FBIZ: Higher Target Price after Great Second Quarter - Analyst Blog
05 August 2011 - 8:15AM
Zacks
Ann Heffron, CFA
FBIZ: Higher Target Price after Great Second
Quarter
First Business Financial Services, Inc.
(FBIZ) knocked it out of the park in the
second quarter, posting diluted operating EPS of $0.68, excluding
one-time tax benefits of $0.29 per share. This was $0.16 better
than our $0.52 estimate and up 47% from the prior-year quarter.
The second quarter also included $0.4 million of one-time net
interest income as CPKF recognized previously forgone interest
income on nonaccrual loans that were paid off during the quarter.
We estimate this added another $0.10 to diluted EPS.
Excluding both items, EPS was $0.58 per share, $0.06 above our
$0.52 estimate and 26% ahead of last year’s $0.46.
Second quarter operating results (excluding the one-time tax
benefit, but including the one-time benefit from foregone interest
income) were boosted by growth in net interest income from a higher
net interest margin, reduced noninterest expense, and a lower
effective tax rate, partially offset by increased compensation from
bonus accruals and a hike in the loan loss provision.
Asset quality showed strong improvement in the second quarter,
following a somewhat disappointing first quarter. Nonaccrual loans
fell $4.6 million, or 12%, sequentially to $34.6 million, while
foreclosed assets dropped $0.9 million, or 39%, to $1.4
million.
We are raising our diluted EPS estimates to $2.35 from $1.90 for
2011 and to $2.60 from $2.10 for 2012. This translates into
year-over-year gains of 65% in 2011 and 11% in 2012.
We are maintaining our neutral recommendation on FBIZ, but
increasing our target price to $18.25 from $14.25, following the
20% surge in FBIZ’s share price over the past few days.
First Business Financial Services, Inc. is a bank holding company
headquartered in Madison, Wisconsin, with $1.1 billion in total
assets at June 30, 2011. FBIZ specializes in business lending for
small-medium-sized companies with sales ranging from $2-50 million.
As an adjunct to these services, FBIZ also offers banking services
to business owners, executives, professionals, and high net worth
individuals, though this is a less significant part of its
business.
For a free copy of the full research report, please email
scr@zacks.com with FBIZ as the subject.
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