First Business Bank Reports Third Quarter 2025 Net Income of $14.2 Million

--  Continued loan and deposit growth and record fee income drive robust earnings -- 

First Business Financial Services, Inc. (the "Company", the "Bank", or "First Business Bank") (NASDAQ:FBIZ) reported quarterly net income available to common shareholders of $14.2 million, or earnings per share ("EPS") of $1.70. This compares to net income available to common shareholders of $11.2 million, or $1.35 per share, in the second quarter of 2025 and $10.3 million, or $1.24 per share, in the third quarter of 2024.

"First Business Bank's robust balance sheet growth and operating leverage drove outstanding financial performance during the quarter," said Corey Chambas, Chief Executive Officer. "We continued to execute our relationship-based growth strategy, producing record pre-tax, pre-provision earnings, 10% loan growth, 9% core deposit growth, and a strong and stable net interest margin. We also experienced improved asset quality, including an 18% reduction in non-performing assets. This led to a 13% year-to-date increase in top-line revenue and drove exceptional growth in shareholder value, with tangible book value expanding 16% from the prior year."

Quarterly Highlights

• Robust Loan Growth. Loans increased $84.6 million, or 10.4% annualized, from the second quarter of 2025, and $286.4 million, or 9.4%, from the third quarter of 2024, reflecting broad-based growth.
• Consistent Core Deposit Growth. Core deposits grew $59.0 million, or 9.3% annualized, from the linked quarter and $209.4 million, or 8.8%, from the third quarter of 2024. Core deposit funding mix improved to 73.12% compared to 71.82% in the linked quarter.
• Stable and Strong Net Interest Margin. The Company's effective match-funding strategy and pricing discipline produced a net interest margin of 3.68%, compared to 3.67% for the linked quarter and 3.64% for the prior year quarter. Net interest income increased 12.5% from the prior year quarter.
• Private Wealth Management Expansion. Private Wealth assets under management and administration grew to $3.814 billion, generating quarterly Private Wealth fee income of $3.7 million. Private Wealth fees increased by 13.0% from the prior year quarter and represented 45% of year-to-date total non-interest income.
• Record Pre-Tax, Pre-Provision ("PTPP") Income. PTPP income grew to $18.9 million, up 17.7% and 22.1% from the linked and prior year quarters, respectively. This performance reflects continued growth across the Company's balance sheet coupled with record fee income and positive operating leverage.
• Continued Tangible Book Value Growth. The Company's strong earnings and sound balance sheet management continued to drive growth in tangible book value per share, producing a 16.8% annualized increase compared to the linked quarter and a 15.6% increase compared to the prior year quarter.

Quarterly Financial Results

Third Quarter 2025 Compared to Second Quarter 2025

Net interest income increased $1.1 million, or 3.3%, to $34.9 million.

• The increase in net interest income was driven by higher average loans and leases receivable and an increase in fees in lieu of interest. Average loans and leases receivable grew by $56.0 million, or 6.9% annualized, to $3.296 billion. Fees in lieu of interest, which vary from quarter to quarter based on client-driven activity, totaled $2.2 million, compared to $1.7 million in the prior quarter. Excluding fees in lieu of interest, net interest income increased $620,000, or 1.9%.
• The yield on average interest-earning assets increased seven basis points to 6.72% from 6.65%. Excluding fees in lieu of interest, the yield on average interest-earning assets increased two basis points to 6.49% from 6.47%.
• The rate paid for average core deposits increased 14 basis points to 2.89% from 2.75%. The rate paid for average total bank funding increased six basis points to 3.14% from 3.08%. Total bank funding is defined as total deposits plus Federal Home Loan Bank ("FHLB") advances.
• Net interest margin was 3.68% compared to 3.67% for the linked quarter. Adjusted net interest margin¹ was 3.44%, down three basis points compared to 3.47% in the linked quarter. The decrease in adjusted net interest margin was driven by an increase in the rate paid on total bank funding partially offset by an increase in the yield on interest-earning assets, excluding fees in lieu of interest.
• The Company maintains a long-term target for net interest margin in the range of 3.60% - 3.65%. Performance in future quarters will vary due to factors such as the level of fees in lieu of interest and the timing, pace, and scale of future interest rate changes.

The Bank reported provision for credit losses of $1.4 million compared to $2.7 million in the linked quarter. The current quarter provision reflects net chargeoffs, loan growth, and an increase in unfunded commitments partially offset by improvement in the economic outlook in our model forecast and a decrease in general reserve qualitative factors.

Non-interest income increased $2.4 million, or 32.9%, to $9.6 million.

• Other non-interest income increased $1.2 million, or 148.1% to $2.0 million. The increase was primarily driven by higher returns on the Company's investments in Small Business Investment Company ("SBIC") funds and $537,000 of nonrecurring fee income in accounts receivable financing. Income from SBIC funds was $854,000 in the second quarter, compared to $200,000 in the linked quarter. Income from SBIC funds varies from period to period based on changes in the realized and unrealized fair value of underlying investments.
• Commercial loan swap fee income increased $804,000 to $974,000. Swap fee income varies from period to period based on loan activity and the interest rate environment.
• Bank-owned life insurance income increased $350,000 or 56.9%, to $965,000 primarily due to a $234,000 insurance claim received during the quarter.

Non-interest expense increased $732,000, or 2.9%, to $25.7 million, while operating expense increased $417,000, or 1.7%, to $25.4 million.

• Compensation expense was $17.4 million, increasing $908,000, or 5.5%, primarily due to an increase in the annual cash bonus accrual. Excluding this accrual update, compensation was $16.4 million, reflecting a decrease of $183,000, or 1.1% from the linked quarter mainly due to a decrease in individual incentive compensation and social security taxes. Average full-time equivalents ("FTEs") for the third quarter of 2025 were 366, up from 364 in the linked quarter.
• Professional fees expense was $1.1 million, decreasing $416,000, or 28%, primarily due to annual vesting of director share-based compensation in the second quarter.

• Data processing expense was $1.1 million, decreasing $245,000, or 17.9%, primarily due to annual expense related to tax processing on behalf of the Bank's Private Wealth clients recognized in the second quarter.
• Marketing expense was $876,000, decreasing $186,000, or 17.5%, primarily due to seasonality in sponsorships.
• Computer software expense was $1.8 million, increasing $170,000, or 10.3%, due to ongoing investment in innovative technology to support growth initiatives, enhance productivity, and improve the client experience.

Income tax expense increased $1.0 million to $3.0 million. The effective tax rate was 17.2% for the three months ended September 30, 2025, compared to 14.6% for the linked quarter. The increase in tax expense reflects an increase in pre-tax income and annual return to provision adjustments including updating tax credit partnership estimates. The effective tax rate for the nine months ended September 30, 2025 was 16.3%. The Company expects to report an effective tax rate between 16% and 18% for 2025.

Total period-end loans and leases receivable increased $84.6 million, or 10.4% annualized, to $3.337 billion. The average rate earned on average loans and leases receivable was 7.10%, up 11 basis points from 6.99% in the prior quarter. Excluding fees in lieu of interest, the average rate earned on average loans and leases receivable was 6.84%, up six basis points from 6.78% in the prior quarter.

• Commercial Real Estate ("CRE") loans increased by $80.0 million, or 16.4% annualized, to $2.027 billion, primarily due to growth in our Northeast Wisconsin, Southeast Wisconsin, and Kansas City markets.
• C&I loans increased $4.9 million, or 1.57% annualized, to $1.264 billion. The increase was due to growth in our Northeast Wisconsin, Southeast Wisconsin, and Kansas City markets.

Total period-end core deposits increased $59.0 million, or 9.3% annualized, to $2.592 billion. The average rate paid was 2.89%, up 14 basis points from 2.75% in the prior quarter primarily due to an increase in higher-cost certificates of deposit.

Period-end wholesale funding, including FHLB advances and brokered deposits, decreased $40.6 million, or 4.1%, to $952.9 million. Consistent with the Bank's long-held philosophy to minimize exposure to interest rate risk, management will continue to utilize the most efficient and cost-effective source of wholesale funds to match-fund fixed-rate loans, as necessary.

• Wholesale deposits decreased $31.2 million to $741.0 million. The average rate paid on wholesale deposits increased one basis point to 4.03% and the weighted average original maturity increased to 4.3 years from 4.1 years.
• FHLB advances decreased $9.5 million to $211.9 million. The average rate paid on FHLB advances decreased 16 basis points to 3.16% and the weighted average original maturity decreased to 5.3 years from 5.5 years.

Non-performing assets decreased $5.2 million to $23.5 million, or 0.58% of total assets, improving from 0.72% in the prior quarter. The decrease reflects pay downs on non-accrual C&I loans and charge-offs of previously reserved equipment finance loans, partially offset by new non-accrual equipment finance loans. We continue to expect full repayment of the previously disclosed Asset-Based Lending ("ABL") loan that defaulted during the second quarter of 2023. The liquidation process under Chapter 7 bankruptcy and related litigation has delayed final resolution. The current balance of this loan is $6.1 million. Excluding this ABL loan, non-performing assets totaled $17.4 million, or 0.43% of total assets in the current quarter and $22.6 million, or 0.56% of total assets in the linked quarter.

The allowance for credit losses, including the unfunded credit commitments reserve, increased $172,000, or 0.5%, primarily due to increases in general reserves driven by loan growth and an increase in unfunded commitments, partially offset by a decrease in specific reserve requirements, an improvement in the economic outlook in our model forecast, and improvement in qualitative factors. The allowance for credit losses, including unfunded credit commitment reserves, as a percent of total gross loans and leases was 1.15% compared to 1.18% in the prior quarter.

Third Quarter 2025 Compared to Third Quarter 2024

Net interest income increased $3.9 million, or 12.5%, to $34.9 million.

• Growth reflects higher average gross loans and leases as well as increased fees in lieu of interest, which grew by $1.0 million to $2.2 million, primarily due to a reclassification of loan fees that were previously classified as non-interest income as well as an increase in prepayment fees and non-accrual interest collected. Excluding fees in lieu of interest, net interest income increased $2.7 million, or 9.1%.
• The yield on average interest-earning assets decreased 25 basis points to 6.72% from 6.97%. Excluding fees in lieu of interest, the yield on average interest-earning assets measured 6.49% compared to 6.85%. This decrease in yield was primarily due to the decrease in short-term market rates partially offset by the reinvestment of cash flows from the securities and fixed-rate loan portfolios.
• The rate paid for average interest-bearing core deposits decreased 66 basis points to 3.44% from 4.10%. The rate paid for average total bank funding decreased 30 basis points to 3.14% from 3.44%.
• Net interest margin increased four basis points to 3.68% from 3.64%.

The Company reported provision for credit losses of $1.4 million, compared to $2.1 million in the third quarter of 2024. See the Provision for Credit Loss breakdown table below for more detail.

Non-interest income increased $2.6 million, or 36.5%, to $9.6 million.

• Other fee income increased $1.2 million, or 170.5%, to $2.0 million. The increase was primarily due to higher returns on the Company's investments in SBIC funds and $537,000 of nonrecurring fee income in accounts receivable financing. Income from SBIC funds was $854,000 in the third quarter, compared to $193,000 in the prior year quarter. Income from SBIC funds varies from period to period based on changes in the realized and unrealized fair value of underlying investments.
• Bank-owned life insurance income increased $549,000 to $965,000 primarily due to the purchase of new policies and the aforementioned insurance claim.
• Commercial loan swap fee income increased $514,000 to $974,000. Swap fee income varies period to period based on loan activity and the interest rate environment.
• Private wealth fee income increased $423,000, or 13.0%, to $3.7 million. Private Wealth assets under management and administration measured $3.814 billion at September 30, 2025 up $415.9 million, or 12.2%.
• Loan fee income decreased $311,000 to $501,000 primarily due to a reclassification of certain types of C&I loan fees from non-interest income to interest income.
• Service charges on deposits increased $231,000, or 25.1%, to $1.2 million, primarily driven by new and expanded core deposit relationships.

Non-interest expense increased $2.6 million, or 11.2%, to $25.7 million. Operating expense increased $2.8 million, or 12.4%, to $25.4 million.

• Compensation expense increased $2.2 million, or 14.8%, to $17.4 million. Growth reflects an increase in average FTEs, annual merit increases and promotions, an increase in the cash bonus accrual, and decreased capitalized software development compensation. Average FTEs increased 3.1% to 366 in the third quarter of 2025, compared to 355 in the third quarter of 2024.
• Computer software expense increased $218,000, or 13.6%, to $1.8 million, due to ongoing investment in innovative technology to support growth initiatives, enhance productivity, and improve the client experience.
• Other non-interest expense increased $381,000, or 29.3%, to $1.7 million, primarily due to an increase in liquidation expenses, donations, and administrative costs in early stage limited partnership investments. This was partially offset by a decrease in SBA recourse provision.
• Professional fees decreased $234,000, or 17.9%, to $1.1 million, primarily due to timing of various consulting fees and legal fees.

Total period-end loans and leases receivable increased $286.4 million, or 9.4%, to $3.337 billion.

• CRE loans increased $110.1 million, or 6.0%, to $2.027 billion, primarily due to growth across the Wisconsin and Kansas City markets.
• C&I loans increased $112.4 million, or 9.6%, to $1.264 billion, primarily due to growth across our bank markets and in our floorplan and equipment finance businesses.

Total period-end core deposits grew $209.4 million, or 8.8%, to $2.592 billion. The average rate paid decreased 45 basis points to 2.89%, reflecting a decrease in short-term market rates. Total average core deposits grew $222.0 million, or 9.3%, to $2.597 billion.

Period-end wholesale funding increased $82.5 million, or 28.0%, to $952.9 million.

• Wholesale deposits increased $153.7 million, or 26.2%, to $741.0 million, as the Bank utilized more wholesale deposits in lieu of FHLB advances to maintain excess liquidity and to match-fund fixed-rate assets. The average rate paid on wholesale deposits decreased nine basis points to 4.03% and the weighted average original maturity increased to 4.3 years from 4.0 years.
• FHLB advances decreased $82.5 million to $211.9 million. The average rate paid on FHLB advances increased 20 basis points to 3.16% and the weighted average original maturity remained flat at 5.3 years.

Non-performing assets increased to $23.5 million, or 0.58% of total assets, compared to $19.4 million, or 0.52% of total assets, primarily driven by new non-accrual loans in the C&I transportation and logistics portfolio partially offset lower non-accrual equipment finance loans. Excluding the ABL loan described above for which we expect full repayment, non-performing assets totaled $17.4 million, or 0.43% of total assets and $13.0 million, or 0.35% of total assets in the prior year quarter.

The allowance for credit losses, including unfunded commitment reserves, increased $2.9 million to $38.4 million primarily due to higher general reserves as a result of loan growth and quantitative factors partially offset by lower specific reserves. The allowance for credit losses as a percent of total gross loans and leases was 1.15%, compared with 1.16% in the prior year.

2026 CEO Succession Plan

On May 5, 2025, the Company announced that Corey A. Chambas intends to retire from his role as Chief Executive Officer on May 2, 2026. The Company will name President and Chief Operating Officer David R. Seiler to succeed him as CEO effective the same date.

Earnings Release Supplement and Conference Call

On October 30, 2025, the Company posted an earnings release supplement to its website firstbusiness.bank under the "Investor Relations" tab which will also be furnished to the U.S. Securities and Exchange Commission on October 30, 2025. The information included in the supplement provides an overview of the Company's recent operating performance, financial condition, and other data relevant to the quarter. The Company intends to use this supplement in connection with its third quarter 2025 earnings call to be held at 1:00 p.m. Central time on October 31, 2025. The conference call can be accessed at 800-549-8228 (646-564-2877 if outside the United States and Canada), using the conference call access code: FBIZ, 82881. Investors may also listen live via webcast at: https://events.q4inc.com/attendee/466645836. A replay of the call will be available through Friday, November 7, 2025, by calling 888-660-6264 (646-517-3975 if outside the United States and Canada). The webcast archive of the conference call will be available on the Company's website, ir.firstbusiness.bank.

About First Business Bank

First Business Bank^® specializes in Business Banking, including Commercial Banking and Specialty Finance, Private Wealth, and Bank Consulting services, and through its refined focus delivers unmatched expertise, accessibility, and responsiveness. Specialty Finance solutions are delivered through First Business Bank's wholly owned subsidiary First Business Specialty Finance, LLC^®. First Business Bank is a wholly owned subsidiary of First Business Financial Services, Inc^®. (NASDAQ:FBIZ). For additional information, visit firstbusiness.bank.

This release may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which reflect First Business Bank'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:

• Adverse changes in the economy or business conditions, either nationally or in our markets including, without limitation, inflation, economic downturn, labor shortages, wage pressures, and the adverse effects of public health events on the global, national, and local economy.
• Uncertainty created by potential federal government actions relating to the authority of regulatory agencies (including bank regulators), international trade policy, prolonged shutdown of the federal government, and other significant policy matters.
• Competitive pressures among depository and other financial institutions nationally and in the Company's markets.
• Increases in defaults by borrowers and other delinquencies.
• Management's ability to manage growth effectively, including the successful expansion of our client support, administrative infrastructure, and internal management systems.
• Fluctuations in interest rates and market prices.
• Changes in legislative or regulatory requirements applicable to the Company and its subsidiaries.
• Changes in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations.
• Fraud, including client and system failure or breaches of our network security, including the Company's internet banking activities.
• Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portion of SBA loans.
• Ongoing volatility in the banking sector may result in new legislation, regulations or policy changes that could subject the Company and the Bank to increased government regulation and supervision.
• The proportion of the Company's deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk.

For 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, 2024, and other filings with the Securities and Exchange Commission.

NON-GAAP RECONCILIATIONS

Certain financial information provided in this release is determined by methods other than in accordance with generally accepted accounting principles (United States) ("GAAP"). Although the Company's management believes that these non-GAAP financial measures provide a greater understanding of its business, these measures are not necessarily comparable to similar measures that may be presented by other companies.

TANGIBLE BOOK VALUE

"Tangible book value per share" is a non-GAAP measure representing tangible common equity divided by total common shares outstanding. "Tangible common equity" itself is a non-GAAP measure representing common stockholders' equity reduced by intangible assets, if any. The Company's management believes that this measure is important to many investors in the marketplace who are interested in period-to-period changes in book value per common share exclusive of changes in intangible assets. The information provided below reconciles tangible book value per share and tangible common equity to their most comparable GAAP measures.

TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS

"Tangible common equity to tangible assets" ("TCE") is defined as the ratio of common stockholders' equity reduced by intangible assets, if any, divided by total assets reduced by intangible assets, if any. Adjusted TCE ratio is defined as TCE adjusted for net fair value adjustments of financial assets and liabilities. For more information on fair value adjustments please refer to Note 19 - Fair Value Disclosures in the annual report on Form 10-K for the year ended December 31, 2024. The Company's management believes that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. The information below reconciles tangible common equity and tangible assets to their most comparable GAAP measures.

EFFICIENCY RATIO & PRE-TAX, PRE-PROVISION ADJUSTED EARNINGS

"Efficiency ratio" is a non-GAAP measure representing non-interest expense excluding the effects of the SBA recourse provision, impairment of tax credit investments, losses or gains on repossessed assets, amortization of other intangible assets and other discrete items, if any, divided by operating revenue, which is equal to net interest income plus non-interest income less realized gains or losses on securities, if any. "Pre-tax, pre-provision adjusted earnings" is defined as operating revenue less operating expense. In the judgment of the Company's management, the adjustments made to non-interest expense and non-interest income allow investors and analysts to better assess the Company's operating expenses in relation to its core operating revenue by removing the volatility that is associated with certain one-time items and other discrete items. The information provided below reconciles the efficiency ratio and pre-tax, pre-provision adjusted earnings to its most comparable GAAP measure.