a slowdown in loan growth in Q2 due to lighter pipelines and known payoffs.
• There are ongoing concerns regarding geopolitical uncertainties and oil prices, which could impact business conditions.
• The bank is still working through a nonperforming asset related to a $20.4 million CRE loan, with no expected resolution until the second half of 2026.
• Charge-offs were slightly higher than expected at 25 basis points, above the typical 20 basis points target.

5. Notable Q&A Insights

• Leadership Transition: Corey Chambas is retiring, and Dave Seiler will take over as CEO. The transition is expected to maintain the bank's strategic focus.
• Fee Income Stability: There is an acknowledgment of the lumpiness in fee income, but efforts are being made to create more consistency through investments in small business funds.
• Growth Composition: The growth in loans is driven primarily by new client relationships, with a focus on maintaining and expanding existing relationships.
• Expense Management: The bank aims to achieve positive operating leverage, with expenses expected to grow modestly below the targeted 10% revenue growth.

Overall, First Business Financial Services reported a strong start to 2026, with solid growth metrics and strategic initiatives in place, though challenges remain regarding loan growth normalization and nonperforming assets.