FIRST BUSINESS FINANCIAL SERVICES, INC. Leases Disclosure
Note 6 — Leases
The Corporation leases various office spaces and specialized lending production offices under non-cancellable operating leases which expire on various dates through 2033. The Corporation also leases office equipment. The Corporation recognizes a right-of-use asset and an operating lease liability for all leases, with the exception of short-term leases. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term.
In May 2025, the Corporation renewed its Northeast region office lease, resulting in a right-of-use asset of $522,000 and a lease liability of $590,000. The Corporation received a $68,000 tenant improvement allowance related to this lease, which was recognized as a lease incentive and deducted from the right-of-use asset.
The components of total lease expense were as follows:
|
|
For the Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
|
(In Thousands) |
|
|||||||||
Operating lease cost |
|
$ |
1,342 |
|
|
$ |
1,366 |
|
|
$ |
1,411 |
|
Short-term lease cost |
|
|
171 |
|
|
|
140 |
|
|
|
200 |
|
Variable lease cost |
|
|
545 |
|
|
|
572 |
|
|
|
576 |
|
Less: sublease income |
|
|
— |
|
|
|
— |
|
|
|
(75 |
) |
Total lease cost, net |
|
$ |
2,058 |
|
|
$ |
2,078 |
|
|
$ |
2,112 |
|
Quantitative information regarding the Corporation’s operating leases was as follows:
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
|||
Weighted-average remaining lease term (in years) |
|
|
6.00 |
|
|
|
6.93 |
|
|
|
7.70 |
|
Weighted-average discount rate |
|
|
4.04 |
% |
|
|
3.37 |
% |
|
|
3.61 |
% |
The following maturity analysis shows the undiscounted cash flows due on the Corporation’s operating lease liabilities:
(In Thousands) |
|
|
|
|
2026 |
|
$ |
1,623 |
|
2027 |
|
|
1,647 |
|
2028 |
|
|
1,285 |
|
2029 |
|
|
933 |
|
2030 |
|
|
841 |
|
Thereafter |
|
|
2,001 |
|
Total undiscounted cash flows |
|
|
8,330 |
|
Discount on cash flows |
|
|
(969 |
) |
Total lease liability |
|
$ |
7,361 |
|
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.