First Business Financial Services, Inc. (the "Company" or "First
Business") (Nasdaq:FBIZ), the parent company of First Business
Bank, First Business Bank - Milwaukee and Alterra Bank, today
reported strong fourth quarter and year-to-date results, including
two months of contribution from Alterra Bank ("Alterra"), the
Company's Leawood, Kansas-based business banking subsidiary
acquired on November 1, 2014. First Business, excluding the
additional impact of Alterra, grew loans and top line revenue to
record levels while reducing problem assets.
Highlights for the quarter ended December 31, 2014 include:
- Net income totaled $3.7 million, including $566,000 in pre-tax
merger-related costs recorded for the fourth quarter of 2014. Net
income for the fourth quarter of 2013 totaled $3.8 million.
- Annualized return on average assets and annualized return on
average equity measured 0.95% and 10.92%, respectively, for the
fourth quarter of 2014.
- Top line revenue, consisting of net interest income and
non-interest income, increased 26% to a record $16.6 million,
compared to $13.2 million for the fourth quarter of 2013.
- Excluding two months of contribution from Alterra, fourth
quarter 2014 top line revenue totaled a record $14.0 million,
reflecting organic growth of 7% compared to the final quarter of
2013.
- Excluding 48 Alterra employees added in November, the Company's
full-time equivalent employees ("FTEs") increased to 167 at
December 31, 2014 from 145 at December 31, 2013, contributing to a
26% increase in compensation expense compared to the prior year
quarter.
- The Company's fourth quarter efficiency ratio measured 61%,
including merger-related costs, compared to 56% for the fourth
quarter of 2013.
- Net loans and leases grew for the eleventh consecutive quarter,
reaching a record $1.266 billion at December 31, 2014, up 31% from
December 31, 2013.
- Excluding Alterra, net loans and leases were a record $1.070
billion at December 31, 2014, increasing 11% from the prior year
end and 16%, annualized, from the linked quarter.
- Net interest margin increased to 3.67% for the fourth quarter
of 2014, including the favorable impact of 11 basis points related
to the net accretion/amortization on purchase accounting
adjustments of $392,000 on Alterra loans, deposits and
borrowings.
- Loan loss provision was $1.2 million for the fourth quarter of
2014, compared to a negative provision of $1.2 million in the
fourth quarter of 2013.
- Non-performing assets as a percent of total assets declined to
0.70% at December 31, 2014, from 1.28% at December 31, 2013.
- The effective tax rate for the fourth quarter of 2014 was 28%,
reflecting the utilization of new market federal tax credits,
compared to 35% for the fourth quarter of 2013.
The Company recorded net income of $3.7 million in the fourth
quarter of 2014, compared to $3.6 million earned in the third
quarter of 2014 and $3.8 million earned in the fourth quarter of
2013. Diluted earnings per common share were $0.89 for the fourth
quarter of 2014, compared to $0.89 for the linked quarter and $0.95
for the prior year quarter. Fourth quarter 2014 results include the
impact of $566,000 in non-recurring, pre-tax merger expenses
related to the Company's recently completed acquisition of Alterra,
which contributed $396,000 to consolidated net income during the
final two months of the quarter.
The Company's net income for the year ended December 31, 2014
was a record $14.1 million, or $3.51 per diluted common share,
compared to $13.7 million, or $3.49 per diluted common share,
earned for the year ended December 31, 2013. Full year 2014 results
include $990,000 in non-recurring, pre-tax merger expenses and
$396,000 in net income contribution from Alterra during the final
two months of the year.
"Again in 2014, First Business ended the year with stronger
second-half earnings, resulting in record net income for the fourth
consecutive year," said Corey Chambas, President and Chief
Executive Officer. "Robust loan growth in the fourth quarter by our
Wisconsin bank subsidiaries highlights the strength of our
franchise and team, which was further enhanced by the productivity
of business development officers hired earlier in the year. With
Alterra now on board and a solid pipeline heading into 2015, we
will be both prudent and entrepreneurial in capitalizing on
continued organic growth opportunities across our markets. In 2015,
we will continue to pursue high-quality loan growth while
emphasizing the exceptional asset quality that is core to the
consistent success of our franchise."
James Ropella Resumes CFO Role
First Business today announced that Senior Vice President James
F. Ropella will postpone his retirement and resume his role as
Chief Financial Officer, following David R. Papritz's decision to
resign from the Company after four months as CFO, effective January
30, 2015. Papritz informed First Business that his decision is
based on personal and family reasons that are unrelated to the
Company's business, strategy and financial condition.
"First Business has never been in a stronger financial position,
and we continue to focus on strategic growth opportunities, with
every expectation of extending our track record of successful
execution in 2015," said Mr. Chambas. "We are very pleased that Jim
has committed to staying with the Company through the completion of
a CFO search, selection and transition process, which we expect to
complete later this year."
Previously Announced Completion of Acquisition of Aslin Group,
the Parent Company of Alterra Bank
As previously disclosed, on November 1, 2014, First Business
completed its acquisition of Leawood, Kansas-based Aslin Group,
Inc., the parent company of Alterra Bank. At December 31, 2014,
Alterra had $258.8 million in assets, $196.5 million in net loans
and leases and $213.7 million in deposits. For the final two months
of 2014, Alterra produced $2.0 million in net interest income,
$567,000 in non-interest income, $1.5 million in non-interest
expense - including $139,000 in non-recurring merger-related costs
- and $337,000 in loan loss provision, contributing a total of
$396,000 in net income to First Business's fourth quarter
results.
Results of Operations
Net interest income for the fourth quarter of 2014 totaled $13.6
million, an increase of $2.6 million, or 23.8%, compared to the
fourth quarter of 2013. Fourth quarter 2014 net interest income
included $2.0 million from Alterra in the final two months of the
year. Net interest income from Alterra included $392,000 in fair
value adjustments related to the net accretion/amortization of the
purchase accounting adjustments on Alterra loans, deposits and
borrowings. Overall, consolidated net interest income continued to
benefit from lower funding costs and growth in earning assets.
Fourth quarter 2014 average earning asset and loan and lease
balances were each 21.3% higher than in the prior-year period,
including the impact of the Alterra acquisition, while earning
asset yields held steady year-over-year at 4.55%. A $501,000
interest recovery associated with the full payoff of a $6.2 million
non-accrual loan, combined with higher average yields at Alterra,
offset the decline in First Business's earning asset yields
attributable to the other bank subsidiaries.
The net interest margin of 3.67% increased 23 basis points from
the third quarter of 2014 and seven basis points from the fourth
quarter of 2013. Fourth quarter 2014 net interest margin included
11 basis points related to the net accretion/amortization on the
purchase accounting adjustments of $392,000 and 14 basis points
related to the interest recovery on a non-accrual loan payoff. The
linked quarter margin was compressed, primarily due to the
temporary excess liquidity on the balance sheet at the end of the
third quarter of 2014. As expected, the excess transactional
deposit balances were gradually reduced by the end of the fourth
quarter. Net interest margin may experience occasional volatility
due to non-recurring events such as prepayment fees collected in
lieu of interest, the collection of foregone interest or the
accumulation of significant short-term deposit inflows.
Non-interest income of $3.0 million for the fourth quarter of
2014 increased $774,000, or 35.3%, from the fourth quarter of 2013.
Alterra contributed $567,000 in non-interest income during the
final two months of 2014, of which $399,000 was due to the sale of
the guaranteed portion of SBA loans and related servicing fee
income. Overall growth in non-interest income reflects the
continued success of the Company's initiatives to grow full-service
banking relationships. The Company's deposit service charge income,
excluding Alterra, increased 10.1% year-over-year, while trust and
investment services income of $1.1 million remained the primary
source of fee revenue, increasing $136,000, or 13.8%, from the
fourth quarter of 2013. Trust revenue growth continued to reflect
significant success at new business development, including current
client additions to accounts. Both the domestic equity and fixed
income markets were positive year-over-year, which was also
additive to the growth in revenue. Trust assets under management
and administration measured $959.7 million as of December 31, 2014,
compared to $959.0 million at December 31, 2013. Off-balance sheet
growth was relatively flat year-over-year primarily due to the
mutual agreement between the Company and a client to discontinue
providing trust services to a group sponsored investment program
during the second quarter of 2014. While the assets within the
relationship were significant, the fees for services were not;
therefore, the impact to revenue in 2014 was not material nor does
the Company anticipate that it will be in future periods.
Non-interest expense for the fourth quarter of 2014 was $10.1
million, an increase of $1.6 million, or 18.4%, compared to the
fourth quarter of 2013. Fourth quarter 2014 included $1.5 million
in expenses at Alterra for the last two months of the year -
including $139,000 in non-recurring merger-related costs - along
with $427,000 in non-recurring First Business merger-related costs.
Excluding merger-related costs and expenses generated by Alterra,
non-interest expense decreased by $399,000, or 4.7%, compared to
the prior year quarter. The year-over-year decline partly reflects
the Company's one-time $1.3 million endowment to the First Business
Charitable Foundation during the fourth quarter of 2013. Higher
compensation costs in the fourth quarter of 2014 largely offset the
difference. Compared to the prior year quarter, fourth quarter 2014
compensation costs, excluding Alterra, grew $1.2 million, or 26.3%,
on a larger base of employees, annual merit increases, higher
employee benefit costs and higher incentive compensation accruals
commensurate with the Company's strong financial performance in
2014.
The Company meaningfully invested in talent throughout 2014
ending the year with 167 FTEs, excluding Alterra employees, up 15%
from 145 at December 31, 2013. Management expects to continue
investing in personnel, products and technology to support its
growth strategies and initiatives, while remaining committed to its
history of efficient expense management. The Company's efficiency
ratio of 61.1% for the fourth quarter of 2014 reflects continued
success in aligning non-interest expense growth with top line
revenue growth, despite merger-related costs and increased
compensation expense. The efficiency ratio was 60.1% for the third
quarter of 2014 and 56.0% for the fourth quarter of 2013.
The Company recorded provision for loan and lease losses
totaling $1.2 million for the fourth quarter of 2014, compared to a
negative provision for loan and lease losses of $1.2 million in the
fourth quarter of 2013. The significant negative provision in the
fourth quarter of 2013 reflected the positive outcome of an annual
review of the Company's rolling three-year historical loss rates,
resulting in a reduction in the loan and lease loss reserve at
December 31, 2013. During the fourth quarter of 2014, the Company
recorded $541,000 in provision to support solid loan growth, which
was partially offset by a reduction in provision as a result of the
annual review of the Company's rolling three-year historical loss
rates. Additionally, the Company experienced $1.2 million in
charge-offs related to two discrete commercial loan clients, along
with $393,000 in recoveries on previously charged-off loans. Net
charge-offs represented an annualized 0.28% of average loans and
leases for the fourth quarter of 2014. This compares to annualized
net charge-offs measuring 0.03% of average loans and leases in the
fourth quarter of 2013. For the full year 2014, the Company's net
charge-offs as a percentage of average loans and leases measured
0.08%, which was relatively consistent with 0.06% for 2013.
The effective tax rate for the fourth quarter of 2014 was 28.0%,
compared to 34.6% and 35.4% in the linked and year-ago quarters,
respectively. During the fourth quarter of 2014, the Company
utilized new market federal tax credits of $243,750 related to
community development-related loans which reduced the effective tax
rate for the quarter. It is expected that similar amounts of
federal tax credits will be utilized in 2015.
Balance Sheet and Asset Quality Strength
Period-end net loans and leases grew for the eleventh
consecutive quarter, reaching a record $1.266 billion at December
31, 2014. Including $196.5 million of Alterra balances, net loans
and leases grew $299.4 million, or 31.0%, from December 31, 2013.
Excluding Alterra, net loans and leases were still a record $1.070
billion at December 31, 2014, increasing 10.6% from the prior year
end and 16.3%, annualized, from the linked quarter. Growth reflects
the successful execution of the Company's strategic plan, including
consistent performance by business development officers ("BDOs") in
deepening client relationships, attracting new commercial clients
and capitalizing on market opportunities.
Period-end in-market deposits - consisting of all transaction
accounts, money market accounts and non-wholesale deposits -
increased to $1.011 billion, or 70.3% of total deposits, at
December 31, 2014. Period-end wholesale deposits were $427.3
million at December 31, 2014, consisting of brokered certificates
of deposit and deposits gathered through internet deposit listing
services of $376.4 million and $50.9 million, respectively. Average
in-market deposits were $955.7 million, or 68.9% of total deposits
in the fourth quarter of 2014. In order to reduce interest-rate
risk, the Company uses wholesale deposits to efficiently match-fund
fixed rate loans. Over time, management expects to maintain a ratio
of in-market deposits to total deposits in line with the Company's
recent historical range of 60%-70%.
Management continues to believe asset quality is a source of
strength and differentiation for the Company relative to many of
its peers. Strong underwriting and the continued success of certain
exit strategies, including payoffs and paydowns, continue to
benefit asset quality metrics. As previously disclosed, a $6.2
million non-accrual commercial and industrial credit paid off in
full during the fourth quarter of 2014, driving a 38.2% reduction
in non-performing loans compared to September 30, 2014. In
addition, Alterra loans were acquired at fair value, with no
corresponding reserves. As a result, the Company's non-performing
loans as a percentage of total gross loans and leases declined to
0.76% as of December 31, 2014, compared to 1.52% as of September
30, 2014 and 1.61% at December 31, 2013. The ratio of
non-performing assets to total assets declined to 0.70% at December
31, 2014, compared to 1.12% at September 30, 2014 and 1.28% at
December 31, 2013. Non-performing assets totaled $11.5 million at
December 31, 2014, compared to $15.9 million at September 30, 2014
and $16.2 million at December 31, 2013.
Capital Strength
The Company's earnings power continues to generate capital, and
as of December 31, 2014, its capital ratios were in excess of the
then-current highest required regulatory benchmark levels. As of
December 31, 2014, total capital to risk-weighted assets was
12.13%, tier 1 capital to risk-weighted assets was 9.52% and tier 1
capital to average assets was 8.71%. The Company anticipates that
its capital ratios will remain in excess of the enhanced regulatory
benchmark levels required by Basel III which went into effect on
January 1, 2015.
Quarterly Dividend
As previously announced, during the fourth quarter of 2014 the
Company's Board of Directors approved a $0.21 quarterly
cash dividend on its common stock, which was paid on November 24,
2014 to shareholders of record at the close of business on November
13, 2014. The Board of Directors routinely considers dividend
declarations as part of its normal course of business.
About First Business Financial Services, Inc.
First Business Financial Services, Inc. (Nasdaq:FBIZ) is a
Wisconsin-based bank holding company, focused on the unique needs
of businesses, business executives, and high net worth individuals.
First Business offers commercial banking, specialty finance, and
private wealth management solutions, and because of its niche
focus, is able to provide its clients with unmatched expertise,
accessibility, and responsiveness. For additional information,
visit www.firstbusiness.com or call 608-238-8008.
This press release includes "forward-looking" statements related
to 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 2013 annual report on Form 10-K, quarterly reports on
Form 10-Q and other filings with the Securities and Exchange
Commission.
SELECTED FINANCIAL CONDITION DATA
(Unaudited) |
As
of |
(Dollars in thousands) |
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
|
2014 |
2014 |
2014 |
2014 |
2013 |
ASSETS |
|
|
|
|
|
Cash and cash equivalents |
$ 103,237 |
$ 174,498 |
$ 85,977 |
$ 76,396 |
$ 81,286 |
Securities available-for-sale,
at fair value |
144,698 |
142,427 |
143,642 |
185,547 |
180,118 |
Securities held-to-maturity, at
amortized cost |
41,563 |
42,522 |
43,434 |
— |
— |
Loans and leases
receivable |
1,280,767 |
1,041,816 |
1,007,736 |
985,319 |
980,951 |
Allowance for loan and lease
losses |
(14,329) |
(13,930) |
(14,015) |
(14,101) |
(13,901) |
Loans and leases, net |
1,266,438 |
1,027,886 |
993,721 |
971,218 |
967,050 |
Leasehold improvements and
equipment, net |
3,943 |
1,198 |
1,152 |
1,186 |
1,155 |
Foreclosed properties |
1,693 |
106 |
329 |
333 |
333 |
Cash surrender value of
bank-owned life insurance |
27,314 |
23,772 |
23,558 |
23,348 |
23,142 |
Investment in Federal Home Loan
Bank and Federal Reserve Bank stock, at cost |
2,340 |
1,349 |
1,349 |
1,255 |
1,255 |
Goodwill and other
intangibles |
11,002 |
— |
— |
— |
— |
Accrued interest receivable and
other assets |
27,159 |
13,809 |
13,341 |
14,489 |
14,316 |
Total
assets |
$ 1,629,387 |
$ 1,427,567 |
$ 1,306,503 |
$ 1,273,772 |
$ 1,268,655 |
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
|
|
|
In-market deposits |
$ 1,010,928 |
$ 859,114 |
$ 729,400 |
$ 731,164 |
$ 736,323 |
Wholesale deposits |
427,340 |
410,086 |
437,297 |
405,536 |
393,532 |
Total deposits |
1,438,268 |
1,269,200 |
1,166,697 |
1,136,700 |
1,129,855 |
Federal Home Loan Bank and
other borrowings |
33,994 |
22,936 |
7,936 |
7,936 |
11,936 |
Junior subordinated notes |
10,315 |
10,315 |
10,315 |
10,315 |
10,315 |
Accrued interest payable and
other liabilities |
9,062 |
6,924 |
5,907 |
6,626 |
7,274 |
Total liabilities |
1,491,639 |
1,309,375 |
1,190,855 |
1,161,577 |
1,159,380 |
Total stockholders' equity |
137,748 |
118,192 |
115,648 |
112,195 |
109,275 |
Total liabilities and
stockholders' equity |
$ 1,629,387 |
$ 1,427,567 |
$ 1,306,503 |
$ 1,273,772 |
$ 1,268,655 |
STATEMENTS OF INCOME
(Unaudited) |
As of and for the
Three Months Ended |
As of and for the
Year Ended |
|
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
December 31, |
December 31, |
(Dollars in thousands, except per
share amounts) |
2014 |
2014 |
2014 |
2014 |
2013 |
2014 |
2013 |
Total interest income |
$ 16,863 |
$ 13,871 |
$ 13,565 |
$ 13,402 |
$ 13,763 |
$ 57,701 |
$ 53,810 |
Total interest expense |
3,268 |
2,936 |
2,766 |
2,601 |
2,779 |
11,571 |
11,705 |
Net interest income |
13,595 |
10,935 |
10,799 |
10,801 |
10,984 |
46,130 |
42,105 |
Provision for loan and lease losses |
1,236 |
(89) |
(91) |
180 |
(1,202) |
1,236 |
(959) |
Net interest income after
provision for loan and lease losses |
12,359 |
11,024 |
10,890 |
10,621 |
12,186 |
44,894 |
43,064 |
Trust and investment services fee income |
1,119 |
1,137 |
1,110 |
1,068 |
983 |
4,434 |
3,756 |
Service charges on deposits |
682 |
620 |
600 |
567 |
574 |
2,469 |
2,150 |
Loan fees |
421 |
386 |
380 |
390 |
309 |
1,577 |
1,295 |
Gain on sale of loans and leases |
409 |
24 |
3 |
23 |
10 |
460 |
49 |
Other |
334 |
292 |
265 |
273 |
315 |
1,163 |
1,192 |
Total non-interest income |
2,965 |
2,459 |
2,358 |
2,321 |
2,191 |
10,103 |
8,442 |
Compensation |
6,486 |
5,193 |
4,741 |
5,057 |
4,459 |
21,477 |
18,278 |
Net collateral liquidation costs |
44 |
32 |
85 |
159 |
29 |
320 |
196 |
Net (gain) loss on foreclosed properties |
(5) |
(9) |
4 |
— |
(118) |
(10) |
(117) |
Endowment to First Business Charitable
Foundation |
— |
— |
— |
— |
1,300 |
— |
1,300 |
Merger-related costs |
566 |
104 |
320 |
— |
— |
990 |
— |
Other |
3,036 |
2,727 |
2,599 |
2,636 |
2,886 |
10,998 |
10,714 |
Total non-interest expense |
10,127 |
8,047 |
7,749 |
7,852 |
8,556 |
33,775 |
30,371 |
Income before tax expense |
5,197 |
5,436 |
5,499 |
5,090 |
5,821 |
21,222 |
21,135 |
Income tax expense |
1,453 |
1,883 |
1,994 |
1,753 |
2,061 |
7,083 |
7,389 |
Net income |
$ 3,744 |
$ 3,553 |
$ 3,505 |
$ 3,337 |
$ 3,760 |
$ 14,139 |
$ 13,746 |
|
|
|
|
|
|
|
|
Per common share: |
|
|
|
|
|
|
|
Basic earnings |
$ 0.89 |
$ 0.90 |
$ 0.89 |
$ 0.85 |
$ 0.95 |
$ 3.52 |
$ 3.50 |
Diluted earnings |
0.89 |
0.89 |
0.88 |
0.84 |
0.95 |
3.51 |
3.49 |
Dividends declared |
0.21 |
0.21 |
0.21 |
0.21 |
0.14 |
0.84 |
0.56 |
Book value |
31.77 |
29.85 |
29.31 |
28.44 |
27.71 |
31.77 |
27.71 |
Tangible book value |
29.23 |
29.85 |
29.31 |
28.44 |
27.71 |
29.23 |
27.71 |
Weighted-average common shares
outstanding(1) |
4,130,158 |
3,867,835 |
3,860,087 |
3,859,503 |
3,848,573 |
3,929,969 |
3,832,296 |
Weighted-average diluted common shares
outstanding(1) |
4,137,411 |
3,889,679 |
3,883,355 |
3,880,561 |
3,867,247 |
3,948,372 |
3,847,610 |
(1) Excluding
participating securities |
NET INTEREST INCOME ANALYSIS
(Unaudited) |
For the Three
Months Ended |
(Dollars in thousands) |
December 31,
2014 |
September 30,
2014 |
December 31,
2013 |
|
Average |
|
Average |
Average |
|
Average |
Average |
|
Average |
|
balance |
Interest |
yield/rate |
balance |
Interest |
yield/rate |
balance |
Interest |
yield/rate |
Interest-earning assets |
|
|
|
|
|
|
|
|
|
Commercial real estate and other mortgage
loans(1) |
$ 745,411 |
$ 9,162 |
4.92% |
$ 641,522 |
$ 7,705 |
4.80% |
$ 642,104 |
$ 8,133 |
5.07% |
Commercial and industrial loans(1) |
381,202 |
6,192 |
6.50% |
326,579 |
4,769 |
5.84% |
288,478 |
4,265 |
5.91% |
Direct financing leases(1) |
33,698 |
403 |
4.78% |
30,278 |
351 |
4.64% |
24,300 |
282 |
4.64% |
Consumer and other loans(1) |
17,631 |
196 |
4.45% |
15,696 |
143 |
3.64% |
15,880 |
153 |
3.85% |
Total loans and leases receivable(1) |
1,177,942 |
15,953 |
5.42% |
1,014,075 |
12,968 |
5.12% |
970,762 |
12,833 |
5.29% |
Mortgage-related securities(2) |
158,091 |
686 |
1.74% |
158,832 |
716 |
1.80% |
151,041 |
734 |
1.94% |
Other investment securities(3) |
28,166 |
113 |
1.60% |
26,284 |
105 |
1.60% |
33,330 |
121 |
1.45% |
FHLB and FRB stock |
2,004 |
10 |
1.96% |
1,349 |
2 |
0.57% |
1,255 |
1 |
0.36% |
Short-term investments |
116,283 |
101 |
0.35% |
70,633 |
80 |
0.45% |
65,451 |
74 |
0.45% |
Total interest-earning
assets |
1,482,486 |
16,863 |
4.55% |
1,271,173 |
13,871 |
4.36% |
1,221,839 |
13,763 |
4.51% |
Non-interest-earning assets |
92,439 |
|
|
63,485 |
|
|
57,233 |
|
|
Total assets |
$ 1,574,925 |
|
|
$ 1,334,658 |
|
|
$ 1,279,072 |
|
|
Interest-bearing
liabilities |
|
|
|
|
|
|
|
|
|
Transaction accounts |
$ 90,836 |
48 |
0.21% |
$ 84,434 |
47 |
0.22% |
$ 72,016 |
41 |
0.23% |
Money market |
575,266 |
768 |
0.53% |
484,402 |
627 |
0.52% |
471,610 |
599 |
0.51% |
Certificates of deposit |
98,111 |
186 |
0.76% |
44,423 |
115 |
1.04% |
54,400 |
134 |
0.99% |
Wholesale deposits |
432,361 |
1,557 |
1.44% |
422,618 |
1,616 |
1.53% |
399,671 |
1,515 |
1.52% |
Total interest-bearing
deposits |
1,196,574 |
2,559 |
0.86% |
1,035,877 |
2,405 |
0.93% |
997,697 |
2,289 |
0.92% |
FHLB advances |
6,242 |
16 |
1.09% |
1,304 |
1 |
0.16% |
5 |
— |
—% |
Other borrowings |
23,748 |
412 |
6.94% |
13,806 |
250 |
7.24% |
12,528 |
210 |
6.70% |
Junior subordinated notes |
10,315 |
281 |
10.86% |
10,315 |
280 |
10.86% |
10,315 |
280 |
10.86% |
Total interest-bearing
liabilities |
1,236,879 |
3,268 |
1.06% |
1,061,302 |
2,936 |
1.11% |
1,020,545 |
2,779 |
1.09% |
Non-interest-bearing demand deposit
accounts |
191,438 |
|
|
148,017 |
|
|
142,738 |
|
|
Other non-interest-bearing liabilities |
9,436 |
|
|
7,908 |
|
|
7,436 |
|
|
Total liabilities |
1,437,753 |
|
|
1,217,227 |
|
|
1,170,719 |
|
|
Stockholders' equity |
137,172 |
|
|
117,431 |
|
|
108,353 |
|
|
Total liabilities and
stockholders' equity |
$ 1,574,925 |
|
|
$ 1,334,658 |
|
|
$ 1,279,072 |
|
|
Net interest income |
|
$ 13,595 |
|
|
$ 10,935 |
|
|
$ 10,984 |
|
Interest rate spread |
|
|
3.49% |
|
|
3.25% |
|
|
3.42% |
Net interest-earning assets |
$ 245,607 |
|
|
$ 209,871 |
|
|
$ 201,294 |
|
|
Net interest margin |
|
|
3.67% |
|
|
3.44% |
|
|
3.60% |
|
|
|
|
|
|
|
|
|
|
(1) The average
balances of loans and leases include non-performing loans and
leases. Interest income related to non-performing loans and
leases is recognized when collected. |
(2) Includes amortized
cost basis of assets available for sale and held to maturity. |
(3) Yields on
tax-exempt municipal obligations are not presented on a
tax-equivalent basis in this table. |
NET INTEREST INCOME ANALYSIS (CONTINUED)
(Unaudited) |
For the Year
Ended December 31, |
(Dollars in thousands) |
2014 |
2013 |
|
Average |
|
Average |
Average |
|
Average |
|
balance |
Interest |
yield/cost |
balance |
Interest |
yield/cost |
Interest-earning assets |
|
|
|
|
|
|
Commercial real estate and other mortgage
loans(1) |
$ 665,213 |
$ 32,066 |
4.82% |
$ 633,605 |
$ 32,021 |
5.05% |
Commercial and industrial loans(1) |
332,591 |
19,962 |
6.00% |
268,376 |
16,739 |
6.24% |
Direct financing leases(1) |
29,395 |
1,367 |
4.65% |
17,413 |
844 |
4.85% |
Consumer and other loans(1) |
16,862 |
652 |
3.87% |
16,446 |
634 |
3.86% |
Total loans and leases receivable(1) |
1,044,061 |
54,047 |
5.18% |
935,840 |
50,238 |
5.37% |
Mortgage-related securities(2) |
156,144 |
2,894 |
1.85% |
159,188 |
2,841 |
1.78% |
Other investment securities(3) |
28,458 |
448 |
1.57% |
33,990 |
474 |
1.39% |
FHLB and FRB stock |
1,512 |
14 |
0.94% |
1,402 |
4 |
0.29% |
Short-term investments |
67,281 |
298 |
0.44% |
59,737 |
253 |
0.42% |
Total interest-earning
assets |
1,297,456 |
57,701 |
4.45% |
1,190,157 |
53,810 |
4.52% |
Non-interest-earning assets |
67,507 |
|
|
58,536 |
|
|
Total assets |
$ 1,364,963 |
|
|
$ 1,248,693 |
|
|
Interest-bearing
liabilities |
|
|
|
|
|
|
Transaction accounts |
$ 83,508 |
185 |
0.22% |
$ 62,578 |
126 |
0.20% |
Money market |
493,322 |
2,553 |
0.52% |
450,558 |
2,398 |
0.53% |
Certificates of deposit |
60,284 |
536 |
0.89% |
60,276 |
611 |
1.01% |
Wholesale deposits |
416,202 |
6,196 |
1.49% |
393,726 |
6,604 |
1.68% |
Total interest-bearing deposits |
1,053,316 |
9,470 |
0.90% |
967,138 |
9,739 |
1.01% |
FHLB advances |
5,017 |
22 |
0.45% |
6,471 |
13 |
0.19% |
Other borrowings |
13,688 |
967 |
7.06% |
12,196 |
842 |
6.90% |
Junior subordinated notes |
10,315 |
1,112 |
10.78% |
10,315 |
1,111 |
10.78% |
Total interest-bearing
liabilities |
1,082,336 |
11,571 |
1.07% |
996,120 |
11,705 |
1.18% |
Non-interest-bearing demand deposit
accounts |
154,687 |
|
|
138,920 |
|
|
Other non-interest-bearing liabilities |
7,918 |
|
|
8,909 |
|
|
Total liabilities |
1,244,941 |
|
|
1,143,949 |
|
|
Stockholders' equity |
120,022 |
|
|
104,744 |
|
|
Total liabilities and stockholders'
equity |
$ 1,364,963 |
|
|
$ 1,248,693 |
|
|
Net interest income |
|
$ 46,130 |
|
|
$ 42,105 |
|
Interest rate spread |
|
|
3.38% |
|
|
3.34% |
Net interest-earning assets |
$ 215,120 |
|
|
$ 194,037 |
|
|
Net interest margin |
|
|
3.56% |
|
|
3.54% |
|
|
|
|
|
|
|
(1) The
average balances of loans and leases include non-performing loans
and leases. Interest income related to non-performing loans and
leases is recognized when collected. |
(2) Includes
amortized cost basis of assets available for sale and held to
maturity. |
(3) Yields on
tax-exempt municipal obligations are not presented on a
tax-equivalent basis in this table. |
SELECTED FINANCIAL TRENDS
PERFORMANCE RATIOS
|
For the Three
Months Ended |
For the Year
Ended |
|
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
December 31, |
December 31, |
(Unaudited) |
2014 |
2014 |
2014 |
2014 |
2013 |
2014 |
2013 |
Return on average assets (annualized) |
0.95% |
1.06% |
1.09% |
1.06% |
1.18% |
1.04% |
1.10% |
Return on average equity (annualized) |
10.92% |
12.10% |
12.29% |
12.01% |
13.88% |
11.78% |
13.12% |
Efficiency ratio |
61.11% |
60.15% |
58.87% |
59.84% |
55.97% |
60.06% |
57.74% |
Interest rate spread |
3.49% |
3.25% |
3.35% |
3.40% |
3.42% |
3.38% |
3.34% |
Net interest margin |
3.67% |
3.44% |
3.52% |
3.58% |
3.60% |
3.56% |
3.54% |
Average interest-earning assets to average
interest-bearing liabilities |
119.86% |
119.77% |
119.35% |
120.56% |
119.72% |
119.88% |
119.48% |
ASSET QUALITY RATIOS
(Unaudited) |
As
of |
|
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
(Dollars in thousands) |
2014 |
2014 |
2014 |
2014 |
2013 |
Non-performing loans and leases |
$ 9,792 |
$ 15,837 |
$ 14,180 |
$ 14,110 |
$ 15,855 |
Foreclosed properties, net |
1,693 |
106 |
329 |
333 |
333 |
Total non-performing
assets |
11,485 |
15,943 |
14,509 |
14,443 |
16,188 |
Performing troubled debt restructurings |
2,003 |
556 |
602 |
586 |
371 |
Total impaired assets |
$ 13,488 |
$ 16,499 |
$ 15,111 |
$ 15,029 |
$ 16,559 |
|
|
|
|
|
|
Non-performing loans and leases as a percent
of total gross loans and leases |
0.76% |
1.52% |
1.41% |
1.43% |
1.61% |
Non-performing assets as a percent of total
gross loans and leases plus foreclosed properties |
0.89% |
1.53% |
1.44% |
1.46% |
1.65% |
Non-performing assets as a percent of total
assets |
0.70% |
1.12% |
1.11% |
1.13% |
1.28% |
Allowance for loan and lease losses as a
percent of total gross loans and leases |
1.12% |
1.34% |
1.39% |
1.43% |
1.42% |
Allowance for loan and lease losses as a
percent of non-performing loans |
146.33% |
87.96% |
98.84% |
99.94% |
87.68% |
|
|
|
|
|
|
Criticized assets: |
|
|
|
|
|
Special mention |
$ — |
$ — |
$ — |
$ — |
$ — |
Substandard |
27,078 |
26,147 |
29,337 |
21,283 |
22,841 |
Doubtful |
— |
— |
— |
— |
— |
Foreclosed properties, net |
1,693 |
106 |
329 |
333 |
333 |
Total criticized assets |
$ 28,771 |
$ 26,253 |
$ 29,666 |
$ 21,616 |
$ 23,174 |
Criticized assets to total assets |
1.77% |
1.84% |
2.27% |
1.70% |
1.83% |
NET CHARGE-OFFS (RECOVERIES)
(Unaudited) |
For the Three
Months Ended |
For the Year
Ended |
|
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
December 31, |
December 31, |
(Dollars in thousands) |
2014 |
2014 |
2014 |
2014 |
2013 |
2014 |
2013 |
Charge-offs |
$ 1,231 |
$ 2 |
$ — |
$ — |
$ 120 |
$ 1,233 |
$ 914 |
Recoveries |
(393) |
(6) |
(5) |
(20) |
(38) |
(425) |
(374) |
Net (recoveries) charge-offs |
$ 838 |
$ (4) |
$ (5) |
$ (20) |
$ 82 |
$ 808 |
$ 540 |
Net (recoveries) charge-offs as a percent of
average gross loans and leases (annualized) |
0.28% |
—% |
—% |
(0.01)% |
0.03% |
0.08% |
0.06% |
CAPITAL RATIOS
|
As of and for the
Three Months Ended |
|
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
(Unaudited) |
2014 |
2014 |
2014 |
2014 |
2013 |
Total capital to risk-weighted assets |
12.13% |
13.97% |
12.80% |
12.92% |
13.16% |
Tier I capital to risk-weighted assets |
9.52% |
10.84% |
10.89% |
10.96% |
10.83% |
Tier I capital to average assets |
8.71% |
9.56% |
9.73% |
9.67% |
9.35% |
Tangible common equity to tangible
assets |
7.83% |
8.28% |
8.85% |
8.81% |
8.61% |
SELECTED OTHER INFORMATION
(Unaudited) |
As
of |
|
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
(Dollars in thousands) |
2014 |
2014 |
2014 |
2014 |
2013 |
Trust assets under management |
$ 773,192 |
$ 741,210 |
$ 703,626 |
$ 787,645 |
$ 763,912 |
Trust assets under administration |
186,505 |
186,212 |
186,014 |
181,611 |
195,056 |
Total trust assets |
$ 959,697 |
$ 927,422 |
$ 889,640 |
$ 969,256 |
$ 958,968 |
NON-GAAP RECONCILIATIONS
Certain financial information provided in this release is
determined by methods other than in accordance with generally
accepted accounting principles (United States)
("GAAP"). Although the Company believes that these non-GAAP
financial measures provide a greater understanding of its business,
these measures are not necessarily comparable to similar measures
that may be presented by other companies.
TANGIBLE BOOK VALUE
"Tangible book value per share" is a non-GAAP measure
representing tangible common equity divided by total common shares
outstanding. "Tangible common equity" itself is a non-GAAP
measure representing common stockholders' equity reduced by
intangible assets, if any. The Company's management believes
that this measure is important to many investors in the marketplace
who are interested in period-to-period changes in book value per
common share exclusive of changes in intangible assets. The
information provided below reconciles tangible book value per share
and tangible common equity to their most comparable GAAP
measures.
(Unaudited) |
As
of |
|
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
(Dollars in thousands, except per
share amounts) |
2014 |
2014 |
2014 |
2014 |
2013 |
Common stockholders' equity |
$ 137,748 |
$ 118,192 |
$ 115,648 |
$ 112,195 |
$ 109,275 |
Goodwill and other intangibles |
(11,002) |
— |
— |
— |
— |
Tangible common equity |
$ 126,746 |
$ 118,192 |
$ 115,648 |
$ 112,195 |
$ 109,275 |
Common shares outstanding |
4,335,927 |
3,959,115 |
3,945,220 |
3,944,795 |
3,943,997 |
Book value per share |
$ 31.77 |
$ 29.85 |
$ 29.31 |
$ 28.44 |
$ 27.71 |
Tangible book value per share |
29.23 |
29.85 |
29.31 |
28.44 |
27.71 |
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS
''Tangible common equity to tangible assets'' is defined as the
ratio of common stockholders' equity reduced by intangible assets,
if any, divided by total assets reduced by intangible assets, if
any. The Company's management believes that this measure is
important to many investors in the marketplace who are interested
in the relative changes from period to period in common equity and
total assets, each exclusive of changes in intangible
assets. The information below reconciles tangible common
equity and tangible assets to their most comparable GAAP
measures.
(Unaudited) |
As
of |
|
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
(Dollars in thousands) |
2014 |
2014 |
2014 |
2014 |
2013 |
Common stockholders' equity |
$ 137,748 |
$ 118,192 |
$ 115,648 |
$ 112,195 |
$ 109,275 |
Goodwill and other intangibles |
(11,002) |
— |
— |
— |
— |
Tangible common equity |
$ 126,746 |
$ 118,192 |
$ 115,648 |
$ 112,195 |
$ 109,275 |
Total assets |
$ 1,629,387 |
$ 1,427,567 |
$ 1,306,503 |
$ 1,273,772 |
$ 1,268,655 |
Goodwill and other intangibles |
(11,002) |
— |
— |
— |
— |
Tangible assets |
$ 1,618,385 |
$ 1,427,567 |
$ 1,306,503 |
$ 1,273,772 |
$ 1,268,655 |
Tangible common equity to tangible
assets |
7.83% |
8.28% |
8.85% |
8.81% |
8.61% |
EFFICIENCY RATIO
"Efficiency ratio" is a non-GAAP measure representing
non-interest expense excluding the effects of losses or gains on
foreclosed properties, other discrete items that are unrelated to
the Company's primary business activities and amortization of other
intangible assets, if any, divided by operating revenue, which is
equal to net interest income plus non-interest income less realized
gains or losses on securities, if any. In the judgment of the
Company's management, the adjustments made to non-interest expense
and operating revenue allow investors and analysts to better assess
the Company's operating expenses in relation to its core operating
revenue by removing the volatility that is associated with certain
one-time items and other discrete items that are unrelated to its
business. The information provided below reconciles the
efficiency ratio to its most comparable GAAP measure.
(Unaudited) |
For the Three
Months Ended |
For the Year
Ended |
|
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
December 31, |
December 31, |
(Dollars in thousands) |
2014 |
2014 |
2014 |
2014 |
2013 |
2014 |
2013 |
Total non-interest expense |
$ 10,127 |
$ 8,047 |
$ 7,749 |
$ 7,852 |
$ 8,556 |
$ 33,775 |
$ 30,371 |
Less: |
|
|
|
|
|
|
|
Net (gain) loss on foreclosed
properties |
(5) |
(9) |
4 |
— |
(118) |
(10) |
(117) |
Amortization of other
intangible assets |
12 |
— |
— |
— |
— |
12 |
— |
Endowment to First Business
Charitable Foundation |
— |
— |
— |
— |
1,300 |
— |
1,300 |
Total operating expense |
$ 10,120 |
$ 8,056 |
$ 7,745 |
$ 7,852 |
$ 7,374 |
$ 33,773 |
$ 29,188 |
Net interest income |
$ 13,595 |
$ 10,935 |
$ 10,799 |
$ 10,801 |
$ 10,984 |
$ 46,130 |
$ 42,105 |
Total non-interest income |
2,965 |
2,459 |
2,358 |
2,321 |
2,191 |
10,103 |
8,442 |
Total operating revenue |
$ 16,560 |
$ 13,394 |
$ 13,157 |
$ 13,122 |
$ 13,175 |
$ 56,233 |
$ 50,547 |
Efficiency ratio |
61.11% |
60.15% |
58.87% |
59.84% |
55.97% |
60.06% |
57.74% |
CONTACT: First Business Financial Services, Inc.
James F. Ropella, Senior Vice President
608-232-5970
jropella@firstbusiness.com
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