First Business Bank Announces Fourth Quarter 2025 Financial Results and 17% Cash Dividend Increase

“First Business Bank continued to produce strong deposit and loan growth that outpaced the industry, expanding client relationships and driving outstanding financial performance during the fourth quarter,” said Corey Chambas, Chief Executive Officer. “We concluded 2025 with positive momentum. Our revenue growth goals continued to be supported by robust loan pipelines, expansion of our private wealth platform, core deposit growth, and diversified fee income sources. While we saw an increase in nonperforming loans due to a single client relationship, we continue to experience stable credit quality across our performing portfolio. We are pleased to report strong profitability despite this isolated event. We are on track with our five-year strategic plan, achieving 10% growth in top-line revenue and maintaining an efficiency ratio below 60%. This momentum continued to drive above-target performance on return on average tangible common equity and growth in tangible book value for 2025."

“We continued our track record of producing double-digit annual growth, exceeding 14% growth in both pre-tax, pre-provision adjusted earnings and earnings per share in 2025," Chambas continued. "We are particularly proud that we have sustained 10% compound average annual growth in earnings per share for the past 20 years. This consistent growth in earnings has supported our ability to provide shareholders a strong cash dividend that has grown for 14 consecutive years. We continue to target double-digit growth going forward."

Quarterly Highlights

• Robust Core Deposit Growth. Core deposits grew $80.9 million, or 12.5% annualized, from the linked quarter and $276.6 million, or 11.5%, from the fourth quarter of 2024. Core deposit funding mix improved to 74.7% compared to 71.5% in the linked quarter and 70.7% in the fourth quarter of 2024.

• Continued Loan Growth. Loans increased $38.6 million, or 4.6% annualized, from the third quarter of 2025, and $261.4 million, or 8.4%, from the fourth quarter of 2024. Loan growth was muted by elevated commercial real estate payoffs in the second half of 2025.

• Net Interest Margin. The Company's net interest margin of 3.53% included a 10 basis point impact of non-accrual interest reversals during the quarter. Net interest margin was 3.63% excluding this item, reflecting the Bank's effective match-funding strategy and pricing discipline. This compared to 3.68% for the linked quarter and 3.77% for the prior-year quarter.

• Commitment to Efficiency. The Company’s efficiency ratio improved to 56.61% from 57.44% and 56.94% in the linked and prior-year quarters, respectively. Efficiency ratio for the full year was 58.78% compared to 60.61%, producing positive operating leverage for the fourth consecutive year. We expect our disciplined expense management and balanced revenue growth to support positive operating leverage going forward.

• Continued Tangible Book Value Growth. The Company’s strong earnings and sound balance sheet management continued to drive growth in tangible book value per share, producing a 15.9% annualized increase compared to the linked quarter and a 13.7% increase compared to the prior-year quarter.
• Dividend Increase. The Company's quarterly cash dividend was increased 17%, to $0.34 per share, marking the Company's 14th consecutive annual increase.

Quarterly Financial Results

Fourth Quarter 2025 Compared to Third Quarter 2025

Net interest income decreased $124,000, or 0.4%, to $34.8 million.

• The decrease in net interest income was driven by non-accrual interest reversals in the current quarter and non-accrual interest recoveries in the linked quarter, partially offset by higher average loans and leases receivable. Average loans and leases receivable grew by $67.9 million, or 8.2% annualized, to $3.364 billion. Excluding non-accrual interest activity in both periods, net interest income increased $1.1 million, or 3.1%.
• The yield on average interest-earning assets decreased 34 basis points to 6.38% from 6.72% mainly due to non-accrual interest reversals in the current quarter and non-accrual interest recoveries in the linked quarter and reduction in short-term market rates. Excluding non-accrual interest activity in both periods, the yield on average interest-earning assets was 6.47% compared to 6.69% in the linked quarter. Excluding non-accrual interest activity in both periods, the interest- earning asset beta was 54.1%. The change in yield of the respective interest-earning asset or the rate paid on interest-bearing liability compared to the change in the effective daily fed funds rate is commonly referred to as beta.
• The rate paid for average core deposits decreased 25 basis points to 2.64% from 2.89%. The rate paid for average total bank funding decreased 19 basis points to 2.95% from 3.14%. Total bank funding is defined as total deposits plus Federal Home Loan Bank (“FHLB”) advances. The core deposit beta and total bank funding beta compared to the prior quarter was 62.5% and 47.5%, respectively.
• Net interest margin was 3.53% compared to 3.68% for the linked quarter. The decrease in net interest margin was driven primarily by non-accrual interest reversals in the current quarter and non-accrual interest recoveries in the linked quarter. Excluding non-accrual interest activity in both periods, net interest margin was 3.63% compared to 3.64% in the linked quarter.
• The Company maintains a long-term target for net interest margin in the range of 3.60% - 3.65%. Performance in future quarters will vary due to factors such as the level of fees in lieu of interest and the timing, pace, and scale of future interest rate changes.

The Bank reported provision for credit losses of $1.9 million compared to $1.4 million in the linked quarter. The current quarter provision primarily reflects net charge-offs and loan growth, partially offset by improvement in the economic outlook in our model forecast and a decrease in general reserve qualitative factors. Specific reserves were flat reflecting a decrease in reserve requirements in equipment finance lending offset by an increase in reserves in accounts receivable financing.

Non-interest income decreased $2.2 million, or 22.6%, to $7.5 million.

• Gain on sale of SBA loans decreased $242,000, or 63.4%, to $140,000, mainly due to delays related to the government shutdown.

• Commercial loan swap fee income decreased $236,000, or 24.2%, to $738,000. Swap fee income varies from period to period based on loan activity and the interest rate environment.

• Other non-interest income decreased $1.5 million, or 76.9%, to $458,000 mainly due to a reclassification of partnership investment expenses and $537,000 of nonrecurring fee income in accounts receivable financing in the prior quarter. In the fourth quarter, the Company reclassified $904,000 of investment expenses incurred during the first nine months of 2025 to net against the related revenue to present the net benefit of our partnership investments. The Company will continue this method of disclosure on a go-forward basis and prior-year periods were not adjusted due to immateriality.

• Bank-owned life insurance income decreased $226,000, or 23.4%, to $739,000 primarily due to a $234,000 insurance claim received in the prior quarter.

Non-interest expense decreased $1.6 million, or 6.1%, to $24.1 million, while operating expense decreased $1.5 million, or 6.0%, to $23.9 million.

• Compensation expense was $17.2 million, decreasing $291,000, or 1.7%, primarily due to a decrease in annual cash bonus and 401(k) accruals, partially offset by an increase in individual incentive compensation. Average full-time equivalents (“FTEs”) for the fourth quarter of 2025 were 368, up from 366 in the linked quarter.
• Other non-interest expense decreased $1.5 million, or 86.6%, to $225,000, primarily due to the aforementioned reclassification of partnership investment expenses and a decrease in donations and contributions.

Income tax expense decreased $88,000 to $2.9 million. The effective tax rate was 17.9% for the three months ended December 31, 2025, compared to 17.2% for the linked quarter. The change in tax expense reflects a decrease in pre-tax income and updated tax credit partnership estimates. The effective tax rate for the year ended December 31, 2025 was 16.8%. The Company expects to report an effective tax rate between 16% and 18% for 2026.

Total period-end loans and leases receivable increased $38.6 million, or 4.6% annualized, to $3.375 billion. Loan growth was muted due to elevated commercial real estate loan payoffs in the second half of 2025. The average rate earned on average loans and leases receivable was 6.77%, down 33 basis points from 7.10% in the prior quarter. Excluding the non-accrual interest reversals and recoveries, the average rate earned on average loans and leases receivable was 6.87% compared to 7.06% in the linked quarter.

Total period-end core deposits increased $80.9 million, or 12.5% annualized, to $2.673 billion. The average rate paid was 2.64%, down 25 basis points from 2.89% in the prior quarter primarily due to a decrease in short-term market rates.

Period-end wholesale funding, including FHLB advances and brokered deposits, decreased $48.2 million, or 5.1%, to $904.7 million due to an increase in core deposits. Consistent with the Bank’s long-held philosophy to minimize exposure to interest rate risk, management will continue to utilize the most efficient and cost-effective source of wholesale funds to match-fund fixed-rate loans, as necessary.

• Wholesale deposits decreased $33.5 million to $707.4 million. The average rate paid on wholesale deposits increased one basis point to 4.04% and the weighted average original maturity increased to 4.4 years from 4.3 years.

• FHLB advances decreased $14.7 million to $197.2 million. The average rate paid on FHLB advances decreased two basis points to 3.18% and the weighted average original maturity increased to 5.7 years from 5.3 years.

Non-performing assets increased $20.3 million to $43.9 million, or 1.07% of total assets, compared to 0.58% in the prior quarter. The increase primarily reflects the downgrade of $20.4 million of CRE loans from a single southeast Wisconsin-based client relationship. Management has evaluated the Bank's collateral position of these loans and concluded no specific reserves are required. This increase in non-performing assets was partially offset by lower non-accrual equipment finance loans.

The allowance for credit losses, including the unfunded credit commitments reserve, decreased $690,000, or 1.8%, primarily due to decreases in general reserves due to an improvement in the economic outlook in our model forecast, improvement in qualitative factors, and a decrease in specific reserves, partially offset by loan growth, general reserve model updates, and an increase in unfunded commitment reserves. The allowance for credit losses, including unfunded credit commitment reserves, as a percent of total gross loans and leases was 1.12% compared to 1.15% in the prior quarter.

Fourth Quarter 2025 Compared to Fourth Quarter 2024

Net interest income increased $1.6 million, or 4.9%, to $34.8 million.

• Growth reflects higher average gross loans and leases partially offset by the aforementioned non-accrual interest activity and lower prepayment fees. Excluding the non-accrual interest activity, net interest income increased $2.4 million, or 7.3%.
• The yield on average interest-earning assets decreased 46 basis points to 6.38% from 6.84%. Excluding the non-accrual interest activity, the yield on average interest-earning assets measured 6.47%. This decrease in yield was primarily due to the decrease in short-term market rates and lower prepayment fees, partially offset by the reinvestment of cash flows from the securities and fixed-rate loan portfolios. Excluding the non-accrual interest activity, the interest-earning asset beta was 46.7%
• The rate paid for average interest-bearing core deposits decreased 51 basis points to 3.14% from 3.65%. The rate paid for average total bank funding decreased 23 basis points to 2.95% from 3.18%. The core deposit and total bank funding betas compared to the prior year were 45.3% and 30.7%, respectively.
• Net interest margin decreased 24 basis points to 3.53% from 3.77%. Excluding the non-accrual interest activity, net interest margin was 3.63%. The remaining decrease in net interest margin was mainly due to a reduction in prepayment fees and the decrease in earning asset yields outpacing the decrease in total bank funding costs.

The Company reported provision for credit losses of $1.9 million, compared to $2.7 million in the fourth quarter of 2024. See the Provision for Credit Loss breakdown table below for more detail.

Non-interest income decreased $544,000, or 6.8%, to $7.5 million.

• Gain on sale of SBA loans decreased $798,000, or 85.1%, to $140,000, primarily due to delays caused by the government shutdown.

• Loan fee income decreased $504,000, or 55.1%, to $410,000, primarily due to a reclassification of certain types of C&I loan fees from non-interest income to interest income.

• Other non-interest income decreased $303,000, or 38.9%, to $458,000, primarily due to the aforementioned partnership investment expense reclassification, partially offset by increases in credit card fee income and income from partnership investments.

• Private wealth fee income increased $362,000, or 10.6%, to $3.8 million. Private wealth assets under management and administration measured $3.815 billion at December 31, 2025 up $396.0 million, or 11.6%.

• Bank-owned life insurance income increased $321,000, or 76.8%, to $739,000, primarily due to the purchase of new policies.

• Service charges on deposits increased $228,000, or 23.8%, to $1.2 million, primarily driven by new and expanded core deposit relationships and a reduction in earnings credit rates.

• Commercial loan swap fee income increased $150,000, or 25.5%, to $738,000. Swap fee income varies period to period based on loan activity and the interest rate environment.

Non-interest expense increased $978,000, or 4.2%, to $24.1 million. Operating expense increased $467,000 or 2.0%, to $23.9 million.

• Compensation expense increased $1.6 million, or 10.4%, to $17.2 million. Growth reflects an increase in average FTEs, salary increases, and an increase in the annual cash bonus accrual. Average FTEs increased 5.4% to 368 in the fourth quarter of 2025, compared to 349 in the fourth quarter of 2024.
• Computer software expense increased $317,000, or 20.0%, to $1.9 million, due to ongoing investment in innovative technology to support growth initiatives, enhance productivity and security, and improve the client experience.

• Data processing expense decreased $489,000, or 29.7%, to $1.2 million, primarily due to a one-time expense related to a change in credit card vendors in the prior-year quarter.

• Professional fees decreased $322,000, or 24.3%, to $1.0 million, primarily due to timing of recruiting and legal fees.

• Other non-interest expense decreased $292,000, or 56.5%, to $225,000, primarily due to the aforementioned reclassification of partnership investment expenses, partially offset by an increase in liquidation expenses.

Total period-end loans and leases receivable increased $261.4 million, or 8.4%, to $3.375 billion. The average yield decreased 44 basis points to 6.77%, primarily due to a decrease in short-term market rates and the aforementioned non-accrual interest reversal. Excluding the non-accrual interest reversal, average yield was 6.87%.

• CRE loans increased $143.1 million, or 7.5%, to $2.060 billion, primarily due to growth across the Wisconsin and Kansas City markets.
• C&I loans increased $122.3 million, or 10.6%, to $1.274 billion, primarily due to growth across our bank markets and in our floorplan, asset-based lending, and equipment finance businesses.

Total period-end core deposits grew $276.6 million, or 11.5%, to $2.673 billion. The average rate paid decreased 34 basis points to 2.64%, reflecting a decrease in short-term market rates.

Period-end wholesale funding decreased $71.3 million, or 7.3%, to $904.7 million.

• Wholesale deposits decreased $3.3 million, or 0.5%, to $707.4 million. The average rate paid on wholesale deposits decreased seven basis points to 4.04% and the weighted average original maturity increased to 4.4 years from 3.9 years.
• FHLB advances decreased $68.1 million to $197.2 million. The average rate paid on FHLB advances increased 27 basis points to 3.18% and the weighted average original maturity increased to 5.7 years from 5.4 years.

Non-performing assets increased to $43.9 million, or 1.07% of total assets, compared to $28.4 million, or 0.74% of total assets, primarily driven by the downgrade of $20.4 million of CRE loans from a single client relationship, partially offset by lower non-accrual equipment finance loans.

The allowance for credit losses, including unfunded commitment reserves, increased $424,000 to $37.7 million primarily due to higher general reserves as a result of loan growth and quantitative factors, partially offset by lower specific reserves. The allowance for credit losses as a percent of total gross loans and leases was 1.12%, compared with 1.20% in the prior year.

Dividend Increase Announced

On January 29, 2026, the Company's Board of Directors declared a quarterly cash dividend on its common stock of $0.34 per share, which is equivalent to a dividend yield of 2.45% based on the market close price of $55.44 on Wednesday, January 28, 2026. The quarterly dividend represents a 17% increase over the quarterly dividend declared in October 2025 and marks the 14^th consecutive annual dividend raise. Based on fourth quarter 2025 earnings per share, this represents a dividend payout ratio of 22%. This regular cash dividend is payable on February 28, 2026, to shareholders of record at the close of business on February 14, 2026.

The Board of Directors also declared a dividend on the Company’s 7% Series A Preferred Stock of $17.50 per share, payable on March 16, 2026, to shareholders of record on February 27, 2026.

2026 CEO Succession Plan

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

Earnings Release Supplement and Conference Call

On January 29, 2026, the Company posted an earnings release supplement to its website firstbusiness.bank under the “Investor Relations” tab which will also be furnished to the U.S. Securities and Exchange Commission on January 29, 2026. The information included in the supplement provides an overview of the Company’s recent operating performance, financial condition, and other data relevant to the quarter. The Company intends to use this supplement in connection with its fourth quarter 2025 earnings call to be held at 1:00 p.m. Central time on January 30, 2026. The conference call can be accessed at 800-549-8228 (646-564-2877 if outside the United States and Canada), using the conference call access code: FBIZ, 15092. Investors may also listen live via webcast at: https://events.q4inc.com/attendee/437898665. A replay of the call will be available through Friday, February 6, 2026, by calling 888-660-6264 (646-517-3975 if outside the United States and Canada). The webcast archive of the conference call will be available on the Company’s website, ir.firstbusiness.bank.

About First Business Bank

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

This release may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which reflect First Business Bank’s current views with respect to future events and financial performance. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results, or other developments. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, uncertainties, and other factors that may cause actual results to differ materially from the views, beliefs, and projections expressed in such statements. Such statements are subject to risks and uncertainties, including among other things:

• Adverse changes in the economy or business conditions, either nationally or in our markets including, without limitation, inflation, economic downturn, labor shortages, wage pressures, and the adverse effects of public health events on the global, national, and local economy.

• Uncertainty created by potential federal government actions relating to the authority of regulatory agencies (including bank regulators), international trade policy, prolonged shutdown of the federal government, and other significant policy matters.

• Competitive pressures among depository and other financial institutions nationally and in the Company’s markets.
• Increases in defaults by borrowers and other delinquencies.
• Management’s ability to manage growth effectively, including the successful expansion of our client support, administrative infrastructure, and internal management systems.
• Fluctuations in interest rates and market prices.
• Changes in legislative or regulatory requirements applicable to the Company and its subsidiaries.
• Changes in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations.
• Fraud, including client and system failure or breaches of our network security, including the Company’s internet banking activities.
• Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portion of SBA loans.
• Ongoing volatility in the banking sector may result in new legislation, regulations or policy changes that could subject the Company and the Bank to increased government regulation and supervision.
• The proportion of the Company’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk.

For further information about the factors that could affect the Company’s future results, please see the Company’s annual report on Form 10-K for the year ended December 31, 2024, and other filings with the Securities and Exchange Commission.