First Business Financial Services, Inc.

Good afternoon. Welcome to the first Business Financial Services First Quarter 2025 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press PAR 0 for the operator. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded Friday, April 15, 2025. I would now like to turn the conference over to First Business Financial Services Inc. CEO Corey Chambas. Please go ahead.

Good afternoon, everyone, and thank you for joining us. We appreciate your time and your interest in First Business Bank. Joining me today is our President and Chief Operating Officer, Dave Seiler, and our CFO, Brian Spielman. Today we'll discuss our financial performance along with some operational highlights, followed by a Q&A session. I'd like to direct you to our first quarter earnings release and supplemental earnings call slides, which are available through our website at ir.firstbusiness.bank. We encourage you to review these along with our other investor materials. Before we begin, please note this call may include forward-looking statements, and the company's actual results may differ materially from those indicated in any forward-looking statements. Important factors that could cause actual results to differ materially from those indicated in the forward-looking statements are listed in the earnings release and the company's most recent annual report on Form 10-K, and it may be supplemented from time to time in the company's other filings with the SEC. all of which are expressly incorporated herein by reference. There you can also find information related to any non-GAAP financial measures we discuss on today's call, including reconciliations of such measures. We are pleased to report another outstanding quarter. Our model is built to produce 10% annual growth, and the first quarter is one more example of our strategic plan at work. Our team has a clear directive to drive relationship-based deposit growth. and this quarter we produced double-digit core deposit growth that outpaced our robust expansion of loans. We also maintained a strong net interest margin and stable asset quality. All the elements required to consistently grow shareholder returns showed strength during the quarter. Loans grew across our markets and portfolios. Private wealth management assets and fees grew. Operating revenue showed continued strength, and operating expenses were contained and in line with growth in our workforce. Non-performing assets declined. These successes drove pre-tax, pre-provision adjusted earnings up 23% over last year's first quarter and earnings per share of $1.32, up 27% from a year ago. Most importantly, tangible book value per share grew 14%. Dave will walk through some of the business activity that drove strong first quarter results. Dave?

Thanks, Corey. It's worth repeating that our balance sheet growth was very strong this quarter, and that's by design. You can see the quarterly highlights on slide three of the earnings call supplemental slides. Loan balances grew about $275 million over the same period last year. That's up almost 10%, which is our long-term organic growth goal. Total deposits grew 488 million or 18% from last year's first quarter. That includes our continued use of wholesale deposits to execute our match funding strategy, maintain adequate liquidity and support our loan growth goals. We saw exceptional growth in the first quarter with core deposits growing 66 million or over 11%. You can see our quarterly deposit and loan growth trends on slide four. On the lending side, we continue to deliver on our growth targets in the first quarter. CNI led the growth with balances expanding 77 million or 27% annualized. A few successes in particular merit attention. SBA lending sustained its momentum under the recently expanded team. We expect this trajectory will be variable, but with strong loan sale premiums for the past two quarters, we expect SBA to be a meaningful driver of revenue in 2025. Additionally, activity levels in our asset-based lending group are exceeding what we've seen in the last one and a half to two years. We attribute this to market dynamics and with our new ABL leader now in place alongside our exceptional team, we're positioned to capture growth opportunities in this space. Our floor plan financing team also continues to show nice demand, extremely high client satisfaction results, and is off to a great start in 2025. This is a good time to highlight two of our lending businesses in light of the current uncertainty around the economic outlook. Our asset-based lending and accounts receivable financing businesses are typically countercyclical. Yields on these loans typically carry a significant premium over conventional CNI yields, and they are generally 100% secured. We would expect growth in these portfolios in a softening economy. Moving briefly to revenue, our first quarter revenue grew by nearly 13% compared to the first quarter of 2024. This sustained strength reflects the diversified nature of our revenue streams and supports our continued goal of achieving 10% or greater annual revenue growth over the long term. diversification we've built into our revenue profile provides a buffer against reliance on any one source you can see our revenue growth trajectory on slide seven of the earnings deck on to asset quality we continue to be pleased with how our portfolio is performing and have no areas of particular concern NPAs declined by 4.3 million from the linked quarter due to net charge-offs against specific reserves on credits in the transportation sector of the equipment finance portfolio and the SBA portfolio. While these net charge-offs reduced the overall allowance for credit losses, this was partially offset by increased general reserves due to loan growth and modest deterioration in the economic outlook in our model forecast. Together, these factors drove the increase in the allowance coverage of NPLs compared to December 31st. We are always looking closely at migration in the portfolio. Our weighted average risk rating has barely moved. We continue to wait out the bankruptcy proceeding process and related litigation for the $6.2 million ABL credit mentioned in previous quarters. We expect full repayment on this credit, but unfortunately it continues to inflate our otherwise healthy level of NPAs. Lastly, I want to comment on the current environment and what we're hearing from our clients. We are in very healthy markets and our clients are generally healthy and thriving. We do have ongoing dialogue with clients and there is a rising level of uncertainty related to changes in US trade policy, along with the potential for any unfavorable changes to lead the economy into recession. Although we are built to grow at a double digit pace in most conditions, our growth will be impacted if conditions weaken. We can't put a number on that today, but we would expect to continue outperforming our peers as we have done in recent periods of economic weakness. Now, I'll hand it off to Brian.