-- Robust balance sheet expansion supports continued earnings and tangible book value growth --

The original source-language text of this announcement is the official, authoritative version. Translations are provided as an accommodation only, and should be cross-referenced with the source-language text, which is the only version of the text intended to have legal effect. First Business Financial Services, Inc. (the “Company”, the “Bank”, or “First Business Bank”) (Nasdaq:FBIZ) reported quarterly net income available to common shareholders of $11.2 million, or earnings per share ("EPS") of $1.35. This compares to net income available to common shareholders of $11.0 million, or $1.32 per share, in the first quarter of 2025 and $10.2 million, or $1.23 per share, in the second quarter of 2024.

“First Business Bank’s strong second quarter results demonstrate our consistent ability to drive quality balance sheet and earnings growth,” said Corey Chambas, Chief Executive Officer. “We grew loans over 8% and core deposits by 11% by continuing to execute our relationship-based growth strategy. Driven by continued operational efficiency and strong asset quality, we achieved 10% growth in operating revenue, 18% growth in pre-tax, pre-provision earnings, and 17% growth in net income for the first half of 2025 which demonstrates strong execution of our long-term strategic goals. These successes contributed to tangible book value expanding an impressive 14% from the prior year.”

Quarterly Highlights

• Robust Deposit Growth. Total deposits, consisting of core deposits and wholesale deposits, grew $62.2 million, or 7.7% annualized, from the linked quarter and $420.0 million, or 14.6%, from the second quarter of 2024. Core deposits grew $70.4 million, or 11.4% annualized, from the linked quarter and $223.5 million, or 9.7%, from the second quarter of 2024.
• Strong and Consistent Loan Growth. Loans increased $66.9 million, or 8.4% annualized, from the first quarter of 2025, and $266.9 million, or 8.9%, from the second quarter of 2024, reflecting broad-based growth.
• Stable and Strong Net Interest Margin. The Company's effective match-funding strategy and pricing discipline produced a net interest margin of 3.67%, compared to 3.69% for the linked quarter and 3.65% for the prior year quarter. Net interest income increased 10.6% from the prior year quarter.
• Private Wealth Management Expansion. Private Wealth assets under management and administration grew to $3.731 billion, generating record quarterly Private Wealth fee income of $3.7 million. Private Wealth fees increased by 8.3% from the prior year quarter and comprised 49% of year-to-date total non-interest income.
• Strong 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 10.2% annualized increase compared to the linked quarter and a 13.6% increase compared to the prior year quarter.

Quarterly Financial Results

Second Quarter 2025 Compared to First Quarter 2025

Net interest income increased $526,000, or 1.6%, to $33.8 million.

• The increase in net interest income was driven by higher average loans and leases receivable, partially offset by a decrease in fees in lieu of interest. Average loans and leases receivable grew by $54.0 million, or 6.8% annualized, to $3.240 billion. Fees in lieu of interest, which vary from quarter to quarter based on client-driven activity, totaled $1.7 million, compared to $2.1 million in the prior quarter. Excluding fees in lieu of interest, net interest income increased $905,000, or 2.9%.
• The yield on average interest-earning assets increased four basis points to 6.65% from 6.61%. Excluding fees in lieu of interest, the yield on average interest-earning assets increased nine basis points to 6.47% from 6.38%.
• The rate paid for average interest-bearing core deposits increased three basis points to 3.32% from 3.29%. The rate paid for average total bank funding increased six basis points to 3.08% from 3.02%. Total bank funding is defined as total deposits plus Federal Home Loan Bank (“FHLB”) advances.
• Net interest margin was 3.67% compared to 3.69% for the linked quarter. Adjusted net interest margin¹ was 3.47%, up one basis point compared to 3.46% in the linked quarter. The increase in adjusted net interest margin was driven by an increase in the yield on interest-earning assets partially offset by an increase in rate paid on total bank funding.
• 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 $2.7 million in both periods of comparison. The current quarter provision was primarily driven by an increase in general reserves due to a deterioration in the economic outlook in our model forecast, an increase in qualitative factors, and loan growth; partially offset, by a decrease in specific reserve requirements.

Non-interest income decreased $324,000, or 4.3%, to $7.3 million.

• Private wealth fee income increased $256,000, or 7.3% to $3.7 million. Private Wealth assets under management and administration measured $3.731 billion on June 30, 2025, up $306.1 million, or 35.8% annualized from the prior quarter. Fee income is based on overall asset levels and may vary based on seasonal activity and the timing of fluctuations in market values.
• Gains on sale of SBA loans decreased $566,000, or 58.77%, to $397,000. Gain on sale of SBA loans varies period to period based on the amount of closed and fully funded loans. While quarterly gains may vary, management expects SBA loan production to continue growing year-over-year.
• Cash surrender value of bank-owned life insurance increased $178,000 or 40.7%, to $615,000 primarily due to the purchase of new policies totaling $24.5 million.
• Other non-interest income decreased $340,000 or 29.9% to $798,000. The decrease was primarily due to lower returns on the Company’s investments in Small Business Investment Company ("SBIC") funds. Income from SBIC funds was $200,000 in the second quarter, compared to $569,000 in the linked quarter. Income from SBIC funds varies from period to period based on changes in the realized and unrealized fair value of underlying investments.

Non-interest expense decreased $249,000, or 1.0%, to $25.0 million, while operating expense decreased $406,000, or 1.6%, to $25.0 million.

• Compensation expense was $16.5 million, reflecting a decrease of $213,000, or 1.3%, from the linked quarter due to payroll taxes paid in the prior quarter on the annual cash bonus payout, partially offset by an expanded workforce. Average full-time equivalents (“FTEs”) for the second quarter of 2025 were 364, up from 353 in the linked quarter.

• Data processing expense was $1.4 million, increasing $286,000, or 26.4%, from the linked quarter primarily due to annual expense related to tax processing on behalf of the Bank’s Private Wealth clients and elevated non-recurring credit card fees.

Income tax expense decreased $340,000 to $1.9 million. The effective tax rate was 14.6% for the three months ended June 30, 2025, compared to 17.0% for the linked quarter. The decrease in tax expense reflects updated tax credit partnership estimates, increased investment in bank-owned life insurance, and net benefit from quarterly discrete items. The effective tax rate for the six months ended June 30, 2025 was 15.8%. The Company expects to report an effective tax rate between 16% and 18% for 2025.

Total period-end loans and leases receivable increased $66.9 million, or 8.4% annualized, to $3.252 billion. The average rate earned on average loans and leases receivable was 6.99%, up five basis points from 6.94% in the prior quarter. Excluding fees in lieu of interest, the average rate earned on average loans and leases receivable was 6.78%, up 10 basis points from 6.68% in the prior quarter.

• Commercial Real Estate (“CRE”) loans increased by $37.2 million, or 7.8% annualized, to $1.947 billion, primarily due to an increase in multi-family loans in our southern Wisconsin markets.
• C&I loans increased $30.1 million, or 9.79% annualized, to $1.259 billion. The increase was due to growth across our bank markets and niche lending areas.

Total period-end core deposits increased $70.4 million, or 11.4% annualized, to $2.533 billion, compared to $2.463 billion. The average rate paid was 2.75%, up 4 basis points from 2.71% in the prior quarter.

Period-end wholesale funding, including FHLB advances and brokered deposits, decreased $18.7 million, or 1.8%, to $993.5 million. 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 $8.2 million, or 4.2%, to $772.1 million, compared to $780.3 million. The average rate paid on wholesale deposits decreased one basis point to 4.02% and the weighted average original maturity remained flat at 4.1 years.
• FHLB advances decreased $10.5 million, or 4.5%, to $221.4 million, compared to $231.9 million. The average rate paid on FHLB advances increased 21 basis points to 3.32% and the weighted average original maturity increased to 5.5 years from 5.4 years.

Non-performing assets increased $4.6 million to $28.7 million, or 0.72% of total assets, increasing as a percentage of total assets from 0.61% in the prior quarter. The increase is primarily driven by one new non-accrual loan in the transportation and logistics segment of the C&I portfolio, partially offset by charge-offs of previously reserved equipment finance loans and paydowns on non-accrual C&I loans. We continue to expect full repayment of the previously disclosed Asset-Based Lending ("ABL") loan that defaulted during the second quarter of 2023. The liquidation process under Chapter 7 bankruptcy and related litigation has delayed final resolution. The current balance of this loan is $6.1 million, down slightly from the linked quarter. Excluding this ABL loan, non-performing assets totaled $22.6 million, or 0.56% of total assets in the current quarter and $17.9 million, or 0.45% of total assets in the linked quarter.

The allowance for credit losses, including the unfunded credit commitments reserve, increased $1.7 million, or 4.6%, primarily due to increases in general reserves driven by deterioration in the economic outlook in our model forecast, changes in qualitative factors, and loan growth partially offset by a decrease in specific reserves. The allowance for credit losses, including unfunded credit commitment reserves, as a percent of total gross loans and leases was 1.18% compared to 1.15% in the prior quarter.

Second Quarter 2025 Compared to Second Quarter 2024

Net interest income increased $3.2 million, or 10.6%, to $33.8 million.

• The increase in net interest income primarily reflects an increase in average gross loans and leases, as well as an increase in fees in lieu of interest. Fees in lieu of interest increased to $1.7 million from $1.3 million. Excluding fees in lieu of interest, net interest income increased $2.9 million, or 9.8%.
• The yield on average interest-earning assets decreased 27 basis points to 6.65% from 6.92%. Excluding fees in lieu of interest, the yield on average interest-earning assets measured 6.47% compared to 6.76%. This decrease in yield was primarily due to the decrease in short-term market rates partially offset by the reinvestment of cash flows from the securities and fixed-rate loan portfolios.
• The rate paid for average interest-bearing core deposits decreased 77 basis points to 3.32% from 4.09%. The rate paid for average total bank funding decreased 31 basis points to 3.08% from 3.39%.
• Net interest margin increased two basis points to 3.67% from 3.65%. Adjusted net interest margin increased one basis point to 3.47% from 3.46%.

The Company reported provision for credit losses of $2.7 million, compared to $1.7 million in the second quarter of 2024. See the Provision for Credit Loss breakdown table below for more detail on the components of provision for credit losses expense.

Non-interest income decreased $170,000, or 2.3%, to $7.3 million.

• Private wealth fee income increased $287,000, or 8.3%, to $3.7 million. Private Wealth assets under management and administration measured $3.731 billion at June 30, 2025, up $482.0 million, or 14.8%.
• Loan fee income decreased $402,000 to $424,000 primarily due to a reclassification of certain types of C&I loan fees from non-interest income to interest income.
• Cash surrender value of bank-owned life insurance increased $212,000, or 52.6%, to $615,000 primarily due to the purchase of new policies totaling $24.5 million.
• Service charges on deposits increased $152,000, or 16.0%, to $1.1 million, primarily driven by new core deposit relationships.
• Other fee income decreased $480,000, or 37.6%, to $798,000. The decrease was primarily due to lower returns on the Company’s investments in SBIC funds. Income from SBIC funds was $200,000 in the second quarter, compared to $796,000 in the prior year quarter. Income from SBIC funds varies from period to period based on changes in the realized and unrealized fair value of underlying investments.

Non-interest expense increased $1.1 million, or 4.6%, to $25.0 million. Operating expense increased $1.2 million, or 5.0%, to $25.0 million.

• Compensation expense increased $319,000, or 2.0%, to $16.5 million. The increase in compensation expense was primarily due to an increase in average FTEs and annual merit increases and promotions, partially offset by lower year-to-date incentive compensation accruals. Average FTEs increased 3.7% to 364 in the second quarter of 2025, compared to 351 in the second quarter of 2024.
• FDIC Insurance increased $222,000, or 36.3%, to $834,000 primarily due to an increase in assessment rate and assessable base.
• Data processing expense increased $186,000, or 15.7%, to $1.4 million primarily due to an increase in core processing costs commensurate with loan and deposit account growth, Private Wealth assets under management and administration growth, and various project implementations.
• Computer software expense increased $101,000, or 6.5%, to $1.7 million, primarily due to our commitment to innovative technology to support growth initiatives, enhance productivity, and improve the client experience.
• Marketing expense increased $212,000, or 24.9%, to $1.1 million, primarily due to increased business development efforts and advertising projects to support Company growth goals.

Total period-end loans and leases receivable increased $266.9 million, or 8.9%, to $3.252 billion.

• CRE loans increased $171.8 million, or 9.7%, to $1.947 billion, primarily due to increases in all loan categories in the Wisconsin markets.
• C&I loans increased $97.5 million, or 8.4%, to $1.259 billion, primarily due to growth across bank markets, floorplan financing, and equipment finance.

Total period-end core deposits grew $223.5 million, or 9.7%, to $2.533 billion, and the average rate paid decreased 59 basis points to 2.75%. The decrease in the average rate paid on core deposits was primarily due to a decrease in short-term market rates. Total average core deposits grew $21.4 million, or 0.9%, to $2.397 billion.

Period-end wholesale funding increased $139.6 million, or 16.3%, to $993.5 million.

• Wholesale deposits increased $196.6 million to $772.1 million, as the Bank utilized more wholesale deposits in lieu of FHLB advances to maintain excess liquidity and to match-fund fixed-rate assets. The average rate paid on wholesale deposits decreased seven basis points to 4.02% and the weighted average original maturity increased to 4.1 years from 4.0 years. Consistent with our balance sheet strategy to use the most efficient and cost-effective source of wholesale funding, the Company has entered into derivative contracts which hedge a portion of the wholesale deposits to reduce the fixed rate funding costs.
• FHLB advances decreased $57.0 million to $221.4 million. The average rate paid on FHLB advances increased 63 basis points to 3.32% and the weighted average original maturity increased to 5.5 years from 5.3 years.

Non-performing assets increased to $28.7 million, or 0.72% of total assets, compared to $19.1 million, or 0.53% of total assets, primarily driven by new non-accrual loans in the C&I transportation and logistics portfolio partially offset by charge-offs of previously reserved equipment finance loans. Excluding the ABL loan described above for which we expect full repayment, non-performing assets totaled $22.6 million, or 0.56% of total assets and $12.6 million, or 0.35% of total assets in the prior year quarter.

The allowance for credit losses, including unfunded commitment reserves, increased $3.3 million to $38.2 million, compared to $35.0 million primarily due to deterioration in the economic outlook in our model forecast and loan growth, partially offset by net charge-offs. The allowance for credit losses as a percent of total gross loans and leases was 1.18%, compared 1.17% in the prior year.

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 CEO effective the same date.

Earnings Release Supplement and Conference Call

On July 24, 2025, 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 July 24, 2025. 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 second quarter 2025 earnings call to be held at 1:00 p.m. Central time on July 25, 2025. The conference call can be accessed at 800-549-8228 (289-819-1520 if outside the United States and Canada), using the conference call access code: FBIZ, 54568. Investors may also listen live via webcast at: https://events.q4inc.com/attendee/999971382. A replay of the call will be available through Friday, August 1, 2025, by calling 888-660-6264 or 289-819-1325 for international participants. 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, 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.

NON-GAAP RECONCILIATIONS

Certain financial information provided in this release is determined by methods other than in accordance with generally accepted accounting principles (United States) (“GAAP”). Although the Company’s management believes that these non-GAAP financial measures provide a greater understanding of its business, these measures are not necessarily comparable to similar measures that may be presented by other companies.

TANGIBLE BOOK VALUE

“Tangible book value per share” is a non-GAAP measure representing tangible common equity divided by total common shares outstanding. “Tangible common equity” itself is a non-GAAP measure representing common stockholders’ equity reduced by intangible assets, if any. The Company’s management believes that this measure is important to many investors in the marketplace who are interested in period-to-period changes in book value per common share exclusive of changes in intangible assets. The information provided below reconciles tangible book value per share and tangible common equity to their most comparable GAAP measures.

TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS

“Tangible common equity to tangible assets” (“TCE”) is defined as the ratio of common stockholders’ equity reduced by intangible assets, if any, divided by total assets reduced by intangible assets, if any. Adjusted TCE ratio is defined as TCE adjusted for net fair value adjustments of financial assets and liabilities. For more information on fair value adjustments please refer to Note 19 - Fair Value Disclosures in the annual report on Form 10-K for the year ended December 31, 2024. The Company’s management believes that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. The information below reconciles tangible common equity and tangible assets to their most comparable GAAP measures.

EFFICIENCY RATIO & PRE-TAX, PRE-PROVISION ADJUSTED EARNINGS

“Efficiency ratio” is a non-GAAP measure representing non-interest expense excluding the effects of the SBA recourse provision, impairment of tax credit investments, losses or gains 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 gains or losses on securities, if any. “Pre-tax, pre-provision adjusted earnings” is defined as operating revenue less operating expense. In the judgment of the Company’s management, the adjustments made to non-interest expense and non-interest income allow investors and analysts to better assess the Company’s operating expenses in relation to its core operating revenue by removing the volatility that is associated with certain one-time items and other discrete items. The information provided below reconciles the efficiency ratio and pre-tax, pre-provision adjusted earnings to its most comparable GAAP measure.