First Business Financial Services, Inc. (the "Company")
(Nasdaq:FBIZ), the parent company of First Business Bank and First
Business Bank – Milwaukee, today reported strong first quarter
results highlighted by growth in top line revenue, a meaningful
reduction in non-performing assets, and continued capital strength.
Highlights for the quarter ended March 31, 2012 include:
- Net income increased 64% to $2.2 million, compared to $1.3
million for the first quarter of 2011.
- Annualized return on average equity and return on average
assets improved to 13.43% and 0.74%, respectively, compared to
9.62% and 0.48% for the first quarter of 2011.
- Top line revenue, consisting of net interest income and
non-interest income, increased 6% or $620,000 to $10.8 million for
the quarter ended March 31, 2012, compared to $10.2 million for the
quarter ended March 31, 2011.
- Average in-market deposits of $630.8 million grew to 59.4% of
total deposits, compared to average in-market deposits of $509.5
million, or 50.7% of total deposits, for the first quarter of 2011.
- The Company's efficiency ratio improved by 423 basis points to
61.8% for the first quarter of 2012, compared to 66.0% for the same
period of 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,
rose 19% to $4.1 million for the first quarter of 2012, compared to
$3.4 million recorded in the same period of 2011.
- Provision for loan and lease losses fell 64% to $504,000 for
the first quarter of 2012, down $900,000 from the prior year.
- Non-performing assets of $22.8 million at March 31, 2012
declined by $1.2 million or 5% from December 31, 2011, and declined
by $18.7 million or 45% from March 31, 2011.
The Company recorded first quarter 2012 net income of $2.2
million, or diluted earnings per common share of $0.84, compared to
net income of $1.3 million, or diluted earnings per common share of
$0.52, for the first quarter of 2011.
"The momentum of our efforts to grow top line revenue, generate
in-market deposits and carefully manage credit risk drove another
quarter of outstanding results for First Business Financial
Services," said Corey A. Chambas, President and Chief Executive
Officer. "Our ability to consistently deliver quality earnings
has also placed us in the enviable position of being financially
and strategically equipped to invest in additional talent as a
driver of future growth. We are adding talented individuals
with niche commercial expertise today, enhancing our organic
revenue and loan growth opportunities for tomorrow. As we
remain focused on executing our strategic plan, we are confident
the momentum we've achieved positions us well for continued growth
in long-term shareholder value."
Core Business Results
Net interest income increased $442,000, or 5.2%, to $8.9 million
in the first quarter of 2012, compared to $8.5 million for the
first quarter of 2011. The improvement principally resulted
from a 45 basis point decline in the average rate paid on
interest-bearing deposit balances, combined with a lesser decline
in yields on average earning assets. The decrease in overall
deposit funding costs was primarily caused by a 55 basis point
reduction in the rate paid on brokered certificates of deposit,
commensurate with lower current market rates, coupled with a 13%
decline in average brokered certificate of deposit
balances. The Company was able to actively reduce its
overall usage of brokered certificates of deposit for funding as a
result of its success in achieving 23.8% year-over-year growth in
average in-market client deposits, which include all transaction
accounts, money market accounts, and non-brokered certificates of
deposit. Accordingly, interest expense for the first quarter
decreased 15.7%, or $879,000, to $4.7 million, compared to $5.6
million for the first quarter of 2011. The decline in interest
expense was partially offset by lower interest income as a result
of lower market rates on securities purchased and lower average
loan and lease balances. Net interest margin of 3.15% was down
8 basis points compared with the fourth quarter of 2011, but
remained essentially flat as compared to 3.14% reported for the
first quarter of 2011.
Non-interest income for the first quarter of 2012 was $1.9
million, an increase of $178,000, or 10.6%, compared with the same
period of 2011. Service charges on deposits grew $106,000, or
28.4%, on increased deposit balances and transactions from
commercial clients, while increased asset-based lending activity
drove growth in loan fees of $67,000, up 20.2%, compared to the
first quarter of 2011. Trust and investment services income
grew $46,000, or 7.2%, compared to the same quarter of the prior
year, primarily benefitting from an increase in assets under
management from new client relationships, including a large client
transaction executed in the fourth quarter of 2011.
Non-interest expense for the first quarter of 2012 was $6.8
million, representing a modest increase of $72,000, or 1.1%,
compared to the same quarter in 2011. Compensation costs of
$4.0 million were $268,000, or 7.2%, higher than the first quarter
of 2011 due to merit increases on salaries, new positions filled in
support of strategic initiatives, elevated social security taxes on
non-equity incentive awards, and increased expenses related to the
Company's 401(k) employer match. Significant declines in FDIC
insurance costs and collateral liquidation costs helped offset
expense growth. FDIC insurance expense declined $172,000, or
22.7%, from the first quarter of 2011 due to the modification of
the FDIC's methodology for calculating an institution's deposit
insurance assessment base. The Company's success in reducing
non-performing loans drove a corresponding reduction of $134,000,
or 55.4%, in collateral liquidation costs. Coupled with top line
revenue growth of 6.1%, first quarter 2012 cost containment drove
an improvement in the efficiency ratio to 61.8%, 423 basis points
lower than in the prior year period.
The provision for loan and lease losses for the first quarter of
2012 was $504,000, representing a decline of $900,000, or 64.1%,
compared to the same quarter of the prior year, primarily due to a
reduction in net charge-offs of $665,000, from $873,000 to
$208,000.
Asset Quality Continues to Improve
The ratio of non-performing assets to total assets fell 8 basis
points from 2.04% at December 31, 2011 to 1.96% at March 31,
2012. The same measure fell 177 basis points from 3.73% at
March 31, 2011. Non-performing assets decreased by 45.1%, or
$18.7, million from March 31, 2011 to March 31, 2012, reflecting
payoffs, paydowns, charge-offs and improved client performance
causing a return to accrual status. These reductions were
partially offset by continued additions of newly identified problem
loans and leases. Annualized net charge-offs as a percent of
average gross loans and leases declined 30 basis points to 0.10%
for the three months ended March 31, 2012, compared to 0.40% for
the same period of the prior year.
Total assets of $1.2 billion declined modestly by $15.1 million,
or 1.3%, from December 31, 2011. Total assets grew $49.2
million, or 4.4%, from March 31, 2011. Compared to December
31, 2011, cash and cash equivalents increased $5.3 million while
available-for-sale securities remained relatively flat.
Growth in short-term investments was offset by a $19.4
million, or 2.3%, reduction in net loan and lease balances since
December 31, 2011. The 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 first quarter of 2012 the Company's Board of
Directors approved a $0.07 quarterly cash dividend on its common
stock, which was paid on April 15, 2012 to shareholders of record
at the close of business on April 1, 2012. This maintained the
Company's annualized dividend at $0.28 per share, a level it has
maintained for seventeen 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 13.56% as of March 31, 2012 as
compared to 13.11% at December 31, 2011.
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
CONDITION DATA |
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|
(Unaudited) |
March 31, |
December 31, |
September 30, |
June 30, |
March 31, |
(Dollars in
Thousands) |
2012 |
2011 |
2011 |
2011 |
2011 |
ASSETS |
|
|
|
|
|
Cash and cash
equivalents |
$ 135,351 |
$ 130,093 |
$ 80,461 |
$ 42,875 |
$ 60,332 |
Securities
available-for-sale, at fair value |
170,547 |
170,386 |
168,307 |
168,318 |
159,793 |
Loans and leases
receivable |
831,748 |
850,842 |
860,804 |
860,694 |
867,906 |
Allowance for loan
and lease losses |
(14,451) |
(14,155) |
(14,141) |
(15,937) |
(16,802) |
|
Loans and leases, net |
817,297 |
836,687 |
846,663 |
844,757 |
851,104 |
Leasehold
improvements and equipment, net |
1,035 |
999 |
1,000 |
1,041 |
951 |
Foreclosed
properties |
2,590 |
2,236 |
2,043 |
1,400 |
2,327 |
Cash surrender
value of bank-owned life insurance |
17,830 |
17,660 |
17,462 |
17,293 |
17,125 |
Investment in FHLB
stock, at cost |
1,748 |
2,367 |
2,367 |
2,367 |
2,367 |
Accrued interest
receivable and other assets |
15,647 |
16,737 |
17,296 |
18,326 |
18,866 |
|
Total
assets |
$ 1,162,045 |
$ 1,177,165 |
$ 1,135,599 |
$ 1,096,377 |
$ 1,112,865 |
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
In-market
deposits |
$ 618,609 |
$ 604,647 |
$ 530,364 |
$ 480,770 |
$ 505,046 |
Brokered CDs |
415,180 |
446,665 |
482,764 |
496,718 |
491,034 |
|
Total Deposits |
1,033,789 |
1,051,312 |
1,013,128 |
977,488 |
996,080 |
Federal Home Loan
Bank and other borrowings |
41,498 |
40,292 |
39,495 |
39,498 |
39,501 |
Junior subordinated
notes |
10,315 |
10,315 |
10,315 |
10,315 |
10,315 |
Accrued interest
payable and other liabilities |
10,009 |
11,032 |
10,911 |
9,229 |
10,652 |
|
Total liabilities |
1,095,611 |
1,112,951 |
1,073,849 |
1,036,530 |
1,056,548 |
|
Total stockholders' equity |
66,434 |
64,214 |
61,750 |
59,847 |
56,317 |
|
Total liabilities and
stockholders' equity |
$ 1,162,045 |
$ 1,177,165 |
$ 1,135,599 |
$ 1,096,377 |
$ 1,112,865 |
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STATEMENTS OF
INCOME |
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Three Months
Ended |
|
(Unaudited) |
March 31, |
December 31, |
September 30, |
June 30, |
March 31, |
|
(Dollars in Thousands,
except per share amounts) |
2012 |
2011 |
2011 |
2011 |
2011 |
|
|
|
|
|
|
|
|
|
Total interest income |
$ 13,633 |
$ 13,854 |
$ 14,119 |
$ 14,174 |
$ 14,070 |
|
Total interest expense |
4,707 |
4,950 |
5,015 |
5,205 |
5,586 |
|
|
Net interest income |
8,926 |
8,904 |
9,104 |
8,969 |
8,484 |
|
Provision for loan and lease
losses |
504 |
937 |
435 |
1,474 |
1,404 |
|
|
Net interest income after
provision for |
|
|
|
|
|
|
|
loan and lease losses |
8,422 |
7,967 |
8,669 |
7,495 |
7,080 |
|
Trust and investment services fee
income |
687 |
614 |
622 |
655 |
641 |
|
Service charges on deposits |
479 |
497 |
425 |
417 |
373 |
|
Loan fees |
398 |
402 |
380 |
368 |
331 |
|
Other |
286 |
403 |
301 |
304 |
327 |
|
|
Total non-interest income |
1,850 |
1,916 |
1,728 |
1,744 |
1,672 |
|
Compensation |
4,005 |
3,485 |
3,840 |
3,836 |
3,737 |
|
FDIC insurance |
587 |
585 |
571 |
571 |
759 |
|
Collateral liquidation costs |
108 |
212 |
155 |
177 |
242 |
|
Other |
2,132 |
1,967 |
2,184 |
2,054 |
2,022 |
|
|
Total non-interest expense |
6,832 |
6,249 |
6,750 |
6,638 |
6,760 |
|
Income before tax expense |
3,440 |
3,634 |
3,647 |
2,601 |
1,992 |
|
Income tax expense |
1,230 |
1,250 |
1,468 |
88 |
643 |
|
Net income |
$ 2,210 |
$ 2,384 |
$ 2,179 |
$ 2,513 |
$ 1,349 |
|
Per Common Share: |
|
|
|
|
|
|
Basic and diluted earnings |
$ 0.84 |
$ 0.90 |
$ 0.83 |
$ 0.98 |
$ 0.52 |
|
Dividends declared |
0.07 |
0.07 |
0.07 |
0.07 |
0.07 |
|
Book value |
25.31 |
24.46 |
23.49 |
23.04 |
21.68 |
|
Tangible book value |
25.31 |
24.46 |
23.48 |
23.03 |
21.67 |
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SELECTED FINANCIAL
RATIOS |
|
|
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|
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|
Three Months
Ended |
|
|
March 31, |
December 31, |
September 30, |
June 30, |
March 31, |
(Unaudited) |
2012 |
2011 |
2011 |
2011 |
2011 |
|
|
|
|
|
|
|
Return on average assets |
0.74% |
0.82% |
0.78% |
0.91% |
0.48% |
Return on average equity |
13.43% |
15.02% |
14.02% |
17.21% |
9.62% |
Efficiency ratio |
61.78% |
55.17% |
62.01% |
61.19% |
66.01% |
Average interest-earning assets
to average interest-- bearing liabilities |
115.08% |
115.47% |
114.53% |
113.77% |
112.32% |
Interest rate spread |
2.91% |
2.95% |
3.13% |
3.12% |
2.89% |
Net interest margin |
3.15% |
3.23% |
3.40% |
3.39% |
3.14% |
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ASSET QUALITY
RATIOS |
|
|
As Of |
|
|
|
|
March 31, |
December 31, |
September 30, |
June 30, |
March 31, |
(Unaudited) |
2012 |
2011 |
2011 |
2011 |
2011 |
|
|
|
|
|
|
|
Non-performing loans and leases
as a percent of total loans and leases |
2.43% |
2.56% |
3.14% |
4.02% |
4.51% |
Non-performing assets as a
percent of total assets |
1.96% |
2.04% |
2.56% |
3.29% |
3.73% |
Allowance for loan and lease
losses as a percent of total gross loans and leases |
1.74% |
1.66% |
1.64% |
1.85% |
1.93% |
Allowance for loan and lease
losses as a percent of non-performing loans |
71.55% |
65.03% |
52.34% |
46.03% |
42.87% |
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NON-GAAP
RECONCILIATIONS |
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CORE
EARNINGS |
|
|
|
|
|
|
Three Months
Ended |
(Unaudited) |
March 31, |
December 31, |
September 30, |
June 30, |
March 31, |
(Dollars in
thousands) |
2012 |
2011 |
2011 |
2011 |
2011 |
|
|
|
|
|
|
|
Income before tax expense |
$ 3,440 |
$ 3,634 |
$ 3,647 |
$ 2,601 |
$ 1,992 |
|
Provision for loan and lease
losses |
504 |
937 |
435 |
1,474 |
1,404 |
|
Loss on foreclosed
properties |
175 |
261 |
29 |
79 |
51 |
Core Earnings (pre-tax) |
$ 4,119 |
$ 4,832 |
$ 4,111 |
$ 4,154 |
$ 3,447 |
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EFFICIENCY
RATIO |
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|
|
Three Months
Ended |
(Unaudited) |
March 31, |
December 31, |
September 30, |
June 30, |
March 31, |
(Dollars in
thousands) |
2012 |
2011 |
2011 |
2011 |
2011 |
|
|
|
|
|
|
|
Total non-interest expense |
$ 6,832 |
$ 6,249 |
$ 6,750 |
$ 6,638 |
$ 6,760 |
|
Loss on foreclosed
properties |
175 |
261 |
29 |
79 |
51 |
|
Amortization of other
intangible assets |
-- |
19 |
4 |
4 |
5 |
Total operating expense |
$ 6,657 |
$ 5,969 |
$ 6,717 |
$ 6,555 |
$ 6,704 |
|
|
|
|
|
|
|
Net interest income |
$ 8,926 |
$ 8,904 |
$ 9,104 |
$ 8,969 |
$ 8,484 |
Total non-interest income |
1,850 |
1,916 |
1,728 |
1,744 |
1,672 |
Gain on sale of securities |
-- |
-- |
-- |
-- |
-- |
Total operating revenue |
$ 10,776 |
$ 10,820 |
$ 10,832 |
$ 10,713 |
$ 10,156 |
|
|
|
|
|
|
|
Efficiency ratio |
61.78% |
55.17% |
62.01% |
61.19% |
66.01% |
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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