First Business Q3 2025 slides: 16% revenue growth drives record performance

First Business Financial Services (NASDAQ:FBIZ) reported strong third-quarter results on October 31, 2025, with performance metrics exceeding analyst expectations across multiple categories. The company’s presentation highlighted robust growth in loans, deposits, and revenue, while maintaining stable margins and strong asset quality.

Quarterly Performance Highlights

First Business reported earnings per share of $1.70, beating forecasts by 22.3%, and revenue of $44.29 million, exceeding expectations by 4.38%. Following the announcement, FBIZ stock rose 3.1% in after-hours trading to $50.65, reflecting positive investor sentiment.

The bank’s Q3 2025 results demonstrated broad-based growth across key metrics, with operating revenue increasing 16.3% year-over-year and pre-tax, pre-provision earnings growing 20% year-to-date. Net income for the first nine months of 2025 increased by 25% compared to the same period in 2024.

As shown in the following comprehensive overview of the quarter’s performance:

The company maintained a strong and stable net interest margin (NIM) of 3.68%, compared to 3.67% in the linked quarter and 3.64% in the prior-year quarter. This stability reflects the effectiveness of First Business’s match-funding strategy and pricing discipline in a challenging interest rate environment.

Loan and Deposit Growth Strategy

First Business’s relationship banking approach continues to drive balanced growth in both loans and deposits. The company reported a 10.4% annualized increase in loans from the linked quarter and a 9.4% year-over-year increase. Similarly, core deposits grew 9.3% on an annualized basis from the linked quarter and 8.8% year-over-year.

The following chart illustrates the company’s balanced growth in both core deposits and loans:

The bank’s lending portfolio shows diversification with particular strength in Commercial and Industrial (C&I) lending, which has grown at a 17% CAGR over the past three years, outpacing the 11% growth in Commercial Real Estate (CRE) and other loans. This focus on C&I lending has contributed to higher yields in the overall loan portfolio.

As demonstrated in the following chart of the company’s lending growth:

During the earnings call, President and COO Dave Seiler emphasized the importance of talent acquisition in sustaining this growth: "As long as we keep winning the talent game, we can continue to grow at this kind of a pace." He also noted positive sentiment among the company’s entrepreneurial clients.

Net Interest Margin Stability

First Business has maintained a stable net interest margin despite industry challenges, outperforming peer medians. The company’s disciplined match-funding approach has been key to this stability.

The following chart illustrates the components and performance of the bank’s net interest margin:

This stability is achieved through a methodical approach to interest rate risk management, including individually match-funding loans with maturities over 5 years and amounts greater than $5 million, and portfolio match-funding for smaller loans. The bank maintains a balanced mix with 58% of its portfolio in floating-rate loans (predominantly SOFR-indexed) and 42% in fixed-rate loans as of September 30, 2025.

Revenue Diversification and Fee Income

First Business has successfully diversified its revenue streams, with strong contributions from both net interest income and various fee income sources. The company’s Private Wealth Management business has been particularly strong, comprising 45% of year-to-date total non-interest income.

The following chart shows the bank’s balanced revenue growth:

This diversification strategy has helped the bank achieve a 16% year-over-year increase in operating revenue, with year-to-date operating revenue up 12.3% compared to the first nine months of 2024.

Asset Quality and Capital Position

First Business maintains strong asset quality metrics, with non-performing assets remaining well managed. As of September 30, 2025, 93% of the loan portfolio was classified in category 1, and 99% of loans were current.

The following chart details the bank’s asset quality indicators:

The company’s capital position continues to strengthen, with tangible book value per share increasing by 16.8% annualized from the linked quarter and 15.6% year-over-year, reaching $40.16 as of Q3 2025. Capital ratios remain robust, with Common Equity Tier 1 at 8.50% and Total Capital at 10.50%.

As illustrated in the following capital metrics chart:

Strategic Goals and Progress

First Business is making significant progress against its 2024-2028 strategic plan, with most metrics already exceeding or on track to exceed 2028 targets. The company reported a return on average tangible common equity (ROATCE) of 17.3% for the first nine months of 2025, already exceeding the 2028 goal of 15%.

The following chart shows the company’s performance against its strategic goals:

The efficiency ratio has improved to 59.51% year-to-date, already below the 2028 target of 60%. Core deposits as a percentage of total funding have increased to 73%, moving closer to the 75% goal. Employee engagement and Net Promoter Score metrics remain strong at 86% and 70, respectively, both meeting or exceeding targets.

Forward-Looking Statements

Looking ahead, First Business maintains an optimistic outlook, targeting 10% annual growth in both loans and deposits. The company expects fee income to grow by approximately 10% and maintains a net interest margin guidance of 3.60% to 3.65%.

Potential challenges include the impact of economic uncertainties, competition in specialty lending markets, and regulatory changes affecting financial services. However, management expressed confidence in the company’s ability to navigate these challenges through its relationship-focused business model and disciplined risk management approach.

With a current stock price of $50.65, up 3.1% following the earnings release, First Business shares remain well within their 52-week range of $42.18 to $56.46, suggesting potential upside as the company continues to execute on its strategic plan.

Full presentation:

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