First Business Bank Reports Strong Third Quarter 2025 Results with $14.2 Million Net Income and Record Operating Performance
First Business Financial Services, Inc. (the “Company,” the “Bank,” or “First Business Bank”) (Nasdaq: FBIZ) announced impressive financial results for the third quarter ended September 30, 2025, reporting net income available to common shareholders of $14.2 million, or earnings per share (EPS) of $1.70. This represents a significant increase from $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.
Corey Chambas, Chief Executive Officer of First Business Bank, attributed the strong quarterly performance to the company’s robust balance sheet growth and disciplined operational strategy.
First Business Bank’s robust balance sheet growth and operating leverage drove outstanding financial performance during the quarter,” Chambas said. “We continued executing our relationship-based growth strategy, delivering record pre-tax, pre-provision earnings, double-digit loan and deposit growth, and a strong, stable net interest margin. Our commitment to credit discipline also resulted in improved asset quality, including an 18% reduction in non-performing assets.”
He added that the Bank’s strategic focus and consistent performance are generating measurable shareholder value, with tangible book value per share up 16% year-over-year and total revenue rising 13% year-to-date.
Quarterly Performance Highlights
Robust Loan Growth:
Loans increased by $84.6 million, or 10.4% annualized, compared to the previous quarter, and by $286.4 million, or 9.4%, compared to the same period last year. The loan portfolio expansion was broad-based, supported by growth across commercial real estate (CRE) and commercial & industrial (C&I) lending.
Steady Core Deposit Expansion:
Core deposits grew by $59.0 million, or 9.3% annualized, over the previous quarter and $209.4 million, or 8.8%, year-over-year. The core deposit funding mix improved to 73.12%, up from 71.82% in Q2 2025, demonstrating a healthier and more stable funding structure.
Strong Net Interest Margin and Income Growth:
The Bank maintained a net interest margin (NIM) of 3.68%, slightly higher than 3.67% in Q2 2025 and 3.64% in Q3 2024. Net interest income increased 12.5% year-over-year to $34.9 million, driven by loan growth and a disciplined pricing strategy.
Excluding “fees in lieu of interest” — a volatile income component tied to client-driven activities — adjusted NIM stood at 3.44%, within the Bank’s target range of 3.60%–3.65%. The yield on average interest-earning assets improved to 6.72%, while the rate paid on average core deposits rose modestly to 2.89%.
Private Wealth Management Expansion:
Private Wealth assets under management and administration reached $3.814 billion, generating $3.7 million in quarterly fee income, up 13% from the same period in 2024. Private Wealth fees now account for 45% of total non-interest income year-to-date, highlighting the Bank’s growing diversification in non-interest revenue sources.
Record Pre-Tax, Pre-Provision (PTPP) Income:
PTPP income surged to a record $18.9 million, up 17.7% from Q2 2025 and 22.1% from Q3 2024. The growth reflects the combination of a larger balance sheet, record fee income, and positive operating leverage.
Tangible Book Value Growth:
The Company’s tangible book value per share rose 16.8% annualized from Q2 and 15.6% year-over-year, reflecting the Bank’s sustained profitability and prudent balance sheet management.
Detailed Financial Performance
Net Interest Income and Margin
Net interest income grew $1.1 million, or 3.3%, sequentially to $34.9 million. The increase was driven by higher average loans and leases receivable, which rose $56.0 million, or 6.9% annualized, to $3.296 billion, and by increased fee income tied to loan activity.
“Fees in lieu of interest” totaled $2.2 million, up from $1.7 million in Q2 2025. Excluding these, net interest income still rose 1.9%, supported by steady loan yields and disciplined funding management.
The average yield on interest-earning assets increased to 6.72%, while the rate paid on total bank funding rose slightly to 3.14%. The Bank’s match-funding strategy helped sustain NIM despite rising funding costs, keeping it well within the long-term target range.
Provision for Credit Losses
Provision for credit losses declined to $1.4 million, down from $2.7 million in Q2 2025, reflecting stable credit performance and improved macroeconomic conditions. The allowance for credit losses, including unfunded commitments, was 1.15% of total loans and leases, compared to 1.18% in the prior quarter.
Non-performing assets (NPAs) declined $5.2 million to $23.5 million, representing 0.58% of total assets, down from 0.72% in Q2 2025. The reduction was driven by paydowns and charge-offs of previously reserved loans. Excluding one long-standing Asset-Based Lending (ABL) loan in Chapter 7 bankruptcy proceedings, NPAs were just 0.43% of total assets.
Non-Interest Income
Non-interest income climbed 32.9%, or $2.4 million, to $9.6 million for the quarter. Growth was driven by diverse sources:
- Other non-interest income rose 148.1% to $2.0 million, fueled by strong returns from Small Business Investment Company (SBIC) funds and a $537,000 nonrecurring fee from accounts receivable financing.
- Commercial loan swap fee income surged to $974,000, up $804,000, due to increased client loan activity.
- Bank-owned life insurance (BOLI) income jumped 56.9% to $965,000, reflecting insurance claim income and additional policies.
- Private Wealth fee income continued its upward trajectory, increasing 13.0% year-over-year.
This non-interest income performance underscores First Business Bank’s success in diversifying beyond interest-based revenue.
Non-Interest Expense
Total non-interest expense increased 2.9% to $25.7 million, primarily due to higher compensation costs.
- Compensation expense rose 5.5% to $17.4 million, reflecting increased bonus accruals and slightly higher full-time equivalent (FTE) headcount, which averaged 366 employees, up from 364 in the prior quarter.
- Professional fees decreased 28% to $1.1 million, following annual vesting of director share-based compensation in the previous quarter.
- Data processing and marketing expenses fell 17.9% and 17.5%, respectively, demonstrating cost control.
- Computer software expenses rose 10.3% to $1.8 million, reflecting continued investments in technology for growth and client experience enhancement.
The Bank’s income tax expense increased by $1.0 million to $3.0 million, resulting in an effective tax rate of 17.2% for the quarter. For 2025, the Company expects its effective tax rate to remain between 16% and 18%.
Balance Sheet Highlights
At the end of Q3 2025, total loans and leases receivable reached $3.337 billion, up 10.4% annualized from Q2 and 9.4% year-over-year.
- CRE loans increased $80.0 million, or 16.4% annualized, to $2.027 billion, with notable growth in Northeast Wisconsin, Southeast Wisconsin, and Kansas City markets.
- C&I loans rose $4.9 million, or 1.57% annualized, to $1.264 billion, primarily in the same key markets.
Core deposits expanded to $2.592 billion, up 9.3% annualized from Q2 2025 and 8.8% year-over-year. The average rate paid on deposits increased modestly to 2.89%, reflecting competitive deposit pricing dynamics.
Wholesale funding, including Federal Home Loan Bank (FHLB) advances and brokered deposits, decreased 4.1% sequentially to $952.9 million. The Company continues to employ a disciplined strategy to minimize exposure to interest rate risk by match-funding fixed-rate loans with cost-efficient wholesale sources.
Year-over-Year Comparisons (Q3 2025 vs. Q3 2024)
Compared to the same period last year:
- Net interest income grew 12.5% to $34.9 million.
- Non-interest income surged 36.5% to $9.6 million.
- Total loans and leases increased $286.4 million, or 9.4%.
- Core deposits rose 8.8% to $2.592 billion.
- Tangible book value per share expanded 15.6%, underscoring strong shareholder returns.
Meanwhile, non-performing assets improved year-over-year, and the Bank maintained a healthy credit reserve ratio.
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