First Business(FBIZ) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Earnings Overview Executive Summary First Business Bank reported strong Q2 2025 net income and EPS, driven by balance sheet expansion, loan growth, and improved efficiency - Net income available to common shareholders for Q2 2025 was $11.2 million, up from $11.0 million in Q1 2025 and $10.2 million in Q2 2024[1] - Diluted EPS for Q2 2025 was $1.35, compared to $1.32 in Q1 2025 and $1.23 in Q2 2024[1] - For the first half of 2025, operating revenue grew 10%, pre-tax, pre-provision earnings grew 18%, and net income grew 17%[2] - Tangible book value expanded an impressive 14% from the prior year[2] Quarterly Highlights Q2 2025 highlights include robust growth in deposits and loans, stable net interest margin, and strong tangible book value - Total deposits grew $62.2 million (7.7% annualized) from the linked quarter and $420.0 million (14.6%) from Q2 2024[4] - Core deposits grew $70.4 million (11.4% annualized) from the linked quarter and $223.5 million (9.7%) from Q2 2024[4] - Loans increased $66.9 million (8.4% annualized) from Q1 2025 and $266.9 million (8.9%) from Q2 2024[4] - Net interest margin was 3.67%, compared to 3.69% for the linked quarter and 3.65% for the prior year quarter, with net interest income increasing 10.6% YoY[4] - Private Wealth assets under management and administration grew to $3.731 billion, generating record quarterly Private Wealth fee income of $3.7 million (up 8.3% YoY)[4] - Tangible book value per share increased 10.2% annualized QoQ and 13.6% YoY[4] Detailed Financial Performance Quarterly Financial Results (Table) This table presents unaudited financial results for Q2 2025, Q1 2025, and Q2 2024, covering income statement, balance sheet, and performance ratios Quarterly Financial Results (Unaudited) | (Dollars in thousands, except per share amounts) | June 30, 2025 | March 31, 2025 | June 30, 2024 | June 30, 2025 (YTD) | June 30, 2024 (YTD) | | :---------------------------------------------- | :------------ | :------------- | :------------ | :------------------ | :------------------ | | Net interest income | $33,784 | $33,258 | $30,540 | $67,042 | $60,051 | | Operating revenue | 41,039 | 40,837 | 37,965 | 81,876 | 74,241 | | Operating expense | 25,023 | 24,617 | 23,823 | 49,640 | 46,954 | | Pre-tax, pre-provision adjusted earnings | 16,016 | 16,220 | 14,142 | 32,236 | 27,287 | | Net income available to common shareholders | $11,203 | $10,952 | $10,237 | $22,265 | $18,866 | | Earnings per share, diluted | $1.35 | $1.32 | $1.23 | $2.66 | $2.26 | | Tangible book value per share | $38.54 | $37.58 | $33.92 | $38.54 | $33.92 | | Net interest margin | 3.67% | 3.69% | 3.65% | 3.68% | 3.62% | | Efficiency ratio | 60.97% | 60.28% | 62.75% | 60.63% | 63.25% | | Period-end loans and leases receivable | $3,250,925 | $3,184,400 | $2,985,414 | $3,250,925 | $2,985,414 | | Period-end core deposits | $2,533,099 | $2,462,695 | $2,309,635 | $2,533,099 | $2,309,635 | | Non-performing assets | $28,664 | $24,092 | $19,053 | $28,664 | $19,053 | | Non-performing assets as a percent of total assets | 0.72% | 0.61% | 0.53% | 0.72% | 0.53% | Q2 2025 vs Q1 2025 Performance Analysis Net interest income increased, while non-interest income and operating expenses saw slight decreases, with loan and deposit growth continuing and stable net interest margin - Net interest income increased by $526,000, or 1.6%, to $33.8 million[7] - Provision for credit losses remained stable at $2.7 million, primarily driven by an increase in general reserves due to a deterioration in economic outlook and loan growth, partially offset by a decrease in specific reserve requirements[8] - Non-interest income decreased $324,000, or 4.3%, to $7.3 million[9] - Operating expense decreased $406,000, or 1.6%, to $25.0 million, mainly due to lower compensation expense from payroll taxes in the prior quarter, despite an expanded workforce (average FTEs up to 364 from 353)[10] - Net interest margin was 3.67% compared to 3.69% for the linked quarter, while adjusted net interest margin increased one basis point to 3.47%[11] - Private wealth fee income increased $256,000, or 7.3%, to $3.7 million, with Private Wealth assets under management and administration up $306.1 million, or 35.8% annualized[11] - Total period-end loans and leases receivable increased $66.9 million, or 8.4% annualized, to $3.252 billion[13] - Total period-end core deposits increased $70.4 million, or 11.4% annualized, to $2.533 billion[14] - Non-performing assets increased $4.6 million to $28.7 million, or 0.72% of total assets, primarily driven by one new non-accrual loan in the transportation and logistics segment[16] - The allowance for credit losses, including unfunded credit commitments reserve, increased $1.7 million, or 4.6%, to 1.18% of total gross loans and leases, up from 1.15% in the prior quarter[17] Q2 2025 vs Q2 2024 Performance Analysis Net interest income significantly increased year-over-year, supported by loan growth, despite higher provision for credit losses and increased operating expenses - Net interest income increased $3.2 million, or 10.6%, to $33.8 million[18] - Provision for credit losses increased to $2.7 million, compared to $1.7 million in the second quarter of 2024[20] - Non-interest income decreased $170,000, or 2.3%, to $7.3 million[21] - Operating expense increased $1.2 million, or 5.0%, to $25.0 million, driven by increases in compensation (up 2.0% due to increased FTEs), FDIC Insurance (up 36.3%), data processing (up 15.7%), computer software (up 6.5%), and marketing (up 24.9%)[22][24](index=24&