First Business Financial Services' Q1 2025: Key Contradictions in Loan Growth, Deposit Strategy, and Margin Outlook

C&I loan growth expectations, deposit growth strategy, deposit costs and leveraging, margin trajectory and impact of rate cuts are the key contradictions discussed in First Business Financial Services' latest 2025Q1 earnings call.



Financial Performance and Growth:
- First Business Financial Services reported a 23% increase in pre-tax, pre-provision adjusted earnings and earnings per share of $1.32, up 27% from the previous year.
- The growth was driven by a combination of double-digit core deposit growth outpacing loan expansion, a stable net interest margin, and strong asset quality.

Deposit and Loan Growth:
- Total deposits grew by $488 million or 18%, with core deposits rising by $66 million or over 11%.
- Loan balances increased by $275 million, representing almost 10% growth, which is in line with the company's long-term organic growth goal.

Revenue Diversification:
- First Business Financial Services reported a 13% increase in revenue compared to the previous year.
- This is attributed to a diversified revenue profile that supports long-term growth targets by providing a buffer against reliance on any one source.

Net Interest Margin and Expense Management:
- The net interest margin was reported at 3.69%, maintaining stability and reflecting strong balance sheet management.
- Expenses were contained and aligned with workforce growth, with total expenses increasing by $1.6 million, largely due to compensation-related expenses.