FBIZ 10-K & 10-Q changes, risk factors and insider trading
First Business Financial Services, Inc. · Nasdaq · State Commercial Banks · CIK 1521951 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Liquidity and Interest Rate Risks”
New heading “Operational Risks”
New heading “Strategic and External Risks”
New heading “Regulatory, Compliance, Legal and Reputational Risks”
New heading “General Risk Factors”
New heading “If we do not effectively manage our credit risk, we may experience increased levels of delinquencies, non-accrual loans, and charge-offs, which would require increases in our provision for credit losses.”
New heading “Our allowance for credit losses may not be adequate to cover actual losses.”
New heading “A significant portion of our loan and lease portfolio is comprised of commercial real estate loans, which involve risks specific to real estate values and the real estate markets in general.”
New heading “The adoption of artificial intelligence tools by us and our third-party vendors and service providers may increase the risk of errors, omissions, unfair treatment, or fraudulent behavior by our employees, clients, or counterparties, or other third parties.”
Removed heading “A large portion of our loan and lease portfolio is comprised of commercial loans secured by various business assets, the deterioration in value of which could increase our exposure to future probable losses.”
Largest changes
“Our adoption of artificial intelligence, including generative artificial intelligence, machine learning, and similar tools and technologies that collect, aggregate, analyze, or generate data or other materials or content (collectively, “AI”), is currently evolving and is being implemented on a measured basis for internal use, and we expect to continue to adopt such tools as appropriate. In addition, we expect our third-party vendors and service providers to increasingly develop and incorporate AI into their product offerings. …”see in full comparison
“We are subject to extensive regulation and supervision that govern almost all aspects of our operations. …”see in full comparison
“Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose additional costs. Through our nationwide lending businesses we operate in all 50 states, and through our workforce we employ individuals across 25-30 states at any given time. Each state has statutes that are unique to that state which could impact how we conduct business in the state. …”see in full comparison
“The adoption of artificial intelligence tools by us and our third-party vendors and service providers may increase the risk of errors, omissions, unfair treatment, or fraudulent behavior by our employees, clients, or counterparties, or other third parties.”see in full comparison
Federal banking agencies have concluded that the proportion of the deposits that exceeded FDIC insurance limits was a significant factor in the failure ofsee in full comparisoncertainseveral banking institutions in the first half of 2023. Advances in digital banking and payment technologies, as well as increased access to real-time information, have heightened regulators’ focus on the potential speed and magnitude of deposit outflows. These advances may also enable depositors to withdraw funds more rapidly than in the past. Inresponse,response to the 2023 bank failures, many large depositors across the industry withdrew deposits in excess of applicable deposit insurance limits and deposited these funds in other financial institutions and low-risk securities accounts in an effort to mitigate the risk of potentialfurtherbank failures.While theThe Bankhasdid notexperiencedexperience significant withdrawal activity in connection with the 2023 bankfailures,failures.ifIf a significant portion of the Bank’s deposits were to be withdrawn within a short period of time in connection with asimilarsimilar, future crisis, additional sources of funding may be required to meet withdrawaldemands.demandsTheandCorporation may be unable to obtain sufficientthese fundingon favorable terms, whichsources may have an adverse effect on the Corporation’s net interest margin.InAnyaddition,decline in available fundingdepositcould adversely impact our ability to originate loans, invest in securities, meet our expenses, pay dividends to our shareholders, or fulfill obligationsmaysuchbeasmorerepayingdifficultourinborrowings or meeting deposit withdrawal demands, any of which could have ahighmaterialinterestadverserateeffectenvironment.onBecauseourthebusiness,Corporation’s available-for-sale investment securities may lose value when interest rates rise, proceeds from the saleresults ofsuchoperations,assetsandmayfinancialbe diminished during periods of elevated interest rates. Under such circumstances, the Corporation may be required to access funding from alternative liquidity sources in order to manage our liquidity risk.condition.
Full comparison: every changed paragraph (99)
An investment in our common stock is subject to risks inherent to our business. Before making an investment decision, you should carefully read and consider the following risks and uncertainties. We may encounter risks in addition to those described below, including risks and uncertainties not currently known to us or those we currently deem to be immaterial. The risks described below, as well as such additional risks and uncertainties, may materially affect or impair our business, results of operations, and financial condition. The risks are organized in the following categories:
Credit Risk
Liquidity and Interest Rate Risk
Operational Risk
Strategic and External Risk
Regulatory, Compliance, Legal, and Reputational Risk
General Risk Factors Summary
An investment in our common stock is subject to risks inherent to our business. Before making an investment decision, you should carefully read and consider the following risks and uncertainties. We may encounter risks in addition to those described below, including risks and uncertainties not currently known to us or those we currently deem to be immaterial. The risks described below, as well as such additional risks and uncertainties, may materially affect or impair our business, results of operations, and financial condition.
There are risks inherent in making any loan or lease, including risks inherent in dealing with borrowers, including, risks of nonpayment, risks resulting from uncertainties as to the future value of collateral and cash flows available to repay debt, and risks resulting from changes in economic and market conditions. Our credit risk underwriting and monitoring procedures may not have identified, or will identify, all of these credit risks, and they cannot be expected to completely eliminate our credit risks. If the overall economic conditions in the U.S., generally, or in our specific markets, deteriorates, or if the financial condition of our borrowers otherwise declines, then our borrowers may experience difficulties in repaying their loans and leases, and delinquencies, the level of non-accrual loans and leases, and charge-offs could rise. This would, in turn, require increases in the provision for credit losses, which may adversely affect our business, results of operations, and financial condition.
We establish our allowance for credit losses (“ACL”) and maintain it at a level considered appropriate by management based on an analysis of our portfolio and market environment. The ACL is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses over the life of an asset or an off-balance sheet credit exposure. Management’s determination of the adequacy of the ACL is based on periodic evaluations of past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. Additions to the ACL, which are charged to earnings through the provision for credit losses, are determined based on a variety of factors, including an analysis of our loan and lease portfolio by segment, historical loss experience, subjective factors, and an evaluation of changes in economic, operating, and other conditions within our markets, which may be beyond our control. Such losses may exceed current estimates.
At December 31, 2024, our ACL as a percentage of total loans and leases was 1.20% and as a percentage of total non-performing loans and leases was 131.38%. Although management believes the ACL is appropriate, we may be required to take additional provisions for losses in the future to further supplement the allowance, either due to management’s assessment of credit conditions, or requirements by our banking regulators. In addition, bank regulatory agencies will periodically review our ACL and the value attributed to non-performing loans and leases. Such regulatory agencies may require us to adjust our determination of the value for these items. Any significant increases to the ACL may materially decrease our net income, which may adversely affect our business, results of operations, and financial condition.
Real estate construction and land development loans are based upon estimates of costs and values associated with the completed project. These estimates may be inaccurate and we may be exposed to significant losses on loans for these projects.
The success of our SBA lending program is dependent upon the continued availability of SBA loan programs, our status as a Preferred Lender under the SBA loan programs, our ability to effectively compete and originate new SBA loans, and our ability to comply with applicable SBA lending requirements.
Non-performing assets take time to resolve, adversely affect our results of operations and financial condition, and could result in losses.
Liquidity and Interest Rate Risks
Liquidity risks could affect operations and jeopardize our business, financial condition, and results of operations.
The Corporation is a bank holding company and its sources of funds necessary to meet its obligations are limited.
Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations.
The proportion of the Corporation’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk.
Operational Risks
Information security risks for financial institutions like us continue to increase in part because of new technologies, the increased use of the internet and telecommunications technologies (including mobile devices and cloud computing) to conduct financial and other business transactions, political activism, and the increased sophistication and activities of organized crime, terrorist, hackers, and perpetrators of fraud. A successful cyber-attack or other breach of our information systems could adversely affect the Corporation’s business, financial condition or results of operations and damage its reputation.
We are dependent upon third party service providers for certain information systems, data management and processing services, and key components of our business infrastructure, which are subject to operational, security, and other risks.
The nature of our operations is such that we are exposed to risks associated with potential fraudulent activities, errors, breaches and the like.
The adoption of artificial intelligence tools by us and our third-party vendors and service providers may increase the risk of errors, omissions, unfair treatment, or fraudulent behavior by our employees, clients, or counterparties, or other third parties.
Our business continuity plans could prove to be inadequate, resulting in a material interruption in or disruption to our business and a negative impact on our results of operations.
New lines of business, products, and services are essential to our ability to compete but may subject us to additional risks.
Our framework for managing risks may not be effective in mitigating risk and loss to us.
We are subject to changes in accounting principles, policies, or guidelines.
Our internal controls may be ineffective.
Strategic and External Risks
Our business may be adversely affected by conditions in the financial markets and economic conditions generally.
Changes in U.S. trade policies, including the imposition of tariffs, may adversely affect our business, results of operations and financial condition.
The Corporation’s business and financial results could be materially and adversely affected by widespread public health events.
Our business is concentrated in and largely dependent upon the continued growth and welfare of the general geographical markets in which we operate.
Our financial condition and results of operations could be negatively affected if we fail to effectively execute our strategic plan or manage the growth called for in our strategic plan.
We could recognize impairment losses on securities held in our securities portfolio, goodwill, or other long-lived assets.
The failure or perceived weakness of any of our significant counterparties could expose us to loss.
We could be required to establish a deferred tax asset valuation allowance and a corresponding charge against earnings if we experience a decrease in earnings.
Competition from other financial services providers could adversely affect our profitability.
Consumers and businesses are increasingly using non-banks to complete their financial transactions, which could adversely affect our business and results of operations.
If we are unable to keep pace with technological advances in our industry, our ability to attract and retain clients could be adversely affected.
Our Private Wealth management results of operations may be negatively impacted by changes in economic and market conditions.
Potential acquisitions may disrupt our business and dilute shareholder value.
The investments we make in certain tax-advantaged projects may not generate returns as anticipated and may have an adverse impact on the Corporation’s financial results.
A prolonged U.S. government shutdown or default by the U.S. on government obligations would harm our results of operations.
Regulatory, Compliance, Legal and Reputational Risks
We operate in multiple states and in a highly regulated industry and the federal and state laws and regulations that govern our operations, corporate governance, executive compensation, and accounting principles. Changes in applicable laws or regulations, or our failure to comply with them, may adversely affect us.
We face a risk of noncompliance and enforcement action with various statutes and regulations.
We are periodically subject to examination and scrutiny by a number of banking agencies and, depending upon the findings and determinations of these agencies, we may be required to make adjustments to our business that could adversely affect us.
We are subject to claims and litigation pertaining to our fiduciary responsibilities.
Our stock is thinly traded and our stock price can fluctuate.
To maintain adequate capital levels, we may be required to raise additional capital in the future, but that capital may not be available when it is needed and/or could be dilutive to our existing shareholders.
If equity research analysts publish research or reports about our business with unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline.
Volatility or events impacting a subset of the banking industry can impact the entire sector, including the Corporation, which could affect the confidence of our clients and investors and result in a material adverse effect on our performance and a decline in our stock price for reasons outside of our control.
General Risk Factors
Our ability to attract and retain talented employees is critical to our success.
We rely on our management and the loss of one or more of those managers may harm our business.
Negative publicity could damage our reputation and adversely impact our business and financial results.
Risk Factors
Credit Risks
Management's Discussion & Analysis (MD&A)
New heading “Investments in Limited Partnerships”
New heading “Sources of Liquidity”
Largest changes
“Non-accrual loans and leases increased $7.8 million, to $28.4 million at December 31, 2024, compared to $20.6 million at December 31, 2023. The Corporation's non-accrual loans and leases as a percentage of total gross loans and leases measured 0.91% and 0.72% at December 31, 2024, and 2023, respectively. The change in non-accrual loans and leases is primarily driven by a conventional C&I loan that management identified as non-performing and recognized a specific reserve. …”see in full comparison
“Goodwill Impairment Assessment. Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, including goodwill. The Corporation conducted its annual impairment test as of July 1, 2024, utilizing a qualitative assessment, and concluded that it was more likely than not the estimated fair value of the reporting unit exceeded its carrying value, resulting in no impairment. …”see in full comparison
“We will continue to use wholesale funds in specific maturity periods, typically three to five years, needed to effectively mitigate the interest rate risk measured through our asset/liability management process or in shorter time periods if core deposit balances decline. In order to provide for ongoing liquidity and funding, none of our wholesale certificates of deposit allow for withdrawal at the option of the depositor before the stated maturity date and FHLB advances have contractual maturity terms. …”see in full comparison
We had total borrowings ofsee in full comparison$320.0$252.1 million as of December 31,2024,2025, a decrease of$10.9$68.0 million, or3.28%,21.25%, from$330.9$320.0 million at December 31,2023.2024. The Bank elected to utilize more wholesale deposits in lieu of FHLB advances in consideration ofcost,liquidityefficiency,riskmanaging interest rate risk,management andliquidity.business strategy. Total wholesale funding as a percentage of total bank funding was 25.3% as of December 31, 2025, compared to 28.9% as of December 31,2024, compared to 24.0% as of December 31, 2023.2024. Total bank funding is defined as total deposits plus FHLB advances.
Full comparison: every changed paragraph (106)
Adverse changes in the economy or business conditions, either nationally or in ourthe Corporation's 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 ourthe Corporation's markets.
OurManagement's ability to manage growth effectively, including the successful expansion of our client support, administrative infrastructure, and internal management systems.
Changes in legislative or regulatory requirements applicable tothe usCorporation and ourits subsidiaries.
Fraud, including client and system failure or breaches of ourthe Corporation's network security, including ourthe Corporation's internet banking activities.
Overview
We are a registered bank holding company incorporated under the laws of the State of Wisconsin and are engaged in the commercial banking business through our wholly-owned banking subsidiary, FBB. All of our operations are conducted through FBB and First Business Specialty Finance, LLC (“FBSF”), a wholly-owned subsidiary of FBB. We operate as a business bank focusing on delivering a full line of commercial banking products and services tailored to meet the specific needs of small and medium-sized businesses, business owners, executives, professionals, and high net worth individuals. Our products and services include those for business banking, private wealth management services, and bank consulting. Within business banking, we offer commercial lending, asset-based lending, accounts receivable financing, equipment financing, floorplan financing, vendor financing, SBA lending and servicing, treasury management services, and company retirement plans. Our private wealth management services include trust and estate administration, financial planning, investment management, and private banking for executives and owners of our business banking clients and others. Our bank consulting experts provide investment portfolio administrative services, asset liability management services, and asset liability management process validation for other financial institutions. We do not utilize a branch network to attract retail clients. Our operating model is predicated on deep client relationships, financial expertise, and an efficient, centralized administration function delivering best in class client satisfaction. Our focused model allows experienced staff to provide the level of financial expertise needed to develop and maintain long-term relationships with our clients.
The table below shows the Corporation’s performance for the years ended December 31, 2025, 2024, 2023, and 20222023 in comparison to the key performance indicators included in the Corporation’s 2024current strategic plan.
Excluding tax and SBA recourse benefits, the 2024 ROATCE was 14.6%.
Net promoter score assesses likelihood to recommend on a 11-point scale, where detractors (scores 0-6) are subtracted from promoters (scores 9-10), while passives (scores 7-8) are not considered.considered
Net income available to common shareholders for the year ended December 31, 20242025 was $43.4$49.4 million, increasing 20.0% compared to $36.2$43.4 million for the year ended December 31, 2023.2024.
Diluted earnings per common share were $5.20$5.94 for the year ended December 31, 2024, increasing 20.0%2025, compared to $4.33$5.20 in the prior year.
Return on average tangible common equity (“ROACEROATCE”) is defined as net income available to common shareholders divided by average equity less average preferred stock.stock ROACEand less intangibles. ROATCE was 14.73%15.25% for the year ended December 31, 2024,2025, compared to 13.79%15.35% for the year ended December 31, 2023.2024.
Efficiency ratio measured 58.78% for the year ended December 31, 2025, compared to 60.61% for the year ended December 31, 2024.
Net interest margin was 3.64% for the year ended December 31, 2025, compared to 3.66% for the year ended December 31, 2024.
Fees in lieu of interest, defined as prepayment fees, asset-based loan fees, non-accrual interest, and loan fee amortization, totaled $5.5 million for the year ended December 31, 2024, compared to $3.5 million for the year ended December 31, 2023.
Net interest margin was 3.66% for the year ended December 31, 2024, compared to 3.78% for the year ended December 31, 2023. Adjusted net interest margin, which excludes certain one-time and volatile items including fees in lieu of interest, was 3.47% for the year ended December 31, 2024, compared to 3.62% for the year ended December 31, 2023.
Effective tax rate,rate includingwas 16.8% for the benefityear fromended Low-IncomeDecember Housing31, Tax2025, Credits,compared wasto 13.5% for the year ended December 31, 2024, compared to 21.5% for the year ended December 31, 2023.2024.
The allowance for credit losses, including reserve for unfunded credit commitments, increased $4.3 million$424,000 compared to December 31, 2023.2024. The allowance for credit losses, including reserve for unfunded credit commitments, was 1.20%1.12% of total loans, compared to 1.16%1.20% at December 31, 2023.2024.
Top line revenue, comprised of net interest income and non-interest income, increased $9.6$15.2 million, or 6.6%,9.9%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023,2024, due to a 10.3%10.1% increase in net interest income partially offset byand a 6.6%9.2% decreaseincrease in non-interest income. The increase in net interest income was driven by an increase in average gross loans and leases outstanding.partially offset by net interest margin compression. The decreaseincrease in non-interest income was due to lowerincreases returnsin private wealth fee income, bank owned life insurance policy income, service charges on investmentsdeposits, in SBIC funds,and commercial loan swap fee income, and gains on the sale of SBA loans; partially offset by increasesa decrease in privateloan wealthfees feedriven by a reclassification of certain items to net interest income.
Return on Average Assets and Return on Average Tangible Common Equity
ROAA was 1.24% for the year ended December 31, 2025, compared to 1.20% for the year ended December 31, 2024, compared to 1.13% for the year ended December 31, 2023.2024. The increase in ROAA was due to the increase in net interest income and anon-interest lower effective tax rate,income, partially offset by aan decreaseincrease in non-interestoperating income.expenses and a higher effective tax rate. We consider ROAA a critical metric to measure the profitability of our organization and how efficiently our assets are deployed. ROAA also allows us to better benchmark our profitability to our peers without the need to consider different degrees of leverage which can ultimately influence return on equity measures.
ROACEROATCE for the year ended December 31, 2024,2025 was 14.73%,15.25%, compared to 13.79%15.35% for the year ended December 31, 2023. The reasons for the change in ROACE are consistent with the net income variance explanation as discussed under ROAA above.2024. We view ROACEROATCE as an important measurement for monitoring profitability and continue to focus on improving our return to our shareholders by enhancing the overall profitability of our client relationships, controlling our expenses, and minimizing our costs of credit.
PTPP adjusted earnings for the year ended December 31, 2024,2025, was $60.4$69.4 million, increasing 14.8%, compared to $56.2$60.4 million for the year ended December 31, 2023.2024. PTPP adjusted earnings is a non-GAAP measure defined as operating revenue less operating expense. In the judgment of the Corporation’s management, the adjustments made to non-interest expense and non-interest income allow investors and analysts to better assess the Corporation’s operating expenses in relation to its core operating revenue by removing the volatility associated with certain one-time items and other discrete items. PTPP adjusted earnings allows management to benchmark performance of our model to our peers without the influence of the loan loss provision and tax considerations, which will ultimately influence other traditional financial measurements, including ROA and ROAE.ROATCE. The information provided below reconciles the efficiency ratio and PTPP adjusted earnings to itstheir most comparable GAAP measure.
(3)
(4)
Weighted average rate of junior subordinated notes and debentures reflects the accelerated amortization of subordinated debt issuance costs as a result of the early redemption of the junior subordinated notes during the first quarter of 2022.
The change in yield of the respective interest-earning assetassets or the rate paid on interest-bearing liability compared to the change in short-term market rates is commonly referred to as a beta. The table below displays the beta calculations for loans and leases, total interest earning assets, core deposits, interest-bearing deposits and total interest-bearing liabilities for the year ended December 31, 2024,2025, and 2023. Additionally, adjusted total loans and leases and total interest-earning assets excludes the volatile impact of fees in lieu of interest.2024.
Board of Governors of the Federal Reserve System (US), Effective Federal Funds Rates (DFF) retrieved from FRED, Federal Reserve Bank of St. Louis.
Excluding fees in lieu of interest.
Board of Governors of the Federal Reserve System (US), Effective Federal Funds Rates (DFF) retried from FRED, Federal Reserve Bank of St. Louis.
(4)
Represents annualized yields/rates.
Net interest income increased $11.6$12.5 million, or 10.3%10.1% during the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. The increase in net interest income reflected an increase in average gross loans and leasesleases, the reclassification of certain types of C&I loan fees from non-interest income to interest income, and anlower increasecost of interest-bearing liabilities due to decreases in feesinterest inrates. lieuThese ofchanges interest,were partially offset by neta decrease in yield on loans, non-accrual interest marginreversals, compression.and a decrease in asset-based loan fees. Average gross loans and leases of $2.997$3.272 billion increased by $349.0$275.0 million, or 13.2%,9.2%, for the year ended December 31, 2024,2025, compared to $2.648$2.997 billion for the same period in 2023. Loan fees collected in lieu of interest increased 59.8% to $5.5 million, compared to $3.5 million during the same period of comparison.2024.
The yield on average interest-earning assets for the year ended December 31, 2024,2025, was 6.87%,6.59%, compared to 6.54%6.87% for the year ended December 31, 2023.2024. The increasedecrease in yield was primarily due to lower interest rates, partially offset by the reinvestment of cash flows from the securities and fixed-rate loan portfolios and securities in a higher rate environment. Excluding loan fees in lieu of interest, the yield on average interest-earning assets for the year ended December 31, 2024, was 6.71%, compared to 6.42% for the year ended December 31, 2023.portfolios.
The average rate paid on total interest-bearing liabilities was 3.51% for the year ended December 31, 2025, a decrease from 3.91% for the year ended December 31, 2024, an increase from 3.46% for the year ended December 31, 2023.2024. Total interest-bearing liabilities includes interest-bearing deposits, FHLB advances, subordinated and junior subordinated notes and debentures payable, federal funds purchased, and other borrowings. The average rates paid increaseddecreased due to the increase inlower short-term marketinterest rates, the replacement of maturing wholesale funds at higher fixed rates, and client movement from non-interest bearing to interest bearing core deposit products.
Net interest margin decreased to 3.64% for the year ended December 31, 2025, compared to 3.66% for the year ended December 31, 2024. The decrease in net interest margin was due to lower yields on interest-earning assets, partially offset by lower costs of interest-bearing liabilities due to lower interest rates and the reclassification of certain types of C&I loan fees from non-interest income to net interest income.
Net interest margin decreased to 3.66% for the year ended December 31, 2024, compared to 3.78% for the year ended December 31, 2023. Adjusted net interest margin measured 3.47% for the year ended December 31, 2024, compared to 3.62% for the year ended December 31, 2023. The decrease in net interest margin is due to increased total bank funding costs in a higher rate environment. This was partially offset by an increase in fees collected in lieu of interest and an increase in earning asset yields due to the reinvestment of cash flows from the fixed-rate loan and securities portfolios in a higher rate environment. Adjusted net interest margin is a non-GAAP measure representing net interest income excluding the impact of fees in lieu of interest, and other recurring, but volatile, components of net interest margin divided by average interest-earning assets less other recurring, but volatile, components of average interest-earning assets.
The Corporation maintains a long-term target for net interest margin in the range of 3.60% -to 3.65%. Performance in future periods 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.
Management adopted ASC 326 on January 1, 2023. Prior periods are presented under the incurred loss model.
Non-interest income decreasedincreased by $2.1$2.7 million, or 6.6%,9.2%, to $31.9 million for the year ended December 31, 2025, from $29.3 million for the year ended December 31, 2024, from $31.3 million for the year ended December 31, 2023.2024. Management continues to focus on revenue growth from multiple non-interest income sources to maintain a diversified revenue stream through greater contributions from fee-based revenues. Total non-interest income accounted for 19.1%18.9% of total revenues for the year ended December 31, 2024,2025, compared to 21.8%19.1% in 2023.2024 as net interest income increased at a greater rate than non-interest income. The decreaseincrease in total non-interest income for the year ended December 31, 2024,2025, was driven by lowerprivate returnswealth onfee investmentsincome, inbank-owned SBIClife funds,insurance policy income, commercial loan swap fee income, and gainsservice charges on the sale of SBA loans,deposits, partially offset by ana increasereduction in privateloan wealthfees feedriven by the reclassification of certain types of C&I fees from non-interest income andto servicenet chargesinterest on deposits.income.
Private wealth fee income increased $1.8$1.5 million, or 16.1%,11.0%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. Private wealth fee income is upincreased compared to the prior year primarily due to an increase in assets under management and administration,administration and increases in fee rates across the client base, and non-recurring transaction fees in the 2024 period.base. Private wealth fee income can vary due to the mix of business at different fee structures and can be positively or negatively influenced by the timing and magnitude of volatility within the capital markets. As of December 31, 2024,2025, private wealth and trust assets under management and administration totaled $3.419$3.815 billion, increasing $297.2$396.0 million, or 9.5%,11.6%, compared to $3.122$3.419 billion as of December 31, 2023,2024, due to an increase in market values, new clients, and new money from existing clients.
Service charges on deposits increased $640,000, or 20.4%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase is primarily driven by new and expanded core deposit relationships. Treasury management business development efforts remain robust as gross treasury management service charges increased $647,000, or 11.1%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. Management believes growth in gross analyzed service charges is a strong indicator of success for the Corporation given the direct correlation to adding and expanding core business relationships.
OtherBank-owned non-interestlife insurance policy income decreasedincreased $3.1$1.1 million, or 44.6%,67.1%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. The changeincrease wasis primarily due to a decrease from unexpectedly high 2023 returns on the Corporation'spurchase investmentsof innew SBICpolicies, funds.totaling Income$24.5 from SBIC funds varies from period to period based on changesmillion in the realizedsecond quarter of 2025 and unrealizedan fairinsurance valueclaim of underlying$234,000 investments.in the third quarter of 2025.
Service charges on deposits increased $720,000, or 19.1%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase is primarily driven by new and expanded core deposit relationships and a reduction in earnings credit rates. Treasury management business development efforts remain robust as gross treasury management service charges increased $473,000, or 7.3%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. Management believes growth in gross analyzed service charges is a strong indicator of success for the Corporation given the direct correlation to adding and expanding core business relationships.
Commercial loan interest rate swap fee income decreasedincreased $1.6 million,$592,000, or 52.7%,42.2%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. We originate commercial real estate loans in which we offer clients a floating rate and an interest rate swap. The client’s swap is then offset with a counter-party dealer. The execution of these transactions generates swap fee income. The aggregate amortizing notional value of interest rate swaps with various borrowers was $1.022 billion as of December 31, 2024, compared to $939.2 million as of December 31, 2023. Interest rate swaps can be an attractive product for our commercial borrowers, although associated fee income varies from period to period based on loan activity andactivity, the interest rate environment.environment, and the duration of the swap contracts.
Other non-interest income increased $541,000, or 14.1%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily due to nonrecurring fee income in accounts receivable financing and increases in credit card fee income, bank consulting fee income, and other equipment finance related fees. These increases were partially offset by a decrease in limited partnership investment income.
Loan fee income decreased $1.7 million, or 49.3%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The change is primarily due to the reclassification of certain types of C&I loan fees from non-interest income to interest income. Excluding this reclassification, loan fee income increased $113,000, or 7.0%. The change excluding the reclassification is primarily due to an increase in traditional commercial loan fees.
Gain on sale of SBA loans decreased $113,000, or 5.5%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. Management expects the SBA loan sales to increase in 2025 as production increases and previously closed commitments fully fund and become eligible for sale, due to additions to the business development team.
Non-interest expense increased by $4.9$6.0 million, or 5.5%,6.5%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. Operating expense, which excludes certain one-time and discrete items as defined in the Efficiency Ratio table above, increased $5.2$6.0 million, or 6.0%,6.4%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023. The increase in operating expense was primarily due to an increase in compensation expense, computer software expense, and data processing expense.2024.
Compensation expense increased by $2.0$4.8 million, or 3.4%,7.6%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2024, principally due to an increase in average FTEs, annual meritsalary increases, growth in employee benefit costs, and increase in incentivethe compensation.annual cash bonus accrual. The increase reflects a $2.7$2.5 million, or 7.2%,6.2%, increase in employee salaries and a $428,000,$1.1 million, or 8.4%,18.4%, increase in estimated annual cash bonuses compared to 2023. These increases were partially offset by a $768,000, or 17.2% decrease in individual production incentive compensation.2024. Average FTEs wereof 363 for the year ended December 31, 2025, increased by 13, or 3.7%, from 350 for the year ended December 31, 2024, increased by seven, or 2.0%, from 343 for the year ended December 31, 2023.2024.
Computer software expense increased $1.2 million,$821,000, or 23.7%,13.3%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. The increase was primarily due to our commitment to innovative technology to support growth initiatives, enhance productivity,productivity and security, and improve the client experience.
Data processing expense increased $1.1 million, or 27.9%, for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to an increase in core processing costs due to loan and deposit account growth, private wealth asset growth, and a one-time expense resulting from a change in credit card vendors.
Marketing expense increased $629,000, or 21.8%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase was primarily due to an increase in business development efforts and advertising projects related to the Company’s growth initiatives.
FDIC insurance increased $522,000,$471,000, or 23.3%,17.1%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. The increase was primarilycommensurate duewith to anthe increase in total assetsassets, brokered deposits, and usenon-accrual of brokered deposits.loans.
ProfessionalOther feesnon-interest expense increased $346,000,$468,000, or 6.5%,12.7%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. The increase was primarily due to an increase in recruitingliquidation expenseexpenses and professionala consultingrelease servicesof forSBA variousrecourse projects.reserve in the prior year period.
Other non-interestMarketing expense decreasedincreased $851,000,$326,000, or 18.8%,9.3%, for the year ended December 31, 2024,2025, compared to the year ended December 31, 2023.2024. The decreaseincrease was primarily due to aan decreaseincrease in SBAbusiness recoursedevelopment provisionefforts and liquidationadvertising expensesprojects partiallyrelated offsetto bythe anCompany’s impairmentgrowth on historical tax credit investments at exit.initiatives.
Professional fees decreased $653,000, or 11.5%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The decrease was primarily due to a decrease in recruiting expense and professional consulting services for various projects.
Income tax expense totaled $10.1 million for the year ended December 31, 2025, compared to $6.9 million for the year ended December 31, 2024, compared to $10.1 million for the year ended December 31, 2023.2024. Income tax expense included a $1.6 million net benefit from tax credit investments infor boththe periods.years ended December 31, 2025 and 2024. The effective tax rate for the year ended December 31, 2024,2025, was 13.5%16.8% compared to 21.5%13.5% for the year ended December 31, 2023.2024. The decreaseyear-over-year isincrease primarilywas duemainly todriven by a $1.7 million partial release of a state deferred tax asset valuation allowance due to changes in projected2024, resulting from updated projections of taxable state income basedat on revisedthe state taxation guidance and 2023 state tax return actual results.level. The Corporation expects to report an effective tax rate between 16% and 18% for 2025.2026.
What changed in the latest 10-Q
Risk Factors
There were no material changes to the risk factors previously disclosed in Item 1A. to Part I of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2025.
No wording changes found in this section.
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Management's Discussion & Analysis (MD&A)
Largest changes
see in full comparisonDataOtherprocessingnon-interest expenseincreased $188,000, or 17.4%,for the three and six months endedMarchJune31,30,2026,2026 increased $678,000, or 60.1%, and $725,000, or 32.4%, respectively, compared to the same period in 2025. The increase was primarily due toaimpairmentchangeofintax creditcard vendorinvestments andcore provider costs commensurate withan increase intransactions,liquidationaccounts, and clients.expense.
“Commercial loan swap fee income decreased $8,000, or 4.7%, and increased $507,000, or 179.2%, for the three and six months ended June 30, 2026, respectively, compared to the same period in 2025. Swap fee income varies period to period based on loan activity and the interest rate environment.”see in full comparison
“Commercial loan swap fee income increased $515,000 for the three months ended March 31, 2026, compared to the same period in 2025. Swap fee income varies period to period based on loan activity and the interest rate environment.”see in full comparison
Non-interest income for the three months endedsee in full comparisonMarchJune31,30, 2026 increased$1.2$1.3 million, or15.8%,18.1%, to$8.8$8.6 million compared to$7.6$7.3 million for the same period in 2025. The increase in total non-interest income for the three months ended was primarily driven by higher returns on limited partnership investments, private wealth fee income, service charges on deposits, and bank-owned life insurance income, partially offset by a decrease in gains on sale of SBA loans due to the exit from the out of market SBA 7(a) lending activities in the current quarter. The increase in total non-interest income for the six months ended was primarily driven by increases in commercial loan swap fees, private wealth fee income, bank-owned life insurance income, higher returns on limited partnership investments and service charges on deposits, partially offset by a decrease in gains on sale of SBAloans.loans due to the exit from the out of market SBA 7(a) lending activities in the current quarter. Non-interest income for the six months ended June 30, 2026 increased $2.5 million, or 16.9%, to $17.3 million compared to $14.8 million for the same period in 2025.
Compensation expense for the three and six months endedsee in full comparisonMarchJune31,30, 2026 increased$1.8$1.9 million, or10.7%,11.7%, and $3.7 million, or 11.2%, respectively, compared to the same period in 2025. Growth reflectsincreasesannualinmeritaverageincreases,FTEs,promotions,salaries, individual incentive compensation, and the acceleration$405,000 ofdeferredseverancecompensationexpense related to theCEOoutretirement.ofSuccessfulmarkethiringSBAefforts7(a) lending exit, and higher annual cash bonus accruals due tosecureimprovedtalentCompanyresultedperformance.inExcludingaverageSBA severance, compensation expense increased $1.5 million, or 9.2%. Average full-time equivalent employees for the three months endedMarchJune31,30, 2026increasingdecreased to373,360,updown5.7%,1.1%, compared to353364 for the three months endedMarchJune31,30, 2025. Excluding FTEs in out of market SBA 7(a) lending, average FTEs for the three months ended June 30, 2026 increased to 354, up 2.9%, compared to 344 for the three months ended June 30, 2025.
Income tax expense totaledsee in full comparison$2.2$3.4 million for thethreesix months endedMarchJune31,30, 2026 compared to$2.3$4.2 million for the same period in 2025. Income tax expense included a$578,000$1.2 million net benefit from tax credit investments compared to$459,000$882,000 for the same period in 2025. The effective tax rate for thethreesix months endedMarchJune31,30, 2026 was15.2%,10.9%, compared to17.0%15.8% for the same period in 2025. The change in tax expense reflectsupdatedthe release of state deferred taxcreditvaluationpartnership estimatesallowance and timing of stock compensation vesting activity. Income tax expense for the three and six months ended June 30, 2026 includes a $1.5 million release of the remaining state deferred tax valuation allowance. This was initially recognized in 2023 following the enactment of a state law, which excluded small business lending interest from state income tax. TheCorporationvaluationexpectsallowance was released due toreportsustainedan effective tax rate between 16%historical and18%forecastedforWisconsin2026.taxable income.
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These risks could cause actual results to differ materially from what we have anticipated or projected. These risk factors and uncertainties should be carefully considered by our shareholders and potential investors. See Part I, Item 1A — Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025, and in this report, below, for discussion relating to risk factors impacting us. Investors should not place undue reliance on any such forward-looking statements, which speak only as of the date made. These factors could affect our financial performance and could cause actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods.
We are a registered bank holding company incorporated under the laws of the State of Wisconsin and are engaged in the commercial banking business through our wholly-owned banking subsidiary, FBB. All of our operations are conducted through FBB and First Business Specialty Finance, LLC, a wholly-owned subsidiary of FBB. We operate as a business bank focusing on delivering a full line of commercial banking products and services tailored to meet the specific needs of small and medium-sized businesses, business owners, executives, professionals, and high net worth individuals. Our products and services include those for business banking, private wealth management services, and bank consulting. Within business banking, we offer commercial lending, asset-based lending, accounts receivable financing, equipment financing, floorplan financing, vendor financing, SBA lending and servicing, treasury management services, and company retirement plans. Our private wealth management services include trust and estate administration, financial planning, investment management, and private banking for executives and owners of our business banking clients and others. Our bank consulting experts provide investment portfolio administrative services and asset liability management services. We are not a retail bank and do not rely on a traditional branch network to gather deposits or attract clients. Instead, our operating model is built on deep client relationships, specialized financial expertise, and an efficient, centralized administrative structure designed to deliver best-in-class client satisfaction. This focused approach enables our experienced professionals to provide the level of insight and service required to develop and sustain long-term client relationships. We conduct our commercial banking operations through one operating segment.
Results as of and for the three and six months ended MarchJune 31,30, 2026 include:
Net income available to common shareholders totaled $12.0$15.4 million, or diluted earnings per share of $1.44,$1.84, for the three months ended MarchJune 31,30, 2026, compared to $11.0$11.2 million, or diluted earnings per share of $1.32,$1.35, for the same period in 2025. Net income available to common shareholders totaled $27.3 million, or diluted earnings per share of $3.28, for the six months ended June 30, 2026, compared to $22.2 million, or diluted earnings per share $2.66, for the same period in 2025.
Annualized return on average assets (“ROAA”) for the three months ended MarchJune 31,30, 2026 measured 1.13%1.43%, compared to 1.14% for the same period in 2025. ROAA for the six months ended June 30, 2026 measured 1.28%, compared to 1.14% for the same period in 2025.
Return on average tangible common equity (“ROATCE”) is defined as net income available to common shareholders divided by average equity less average intangible assets and average preferred stock. ROATCE was 13.55%16.89% for the three months ended MarchJune 31,30, 2026, compared to 14.12%14.17% for the same period in 2025. ROATCE was 15.25% for the six months ended June 30, 2026, compared to 14.15% for the same period in 2025.
Efficiency ratio measured 61.14%57.57% for the three months ended MarchJune 31,30, 2026, compared to 60.28%60.97% for the same period in 2025. Efficiency ratio measured 59.31% for the six months ended June 30, 2026, compared to 60.63% for the same period in 2025.
Pre-tax, pre-provision (“PTPP”) adjusted earnings, which excludes certain one-time and discrete items, for the three months ended MarchJune 31,30, 2026 was $17.2$19.8 million, compared to $16.2$16.0 million in the same period in 2025. PTPP for the six months ended June 30, 2026 was $37.0 million, compared to $32.2 million in the same period in 2025.
Net interest margin was 3.56%3.78% for the three months ended MarchJune 31,30, 20262026, compared to 3.69%3.67% for the same period in 2025. Net interest margin was 3.67% for the six months ended June 30, 2026, compared to 3.68% for the same period in 2025.
Top line revenue, defined as net interest income plus non-interest income, totaled $44.3$46.7 million for the three months ended MarchJune 31,30, 2026, compared to $40.8$41.0 million in the same period in 2025. Top line revenue totaled $91.0 million for the six months ended June 30, 2026, compared to $81.9 million in the same period in 2025.
Effective tax rate, including the benefit from Low-Income Housing Tax Credits, was 15.16%10.89% for the threesix months ended MarchJune 31,30, 2026 compared to 17.00%15.79% for the same period in 2025. Income tax expense for the three and six months ended June 30, 2026 included a $1.5 million release of the remaining state deferred tax valuation allowance.
Provision for credit losses was $3.0$2.1 million for the three months ended MarchJune 31,30, 20262026, compared to $2.7 million for the same period in 2025. Provision for credit losses was $5.0 million for the six months ended June 30, 2026, compared to $5.4 million for the same period in 2025.
Total assets at MarchJune 31,30, 2026 increased $239.0$328.1 million, or 5.9%,8.0%, to $4.321$4.410 billion from $4.082 billion at December 31, 2025.
Period-end gross loans and leases receivable increased $125.9$213.1 million, or 14.9%12.6% annualized, to $3.501$3.588 billion as of MarchJune 31,30, 2026 compared to $3.375 billion as of December 31, 2025. Average gross loans and leases of $3.426$3.488 billion increased $240.0$275.5 million, or 7.5%,8.6%, for the threesix months ended MarchJune 31,30, 2026, compared to $3.186$3.213 billion for the same period in 2025.
Non-performing assets were $40.5$38.1 million and 0.94%0.86% of total assets as of MarchJune 31,30, 2026, compared to $43.9 million and 1.07% of total assets as of December 31, 2025.
The allowance for credit losses, including reserve for unfunded credit commitments, increased $797,000$1.8 million compared to December 31, 2025. The allowance for credit losses, including reserve for unfunded credit commitments, was 1.10% of total loans, compared to 1.12% at December 31, 2025.
Period-end core deposits at MarchJune 31,30, 2026 increased $123.1$204.7 million, or 18.4%15.3% annualized, to $2.796$2.878 billion from $2.673 billion as of December 31, 2025. Average core deposits of $2.849$2.854 billion increased $485.7$474.6 million or 20.6%,19.9%, for the threesix months ended MarchJune 31,30, 2026, compared to $2.363$2.380 billion for the same period in 2025.
Private wealth and trust assets under management and administration increased by $66.1$419.9 million, or 6.9%22.0% annualized, to $3.881$4.235 billion at MarchJune 31,30, 2026, compared to $3.815 billion at December 31, 2025. Private wealth and trust assets under management and administration increased $456.2$503.9 million, or 13.3%,13.5%, compared to MarchJune 31,30, 2025.
Top line revenue, comprised of net interest income and non-interest income, increased $3.5$5.7 million, or 8.5%,13.8%, for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025, due to a 6.8%12.9% increase in net interest income and aan 15.8%18.1% increase in non-interest income. The increase in net interest income was primarily driven by increases in average loans and leases outstanding,outstanding and prepayment fees, partially offset by alower decreaseshort-term inmarket net interest margin.rates. The increase in non-interest income was due primarily to increases in commercialincome loanfrom swaplimited partnership investment income, private wealth income, bank-owned life insurance income, and service charges on deposits, partially offset by decreases in gains on sale of SBA loans.loans due to the exit from the out of market SBA 7(a) lending activities in the current quarter.
Top line revenue increased $9.1 million, or 11.1%, for the six months ended June 30, 2026, compared to the same period in 2025, due to a 9.9% increase in net interest income and a 16.9% increase in non-interest income. The increase in net interest income was primarily driven by increases in average loans and leases outstanding and prepayment fees, partially offset by lower short-term market rates. The increase in non-interest income was due primarily to increases in private wealth income, income from limited partnership investments, commercial loan swap income, service charges on deposits, and bank-owned life insurance income, partially offset by decreases in gains on sale of SBA loans as noted above.
ROAA for the three and six months ended MarchJune 31,30, 2026 was 1.13%,1.43% and 1.28%, respectively, compared to 1.14% for both the three and six months ended MarchJune 31,30, 2025. The decreaseincrease in ROAA was due to a decrease in net interest margin and an increase in operatingpre-tax, expense,pre-provision partiallyearnings offsetdriven by anaverage improvedloan growth, stable margin, and strong fee income ratioincome, as non-interestwell as a $1.5 million income grewtax atbenefit. aExcluding fasterthe rateincome thantax netbenefit, interestROAA income.was 1.29% and 1.21% for the three and six months ended June 30, 2026, respectively. We consider ROAA a critical metric to measure the profitability of our organization and how efficiently our assets are deployed. ROAA also allows us to better benchmark our profitability to our peers without the need to consider different degrees of leverage which can ultimately influence return on equity measures.
ROATCE for the three and six months ended MarchJune 31,30, 2026 was 13.6%,16.9% and 15.2%, respectively, compared to 14.1%14.2% for both the three and six months ended MarchJune 31,30, 2025. The explanation of the decreaseincrease in ROATCE is consistent with the ROAA discussion above. Excluding the income tax benefit, ROATCE was 15.3% and 14.4% for the three and six months ended June 30, 2026, respectively. We view ROATCE as an important measurement for monitoring profitability and continue to focus on improving our return to our shareholders by enhancing the overall profitability of our client relationships, controlling our expenses, and minimizing our costs of credit.
Efficiency ratio measured 61.1%57.6% and 59.3% for the three and six months ended MarchJune 31,30, 2026, respectively, compared to 60.3%61.0% and 60.6% for the three and six months ended MarchJune 31,30, 2025.2025, respectively. The increasedecrease in efficiency ratio was primarily due to a decrease in net interest margin and an increase in compensation expense, partially offset by a volume-driven increase in net interest income and an increase in non-interest income.income, partially offset by an increase in compensation expense. Efficiency ratio is a non-GAAP measure representing operating expense, which is non-interest expense excluding the effects of the SBA recourse benefit or provision, net gains or losses 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 net gains or losses on securities, if any.
PTPP adjusted earnings for the three and six months ended MarchJune 31,30, 2026 were $17.2$19.8 million and $37.0 million, up 6.1%,respectively, compared to $16.2$16.0 million and $32.2 million for the three and six months ended MarchJune 31,30, 2025.2025, respectively. The increase in PTPP adjusted earnings is primarily due to an increase in net interest income and non-interest income.income and improved efficiency. This increase in total revenue was partially offset by an increase in non-interest expense primarily due to an increase in compensation expense. In the judgment of the Corporation’s management, the adjustments made to non-interest expense and non-interest income allow investors and analysts to better assess the Corporation’s operating expenses in relation to its core operating revenue by removing the volatility associated with certain one-time items and other discrete items. PTPP adjusted earnings is a non-GAAP measure that allows management to benchmark performance of our model to our peers without the influence of the provision for credit losses and tax considerations, which will ultimately influence other traditional financial measures, including ROAA and ROATCE. The information provided below reconciles the efficiency ratio to its most comparable GAAP measure.
The following table provides information with respect to (1) the change in net interest income attributable to changes in rate (changes in rate multiplied by prior volume) and (2) the change in net interest income attributable to changes in volume (changes in volume multiplied by prior rate) for the three and six months ended MarchJune 31,30, 2026 compared to the same period in 2025. The change in net interest income attributable to changes in rate and volume (changes in rate multiplied by changes in volume) has been allocated to the rate and volume changes in proportion to the relationship of the absolute dollar amounts of the change in each.
The table below shows our average balances, interest, average yields/rates, net interest margin, and the spread between the combined average yields earned on interest-earning assets and average rates on interest-bearing liabilities for the three and six months ended MarchJune 31,30, 2026 and 2025. The average balances are derived from average daily balances.
(4)
The average balances of loans and leases include non-accrual loans and leases and loans held for sale. Interest income related to non-accrual loans and leases is recognized when collected. Interest income includes net loan fees in lieu of interest.
Includes amortized cost basis of assets available-for-sale and held-to-maturity.
(3)
Yields on tax-exempt municipal securities are not presented on a tax-equivalent basis in this table.
Represents annualized yields/rates.
The change in yield of the respective interest-earning assets or the rate paid on interest-bearing liability compared to the change in short-term market rates is commonly referred to as a beta. The table below displays the beta calculations for loans and leases, total interest earning assets, core deposits, interest-bearing deposits and total interest-bearing liabilities for the three and six months ended MarchJune 31,30, 2026 and 2025. Additionally, adjusted total loans and leases receivable and adjusted total interest-earning assets exclude the volatile impact of fees in lieu of interest ("FILOI").
Excluding fees in lieu of interest.
(4)
Comparison of Net Interest Income for the Three and Six Months Ended MarchJune 31,30, 2026 and 2025
Net interest income increased $2.3$4.4 million, or 6.8%,12.9%, and $6.6 million, or 9.9%, respectively, during the three and six months ended MarchJune 31,30, 2026, compared to the three and six months ended MarchJune 31,30, 2025. The increase in net interest income primarily reflected increases in average gross loans and leases,leases partiallyoutstanding offsetand byin lowerprepayment netfees interestof margin.$706,000 and $280,000, respectively, during the three and six months ended June 30, 2026. Average gross loans and leases for the three and six months ended MarchJune 31,30, 2026 increased $240.0$310.6 million, or 7.5%,9.6%, and $275.5 million, or 8.6%, respectively, compared to the three and six months ended MarchJune 31,30, 2025.
The yield on average interest-earning assets for the three and six months ended MarchJune 31,30, 2026,2026 was 6.21%,6.45% and 6.33%, respectively, compared to 6.61%6.65% and 6.63%, respectively, for the three and six months ended MarchJune 31,30, 2025. The decrease in yield was primarily due to the decrease in short-term market rates.
The average rate paid on total interest-bearing liabilities was 3.14% for both the periodthree and six months ended MarchJune 31,30, 2026, acompared decreaseto from3.55% 3.50%and 3.52% for the periodthree and six months ended MarchJune 31,30, 2025.2025, respectively. Total interest-bearing liabilities includes interest-bearing deposits, FHLB advances, subordinated and junior subordinated notes and debentures payable, federal funds purchased, and other borrowings. The average rates paid decreased due to lower short-term interest rates and the replacement of maturing wholesale funds which were at higher fixed rates.
Net interest margin increased to 3.78% and decreased to 3.67% for the three and six months ended June 30, 2026, respectively, compared to 3.67% and 3.68% for the three and six months ended June 30, 2025, respectively. The increase in net interest margin for the three months ended was primarily due to a $1.0 million increase in prepayment fees and asset-based loan fees, partially offset by a decrease in short-term market rates. The decrease in net interest margin for the six months ended was primarily due to a decrease in short term market rates, partially offset by an increase in prepayment fees and asset-based loan fees.
Net interest margin decreased to 3.56% for the three months ended March 31, 2026, compared to 3.69% for the three months ended March 31, 2025. The decrease in net interest margin was primarily due to the decline in short-term earning asset yields outpacing the decline in total bank funding costs. Additionally, the year-over-year increase in non-performing assets contributed to three basis points of decline in net interest margin.
The following table shows the components of the provision for credit losses for the three and six months ended MarchJune 31,30, 2026 compared to the same period in 2025.
Comparison of Non-Interest Income for the Three and Six Months Ended MarchJune 31,30, 2026 and 2025
Non-interest income for the three months ended MarchJune 31,30, 2026 increased $1.2$1.3 million, or 15.8%,18.1%, to $8.8$8.6 million compared to $7.6$7.3 million for the same period in 2025. The increase in total non-interest income for the three months ended was primarily driven by higher returns on limited partnership investments, private wealth fee income, service charges on deposits, and bank-owned life insurance income, partially offset by a decrease in gains on sale of SBA loans due to the exit from the out of market SBA 7(a) lending activities in the current quarter. The increase in total non-interest income for the six months ended was primarily driven by increases in commercial loan swap fees, private wealth fee income, bank-owned life insurance income, higher returns on limited partnership investments and service charges on deposits, partially offset by a decrease in gains on sale of SBA loans.loans due to the exit from the out of market SBA 7(a) lending activities in the current quarter. Non-interest income for the six months ended June 30, 2026 increased $2.5 million, or 16.9%, to $17.3 million compared to $14.8 million for the same period in 2025.
Management continues to focus on revenue growth from multiple non-interest income sources to maintain a diversified revenue stream. Contribution from fee-based revenue sources can be variable and driven by changes in the interest rate environment, client activity, and the value of underlying investments. Total non-interest income accounted for 19.8%18.3% and 19.1% of total revenues for the three and six months ended MarchJune 31,30, 2026, respectively, compared to 18.6%17.7% and 18.1% for the three and six months ended MarchJune 31,30, 2025.2025, respectively.
Commercial loan swap fee income increased $515,000 for the three months ended March 31, 2026, compared to the same period in 2025. Swap fee income varies period to period based on loan activity and the interest rate environment.
Private wealth fee income increased $385,000,$509,000, or 11.0%13.6%, and $894,000, or 12.3%, for the three and six months ended MarchJune 31,30, 2026, respectively, compared to the same period in 2025. Private wealth fee income was up compared to the prior year primarily due to an increase in assets under management and administration. Private wealth fee income can vary due to the mix of business at different fee structures and can be positively or negatively influenced by the timing and magnitude of volatility in the capital markets. As of MarchJune 31,30, 2026, private wealth and trust assets under management and administration increased $456.2$503.9 million, or 13.3%,13.5%, totaling $3.881$4.235 billion compared to $3.425$3.731 billion as of MarchJune 31,30, 2025, due to an increase in market values, new clients, and new money from existing clients.
Bank-owned life insurance policy income increased $320,000, or 73.2%, for the three months ended March 31, 2026, compared to the same period in 2025. This increase was primarily due to the purchase of new policies in the second quarter of 2025, with an aggregate cash surrender value of $24.5 million.
Service charges on deposits increased $270,000, or 25.8% for the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily driven by new and expanded core deposit relationships and a reduction in earnings credit rates. Treasury management business development efforts remain robust as gross treasury management service charges increased $148,000, or 9.1%, for the three months ended March 31, 2026, compared to the same period in 2025. Management believes growth in gross analyzed service charges is a strong indicator of success for the Corporation given the direct correlation to adding and expanding core business relationships.
GainOther onnon-interest saleincome ofincreased SBA loans decreased $371,000,$731,000, or 38.5%,91.6%, and $762,000, or 39.4%, for the three and six months ended MarchJune 31,30, 2026, respectively, compared to the same period in 2025. GainThe increase is primarily due to returns on salethe ofCorporation's SBAinvestments loansin limited partnership investments. Income from limited partnership investments varies from period to period based on changes in the amountrealized and unrealized fair value of closedthe andunderlying fully funded loans.investments.
Commercial loan swap fee income decreased $8,000, or 4.7%, and increased $507,000, or 179.2%, for the three and six months ended June 30, 2026, respectively, compared to the same period in 2025. Swap fee income varies period to period based on loan activity and the interest rate environment.
Service charges on deposits increased $233,000, or 21.1%, and $501,000, or 23.3%, for the three and six months ended June 30, 2026, respectively, compared to the same period in 2025. The increase was primarily driven by new and expanded core deposit relationships. Treasury management business development efforts remain robust as gross treasury management service charges increased $281,000, or 16.5%, and $537,000, or 16.0%, for the three and six months ended June 30, 2026, compared to the same period in 2025. Management believes growth in gross analyzed service charges is a strong indicator of success for the Corporation given the direct correlation to adding and expanding core business relationships.
Gain on sale of SBA loans decreased $397,000, or 100.0%, and $768,000, or 56.5%, for the three and six months ended June 30, 2026, respectively, compared to the same period in 2025. The decrease was due to management's decision to hold for investment any existing and new SBA 7(a) loans.
Comparison of Non-Interest Expense for the Three and Six Months Ended MarchJune 31,30, 2026 and 2025
Non-interest expense for the three and six months ended MarchJune 31,30, 2026 increased $2.2$2.9 million, or 9.0%,11.5%, and $5.1 million, or 10.3%, respectively, compared to the same periods in 2025. Operating expense, which excludes certain one-time and discrete items as defined in the Efficiency Ratio and Pre-Tax, Pre-Provision Adjusted Earnings section above, increased $2.5$1.9 million, or 10.0%,7.5%, and $4.3 million, or 8.7%, for the three and six months ended MarchJune 31,30, 2026, respectively, compared to the same periods in 2025. The increase in operating expense was primarily due to an increase in compensation expense.
Compensation expense for the three and six months ended MarchJune 31,30, 2026 increased $1.8$1.9 million, or 10.7%,11.7%, and $3.7 million, or 11.2%, respectively, compared to the same period in 2025. Growth reflects increasesannual inmerit averageincreases, FTEs,promotions, salaries, individual incentive compensation, and the acceleration$405,000 of deferredseverance compensationexpense related to the CEOout retirement.of Successfulmarket hiringSBA efforts7(a) lending exit, and higher annual cash bonus accruals due to secureimproved talentCompany resultedperformance. inExcluding averageSBA severance, compensation expense increased $1.5 million, or 9.2%. Average full-time equivalent employees for the three months ended MarchJune 31,30, 2026 increasingdecreased to 373,360, updown 5.7%,1.1%, compared to 353364 for the three months ended MarchJune 31,30, 2025. Excluding FTEs in out of market SBA 7(a) lending, average FTEs for the three months ended June 30, 2026 increased to 354, up 2.9%, compared to 344 for the three months ended June 30, 2025.
Computer software expense increased $318,000, or 19.8%, for the three months ended March 31, 2026, compared to the same period in 2025. The increase was primarily due to our commitment to innovative technology to support growth initiatives, enhance productivity, and improve the client experience.
DataOther processingnon-interest expense increased $188,000, or 17.4%, for the three and six months ended MarchJune 31,30, 2026,2026 increased $678,000, or 60.1%, and $725,000, or 32.4%, respectively, compared to the same period in 2025. The increase was primarily due to aimpairment changeof intax credit card vendorinvestments and core provider costs commensurate with an increase in transactions,liquidation accounts, and clients.expense.
FDICComputer insurancesoftware expense increased $129,000,$302,000, or 16.5%,18.2%, and $620,000, or 19.0%, for the three and six months ended MarchJune 31,30, 2026, respectively, compared to the same period in 2025. The increase was primarily due to anour increase in assessment rate relatedcommitment to aninnovative increasetechnology into non-performingsupport assetsgrowth initiatives, enhance productivity, and wholesaleimprove deposits.the client experience.
MarketingData processing expense decreasedincreased $257,000,$114,000, or 26.5%,8.3%, and $302,000, or 12.3%, for the three and six months ended MarchJune 31,30, 2026, respectively, compared to the same period in 2025. The decreaseincrease was primarily due to timinga of projects. Management expects marketing spend for full year 2026 to bechange in linecredit card vendor and core provider costs commensurate with prioran yearincrease spend.in transactions, accounts, and clients.
FBIZ insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 1 filing (1 insider, 1 trade date, 675 shares, about $47.4K). Net open-market shares: -675 (purchases minus sales); net value about -$47.4K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-27 | Chandler Jodi A |
Open-market sale | 675 | $70.19 | $47.4K |
| 2026-08-16 | Ferris Scott M. |
Grant/award | 575 | — | — |
| 2026-05-16 | Garcia Laura M. |
Shares withheld for tax | 194 | $53.81 | $10.4K |
| 2026-05-16 | Crampton Kevin D |
Shares withheld for tax | 54 | $53.81 | $2.9K |
| 2026-05-16 | Olszewski Daniel P. |
Grant/award | 710 | — | — |
| 2026-05-16 | Lorenz William Kent |
Grant/award | 710 | — | — |
| 2026-05-16 | Kilcoyne Gerald L |
Grant/award | 710 | — | — |
| 2026-05-16 | Graham Jason R |
Grant/award | 710 | — | — |
| 2026-05-16 | Chavarria Carla C |
Grant/award | 710 | — | — |
| 2026-05-16 | Chambas Corey A |
Grant/award | 710 | — | — |
| 2026-05-16 | Benson Laurie S. |
Grant/award | 710 | — | — |
| 2026-05-16 | Seiler David R. |
Grant/award | 3,815 | — | — |
| 2026-04-10 | Spielmann Brian D. |
Shares withheld for tax | 1,501 | $58.60 | $88.0K |
| 2026-04-10 | Spielmann Brian D. |
Grant/award | 3,190 | — | — |
| 2026-04-10 | Seiler David R. |
Shares withheld for tax | 1,912 | $58.60 | $112.0K |
| 2026-04-10 | Seiler David R. |
Grant/award | 4,780 | — | — |
| 2026-04-10 | Quade Bradley A |
Shares withheld for tax | 1,096 | $58.60 | $64.2K |
| 2026-04-10 | Quade Bradley A |
Grant/award | 2,740 | — | — |
| 2026-04-10 | Ovokaitys Daniel |
Shares withheld for tax | 1,143 | $58.60 | $67.0K |
| 2026-04-10 | Ovokaitys Daniel |
Grant/award | 2,430 | — | — |
| 2026-04-10 | Hartlieb James Edward |
Shares withheld for tax | 1,039 | $58.60 | $60.9K |
| 2026-04-10 | Hartlieb James Edward |
Grant/award | 2,730 | — | — |
| 2026-04-10 | Hartlieb James Edward |
Gift | 127 | — | — |
| 2026-04-10 | Garcia Laura M. |
Shares withheld for tax | 1,108 | $58.60 | $64.9K |
| 2026-04-10 | Garcia Laura M. |
Grant/award | 2,500 | — | — |
| 2026-04-10 | Chandler Jodi A |
Shares withheld for tax | 834 | $58.60 | $48.9K |
| 2026-04-10 | Chandler Jodi A |
Grant/award | 2,080 | — | — |
| 2026-04-10 | Chambas Corey A |
Grant/award | 10,370 | — | — |
| 2026-04-10 | Chambas Corey A |
Shares withheld for tax | 4,875 | $58.60 | $285.7K |
Well-known investors holding FBIZ (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 128,927 | $8.1M | 0.0% | Added 36% |
| Renaissance Technologies | 2026-06-30 | 120,865 | $7.6M | 0.01% | Reduced 1% |
| Two Sigma Investments | 2026-06-30 | 73,566 | $4.6M | 0.0% | Added 132% |
| Millennium Management (Israel Englander) | 2026-06-30 | 25,364 | $1.6M | 0.0% | Reduced 24% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 20,897 | $1.3M | 0.0% | Added 369% |