Executive Summary

Record quarter: Operating revenue rose to $41.2M, NIM expanded to 3.77%, PTPP reached a record $17.7M, and diluted EPS was $1.71; excluding a $0.28 combined tax/SBA reserve benefit, EPS was $1.43, up 15% QoQ and 24% YoY .
Core drivers: Near-10% YoY loan growth (to $3.11B), 13% QoQ fee income expansion led by SBA gains and higher deposit service charges, plus lower funding costs supported margins and efficiency improvement to 56.94% .
Guidance cadence: Management reiterated a stable NIM target of 3.60–3.65%, ~10% loan and revenue growth ambitions for 2025, positive operating leverage, and a 2025 tax rate of 16–18% after a one-time state tax valuation allowance release in Q4 .
Capital/returns: Tangible book rose 23% annualized QoQ; CET1 was 9.10%; dividend lifted 16% in Feb. 2025 to $0.29 (17% payout), signaling confidence, with opportunistic buybacks considered after funding growth and dividends .
Potential stock catalysts: Dividend hike, sustained NIM resilience versus peers, accelerating C&I growth mix in 2025, and fee income diversification (SBA, Private Wealth) offsetting rate-pressure risks; watch NPAs uptick (0.74% of assets) largely tied to a single C&I credit and small-ticket EF normalization .

What Went Well and What Went Wrong

What Went Well

Record top-line and profitability: Operating revenue hit $41.2M (+8% QoQ), NIM rose to 3.77% (adjusted NIM 3.48%), with record PTPP ($17.7M) and the best efficiency ratio since 2013; CEO: “Our operating model… produced strong loan growth… strong revenue growth as well as positive operating leverage” .
Fee income strength and diversification: Non-interest income grew 13% QoQ to $8.0M, led by SBA loan sale gains (+104% QoQ to $0.94M), higher deposit service charges, and steady Private Wealth fees (43% of non-interest income) .
Margin management and funding discipline: Rate paid on interest-bearing core deposits fell 45 bps QoQ to 3.65%, total funding cost fell 26 bps to 3.18%; management reiterated match-funding keeps NIM stable at 3.60–3.65% through cycles .

What Went Wrong

Asset quality normalization: NPAs rose to $28.4M (0.74% of assets) from 0.52%, driven by a single C&I loan in wholesale equipment and small-ticket EF; provision increased to $2.7M; net charge-offs were $0.94M (0.12% of avg loans annualized) .
C&I balances declined QoQ: C&I fell $22.6M (7.7% annualized) on ABL/AR financing payoffs, though management expects C&I to lead growth in 2025 .
One-time noise in opex mix: Data processing rose $0.6M QoQ from a credit card vendor change; overall operating expense rose 3.6% QoQ, partly offset by an SBA recourse reserve benefit .

Financial Results

Income statement and profitability vs prior periods

Metric	Q4 2023	Q3 2024	Q4 2024
Operating Revenue ($M)	$36.634	$38.071	$41.153
Net Interest Income ($M)	$29.540	$31.007	$33.148
Adjusted Non-Interest Income ($M)	$7.094	$7.064	$8.005
Provision for Credit Losses ($M)	$2.573	$2.087	$2.701
Diluted EPS ($)	$1.15	$1.24	$1.71
Diluted EPS ex Tax/SBA Benefit ($)	—	—	$1.43
Net Interest Margin (%)	3.69%	3.64%	3.77%
Adjusted NIM (%)	3.50%	3.51%	3.48%
Efficiency Ratio (%)	58.34%	59.50%	56.94%
ROA (annualized, %)	1.11%	1.13%	1.52%
ROTCE (annualized, %)	14.64%	14.40%	19.21%
Net Charge-offs ($M)	$0.610	$1.528	$0.942
Pre-tax, Pre-provision (PTPP) ($M)	$15.260	$15.441	$17.719

Note: EPS in Q4 2024 reflects a $0.21 EPS tax benefit and $0.07 EPS SBA recourse reserve benefit .

Balance sheet and credit quality

Metric	Q4 2023	Q3 2024	Q4 2024
Loans & Leases (period-end, $M)	$2,850.3	$3,050.1	$3,113.1
Core Deposits (period-end, $M)	$2,339.1	$2,382.7	$2,396.4
Wholesale Funding (period-end, $M)	$457.7	$881.7	$976.1
Non-performing Assets ($M)	$20.8	$19.4	$28.4
NPA / Assets (%)	0.59%	0.52%	0.74%
ACL / Loans (%)	1.16%	1.16%	1.20%
Tangible Book Value/Share ($)	$31.94	$34.74	$36.74
CET1 Ratio (%)	8.38%	8.76%	9.10%

Loan mix (period-end)

Category ($M)	Q4 2023	Q3 2024	Q4 2024
CRE – Owner Occupied	256.5	259.5	273.4
CRE – Non-Owner Occupied	773.5	768.2	845.3
Construction	193.1	266.8	221.1
Multi-family	450.5	495.0	530.9
1–4 Family	26.3	39.9	46.5
Total CRE	1,699.9	1,829.4	1,917.1
Commercial & Industrial	1,105.8	1,174.3	1,151.7
Consumer & Other	44.3	46.6	45.0
Total Gross Loans & Leases	2,850.0	3,050.3	3,113.9

KPIs and fee drivers

KPI	Q4 2023	Q3 2024	Q4 2024
Private Wealth AUM/AUA ($B)	$3.122	$3.398	$3.419
Private Wealth Fees ($M)	$2.933	$3.264	$3.426
SBA Loan Sale Gains ($M)	$0.284	$0.460	$0.938
Swap Fees ($M)	$0.438	$0.460	$0.588
Service Charges on Deposits ($M)	$0.848	$0.920	$0.960
Fee Income Ratio (% of revenue)	19.36%	18.55%	19.45%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Interest Margin	Ongoing	3.60%–3.65% target (Q2/Q3)	Maintain 3.60%–3.65%; focus on stability	Maintained
Loan Growth	2025	~10% long-term target	Expect ~10%; C&I to lead mix in 2025	Maintained/clarified mix
Revenue Growth	2025	Long-term double-digit aspiration	Target ~10% revenue growth in 2025	Clarified for 2025
Fee Income Run-rate	2025	N/A	~$8M/quarter starting point; ~10% YoY growth aim	New disclosure
Effective Tax Rate	2025	16%–18% for 2024	16%–18% for 2025 (after one-time Q4 benefit)	Maintained for next year
Expenses	2025	Positive operating leverage target	Use Q4 comp as base; ~3.5% merit; positive Op leverage implied mid-to-high single-digit expense growth	Detailed framework
Dividend	Q1 2025	$0.25 (Oct. 2024)	$0.29 (+16%); 17% payout on Q4 EPS	Raised

Earnings Call Themes & Trends

Topic	Q2 2024 (Prior-2)	Q3 2024 (Prior-1)	Q4 2024 (Current)	Trend
NIM & Match Funding	NIM 3.65% (top of range); reiterated 3.60–3.65% target; funding strategy key	NIM 3.64% within target	NIM 3.77% (adj 3.48%); emphasize stable 3.60–3.65% target	Stable to improving
Fee Diversification	Record PW fees; SBA pipeline building; swaps down; SBIC up	Fee income softer on lower SBIC; swaps $0.46M	Fee income +13% QoQ; SBA gains +104%; PW 43% of fees; SBIC variable, expected to pick up in 2025	Improving
Deposits & Wholesale	Greater use of wholesale to match-fund; hedging	Wholesale up to $881.7M; shift from FHLB	Wholesale $976.1M; hedge portion; plan 70–80% core / 20–30% wholesale mix	Higher wholesale proportion
Asset Quality	NPAs 0.53%; halted transport EF; normalization	NPAs 0.52% stable	NPAs 0.74% on one C&I; small-ticket EF past dues; run-rates reserved; ABL still expected full repayment	Slight deterioration but contained
Taxes	ETR 15.5%; 2024 guide 16–18%	ETR 18.3%	One-time state DTA release; Q4 ETR 5.8%; 2025 guide 16–18%	One-time benefit; normalize
Loan Growth Mix	CRE and C&I both grew	CRE +$54M; C&I +$12.6M	CRE +$87.8M; C&I -$22.6M (ABL payoffs); expect C&I to lead 2025	Shift toward C&I ahead

Management Commentary

“Our operating model… produced strong loan growth, a strong and consistent net interest margin and thus strong revenue growth as well as positive operating leverage” — Corey Chambas, CEO .
“Excluding the tax and recourse benefits in the quarter, our earnings per share amounted to $1.43… We remain confident… to achieve 10% balance sheet and top line revenue growth in 2025” — Corey Chambas .
“We continue to view [NIM] 3.60%–3.65% as an appropriate range looking ahead” — Dave Seiler, President & COO .
“We reversed about half of the [state] DTA valuation allowance… amount[ing] to about $0.21 of EPS for the quarter” — Brian Spielmann, CFO .
“With CET1 above 9%… we will balance asset growth with the potential use of our share buyback program” — Brian Spielmann .

Q&A Highlights

Loan growth mix: C&I expected to lead growth in 2025; Q4 C&I decline tied to ABL payoffs (volatility) .
Funding mix: Long-term balance with 70–80% in-market core deposits and 20–30% wholesale to support match-funding philosophy .
Margin outlook: Core/adjusted NIM stability prioritized; fees-in-lieu average ~15 bps contribution through cycles .
Expense framework: Use Q4 compensation as baseline; merit ~3.5%; target positive operating leverage (expenses growing below revenue) .
Credit details: NPA increase largely a single C&I exposure in wholesale equipment; remaining increase from small-ticket EF; reserves calibrated to expected run-rates .

Estimates Context

We attempted to retrieve S&P Global consensus for Q4 2024 EPS and revenue, but the data provider returned a request-limit error; as a result, Wall Street consensus comparisons are unavailable for this recap. We therefore cannot quantify beat/miss versus consensus for EPS or revenue this quarter [functions.GetEstimates error].

Key Takeaways for Investors

Core earnings quality improved: Adjusted NIM held at 3.48% with fee growth and lower deposit/funding costs; record PTPP and a multi-year low efficiency ratio de-risk the earnings trajectory into 2025 .
Fee diversification is working: SBA gain-on-sale, Private Wealth fees, and deposit service charges drove 13% QoQ fee growth; fee engines provide ballast if core spread pressure returns .
Watch asset quality but context matters: NPAs rose to 0.74% largely due to a single identified C&I credit and small-ticket EF normalization; reserves and guidance indicate contained risk, but monitoring is warranted .
2025 setup: Management targets ~10% loan and revenue growth with stable NIM (3.60–3.65%), positive operating leverage, and a normalized 16–18% tax rate, implying durable mid-teens ROTCE potential absent shocks .
Balance sheet strategy remains a differentiator: Match-funding with disciplined wholesale usage and hedging supports NIM stability across rate scenarios; long-term funding mix anchored by core growth initiatives .
Capital returns signaling: 16% dividend increase (17% payout) alongside CET1 9.10% suggests confidence while preserving flexibility for organic growth and opportunistic buybacks .
Trading implications: Near term, dividend hike and record profitability are positives; key risk overhangs are NPA normalization and small-ticket EF charge-offs, mitigated by reserves and diversified revenue momentum .

Additional Context and Cross-Checks

Cross-reference: Q4 EPS includes $0.21 state tax DTA benefit and $0.07 SBA recourse reserve release; adjusted EPS $1.43 aligns between press release and call commentary .
Non-GAAP: Company consistently reports adjusted NIM, operating revenue/expense, and PTPP with reconciliations provided; these highlight core performance excluding volatile items like fees-in-lieu and discrete recourse/tax items .
Prior quarters trend: Q2 and Q3 established the NIM stability and deposit growth footing; Q4 built on that with higher fees-in-lieu and better fee contribution while keeping adjusted NIM essentially flat QoQ .

Press releases and transcript used: Q4 2024 earnings press release (Jan 30, 2025) ; Q4 2024 earnings call (Jan 31, 2025) ; Q3 2024 press release (Oct 24, 2024) for trends ; Q2 2024 press release (Jul 25, 2024) for trends ; Dividend increase PR (Feb 3, 2025) .

FIRST BUSINESS FINANCIAL SERVICES, INC. (FBIZ)·Q4 2024 Earnings Summary