Summary of First Business Financial Services Q1 2026 Earnings Call

1Key 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.

2Strategic 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.

3Forward 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.

4Bad 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.

5Notable 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.