-- Sustained balance sheet growth and disciplined operating efficiency drive exceptional earnings and tangible book value growth --

MADISON, Wis.--(BUSINESS WIRE)--First Business Financial Services, Inc. (the “Company”, the “Bank”, or “First Business Bank”) (Nasdaq: FBIZ) reported quarterly net income available to common shareholders of $15.4 million, or earnings per share ("EPS") of $1.84. This compares to net income available to common shareholders of $12.0 million, or $1.44 per share, in the first quarter of 2026 and $11.2 million, or $1.35 per share, in the second quarter of 2025. EPS for the second quarter of 2026 included a tax benefit that was partially offset by one-time compensation costs, resulting in a net benefit of $0.14 per share.

"Our strong second quarter and first-half 2026 results position us to achieve our annual goal of 10% growth in loans, core deposits, revenue, and earnings,” said Dave Seiler, President and Chief Executive Officer. “During the quarter, we generated record pre-tax, pre-provision earnings by executing our relationship-based growth strategy, achieving strong loan and deposit growth with positive operating leverage. Our higher-yielding specialty C&I lending portfolios supported a strong net interest margin, which measured 3.67% and 3.68% for the first six months of 2026 and 2025, respectively. These achievements, along with stable asset quality, drove 11% growth in operating revenue, 15% growth in pre-tax, pre-provision earnings, and 17% growth in net income for the first half of 2026, excluding the impact of this quarter's $1.5 million tax benefit. This demonstrates our team's exceptional execution of our long-term strategic goals."

"Our commitment to long-term profitability drove our decision to exit Small Business Administration 7(a) lending activities outside our existing bank market footprint. We expect this to have a minimal impact on 2026 earnings and to provide a modest earnings benefit in 2027. We are redirecting resources to higher-return growth opportunities, including our existing bank markets, higher-yielding niche C&I lending businesses, private wealth management, and limited partnership investments. We believe efficient execution of these growth strategies will continue to support strong shareholder returns while maintaining disciplined risk management."

Quarterly Highlights

• Record Pre-Tax, Pre-Provision ("PTPP") Income. PTPP income grew to $19.8 million, up 15.1% and 23.7% from the linked and prior-year quarters, respectively, and up 14.9% on a year-to-date basis. This performance reflects continued growth across the Company’s balance sheet coupled with positive operating leverage.
• Robust Core Deposit Growth. Core deposits grew $81.6 million, or 11.7% annualized, from the linked quarter and $344.6 million, or 13.6%, from the second quarter of 2025.
• Continued Loan Growth. Loans increased $87.2 million, or 10.0% annualized, from the linked quarter and $336.2 million, or 10.3%, from the second quarter of 2025, including the transfer of $23.7 million in held-for-sale SBA loans to loans and leases receivable.
• Net Interest Margin Expansion. The Company's net interest margin was 3.78%, compared to 3.56% for the linked quarter. Expansion primarily reflects increased prepayment fees and asset-based loan fees. Net interest margin was strong and stable at 3.67% and 3.68% for the first six months of both 2026 and 2025, respectively. The Company maintains its annual net interest margin target range of 3.60%-3.65%.
• Strong Non-interest Income. Non-interest income increased $1.3 million, up 18.1% from the prior-year quarter, driven by a 13.6% increase in private wealth management service fees. Non-interest income for the first six months of 2026 grew 16.9% over the prior-year period, or 24.3% after excluding gains on the sale of SBA loans, reflecting the ongoing success of revenue diversification efforts.
• Decrease in Non-Performing Assets: Non-performing assets ("NPAs") declined $2.4 million, or 6.0%, from the linked quarter, resulting in an eight basis point improvement in the ratio of NPAs to Total Assets.
• Continued Tangible Book Value Growth. The Company’s strong earnings continued to drive growth in tangible book value per share, producing a 15.2% increase compared to the prior-year quarter.

Quarterly Financial Results

Second Quarter 2026 Compared to First Quarter 2026

Net interest income increased $2.6 million, or 7.4%, to $38.1 million.

• Net interest income increased as average loans and leases receivable grew by $124.7 million, or 14.6% annualized during the second quarter. The increase also benefited from a $645,000 increase in prepayment fees.
• The yield on average interest-earning assets increased 24 basis points to 6.45% from 6.21%, primarily due to the deployment of excess cash balances held at the Federal Reserve into loan growth during the second quarter and higher prepayment fees.
• The rate paid for average core deposits was stable at 2.40% compared to 2.41%, while the rate paid on average total bank funding increased two basis points to 2.75% from 2.73%. Total bank funding includes total deposits and Federal Home Loan Bank (“FHLB”) advances.
• Net interest margin increased to 3.78% from 3.56% in the linked quarter, primarily due to the deployment of excess cash balances held at the Federal Reserve into loan growth during the second quarter and higher prepayment fees.
• 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 $2.1 million compared to $3.0 million in the linked quarter. Compared to the linked quarter, the provision for credit losses was primarily driven by lower net charge-offs and a decrease in qualitative reserve factors within the general reserve, partially offset by increases in general reserves due to quantitative reserve factors and loan growth. See the Provision for Credit Loss breakdown table below for more detail.

Non-interest income decreased $206,000, or 2.3%, to $8.6 million. Excluding gain on sale of SBA loans, non-interest income increased $386,000, or 4.7%.

• Gain on sale of SBA loans decreased $592,000 due to management's decision to hold for investment any existing and new SBA 7(a) loans.
• Commercial loan swap fee income decreased $466,000, or 74.2%, to $162,000. Swap fee income varies from period to period based on loan activity and the interest rate environment.
• Private wealth fee income increased $380,000, or 9.8%, to $4.3 million. Private wealth assets under management and administration measured $4.235 billion on June 30, 2026, up $353.8 million or, 36.47% annualized from the prior quarter. Results for the quarter benefited from seasonal client tax processing fees of $247,000. Fee income is primarily based on asset levels and may vary based on seasonal activity and the timing of fluctuations in market values.
• Other non-interest income increased $362,000 to $1.5 million, primarily due to an increase in limited partnership investment income.

Non-interest expense increased $896,000, or 3.3%, to $27.8 million, while operating expense decreased $189,000, or 0.7%, to $26.9 million.

• Compensation expense was $18.5 million, decreasing by $79,000, or 0.4% from the linked quarter. The decrease was primarily driven by lower salaries and benefits expense associated with the Company's strategic exit from out of market SBA 7(a) lending activities, as well as lower payroll taxes following the first quarter annual cash bonus payout. These decreases were almost fully offset by $405,000 of severance expense related to the out of market SBA 7(a) lending exit and higher annual cash bonus accruals reflecting above-target Company performance. Average full-time equivalents (“FTEs”) for the second quarter of 2026 were 360, compared to 373 in the linked quarter, with the decrease primarily driven by exit of out of market SBA 7(a) lending. Excluding FTEs in out of market SBA 7(a) lending from both periods of comparison, average FTEs were 354, compared to 352 in the linked quarter.
• Other non-interest expense increased $646,000 to $1.8 million, primarily due to a $552,000 impairment on tax credit investments. The impairment on tax credit investments is related to historic rehabilitation tax credits that are more than offset by a reduction to income tax expense in current or prior periods.
• Data processing expense increased $212,000, or 16.7%, to $1.5 million, due to an increase in core processing costs and annual expense related to tax processing on behalf of the Bank's private wealth clients.
• Marketing expense increased $129,000, or 18.1%, to $840,000, primarily due to timing of marketing campaigns.

Income tax expense decreased $964,000 to $1.2 million. The effective tax rate was 7.2% for the three months ended June 30, 2026, compared to 15.2% for the linked quarter. The change in tax expense primarily reflects the $1.5 million, or $0.18 after tax per share, release of the remaining state deferred tax valuation allowance which was initially recognized in 2023 following the enactment of a state law that excluded small business lending interest from state tax. In the second quarter 2026, this valuation allowance was released due to sustained historical and forecasted Wisconsin taxable income. Excluding the allowance release, the effective tax rate was 15.9%. The Company expects to report a full year 2026 effective tax rate between 13% and 15%. For the remaining quarters, the effective quarterly tax rate is estimated to range between 15% and 17%.

Total period-end loans and leases receivable increased $87.2 million, or 10.0% annualized, to $3.588 billion. The average rate earned on average loans and leases receivable was 6.76%, up 19 basis points from 6.57% in the prior quarter. Excluding the transfer of $23.7 million of SBA 7(a) loans from held-for-sale to loans and leases receivable, period-end loans increased 7.2% during the quarter. Loan growth was moderated by elevated payoff activity, with payoffs approximately $50 million above the Company's quarterly average over the past two years.

• CRE loans increased $66.3 million, or 12.7%, to $2.162 billion, primarily due to growth across the bank markets.
• C&I loans increased $22.1 million, or 6.5% to $1.380 billion, primarily due to the aforementioned transfer of held for sale SBA 7(a) loans to held for investment and an increase in asset-based lending loans.

Total period-end core deposits increased $81.6 million, or 11.7% annualized, to $2.878 billion. The average rate paid was stable at 2.40% compared to 2.41% in the prior quarter.

Period-end wholesale funding, including FHLB advances and brokered deposits, decreased $12.1 million, or 1.19%, to $1.006 billion. Wholesale funding continues to support interest rate risk management through match-funding of fixed-rate assets to enhance funding flexibility and help stabilize net interest margin.

• Wholesale deposits decreased $55.5 million to $714.5 million. The average rate paid on wholesale deposits increased six basis points to 4.03% and the weighted average original maturity remained flat at 3.3 years.
• FHLB advances increased $43.3 million to $291.9 million. The average rate paid on FHLB advances increased 39 basis points to 3.53% and the weighted average original maturity decreased to 6.0 years from 6.2 years.

Non-performing assets decreased $2.4 million to $38.1 million, or 0.86% of total assets, compared to 0.94% in the prior quarter. The decline was primarily due to a repayment of a non-accrual SBA loan and lower non-accrual equipment finance loans and leases.

The allowance for credit losses, including the unfunded credit commitments reserve, increased $1.0 million, or 2.7%, primarily due to increases in general reserves due to loan growth and a modest decline in the economic outlook in our model forecast, partially offset by a decrease in general reserves due to qualitative risk factors and lower specific reserves. The allowance for credit losses, including unfunded credit commitment reserves, as a percent of total gross loans and leases was 1.10% in both quarters.

Second Quarter 2026 Compared to Second Quarter 2025

Net interest income increased $4.4 million, or 12.9%, to $38.1 million.

• Growth reflects a 9.59% increase in average gross loans and leases and a $706,000 increase in prepayment fees.
• The yield on average interest-earning assets decreased 20 basis points to 6.45% from 6.65%. This decrease in yield was primarily due to the decrease in short-term market rates, partially offset by an increase in prepayment fees and asset-based loan fees. The interest-earning asset beta was 28.8%.
• The rate paid for average core deposits decreased 35 basis points to 2.40% from 2.75%. The rate paid for average total bank funding decreased 33 basis points to 2.75% from 3.08%. The core deposit and total bank funding betas compared to the prior year were 50.0% and 47.1%, respectively.
• Net interest margin increased 11 basis points to 3.78% from 3.67%. The increase in net interest margin was primarily due to an increase in prepayment fees and asset-based loan fees, partially offset by a decrease in short-term market rates.

The Company reported provision for credit losses of $2.1 million, compared to $2.7 million in the second quarter of 2025. See the Provision for Credit Loss breakdown table below for more detail.

Non-interest income increased $1.3 million, or 18.1%, to $8.6 million. Excluding gain on sale of SBA loans, non-interest income increased $1.7 million, or 24.9%.

• Other non-interest income increased $731,000, or 91.6%, to $1.5 million, primarily driven by higher returns on the Company’s investments in limited partnerships.
• Private wealth fee income increased $509,000, or 13.6%, to $4.3 million. Private wealth assets under management and administration measured $4.235 billion at June 30, 2026 up $503.9 million, or 13.5%. Fee income is primarily based on asset levels and may vary based on seasonal activity and the timing of fluctuations in market values.
• Service charges on deposits increased $233,000, or 21.1%, to $1.3 million, primarily driven by new and expanded core deposit relationships.
• Bank-owned life insurance income increased $142,000, or 23.1%, to $757,000, primarily due to the purchase of new policies in the second quarter of 2025.
• Gain on sale of SBA loans decreased $397,000 due to management's decision to hold for investment any existing and new SBA 7(a) loans.

Non-interest expense increased $2.9 million, or 11.5%, to $27.8 million. Operating expense increased $1.9 million or 7.5%, to $26.9 million.

• Compensation expense increased $1.9 million, or 11.7%, to $18.5 million. Growth reflects annual merit increases and promotions, the aforementioned $405,000 of severance expense related to the out of market SBA 7(a) lending exit, and higher annual cash bonus accruals due to improved Company performance. Excluding SBA severance, compensation expense increased $1.5 million, or 9.2%. Average FTEs decreased 1.1% to 360 in the second quarter of 2026, compared to 364 in the second quarter of 2025. Excluding FTEs in out of market SBA 7(a) lending in both periods of comparison, average FTEs increased 2.9% to 354 in the second quarter of 2026, compared to 344 in the second quarter of 2025.
• Computer software expense increased $302,000, or 18.2%, to $2.0 million, primarily due to our commitment to innovative technology to support growth initiatives, enhance productivity, and improve the client experience.
• Marketing expense decreased $222,000, or 20.9%, to $840,000, primarily due to seasonality and timing of marketing campaigns. Management expects marketing spend for full year 2026 to be in line with prior-year spend.

Total period-end loans and leases receivable increased $336.2 million, or 10.3%, to $3.588 billion. The average yield decreased 23 basis points to 6.76%, primarily due to a decrease in short-term market rates.

• CRE loans increased $214.6 million, or 11.0%, to $2.162 billion, primarily due to growth across our bank markets.
• C&I loans increased $121.3 million, or 9.6%, to $1.380 billion, primarily due to growth across our bank markets and in asset-based lending.

Total period-end core deposits grew $344.6 million, or 13.6%, to $2.878 billion. The average rate paid decreased 35 basis points to 2.40%, reflecting a decrease in short-term market rates.

Period-end wholesale funding increased $12.9 million, or 1.3%, to $1.006 billion.

• Wholesale deposits decreased $57.6 million, or 7.5%, to $714.5 million. The average rate paid on wholesale deposits decreased one basis point to 4.03% and the weighted average original maturity decreased to 3.3 years from 4.1 years.
• FHLB advances increased $70.7 million, or 31.9%, to $346.8 million. The average rate paid on FHLB advances increased 21 basis points to 3.53% and the weighted average original maturity increased to 6.0 years from 5.5 years.

Non-performing assets increased to $38.1 million, or 0.86% of total assets, from $28.7 million, or 0.72% of total assets, primarily reflecting the fourth quarter 2025 downgrade of $20.4 million of CRE loans from a single client relationship. The increase was partially offset by a $3.4 million sale at par in the first quarter of 2026 related to that same relationship, paydowns in SBA, and lower non-accrual balances from equipment finance loans.

The allowance for credit losses, including unfunded commitment reserves, increased $1.3 million to $39.5 million primarily due to higher general reserves as a result of loan growth and quantitative factors, partially offset by lower specific reserves and lower qualitative factors. The allowance for credit losses as a percent of total gross loans and leases was 1.10%, compared with 1.18% in the prior year.

Dividend Announced

On July 30, 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 2.01% based on the market close price of $67.58 on Wednesday, July 29, 2026. The quarterly dividend is the same as the quarterly dividend declared in April 2026, and based on second quarter 2026 earnings per share, this represents a dividend payout ratio of 18%. This regular cash dividend is payable on August 26, 2026, to shareholders of record at the close of business on August 12, 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 September 15, 2026, to shareholders of record on August 28, 2026.

Earnings Release Supplement and Conference Call

On July 30, 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 July 30, 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 second quarter 2026 earnings call to be held at 8:00 a.m. Central time on July 31, 2026. The conference call can be accessed at 833-461-5787 (585-542-9983 if outside the United States and Canada), using the conference call access code: FBIZ, 940117929. Investors may also listen live via webcast at: https://events.q4inc.com/attendee/940117929. 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, the adverse effects of public health events on the global, national, and local economy, and geopolitical instability and international conflicts that may affect energy prices or otherwise result in market volatility.
• 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.
• Increases in FDIC insurance assessments.

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, 2025, and other filings with the Securities and Exchange Commission.

SELECTED FINANCIAL CONDITION DATA

STATEMENTS OF INCOME

NET INTEREST INCOME ANALYSIS

BETA ANALYSIS

PROVISION FOR CREDIT LOSS COMPOSITION

ALLOWANCE FOR CREDIT LOSS COMPOSITION

PERFORMANCE RATIOS

ASSET QUALITY RATIOS

NET CHARGE-OFFS (RECOVERIES)

CAPITAL RATIOS

LOAN AND LEASE RECEIVABLE COMPOSITION

DEPOSIT COMPOSITION

SOURCES OF LIQUIDITY

EARNINGS PER SHARE

PRIVATE WEALTH OFF-BALANCE SHEET COMPOSITION