First Business Financial Services (FBIZ) Q4 2025: Dividend Hiked 17% as Fee Income and Core Deposits Accelerate

January 30, 2026 | By EarningsIQ Research

FBIZ capped 2025 with robust double-digit growth in both earnings and book value, propelled by resilient core deposit expansion and record private wealth fee income. The bank’s diversified revenue streams and disciplined expense management delivered positive operating leverage for a fourth consecutive year, while a significant dividend increase signals confidence in future momentum. Management is leaning into organic growth, specialty lending, and fee businesses as primary drivers for 2026, despite isolated credit headwinds in CRE and a shrinking equipment finance book.

Summary

• Private Wealth Fee Engine Expands: Record fee income and new client wins reinforced annuity-like revenue streams.
• Deposit Growth Outpaces Peers: Core deposits surged, offsetting runoff in higher-cost funding and supporting margin stability.
• Dividend and Growth Mandate Strengthened: Double-digit EPS and book value growth drove a 17% dividend hike, with management reaffirming its organic growth focus.

Performance Analysis

FBIZ delivered a strong finish to 2025, with pre-tax, pre-provision earnings up nearly 15% and return on average tangible common equity above 15%. The bank’s core net interest margin (NIM) remained resilient, even as a single large CRE downgrade compressed Q4 margin by 10 basis points. Excluding this event, NIM would have held at 363 basis points, within management’s target range. Full-year net interest income climbed 10%, driven by robust loan and deposit growth that consistently outpaced industry averages.

Non-interest income was another bright spot, led by private wealth fees up 11% YoY and service charges up nearly 20%, both reflecting deeper client relationships. Full-year operating revenue grew 10%, while expenses rose just 6.5%, producing positive operating leverage for the fourth straight year. The bank’s tangible book value per share increased 14%, and a 17% dividend boost underscores management’s confidence in ongoing earnings power.

• CRE Credit Event Contained: A $20.4 million CRE downgrade was isolated, with no specific reserves required due to strong collateral and recent appraisals.
• Loan Growth Normalized by Payoffs: Full-year loan growth was 8%, but would have reached 11% if not for elevated payoffs, especially in multifamily CRE.
• Fee Income Resilience: Private wealth and service charges offset volatility in SBA gains and partnership income, demonstrating the value of revenue diversity.

While the equipment finance portfolio continued to shrink, management expects specialty lending and core deposits to drive growth in 2026, with pipelines described as strong across key markets.

Executive Commentary

Strategic Positioning

1. Revenue Diversification Anchors Growth

FBIZ’s business model relies on a diversified mix of net interest income and recurring fee streams, notably from its private wealth and business banking units. This diversification blunted the impact of variable income lines like SBA gains and partnership investments, enabling the bank to consistently meet its double-digit revenue growth mandate even in choppy macro environments.

2. Deposit Franchise and Margin Defense

Core deposit growth was a standout, up 12% YoY, with most inflows coming from interest-bearing and money market accounts. This allowed FBIZ to reduce reliance on high-cost CDs and wholesale funding, supporting NIM stability. Management’s match funding approach and focus on relationship banking make the bank less sensitive to rate swings than peers, providing a margin buffer as the competitive deposit landscape persists.

3. Specialty Lending and Fee Income Expansion

The bank is pushing to expand specialty lending (asset-based lending, ABL, and accounts receivable finance), which currently accounts for 23% of loans but has been as high as 25%. Management aims to return to or exceed this level, as these businesses are counter-cyclical and margin-accretive. The private wealth and SBA lines are also targeted for double-digit fee income growth, with management expecting a rebound in SBA gains and a J-curve upswing in SBIC partnership income.

4. Credit Risk Management and Portfolio Quality

While the Q4 CRE downgrade was notable, management emphasized robust underwriting and collateral coverage, with recent appraisals supporting loan values. Equipment finance charge-offs were anticipated and already reserved, and the portfolio has shrunk from $61 million to $21 million over the past year, reducing risk concentration. Other credit exposures, including a long-standing ABL workout, are progressing through court systems but are not expected to materially impact performance.

5. Relentless Focus on Operating Leverage

FBIZ’s expense discipline is central to its strategy, with a goal of growing expenses at a rate modestly below revenue growth to produce positive operating leverage annually. Compensation is expected to rise in 2026 due to open positions and benefit costs, but management is committed to maintaining this leverage, aided by scalable technology investments and talent acquisition in growth markets.

Key Considerations

FBIZ’s fourth quarter results highlight a disciplined execution of its organic growth strategy, with management focused on driving shareholder value through recurring earnings and capital returns. Several factors warrant close investor attention as the bank enters 2026:

Key Considerations:

• Core Deposit Momentum: Sustained double-digit core deposit growth is a differentiator in a competitive funding environment.
• Specialty Lending Upside: Expansion in ABL and accounts receivable finance could accelerate both loan growth and margin improvement.
• Fee Income Levers: Private wealth and SBA rebound are pivotal for achieving targeted 10%+ non-interest income growth.
• Expense Control Discipline: Maintaining positive operating leverage as compensation and benefit costs rise will be crucial.
• Isolated Credit Issues: Timely resolution of CRE and ABL problem loans will be monitored for impact on asset quality ratios.

Risks

Isolated credit events, such as the CRE downgrade, underscore the risk of concentration in specific borrowers or sectors. While collateral coverage is strong, protracted resolution timelines could drag on asset quality metrics. Competitive deposit pricing remains a persistent headwind, and while management expects continued core growth, any industry-wide funding pressure could challenge NIM targets. Fee income volatility, especially in SBA and partnership lines, introduces variability that requires ongoing diversification and execution.

Forward Outlook

For Q1 2026, FBIZ guided to:

• Net interest margin returning to 363 basis points, within the 360–365 target range.
• Strong loan and deposit pipelines, with expectations for a rebound to double-digit loan growth pace.

For full-year 2026, management maintained guidance:

• 10% growth in net interest income and non-interest income, anchored by core deposit and specialty lending expansion.

Management highlighted several factors that support this outlook:

• Positive trends in business banking and regional economies, especially in Wisconsin markets.
• Tailwinds from federal tax policy changes and potential for lower rates to spur refinancing and loan demand.

Takeaways

FBIZ’s disciplined execution and diversified revenue model have delivered on its long-term growth promises, with the bank entering 2026 in a position of strength.

• Consistent Double-Digit Growth: The bank’s track record, with a 10%+ EPS CAGR over 20 years, is underpinned by robust core deposit and fee income engines.
• Margin and Credit Vigilance: While margin is stable and credit issues are contained, ongoing monitoring of CRE and specialty lending exposures is warranted.
• Organic Growth Remains Central: Management’s aversion to M&A and focus on organic, relationship-driven expansion is likely to continue, with talent and technology investments supporting scalability.

Conclusion

First Business Bank closed 2025 with momentum in core earnings, fee income, and shareholder returns, signaling confidence in its ability to deliver double-digit growth through disciplined, organic expansion. Investors should watch for continued core deposit wins, specialty lending growth, and fee income resilience as the primary levers for 2026 performance.

Industry Read-Through

FBIZ’s results highlight the growing importance of core deposit franchise strength and diversified fee income in mid-cap banking, especially as funding competition persists and rate sensitivity remains a challenge. Banks with scalable private wealth, specialty lending, and strong relationship banking models are better positioned to deliver operating leverage and defend margins. The contained CRE credit event also illustrates the necessity of prudent underwriting and collateral management in an environment where isolated borrower stress can skew asset quality metrics. For regional and community banks, the ability to drive organic growth without relying on M&A is increasingly a differentiator.

FBIZ Financials Banking Fee Income Core Deposits Private Wealth Specialty Lending Operating Leverage