First Business Earnings Rise as Margin Expands
Pre-tax, pre-provision income reached a record $19.8 million, up 23.7% from a year earlier.
First Business Financial Services (FBIZ), the Wisconsin-based commercial bank, reported second-quarter net income available to common shareholders of $15.4 million, up from $11.2 million a year earlier. Diluted earnings rose 36% to $1.84 a share and included a net $0.14-a-share benefit from one-time tax and compensation items.
The quarter extended a first-half earnings acceleration as revenue growth combined with tighter sequential expense control. Pre-tax, pre-provision income increased 15.1% from the first quarter and 23.7% from a year earlier, while the efficiency ratio improved to 57.57% from 61.14% and 60.97%, respectively.
Operating revenue rose 13.9% from a year earlier to $46.7 million, after reaching $44.3 million in the first quarter. Operating expense edged down sequentially to $26.9 million from $27.1 million, though it remained above the year-earlier $25.0 million.
Net interest income increased 12.9% from a year earlier and 7.4% sequentially to $38.1 million. The net interest margin widened to 3.78% from 3.56% in the first quarter as First Business deployed excess Federal Reserve cash into loans and collected higher prepayment fees. The core-deposit rate held essentially flat sequentially at 2.40%.
Period-end loans grew 10.3% from a year earlier to about $3.59 billion, led sequentially by a $66.3 million increase in commercial real estate and a $22.1 million increase in commercial-and-industrial lending. Core deposits rose 13.6% to $2.878 billion, outpacing loan growth and supporting the margin expansion.
Non-interest income declined 2.3% sequentially to $8.6 million as SBA loan-sale gains and commercial loan-swap fees fell. Private-wealth fees provided an offset, rising 13.6% from a year earlier to $4.3 million as assets under management and administration reached $4.235 billion.
Credit costs eased, with the provision for credit losses falling to $2.1 million from $3.0 million in the first quarter. Nonperforming assets declined 6.0% sequentially to $38.1 million, though they remained above the year-earlier level because of a previously downgraded $20.4 million commercial real-estate relationship.
Management maintained its annual net-interest-margin target of 3.60% to 3.65% and the company remains positioned for its goal of 10% growth in loans, core deposits, revenue and earnings. First Business also began exiting SBA 7(a) lending outside its bank-market footprint, a shift expected to have minimal impact on 2026 earnings and provide a modest benefit in 2027.