Good afternoon. Welcome to the First Business Financial Services Third Quarter 2025 Earnings Conference Call. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded Friday, October 31, 2025. I would now like to turn the conference over to the 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, followed by a Q&A session. I'd like to direct you to our third 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, Form 10-K, and as may be supplemented from time to time in the company's other filings with 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. First Business delivered another outstanding quarter. Our team again produced high-quality loan and deposit growth, sourced from core client relationships. We maintained a strong net interest margin and produced positive operating leverage, driving improved efficiency. Private wealth assets continued to expand, delivering significant annuity-like fee income. And operating revenue reached record levels, reiterating the value of our revenue diversification. These highlights contributed to robust profitability metrics. Year-to-date ROA grew 15 basis points to 1.23% compared to the same period of 2024. Year-to-date return on average tangible common equity grew to over 15%, up from just under 14% in 2024. And most importantly for shareholders, we grew tangible book value per share, an impressive 16% from a year ago. We are very pleased with the quality of this quarter's results, which Dave will expand upon more now.

Dave? Thank you, Corey. Third quarter performance was very strong across the board and reflects our consistent growth and profitability. Our model is designed to drive 10% long-term growth, and we view quarterly results as a tool for tracking our success toward this. Our pre-tax, pre-provisioned earnings are a good indicator of the success of our model. We saw 18% growth from the second quarter and 20% growth compared to the first nine months of 2024. Credit costs can impact results meaningfully, and the provision for credit losses this quarter was better than expectations, leading to earnings per share growth of 26% from the second quarter and 25% year-to-date. A primary driver of these exceptional results was the record level of non-interest income generated during the quarter. That included elevated swap fees and income from SBIC funds, as well as two non-recurring items, which totaled about $770,000 that Brian will cover. Swap income grew nearly six times from the linked quarter, and income from SBIC funds grew over four times from the linked quarter. While both items are variable quarter to quarter, third quarter levels exceeded our expectations and we're outside our historical range. This quarter's fee income performance showcases our successful revenue diversification efforts that we believe provide significant long-term benefits and differentiate us from our peers. Fee income comprised 19% of our operating revenue for year-to-date 2025 and 2024, compared to about 15% for peers. I'll highlight, as a business-only bank, we've achieved this outperformance without the heavy fee revenue stream of a residential mortgage or consumer business. This reflects the success of our investments for growth and efficiency and high-quality, high-producing talent we attract. It's also one of the drivers of our strong ratio of operating revenue per average FTE, which has been 30% to 40% above our peers over the past five years. Looking ahead, we'd expect annual fee income growth to approximate 10%. However, we would expect Q4 operating fee income to be more in line with our recent four-quarter average. Net interest income growth was also substantial and reflects continued and robust balance sheet expansion. You can see the highlights on slide three of the earnings call slides and our quarterly loan and deposit growth trends on slide four. Loan balances grew about $85 million, or 10% annualized during the quarter, and $286 million, or 9%, over the same period last year. We had strong growth across our geography, with our Kansas City and Northeast Wisconsin markets leading the way. We continue to see solid demand for our conventional and niche C&I products, and pipelines look strong for the fourth quarter. Activity levels in our asset-based lending group continue to exceed what we've seen in the last two years, and we are positioned to capture growth opportunities in this space. Our accounts receivable financing business is similarly poised for growth. We've been investing in these businesses, which also perform well during economic downturns, through business development officer hires, technology, and process improvements. We know how to lend to these clients, and our solid underwriting process has historically driven better-than-average loss rates across cycles. We value the strong risk-adjusted returns our niche C&I businesses provide. We also continue to see strong growth in core deposits, up 9% from both the linked and prior year quarters. Our south-central Wisconsin market led the way in our deposit growth by landing several large new relationships. We tracked service charges on deposits as a proxy for new relationship deposit growth, and these fees grew 25% from last year's third quarter. On to asset quality, which was pretty stable, with non-performing assets decreasing slightly during the quarter. Net charge-offs totaled $1.3 million and were primarily from previously reserved equipment finance loans. In total, NPAs decreased by $5.2 million to 0.58% of total assets compared to 0.72% last quarter. Our overall portfolio continues to perform as expected, and we have no areas of particular concern. The transportation loans in our small-ticket equipment finance portfolio continue to shrink, and our CRE markets remain strong. Additionally, we don't have direct consumer exposure, so we wouldn't be impacted by things like credit card and auto loan delinquencies. This is a positive differentiator for our business-focused model. Before passing it to Brian, I'll make one quick note on the government shutdown. We do not currently anticipate any negative credit exposure related to the federal government shutdown. We do, however, depend on federal government processing to complete SBA loan closings. This may affect the already variable timing of SBA loan sale premiums. Our SBA loan pipeline is strong, and while pricing continues to be extremely competitive, we continue to win deals. Now I'll hand it off to Brian.

Third quarter net interest margin grew one basis point to 368, reflecting our continued strong balance sheet management. You can see a breakdown of this on slide 6 of our earnings supplement. As you know, our margin includes fees in lieu of interest, which refers to the recurring but somewhat variable amount of interest income we earn from items like prepayment fees, collection of nonaccrual interest, and asset-based loan fees. These fees increased by $482,000 from Q2 and contributed 23 basis points to margin in Q3, up 5 basis points compared to 18 basis points in Q2. Season low of interest contributed 21 basis points on average this year, compared to 16 basis points on average over the past three years. On a year-to-date basis, net interest margin grew to 368 from 362 for the same period of 2024. We're very pleased with our ability to maintain a strong and stable margin in this environment, and this again shows the value of our risk-mitigating match funding strategy. Given the current interest rate environment, I'll remind you that our balance sheet is intentionally interest rate neutral. Looking forward, we continue to target a range of 360 to 365 for margin. A few additional notes on our record fee income this quarter. The $770,000 in non-recurring items Dave mentioned consisted of two distinct components. First, a $537,000 fee was recognized related to the exit of an accounts receivable finance credit. While these types of fees are not unusual, the size of this particular fee was larger than typical. Second, we received $234,000 in Bowley insurance proceeds during the quarter, and we offset this income with a contribution to the First Business Charitable Foundation. As Dave mentioned, we expect SBIC income and SWAT fee income will return to more typical levels in the fourth quarter. We expect to continue investing in additional SBIC funds as a long-term earnings catalyst and effective use of capital. SBA gains are a bit of a wild card for the near term, given the government shutdown and potential backlog at the SBA. But we expect they will rebound and benefit from our continued investment in the business. Our expenses were well-contained in Q3. Compensation expense grew about $900,000 due to an annual cash bonus accrual update tied to strong total bank performance. Excluding this accrual update, compensation expense declined by about $183,000. I'll note that we currently have a higher level of open positions we are actively working to fill. Compounded with increases in benefit costs, we expect 2026 compensation levels to grow a bit more than the 7% year-to-date growth in 2025. I'll reiterate that when we think about expenses, our primary objective is achieving annual positive operating leverage. That is, annual expense growth at some level modestly below our targeted level of 10% annual revenue growth. We saw significant positive operant leverage in the third quarter due to our 16% revenue growth. We would expect this gap to narrow to a more normal level as revenue growth returns to our long-term target of 10%. This reflects consideration of the high revenue produced this quarter, including some one-time items, as well as our ongoing commitment to investing in talent and technology for growth. On taxes, our effective tax rate varies modestly quarter to quarter, in part due to the timing of tax benefits received from our investment and limited partnerships. Our 2025 year-to-date effective tax rate of 16.3% was within our expected annual range of 16% to 18%, and we continue to believe this range is appropriate looking forward. Finally, our strong earnings are generating more than enough capital to facilitate our expected organic growth. We continue to believe reinvestment and the growth of the company typically provides the best return for our shareholders, but of course we regularly evaluate all the capital management tools at our disposal to maximize shareholder returns. And now I'll hand it back over to Corey.

Thank you, Brian. Our 2025 progress toward our long-term strategic plan goals has been excellent and can be seen on slide 12. These outcomes demonstrate the value of consistency in execution. We continue to work our plan by focusing on solid underwriting, building out efficient systems, prioritizing client relationships and profitability, and investing in talent. We are very optimistic about the future and believe our discipline and consistency will continue to serve First Business Bank and our shareholders well. I want to thank you for taking time to join us today. We're happy to take your questions now.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchstone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the public process, please press star, followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. For your first question, Daniel Tamayo from Raymond James, please go ahead.

Thank you. Good afternoon, guys.

Hey, Danny.

Maybe just a clarification first on the fee income guide. So the 10%, I think you said 10% next year, is that an all-in number, or should we be pulling any of these one-time items out that you've had in 25 so far?

I would say it's adjusted for the Q3 items. If you pull those non-recurring items out, so $770,000, and adjust off of that based off the kind of four-quarter average excluding that, that's your good starting point then for 10% growth off of that.

Got it. Okay, thanks. And then maybe looking at the margin. So, you know, if you normalize the fees in lieu of interest, your core margin is really kind of exactly where it should be in terms of where you're thinking about the guidance you've given, 360, 365. You know, deposit costs have continued to rise a bit Just thinking about, you know, understanding the match funding nature of your balance sheet But as we do get rate cuts, you know, just thinking about how the funding side and the loan side would be coming down You're expecting those betas to be pretty similar kind of initially and over the next few quarters?

Correct. Our betas on both sides of the balance sheet have historically been pretty consistent, which gives us comfort in the continued message around that 360 to 365. On the deposit side, you know, new client acquisition is expensive, you know, so we're bringing on clients at, say, SOFR right now, but then we're having opportunities to lend out in our specialty areas at SOFR plus four so that we have that spread that contributes to the net interest margin long-term. and kind of pointed out on slide five of the supplement materials, that this kind of shows our long-term growth for it in the C&I businesses versus the CRE businesses. It's where we think our ability to continue to do that and be able to pay for those higher-cost deposits. I would add that when we're having those conversations for new clients, with those higher prices, we're having conversations around expectations for rate cuts, and so that's built in early on in the conversation, and we're having luck bringing those rates down when there are rate cuts to help stabilize margin.

Understood. That's helpful. Thanks. And just a cleanup question here. Do you have the classified or criticized balances at quarter end or at least the direction from where they were at June 30th?

We have that and the QTL will be filed tomorrow. I can tell you they're very consistent, nothing materially changed. We actually have a decrease in our total NPL that you saw in the release, but nothing significant to report in terms of the adversity classified population.

Got it. Okay. Well, thanks for taking my questions. Appreciate it.

Next question will be from Jeff Rulis from DA Davidson. Please go ahead.

Thanks. Good afternoon. I wanted to maybe refine just a small part of the margin. The fees in lieu, could you remind me if there's any historical, those tend to be higher, lower, or not impacted in times of rate reductions. Is that something to think about? I know that we model for core, but just wanted to see if the next 12 months, if we see, you know, additional rate cuts, if that has any impact on that figure.

Yeah, the fees and louis of interest have historically been pretty eosyncratic, where, you know, on average, I thought we'd get some of the average detail, long-term average, because it's around 20 basis points, I think. But we'll have spikes here and there.

Corey, if you want to add to that. Yeah, the one thought I have on that, Jeff, is the biggest piece of fee and louis, it comes from a variety of places, but the biggest one would be from our asset-based lending group. Their deals are contractual. So if somebody breaks a contract, that's where we get significant fees in lieu. But unlike thinking, well, rates are going down so people might leave, those are all floating rate deals. So they're going to float. It's not like a fixed rate real estate loan. The rates go down. Somebody might want to refinance. Those deals refinance because the company gets stronger and it becomes bankable on a conventional basis. But those deals aren't fixed-rate deals where that would become attractive. So I'm trying to think of any forces of movement in rates, but I don't really see anything with that.

I appreciate it. It's kind of chasing that down, but pretty clear. On the, I guess, kind of a segue to the asset-based lending, the large loan, the $6.1 million, you know, that seemed locked up in litigation for a while. I just wanted to check in on that timeline, and does this feel like a 26 event? Just any update there would be helpful.

Yeah, well, I think your description is pretty good, Jeff. It's locked up in litigation. So there's really no change. It's taking – there's really no change.

And given the geography of where this is, that's normal, as we understand it, from the court system there, is it's just really slow.

Okay. And maybe one last one just on – I think Brian sort of teased the capital close of the formal remarks, but looking at growing capital and just wanted to kind of reconfirm the priorities. I think, obviously, organic growth, you've got a fantastic position in that and don't really need to chase other opportunities. But maybe if you touch on other capital tools as well as if there was one area on the acquisition front that you would consider, what would that be?

I can speak to the capital tools, and maybe Corey or Dale will jump in on the M&A front. But as far as the capital tools we have that we evaluate quarterly and annually, it's going to be just our common stock dividend increase. We've done that for 13 consecutive years. We'll evaluate that now here going into January. And just a reminder, we also have a $5 million repurchase agreement out there with Interpretuity. There's no maturity down that. So that's something we also continue to evaluate in terms of best use of that, comparing it to on-balance sheet growth we have been doing of late. to drive that shareholder value.

And I'll just tack on to that, Jeff, you're not wrong. Capital has continued to build. We're above where we're comfortable with our capital levels, and we've been able to do that through strong earnings, even though we've been growing at 10%. So we are accumulating a bit extra. So, you know, at some point, maybe we grow a little faster. That would be awesome. But 10% growth is a pretty good mark already as it is. But then, as Brian said, yeah, then, you know, at some point you look at other capital options. On the acquisition side, I think an ideal acquisition candidate for us would be something that would fit inside our private wealth business, some kind of, you know, money management business. Unfortunately, those are really rare, hard to find. And as we've, when we've looked at those before, we've gotten very close. Those are typically owned by individuals, you know, one or two people. And then you're sort of dealing with an emotional seller. And the one time I can tell you years ago, we were, I mean, we were like on the precipice of this thing happening. And then the guy couldn't sell his baby. You know, it just – so you have emotional sellers, harder to do deals in that space, I think, because of that. So other than that, it's something that tucked into one of our niche areas where we have nice platforms built out and could add a little more scale. That would be fine as, you know, a fine fit for us as well. But, again, when we can do 10% organically, we're not going to overpay. We're not going to stretch on something that doesn't fit our credit standards, which is typically why those other businesses screen out when we do take a look at those. We're just, as we've said in the past, we play in the top quartile and the credit spectrum of any of the businesses that we're in, any of the business lines or niches. and, you know, by mathematical reasoning, average is below that. So the typical one you see is going to be not going to fit into our credit standards. So that's why those typically fall by the wayside.

Thanks, Corey.

Next question will be from Nathan Race from Piper Sandler. Please go ahead.

Hey, guys. Good afternoon. Thanks for taking the questions. Going back to the margin discussion, you know, Brian, And just given the variability around, you know, the fees and low of interest, I'm wondering if you have any thoughts around kind of just an adjusted margin outlook. I know you reiterated 360 or 365 on a reported basis, but, you know, if we ship that out, any thoughts on just kind of how that adjusted margin stabilizes in the future or perhaps expands?

Yeah, I would say stability is the key there. And I would go off of our long-term average that we've been talking about of 20 basis points. And so just backing into that, I could say $3.4 to $3.45 is going to be our adjusted margin range and expectations. You can tell we're right around there right now, but have a little bit of room there still to continue to go after these nice deposit relationships. But, again, the ability to lend that back out in those higher yielding C&I areas is going to be key.

Understood. That's helpful. And I appreciate that you guys are still expecting, you know, 10% loan and deposit growth going forward. You know, just curious, when you look across your Wisconsin-Kamon City footprint, do you see, and also the national verticals, do you see enough opportunities, you know, to generate that growth with the existing team? Are you guys looking at any markets or any kind of adjacent areas to your footprint where maybe you'd want to establish a presence or is kind of the existing landscape fertile ground enough to execute on that growth outlook?

Right. All right. So when we look at our Southeast Wisconsin market and the Kansas City market, we, you know, we don't have high market shares in those markets. So we think there is a really nice opportunity to grow market share and grow those markets for us. And then additionally, all of our niche CNI businesses are national. And we think we have a lot of, you know, a lot of runway in front of us there. So I think we're pretty optimistic right now in terms of being able to continue the growth for the foreseeable future.

And I would add something to that as well. Nate, we set our board meeting this morning. The board is asking us, how long can you keep doing 10%? And we say, well, we've been doing it, and we believe we can continue to do it if we can add talent. So that's part of – because the first part is, is there market opportunity? And Dave just outlined that. There's lots of market opportunity in some of our other specialty businesses. There's lots of national opportunity in those. So then it's about talent. Do you have the right talent and enough talent? And since we started this last strategic plan, we've added 21 business development officers. So as long as we can keep adding that business development talent, we have the market. Markets have capacity. And so if we can keep attracting and retaining the talent, and that's where we really, you know, our culture is really important to us. It has people happy working for us. They don't leave, so we don't have a kind of hole in the bucket as we're bringing new people in. So good performers like it here, and that also attracts talent from the outside because folks want to be on a winning team. And so that helps us to continue to grow that business development talent pool. So as long as we keep winning the talent game, we can continue to grow at this kind of a pace.

Got it. Makes sense. Really helpful. One last one, Brian, on expenses. Is the 4Q, in terms of the fourth quarter runway, is it similar to expect something that we saw here in 3Q? And, you know, that would put you around 8% growth for this year. or is that kind of a decent proxy as you think about the expense growth trajectory into 2026?

Yeah, it's a good place to start. You know, we had our bonus accrual update here in Q3 because of the strong performance that brought in about $900,000 of additional expense. But that also means that a higher run rate to finish the year. And then we talked about a lot of open positions. So I think he maybe could back out a little bit, but it's a pretty good spot to start. especially if it's that 8% growth rate relative to our 10% operator revenue targets.

Gotcha. I'm with you there. I appreciate all the color. Great quarter. Thanks, guys.

Next question will be from Damon Del Monte from KBW. Please go ahead.

Hey, good afternoon, guys. I hope you're all well, and thanks for taking my questions. Just looking for a little bit more color on the investment wealth management area. You know, if you look at the kind of the year-to-date revenues generated by that area, you know, it's had a nice lift over 2024. You know, is that more of a function of adding new accounts and new customers, or is there, you know, more market appreciation baked into those numbers?

So, well, it's a combination of the two, right? Obviously, markets have done very well, but we have a lot of focus on building new relationships and acquiring new relationships. So I would say it's a good mix there, but we've done a nice job adding relationships this year.

Okay, great. And then you guys mentioned about, Corey, I think you mentioned about the talent hires, you know, 21 business development officers since your last business plan. And what has been your, you know, your recipe for success for adding people? Is it from market disruption where, you know, people are getting displaced? Has it been just, you know, opportunistic relationship building with people in the markets that you kind of cross paths with? Like what's kind of been the, you know, the driver of the additional people?

Yeah, I would say it's more the latter relationships. relationships. The people who run our market presidents, people who run different business lines, we let them know that part of their job, they're supposed to be out prospecting for new clients, but they're also supposed to be prospecting for new bankers. And they should be treating it the same way. They should be knowing in their market who the talented folks are. And you need to cultivate those relationships over long periods of time. And so they're working that all the time and like i said when people see you winning and being successful um and then if they get uncomfortable where they are because you know potentially they've gone through an acquisition and things have changed or or whatever makes them not real um aligned with the philosophy of the organization that they're with um if you're the one who's developed the relationship just like a prospective client. You might have heard us say before, we like to say we have foam fingers that say we're number two, because we want to be in the position to take over that relationship when somebody becomes disgruntled with the large bank that they're with, and that typically happens. We want to be there, have the relationship, and they move to us, kind of no questions asked when they finally throw in the towel. Same thing with the talent that we want. We want to develop those relationships and work those, and it also happens in the same way with some of the folks. The person who's fairly newly in charge of our asset-based lending group, been in the industry a long time, has a lot of good relationships.

The guy who's running our SBA group, I mean, their BDOs are people they've worked with in the past, so they're following those leaders that they've worked with in the past, and so that's primarily how we get the talent. got it okay appreciate that color and then i guess just lastly um obviously a very positive and continued positive outlook for for loan growth um so is it fair to assume that kind of the overall borrower sentiment remains positive in the in the markets that you're in you know others have kind of talked about you know borrowers kind of being a little bit more reluctant waiting for rates to come down or or more clarity on on their you know the prospects for their business, but it seems like you guys continue to just power through regardless of the broader So, just curious on your local sentiment.

Yeah, I'd say it's pretty positive. You know, I would say if you took a sampling of our business clients, probably the modal or most common answer that you would get is that this year is their third best year ever. And the last two were the best ever. And so it's, you know, it's really good. Things are still really good, just not quite as good as they were the last two years. So people are positive. You know, they've had to deal with questions about, you know, tariffs and different things that make life a little confusing. But I would say most of our clients are, they're entrepreneurial, they're positive, optimistic people. Otherwise, you wouldn't start a business because that's a tough endeavor. And they do kind of what we do for the most part. They just, you know, put their head down and say, we're just going to keep winning and we're going to succeed. And so while there is some uncertainty, I don't think any of them are kind of going into a shell in any way, shape, or form.

Got it.

I appreciate that color.

That's all that I had.

Next question will be from Brian Morton from Janney. Please go ahead.

Hey, good afternoon, guys. Hey, Brian. Hey, just one question, Brian, just back to the margin, just one thing. The funding pressure, a little bit of funding uptick you saw on the core margin, if you will, are you beginning to see that stabilize in terms of it? It sounds as though you would, given the dynamics of holding the margin steady, but just kind of wondering how you're seeing the trends there on the funding side and what may be the driver of that this quarter.

Yeah, I would say the drive over this quarter in particular is specific to some CDE relationships we brought on in the Q2. That's really what drove a decent amount of that pricing pressure reported in Q3. I would say from what we're seeing in newer opportunities with now two rate cuts behind us, the pressures, the premium we're seeing for new clients, new deposit acquisition is coming down a little bit. So we are seeing some relief there. You know, it is – for our highest rates, for these ones we're really trying to attract, we were over SOFR for a bit. Now we're at SOFR. We have had ones that are now below SOFR again for those new, new money relationships. So we're seeing better rates across the board for new money.

Okay, that's helpful. And then just in terms of – just one question back to those open positions. I mean, the majority of those open positions are, are they more, you know, operational or back office, or are they more revenue producing in terms of, you know, where the talent is you're looking for today?

Yeah, Brian, I think they're really across the board. I don't think there's a concentration in, you know, business development folks or, you know, other positions throughout the company.

Okay. All right, and just in terms of, you know, the specialty businesses, you know, can you just talk about where, you know, maybe over the next, you know, 12 to 15 months, you know, where is the greatest opportunity, you know, where are you seeing the best opportunity today to grow that book of business? And then it sounds as though the expectation would be that that book, you know, in aggregate would outgrow the traditional book is how you're thinking about things today, and that seems accurate?

Yeah, I would say the places where we see the strongest pipelines right now and activity level, asset-based lending would be one of those. That kind of was slow for quite a while for us, and that's picked up. We've had more New Deal activity there. Our accounts receivable finance business has strong pipelines and really good activity. Floor plan. Floor plan, and that's been really consistent. and our floor plan business has been really strong and steady.

Okay. And in terms of credit risk, you know, in those businesses, remind us where the greatest risk is there. Is there, you know, concern out there as you grow these businesses a little bit quicker, you know, especially given, you know, kind of the market conditions today or just the fears out there, I guess?

No, I don't think so in those business lines. You know, any of those businesses that we've built, we've built with real specialists. I think one place banks can get into trouble is, you know, even like when we got into asset-based lending back in 1995, I mean, I knew what an asset-based deal was, and so did Jerry Smith, but we also knew we didn't know how to monitor them correctly. But we knew they needed to be monitored, so we brought in somebody at that time from Bank One's asset-based group. We built out the full team with a field examiner, collateral analyst, et cetera. So we've always done that. And, again, we play in that kind of top quartile piece of each of those businesses. So what we've seen is there's less credit risk and credit costs in those businesses than even in our conventional book over time. And a lot of the reason is, well, some of those, let's say asset-based lending compared to a conventional CNI loan, So the asset-based loan, that company's balance sheet is going to be weaker. The earnings history is going to be sketchier. But we're all over the collateral. We're out there examining it. Before we go into the deal, we already know at what price we think we could liquidate out of it if we had to liquidate the inventory. Whereas a conventional C&I deal where you may have the same kind of collateral receivables and inventory, you don't do that kind of monitoring on it and when things go south on one of those deals suddenly you don't have what you think you had in terms of collateral it's just kind of how those end up turning out and you don't have the real-time information like you do on asset-based lending or factoring where you've got daily information coming in and so in the absence of broad, if you act quickly, you should be able to get out of those deals whole, and that's our expectation on those kinds of business lines.

Gotcha. No, that's helpful. And just, I guess, in terms of just the SBA, I know Brian mentioned it, I guess bottom line is if this shutdown persists, is it just your expectation would be that the business that would normally flow through this quarter will just fall into one queue, and until we see more clarity on that, that's kind of where it's at? Right.

I think to a certain extent, it would be pushed out, you know, depending upon when the government opens back up. But where we're really impacted is after we have a credit that goes through underwriting and is accepted, you know, approved and accepted by the client. That's when we have to go out and get the E-Tran number from the SBA. And that's what we can't do today. So we can talk with clients. We can structure deals. We can get deals approved. We just can't really start the closing process without that E-Tran number. And then the other thing we can't do is sell a loan once it's closed and funded. And both of those two things will open up when the government opens up. But the E-Tran numbers, we anticipated the closing. Right. We did anticipate the closing, and we were able to get a few deals or a good chunk of deals kind of far enough along in our pipeline where we could get the E-Tran numbers in anticipation of the government shutdown. Gotcha.

All right. Thanks for taking the questions, and great quarter, you guys.

Thanks, Brian.

There are no further questions at this time. I will now turn the call over to Corey Chambis. Please continue.

Thank you for joining us today. We appreciate your time and interest in First Business Bank, and we look forward to sharing our progress next quarter once again. Again, appreciate it, and have a great weekend.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.