First Business Financial Services, Inc. (the "Company")
(Nasdaq:FBIZ), the parent company of First Business Bank and First
Business Bank – Milwaukee, today reported strong fourth quarter and
record full year 2011 net income, as the Company continued to
increase top line revenue, reduce the level of non-performing
assets and improve operating efficiency.
Highlights for the periods ended December 31, 2011 include:
- Net income for the three months ended December 31, 2011
increased to $2.4 million, compared to $598,000 for the same period
of 2010.
- Net income was $8.4 million for the year ended December 31,
2011, compared to $941,000 for the year ended December 31, 2010.
Excluding 2010's $2.7 million goodwill impairment charge, net
income for the year ended December 31, 2011 grew $4.8 million or
132% over the prior year.
- Annualized return on average equity and return on average
assets increased to 15.02% and 0.82%, respectively, for the fourth
quarter of 2011, compared to 4.21% and 0.21% for the same period in
2010.
- Return on average equity and return on average assets increased
to 14.03% and 0.75%, respectively, for 2011, compared to 1.67% and
0.09% for 2010. Excluding the goodwill impairment, return on
average equity and return on average assets for 2010 were 6.46% and
0.33%, respectively.
- Net interest margin of 3.29% for the year ended December 31,
2011 was an improvement of 25 basis points compared to 2010.
- Top line revenue, consisting of net interest revenue and
non-interest income, increased 10% to $42.5 million for the year
ended December 31, 2011, compared to $38.7 million for the year
ended December 31, 2010.
- Provision for loan and lease losses was $4.3 million for the
year ended December 31, 2011, down $2.8 million or 40% from the
prior year.
- Non-performing assets of $24.0 million at December 31, 2011
declined by $16.2 million or 40% from December 31, 2010.
- The Company's efficiency ratio improved by 474 basis points to
61.0% for the year ended December 31, 2011, compared to 65.8% for
the prior year.
- Core earnings, defined as pre-tax income adding back provision
for loan and lease losses, other identifiable costs of credit and
other discrete items unrelated to our core business activities, of
$16.5 million for year ended December 31, 2011 grew 25% over
2010.
The Company recorded fourth quarter 2011 net income of $2.4
million, or diluted earnings per common share of $0.90, compared to
net income of $598,000, or diluted earnings per common share of
$0.24, for the fourth quarter of 2010.
The Company increased net income for the year ended December 31,
2011 to a record $8.4 million, or $3.23 per diluted common share.
This compares to net income of $941,000, or $0.37 per diluted
common share earned in the year ended 2010. Adjusted to exclude the
impact of the $2.7 million goodwill impairment charge in the second
quarter of 2010, 2011 net income grew $4.8 million as compared to
the prior year.
"In 2011 we executed on our strategic goals, delivering record
earnings and significant growth in top line revenue and in-market
deposits," said Corey A. Chambas, President and Chief Executive
Officer. "We achieved important efficiency gains and meaningful
improvement in asset quality. We are confident our consistent and
proven approach to building value has placed First Business in a
very strong position for continued success in 2012."
Net interest income increased 7.9% to $8.9 million in the fourth
quarter of 2011, compared to $8.3 million for the fourth quarter of
2010. The improvement reflects a 15 basis point widening of the net
interest margin to 3.23%, primarily resulting from a 42 basis point
decline in the average rate paid on interest-bearing deposit
balances. The decrease in the overall rate on the
interest-bearing funds was primarily caused by the replacement of
maturing certificates of deposits, including brokered certificates
of deposits, at lower current market rates and a lower rate paid on
money market accounts. Consequently, interest expense for the
fourth quarter decreased 16.0% to $5.0 million, compared to $5.9
million for the fourth quarter 2010.
Net interest income for the year ended December 31, 2011 was
$35.5 million, an increase of $3.5 million or 11.0% compared to the
prior year. Interest income of $56.2 million for the year
ended December 31, 2011 was relatively flat when compared to prior
year, while interest expense of $20.8 million decreased $3.9
million, or 15.9% compared to 2010. The primary driver of the
decline in interest expense was a 39 basis point decline in the
average rate paid on interest-bearing deposits, resulting in a 25
basis point increase in the net interest margin to 3.29% for the
year ended December 31, 2011 as compared to 3.04% for the prior
year. The Federal Reserve held interest rates constant
throughout 2010 and 2011, which facilitated pricing for new
deposits and repricing of maturing deposits commensurate with
current market conditions and demand, along with the replacement of
higher rate maturing brokered certificates of deposits at lower
current market rates.
Non-interest income for the fourth quarter of 2011 was $1.9
million, an increase of $158,000, or 9.0%, compared with the same
period of 2010. Service charges on deposits grew 13.7%, or
$60,000, and increased asset-based lending activity drove growth in
loan fees of $51,000, or 14.5%, compared to the fourth quarter of
2010.
Non-interest income for the year ended December 31, 2011 totaled
$7.1 million, which was $317,000, or 4.7%, higher than fees in
2010. Fee income generated by the Trust and Investment
Services business increased by $198,000, or 8.5%, to $2.5 million
for the year ended December 31, 2011. The increase in revenue
is related to 26% growth in assets under management and
administration at year end, as compared to a year ago. In
addition, loan fees grew by $243,000 or 19.6% compared to the year
ended December 31, 2010, as increased asset based lending activity
resulted in higher collateral audit fees. Lower volume and
gains on lease end terminations drove a partially offsetting
decline of $181,000, or 29.3%, in other income.
Non-interest expense for the fourth quarter of 2011 was $6.2
million, virtually flat compared to the same quarter in
2010. Compensation costs of $3.5 million were $530,000, or
17.9%, higher than the fourth quarter of 2010 due to a larger
accrual to fund the Company's non-equity incentive compensation
program. The higher accrual in 2011 reflects favorable 2011
financial performance. Significant declines in FDIC insurance
costs and collateral liquidation costs helped offset expense
growth. FDIC insurance expense declined $216,000, or 27.0%,
from the fourth quarter of 2010, and collateral liquidation costs
fell by $111,000, or 34.4%.
Non-interest expense for the year ended December 31, 2011
totaled $26.4 million, which was $2.0 million lower than in
2010. Excluding the $2.7 million goodwill impairment charge
recognized in the second quarter of 2010, 2011 non-interest
expenses increased $726,000, or 2.8%. Modest expense growth
for the year ended December 31, 2011 was primarily related to
increased costs to fund incentive compensation accruals in line
with favorable 2011 financial performance. Partially
offsetting core expense growth was the favorable change in FDIC
insurance costs, which drove a decline of $644,000, or 20.6%,
compared to the prior year. In addition, collateral liquidation
costs declined by $381,000, or 32.6%, reflecting successful
outcomes of the Company's efforts to minimize impaired loan
resolution costs. Coupled with top line revenue growth of 9.9%,
2011 cost containment drove an improvement in the efficiency ratio
to 61.0%, which was 474 basis points lower than in the prior year
period.
The provision for loan and lease losses for the fourth quarter
of 2011 was $937,000, representing a decline of $1.7 million or
65.0% compared to the same quarter of the prior year. The
provision for loan and lease losses for the year ended December 31,
2011 decreased 39.7% to $4.3 million from $7.0 million for the
prior year.
Asset quality improved throughout 2011. The ratio of
nonperforming assets to total assets fell 159 basis points from
3.63% at December 31, 2010 to 2.04% at December 31,
2011. Non-accrual loans and leases decreased by 43.3%, or
$16.6 million, during the year ended December 31, 2011, reflecting
payoffs, paydowns and charge-offs, which were partially offset by
continued additions of newly identified problem loans and
leases.
Total assets grew $70.1 million to $1.2 billion as of December
31, 2011, which represents growth of 6.3% from December 31,
2010. Cash and cash equivalents increased $79.3 million and
available-for-sale securities grew $17.0 million as the Company
attempts to provide an enhanced return on excess liquidity.
Growth in short term investments and securities was partially
offset by a $24.2 million reduction in net loan and lease balances
since December 31, 2010. This 2.8% decline in net loans and
leases is attributable to new loan originations being offset by
amortization of the existing loan portfolio and the reduction of
non-accrual loans and leases.
Dividend Maintained
During the fourth quarter of 2011 the Company's Board of
Directors approved a $0.07 quarterly cash dividend on its common
stock, which was paid on January 15, 2012 to shareholders of record
at the close of business on January 1, 2012. This maintained
the Company's annualized dividend at $0.28 per share, a level it
has maintained for sixteen consecutive quarters.
Capital Strength
The Company's capital ratios continue to improve and are in
excess of the highest required regulatory benchmark levels. Total
capital to risk-weighted assets was 13.1% as of December 31, 2011
as compared to 11.2% at December 31, 2010.
About First Business Financial Services, Inc.
First Business Financial Services (Nasdaq:FBIZ) is a $1.2
billion Wisconsin-based bank holding company that specializes in
focused financial solutions for businesses, key executives, and
high net worth individuals through its operating companies. It is
the second largest Wisconsin-based commercial bank holding company
listed on NASDAQ or New York Stock Exchange. Its companies include:
First Business Bank - Madison; First Business Bank - Milwaukee;
First Business Bank - Northeast; First Business Trust &
Investments; First Business Equipment Finance, LLC; and First
Business Capital Corp. For additional information, visit
www.firstbusiness.com or call (608) 238-8008.
The First Business Financial Services, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=2667
This press release includes "forward-looking" statements related
to First Business Financial Services, Inc. (the "Company") that can
generally be identified as describing the Company's future plans,
objectives or goals. Such forward-looking statements are subject to
risks and uncertainties that could cause actual results or outcomes
to differ materially from those currently anticipated. These
forward-looking statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
For further information about the factors that could affect the
Company's future results, please see the Company's annual report on
Form 10-K and other filings with the Securities and Exchange
Commission.
Selected Financial Information (Unaudited)
SELECTED FINANCIAL
CONDITION DATA |
|
|
|
|
(Unaudited) |
As of December
31, |
(Dollars in Thousands) |
2011 |
2010 |
|
|
|
|
|
Total Assets |
$1,177,165 |
$1,107,057 |
|
Cash and cash equivalents |
130,093 |
50,819 |
|
Securities available for sale |
170,386 |
153,379 |
|
Loans receivable, net |
836,687 |
860,935 |
|
Deposits |
1,051,312 |
988,298 |
|
Short-term borrowings |
810 |
2,010 |
|
Long-term debt |
49,797 |
49,809 |
|
Stockholders' Equity |
64,214 |
55,335 |
|
|
STATEMENTS OF
INCOME |
|
(Unaudited) |
Three Months
Ended |
Year
Ended |
(Dollars in Thousands, except
per |
December
31, |
December
31, |
share amounts) |
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
Interest income |
$ 13,854 |
$ 14,144 |
$ 56,217 |
$ 56,626 |
Interest expense |
4,950 |
5,891 |
20,756 |
24,675 |
Net interest income |
8,904 |
8,253 |
35,461 |
31,951 |
Provision for loan and lease losses |
937 |
2,677 |
4,250 |
7,044 |
Net interest income after provision |
|
|
|
|
for loan and lease losses |
7,967 |
5,576 |
31,211 |
24,907 |
|
|
|
|
|
Trust and investment services fee income |
614 |
596 |
2,532 |
2,334 |
Service charges on deposits |
497 |
437 |
1,712 |
1,672 |
Loan fees |
402 |
351 |
1,481 |
1,238 |
Other |
403 |
374 |
1,335 |
1,499 |
Total non-interest income |
1,916 |
1,758 |
7,060 |
6,743 |
|
|
|
|
|
Compensation |
3,485 |
2,955 |
14,898 |
13,286 |
FDIC insurance |
585 |
801 |
2,486 |
3,130 |
Collateral liquidation costs |
212 |
323 |
786 |
1,167 |
Goodwill impairment |
-- |
-- |
-- |
2,689 |
Other |
1,967 |
2,137 |
8,227 |
8,088 |
Total non-interest expense |
6,249 |
6,216 |
26,397 |
28,360 |
Income before income taxes |
3,634 |
1,118 |
11,874 |
3,290 |
Income taxes |
1,250 |
520 |
3,449 |
2,349 |
Net income |
$2,384 |
$ 598 |
$ 8,425 |
$ 941 |
Per Common Share: Basic and diluted
earnings |
$ 0.90 |
$ 0.24 |
$ 3.23 |
$ 0.37 |
Dividends declared |
$ 0.07 |
$ 0.07 |
$ 0.28 |
$ 0.28 |
|
SELECTED FINANCIAL
RATIOS |
|
(Unaudited) |
Three Months
Ended |
Year
Ended |
|
December
31, |
December
31, |
|
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
Return on average assets |
0.82% |
0.21% |
0.75% |
0.09% |
Return on average equity |
15.02% |
4.21% |
14.03% |
1.67% |
Operating return on average assets |
0.82% |
0.21% |
0.75% |
0.33% |
Operating return on average equity |
15.02% |
4.21% |
14.03% |
6.46% |
Efficiency ratio |
55.17% |
60.10% |
61.02% |
65.76% |
Average interest-earning assets to
average interest-bearing liabilities |
115.47% |
110.50% |
114.02% |
109.25% |
Interest rate spread |
2.95% |
2.85% |
3.02% |
2.82% |
Net interest margin |
3.23% |
3.08% |
3.29% |
3.04% |
|
ASSET QUALITY RATIOS |
|
|
|
|
|
(Unaudited) |
As of December
31, |
|
2011 |
2010 |
|
|
|
Non-performing loans as a percent of total
gross loans |
2.56% |
4.37% |
Non-performing assets as a percent of total
assets |
2.04% |
3.63% |
Allowance for loan and lease losses as a
percent of total gross loans and leases |
1.66% |
1.85% |
Allowance for loan and lease losses as a
percent of non-performing loans |
65.03% |
42.37% |
NON-GAAP RECONCILIATIONS
CORE
EARNINGS |
|
(Unaudited) |
Three Months
Ended |
Year
Ended |
(Dollars in Thousands) |
December
31, |
December
31, |
|
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
Income before income tax expense |
$ 3,634 |
$ 1,118 |
$ 11,874 |
$ 3,290 |
Goodwill impairment |
-- |
-- |
-- |
2,689 |
Provision for loan and lease losses |
937 |
2,677 |
4,250 |
7,044 |
Loss on foreclosed properties |
261 |
194 |
420 |
206 |
Core Earnings (pre-tax) |
$ 4,832 |
$ 3,989 |
$ 16,544 |
$ 13,229 |
|
|
|
|
|
OPERATING RETURN ON AVERAGE
ASSETS |
|
|
|
|
OPERATING RETURN ON AVERAGE
EQUITY |
|
|
|
|
|
|
|
|
|
(Unaudited) |
Three Months
Ended |
Year
Ended |
(Dollars in Thousands) |
December
31, |
December
31, |
|
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
Net income |
$ 2,384 |
$ 598 |
$ 8,425 |
$ 941 |
Goodwill impairment, after tax |
-- |
-- |
-- |
2,689 |
Operating net income |
$ 2,384 |
$ 598 |
$ 8,425 |
$ 3,630 |
|
|
|
|
|
Average assets |
$1,157,882 |
$ 1,122,537 |
$ 1,129,051 |
$ 1,099,429 |
Operating return on average assets |
0.82% |
0.21% |
0.75% |
0.33% |
|
|
|
|
|
Average equity |
$ 63,483 |
$ 56,859 |
$ 60,061 |
$ 56,217 |
Operating return on average equity |
15.02% |
4.21% |
14.03% |
6.46% |
|
|
|
|
|
EFFICIENCY RATIO |
|
|
|
|
|
|
|
|
|
(Unaudited) |
Three Months
Ended |
Year
Ended |
(Dollars in Thousands) |
December
31, |
December
31, |
|
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
Noninterest expense |
$ 6,249 |
$ 6,216 |
$ 26,397 |
$ 28,360 |
Loss on foreclosed properties |
261 |
194 |
420 |
206 |
Goodwill impairment |
-- |
-- |
-- |
2,689 |
Amortization of other intangible
assets |
19 |
5 |
32 |
19 |
Total operating expense |
$ 5,969 |
$ 6,017 |
$ 25,945 |
$ 25,446 |
|
|
|
|
|
Net interest income |
$ 8,904 |
$ 8,253 |
$ 35,461 |
$ 31,951 |
Non-interest income |
1,916 |
1,758 |
7,060 |
6,743 |
Gain on sale of securities |
-- |
-- |
-- |
-- |
Total operating revenue |
$ 10,820 |
$ 10,011 |
$ 42,521 |
$ 38,694 |
|
|
|
|
|
Efficiency ratio |
55.17% |
60.10% |
61.02% |
65.76% |
CONTACT: First Business Financial Services, Inc.
James F. Ropella, Senior Vice President
and Chief Financial Officer
608-232-5970
jropella@firstbusiness.com
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