Executive Summary

EPS of $1.23 and operating revenue of $37.97M, with net interest margin at 3.65% (top of long‑term target range), driven by double‑digit loan growth and higher fees in lieu of interest .
Record Private Wealth fee income of $3.5M and robust PTPP earnings ($14.1M), with efficiency ratio improving sequentially to 62.75% .
Credit trends remained stable QoQ: non‑performing assets fell to $19.1M (0.53% of assets), though net charge‑offs rose to 0.19% annualized, primarily in equipment finance transportation/logistics .
Guidance updates: 2024 effective tax rate lowered to 16%–18% (from 17%–19% in Q1); NIM long‑term target reaffirmed at 3.60%–3.65%; $0.25 dividend maintained with 20% payout ratio based on Q2 EPS .

What Went Well and What Went Wrong

What Went Well
- Net interest margin expanded 7 bps QoQ to 3.65%, at the top of the company’s long‑term target range (3.60%–3.65%), supported by higher yields and $1.2M in fees in lieu of interest; CEO: “outstanding second quarter results… improved net interest margin” .
- Private Wealth momentum: assets under management/administration at $3.249B; fee income hit a record $3.5M (+19.6% YoY), diversifying earnings and comprising 47% of non‑interest income .
- PTPP earnings rose to $14.1M (+7.6% QoQ), with operating revenue up to $37.97M (+4.7% QoQ, +8.0% YoY) and efficiency ratio improved to 62.75% QoQ .
What Went Wrong
- Equipment finance headwinds persisted: net charge‑offs of $1.392M; annualized NCO ratio rose to 0.19% and specific reserve changes continued to reflect transportation/logistics stress in C&I .
- Non‑interest expense climbed 2.3% QoQ to $23.879M, with higher data processing (+16.1% QoQ) and software expense (+9.7% QoQ) as the bank invests in growth/technology .
- Wholesale funding grew to $853.9M (+$78.2M YoY), reflecting match‑funding strategy; cost pressures persisted with average wholesale deposit rate at 4.09% and FHLB advances rate up to 2.69% .

Financial Results

Metric	Q2 2023	Q1 2024	Q2 2024
Operating Revenue ($USD Millions)	$35.17	$36.28	$37.97
Diluted EPS ($)	$0.98	$1.04	$1.23
Net Interest Margin (%)	3.81%	3.58%	3.65%
Efficiency Ratio (%)	61.68%	63.76%	62.75%
Return on Avg Assets (%)	1.04%	0.98%	1.14%
Net Interest Income ($USD Millions)	$27.75	$29.51	$30.54
Total Non‑interest Income ($USD Millions)	$7.37	$6.76	$7.43

Segment/Balance Mix (period‑end)

Loans ($USD Millions)	Q2 2023	Q1 2024	Q2 2024
Commercial Real Estate (Total)	$1,591.8	$1,739.8	$1,775.4
Commercial & Industrial	$1,036.9	$1,120.8	$1,161.7
Consumer & Other	$45.7	$50.0	$48.1
Total Gross Loans & Leases	$2,674.4	$2,910.6	$2,985.2

Key KPIs

KPI	Q2 2023	Q1 2024	Q2 2024
Period‑end Loans & Leases ($B)	$2.675	$2.911	$2.985
Period‑end Core Deposits ($B)	$2.074	$2.298	$2.310
Private Wealth Total Trust Assets ($B)	$2.907	$3.320	$3.249
Non‑performing Assets ($MM)	$15.786	$20.146	$19.053
ACL (% of Loans)	1.11%	1.19%	1.17%
Net Charge‑offs (annualized, %)	0.01%	0.10%	0.19%

Estimate Comparison (S&P Global)

S&P Global consensus estimates were unavailable at time of analysis due to API request limits; consequently, estimate comparison could not be provided. Values would be retrieved from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Interest Margin (long‑term target)	Ongoing	Expect approach ~3.50% near floor; over time increase to 3.60%–3.65%	Maintain long‑term target 3.60%–3.65%	Maintained
Effective Tax Rate	FY 2024	17%–19%	16%–18%	Lowered
Loan Growth	Ongoing	Manage toward ~10% long‑term target	Manage toward ~10% long‑term target	Maintained
Compensation Expense	Remainder of 2024	Expected to continue at Q1 level	Anticipates approx current level	Maintained
Dividend (Common)	Q2 2024	$0.25 in April 2024	$0.25 declared; payout ratio 20% of Q2 EPS	Maintained

Earnings Call Themes & Trends

Note: A Q2 2024 earnings call transcript was not accessible in our sources; themes below reflect quarter‑over‑quarter narrative from the company’s earnings releases and investor materials .

Topic	Previous Mentions (Q4 2023, Q1 2024)	Current Period (Q2 2024)	Trend
Interest rate/margin management	Margin declined; nearing floor; deposit rates competitive	NIM up to 3.65%, top of long‑term range	Improving/stabilizing
Technology investments	Higher software/data processing expenses	Continued investment to support growth/productivity	Ongoing build
Deposit competition/mix	Rising paid rates; strong core deposit growth	Avg core deposit rate up to 3.34%; period‑end core deposits +$11.8M QoQ	Competitive but growing
Private Wealth performance	Crossed $3B AUM milestone	Record $3.5M fee income; AUM/administration $3.249B	Strong fees; AUM fluctuates
SBA pipeline	Sales down; pipeline context	Pipeline expected to build in H2 as production funds	Improving outlook
Asset quality (Equipment Finance)	Defaults in transportation/logistics; elevated NPAs	NPAs declined QoQ; NCOs higher; specific reserve reduction	Stabilizing NPAs; elevated NCOs

Management Commentary

“First Business Bank’s consistent growth strategy drove outstanding second quarter results, highlighted by continued double‑digit loan growth, record top line revenue, improved net interest margin, and stable credit trends.” — Corey Chambas, CEO .
“We are pleased that our balance sheet, interest rate positioning, and higher level of fees in lieu of interest during the quarter produced a net interest margin at the top of our long‑term target range of 3.60%–3.65%.” — Corey Chambas, CEO .
Management reaffirmed match‑funding and efficient wholesale funding use to manage interest rate risk and support fixed‑rate loans .

Q&A Highlights

The Q2 2024 earnings call transcript was not available in our document set and company materials accessible at the time of analysis, so Q&A themes could not be summarized .

Estimates Context

The comparison to Wall Street consensus estimates (S&P Global) could not be performed due to an API daily request limit at the time of retrieval; estimate figures were therefore unavailable for Q2 2024. Values would be retrieved from S&P Global.

Key Takeaways for Investors

Margin execution: Achieving a 3.65% NIM at the top of the long‑term target range suggests stable core profitability despite competitive deposit pricing; watch sustainability as fees in lieu of interest normalize .
Fee diversification: Record Private Wealth fees ($3.5M) support non‑interest income resilience; AUM/administration remains above $3.2B, offering durable fee streams .
Credit normalization: NPAs fell QoQ to 0.53% of assets, but higher NCOs (0.19% annualized) in equipment finance indicate ongoing cyclical stress; monitor C&I transportation/logistics exposures .
Balance growth: Loans up 10.3% annualized QoQ and 11.6% YoY, with CRE and C&I both contributing; match‑funding and wholesale optimization remain key to managing earnings and risk .
Expense outlook: Elevated software/data processing expenses reflect tech investments; management expects compensation expense to remain around current levels through 2024 .
Tax rate benefit: 2024 effective tax rate guided lower to 16%–18%, providing a modest net earnings tailwind vs. Q1 guidance .
Dividend consistency: $0.25 per share quarterly dividend maintained, a 20% payout on Q2 EPS, signaling confidence in earnings durability .

FIRST BUSINESS FINANCIAL SERVICES, INC. (FBIZ)·Q2 2024 Earnings Summary