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Share Name | Share Symbol | Market | Type |
---|---|---|---|
First Business Financial Services Inc | NASDAQ:FBIZ | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
1.81 | 4.26% | 44.32 | 37.79 | 44.25 | 44.29 | 43.11 | 43.14 | 22,238 | 22:48:50 |
Robust pre-tax, pre-provision earnings supported by double-digit loan growth, net interest margin expansion, and record private wealth fee income
First Business Financial Services, Inc. (the “Company”, the “Bank”, or “First Business Bank”) (Nasdaq:FBIZ) reported quarterly net income available to common shareholders of $10.2 million, or earnings per share of $1.23 on a diluted basis. This compares to net income available to common shareholders of $8.6 million, or $1.04 per share, in the first quarter of 2024 and $8.1 million, or $0.98 per share, in the second quarter of 2023.
“First Business Banks’s consistent growth strategy drove outstanding second quarter results, highlighted by continued double-digit loan growth, record top line revenue, improved net interest margin, and stable credit trends,” said Corey Chambas, Chief Executive Officer. "We grew both net interest income and margin by executing high-quality loan production and utilizing our long-held and effective funding strategy. We continued to differentiate our business model with strong fee income sources, most notably from fees generated by our Private Wealth Management group’s $3.2 billion in assets under management and administration. The Company's consistently strong performance has generated exceptional shareholder value with 13.5% growth in tangible book value from the prior year.”
“We are pleased that our balance sheet, interest rate positioning, and higher level of fees in lieu of interest during the quarter produced a net interest margin at the top of our long-term target range of 3.60%-3.65%,” Chambas continued. “We believe our neutrally positioned balance sheet is poised for stable and strong relative performance in varied interest rate scenarios.”
Quarterly Highlights
Quarterly Financial Results
(Unaudited)
As of and for the Three Months Ended
As of and for the Six Months Ended
(Dollars in thousands, except per share amounts)
June 30, 2024
March 31, 2024
June 30, 2023
June 30, 2024
June 30, 2023
Net interest income
$
30,540
$
29,511
$
27,747
$
60,051
$
54,453
Adjusted non-interest income (1)
7,425
6,765
7,419
14,190
15,829
Operating revenue (1)
37,965
36,276
35,166
74,241
70,282
Operating expense (1)
23,823
23,130
21,692
46,954
43,471
Pre-tax, pre-provision adjusted earnings (1)
14,142
13,146
13,474
27,287
26,811
Less:
Provision for credit losses
1,713
2,326
2,231
4,039
3,793
Net loss on repossessed assets
65
86
(2
)
151
4
SBA recourse provision
(9
)
126
341
117
323
Add:
Net loss on sale of securities
0
(8
)
(45
)
(8
)
(45
)
Income before income tax expense
12,373
10,600
10,859
22,972
22,646
Income tax expense
1,917
1,752
2,522
3,668
5,330
Net income
$
10,456
$
8,848
$
8,337
$
19,304
$
17,316
Preferred stock dividends
219
219
219
438
438
Net income available to common shareholders
$
10,237
$
8,629
$
8,118
$
18,866
$
16,878
Earnings per share, diluted
$
1.23
$
1.04
$
0.98
$
2.26
$
2.02
Book value per share
$
35.35
$
34.41
$
31.34
$
35.35
$
31.34
Tangible book value per share (1)
$
33.92
$
32.97
$
29.89
$
33.92
$
29.89
Net interest margin (2)
3.65
%
3.58
%
3.81
%
3.62
%
3.83
%
Adjusted net interest margin (1)(2)
3.47
%
3.43
%
3.63
%
3.45
%
3.69
%
Fee income ratio (non-interest income / total revenue)
19.56
%
18.63
%
21.00
%
19.10
%
22.47
%
Efficiency ratio (1)
62.75
%
63.76
%
61.68
%
63.25
%
61.85
%
Return on average assets (2)
1.14
%
0.98
%
1.04
%
1.06
%
1.10
%
Pre-tax, pre-provision adjusted return on average assets (1)(2)
1.57
%
1.49
%
1.72
%
1.53
%
1.75
%
Return on average common equity (2)
14.12
%
12.24
%
12.58
%
13.20
%
13.26
%
Period-end loans and leases receivable
$
2,985,414
$
2,910,864
$
2,674,583
$
2,985,414
$
2,674,583
Average loans and leases receivable
$
2,962,927
$
2,887,454
$
2,583,237
$
2,925,191
$
2,532,500
Period-end core deposits
$
2,309,635
$
2,297,843
$
2,073,744
$
2,309,635
$
2,073,744
Average core deposits
$
2,375,101
$
2,346,453
$
2,035,856
$
2,360,776
$
2,018,327
Allowance for credit losses, including unfunded commitment reserves
$
34,950
$
34,629
$
29,697
$
34,950
$
29,697
Non-performing assets
$
19,053
$
20,146
$
15,786
$
19,053
$
15,786
Allowance for credit losses as a percent of total gross loans and leases
1.17
%
1.19
%
1.11
%
1.17
%
1.11
%
Non-performing assets as a percent of total assets
0.53
%
0.57
%
0.48
%
0.53
%
0.48
%
(1)
This is a non-GAAP financial measure. Management believes these measures are meaningful because they reflect adjustments commonly made by management, investors, regulators, and analysts to evaluate financial performance, provide greater understanding of ongoing operations, and enhance comparability of results with prior periods. See the section titled Non-GAAP Reconciliations at the end of this release for a reconciliation of GAAP financial measures to non-GAAP financial measures.
(2)
Calculation is annualized.
Second Quarter 2024 Compared to First Quarter 2024
Net interest income increased $1.03 million, or 3.5%, to $30.5 million.
The Bank reported a provision expense of $1.7 million, compared to $2.3 million in the first quarter of 2024. The quarterly decrease was driven by lower specific reserve requirements for equipment finance borrowers in the commercial and industrial ("C&I") loan portfolio. The $1.7 million expense consisted of $1.4 million of net charge-offs, $680,000 due to loan growth, a general reserve increase of $496,000 due to qualitative factor changes, and $150,000 related to deterioration in the economic outlook, partially offset by a decrease in specific reserves of $1.0 million. The increase in qualitative factors was primarily driven by above target growth in several loan portfolios. Charge-offs exceeded newly identified non-accrual loans in the quarter in the transportation and logistics segment of equipment finance.
Non-interest income increased $668,000, or 9.9%, to $7.4 million.
1
The change in yield of the respective interest-earning asset or the rate paid on interest-bearing liability compared to the change in short-term market rates is commonly referred to as a beta.
2
Adjusted net interest margin is a non-GAAP measure representing net interest income excluding fees in lieu of interest and other recurring, but volatile, components of net interest margin divided by average interest-earning assets less other recurring, but volatile, components of average interest-earning assets.
Non-interest expense increased $537,000, or 2.3%, to $23.9 million, while operating expense increased $693,000, or 3.0%, to $23.8 million.
Income tax expense increased $165,000, or 9.4%, to $1.9 million. The effective tax rate was 15.5% for the three months ended June 30, 2024, compared to 16.5% for the linked quarter. The decrease reflects an increase in tax exempt loans and investments, adjustments to compensation estimates, and adjustments to estimated timing of cashflows on federal tax credit projects. The Company expects to report an effective tax rate between 16% and 18% for 2024.
Total period-end loans and leases receivable increased $74.6 million, or 10.3% annualized, to $2.985 billion. Management intends to continue to manage loan growth towards our long-term target of 10%. The average rate earned on average loans and leases receivable was 7.28%, up 14 basis points from 7.14% in the prior quarter. Excluding fees in lieu of interest, the average rate earned on average loans and leases receivable was 7.11%, up 8 basis points from 7.03% in the prior quarter. Additionally, $219.6 million of new and renewed loans were originated in the quarter at a weighted average yield of 8.33%, compared to $197.2 million at a weighted average yield of 7.95% in the prior quarter.
Total period-end core deposits increased $11.8 million to $2.310 billion, compared to $2.298 billion. The average rate paid was 3.34%, up 14 basis points from 3.28% in the prior quarter. Average core deposits increased $28.6 million, or 4.9%, to $2.375 billion.
Period-end wholesale funding, including FHLB advances, brokered deposits, and deposits gathered through internet deposit listing services, increased $64.1 million, or 30.6% annualized, to $853.9 million. Of the total increase, $53.0 million was short-term brokered deposits swapped into longer term fixed rate contracts. Consistent with the Bank’s long-held philosophy to manage interest rate risk, management will continue to utilize the most efficient and cost-effective source of wholesale funds to match-fund fixed-rate loans as necessary.
Non-performing assets decreased $1.1 million to $19.1 million, or 0.53% of total assets, down from 0.57% in the prior quarter due to net charge-offs and payments on non-accrual loans. While we continue to expect full repayment of the one asset-based lending (ABL) loan that defaulted during the second quarter of 2023, the liquidation process has transitioned into Chapter 7 bankruptcy, likely delaying final resolution until late 2024 or 2025. Through our collection efforts, the current balance of this loan is $6.5 million, down from $10.9 million in the prior year quarter. Excluding this ABL loan, non-performing assets totaled $12.6 million, or 0.35% of total assets in the current quarter and $12.7 million, or 0.36% of total assets in the linked quarter.
The allowance for credit losses, including the unfunded credit commitments reserve, increased $321,000, or 0.9%, as increases in the general reserve from loan growth, increase in qualitative and quantative factors, and new specific reserves were partially offset by charge-offs. The allowance for credit losses, including unfunded credit commitment reserves, as a percent of total gross loans and leases was 1.17% compared to 1.19% in the prior quarter.
Second Quarter 2024 Compared to Second Quarter 2023
Net interest income increased $2.8 million, or 10.1%, to $30.5 million.
The Company reported a credit loss provision expense of $1.7 million, compared to $2.2 million in the second quarter of 2023. The decrease compared to the prior year quarter is mainly due to a decrease in specific reserves related to the Equipment Finance borrowers in the commercial and industrial lending portfolio and lower loan growth, partially offset by quantative factors.
Non-interest income increased $51,000, or 0.7%, to $7.4 million.
Non-interest expense increased $1.8 million, or 8.4%, to $23.9 million. Operating expense increased $2.1 million, or 9.8%, to $23.8 million.
Total period-end loans and leases receivable increased $310.8 million, or 11.6%, to $2.985 billion.
Total period-end core deposits grew $235.9 million, or 11.4%, to $2.310 billion, and the average rate paid increased 78 basis points to 3.34%. The increase in average rate paid on core deposits was primarily due to heightened competition and a change in deposit mix. Total average core deposits grew $339.2 million, or 16.7%, to $2.375 billion.
Period-end wholesale funding increased $78.2 million to $853.9 million.
Non-performing assets increased to $19.1 million, or 0.53% of total assets, compared to $15.8 million, or 0.48% of total assets, driven by past-due Equipment Finance loans within the C&I portfolio. Excluding one ABL loan for which we expect full repayment, non-performing assets totaled $12.6 million, or 0.35% of total assets.
The allowance for credit losses, including unfunded commitment reserves, increased $5.3 million to $35.0 million, compared to $29.7 million primarily due to an increase in specific reserves and loan growth, partially offset by an improvement in the economic forecast. The allowance for credit losses as a percent of total gross loans and leases was 1.17%, compared 1.11% in the prior year.
Investor Presentation
The Company has prepared investor presentation materials that management intends to use from time to time in discussions about the Company’s operations and performance. The presentation will be available for viewing in the Investor Relations section of the Company’s website at firstbusiness.bank and will also be furnished to the U.S. Securities and Exchange Commission on July 25, 2024.
About First Business Bank
First Business Bank® specializes in Business Banking, including Commercial Banking and Specialty Finance, Private Wealth, and Bank Consulting services, and through its refined focus delivers unmatched expertise, accessibility, and responsiveness. Specialty Finance solutions are delivered through First Business Bank’s wholly owned subsidiary First Business Specialty Finance, LLC®. First Business Bank is a wholly owned subsidiary of First Business Financial Services, Inc®. (Nasdaq: FBIZ). For additional information, visit firstbusiness.bank.
This release may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which reflect First Business Bank’s current views with respect to future events and financial performance. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results, or other developments. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, uncertainties, and other factors that may cause actual results to differ materially from the views, beliefs, and projections expressed in such statements. Such statements are subject to risks and uncertainties, including among other things:
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 for the year ended December 31, 2023 and other filings with the Securities and Exchange Commission.
SELECTED FINANCIAL CONDITION DATA
(Unaudited)
As of
(in thousands)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Assets
Cash and cash equivalents
$
81,080
$
72,040
$
139,510
$
132,915
$
112,809
Securities available-for-sale, at fair value
308,852
314,114
297,006
272,163
253,626
Securities held-to-maturity, at amortized cost
7,082
8,131
8,503
8,689
9,830
Loans held for sale
6,507
4,855
4,589
4,168
2,191
Loans and leases receivable
2,985,414
2,910,864
2,850,261
2,764,014
2,674,583
Allowance for credit losses
(33,088
)
(32,799
)
(31,275
)
(29,331
)
(28,115
)
Loans and leases receivable, net
2,952,326
2,878,065
2,818,986
2,734,683
2,646,468
Premises and equipment, net
6,381
6,268
6,190
6,157
5,094
Repossessed assets
54
317
247
61
65
Right-of-use assets
6,041
6,297
6,559
6,800
7,049
Bank-owned life insurance
56,351
55,948
55,536
55,123
54,747
Federal Home Loan Bank stock, at cost
11,901
13,326
12,042
13,528
14,482
Goodwill and other intangible assets
11,841
11,950
12,023
12,110
12,073
Derivatives
70,773
69,703
55,597
93,702
70,440
Accrued interest receivable and other assets
97,872
90,344
91,058
78,751
76,864
Total assets
$
3,617,061
$
3,531,358
$
3,507,846
$
3,418,850
$
3,265,738
Liabilities and Stockholders’ Equity
Core deposits
$
2,309,635
$
2,297,843
$
2,339,071
$
2,189,264
$
2,073,744
Wholesale deposits
575,548
457,563
457,708
467,743
455,108
Total deposits
2,885,183
2,755,406
2,796,779
2,657,007
2,528,852
Federal Home Loan Bank advances and other borrowings
327,855
381,718
330,916
363,891
370,113
Lease liabilities
8,361
8,664
8,954
9,236
9,499
Derivatives
61,821
61,133
51,949
78,696
61,147
Accrued interest payable and other liabilities
28,671
26,649
29,660
29,262
23,495
Total liabilities
3,311,891
3,233,570
3,218,258
3,138,092
2,993,106
Total stockholders’ equity
305,170
297,788
289,588
280,758
272,632
Total liabilities and stockholders’ equity
$
3,617,061
$
3,531,358
$
3,507,846
$
3,418,850
$
3,265,738
STATEMENTS OF INCOME
(Unaudited)
As of and for the Three Months Ended
As of and for the Six Months Ended
(Dollars in thousands, except per share amounts)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
June 30, 2024
June 30, 2023
Total interest income
$
57,910
$
55,783
$
54,762
$
50,941
$
47,161
$
113,693
$
89,226
Total interest expense
27,370
26,272
25,222
22,345
19,414
53,642
34,773
Net interest income
30,540
29,511
29,540
28,596
27,747
60,051
54,453
Provision for credit losses
1,713
2,326
2,573
1,817
2,231
4,039
3,793
Net interest income after provision for credit losses
28,827
27,185
26,967
26,779
25,516
56,012
50,660
Private wealth management service fees
3,461
3,111
2,933
2,945
2,893
6,571
5,547
Gain on sale of SBA loans
349
195
284
851
444
544
920
Service charges on deposits
951
940
848
835
766
1,890
1,448
Loan fees
826
847
869
786
905
1,674
1,708
Loss on sale of securities
—
(8
)
—
—
(45
)
(8
)
(45
)
Swap fees
157
198
438
992
977
355
1,534
Other non-interest income
1,681
1,474
1,722
2,021
1,434
3,156
4,672
Total non-interest income
7,425
6,757
7,094
8,430
7,374
14,182
15,784
Compensation
16,215
16,157
14,450
15,573
15,129
32,372
31,037
Occupancy
593
607
571
575
603
1,200
1,234
Professional fees
1,472
1,571
1,313
1,429
1,240
3,043
2,583
Data processing
1,182
1,018
936
953
1,061
2,200
1,936
Marketing
850
818
724
758
779
1,669
1,407
Equipment
335
345
340
349
355
680
650
Computer software
1,555
1,418
1,317
1,289
1,197
2,973
2,379
FDIC insurance
612
610
585
680
580
1,222
974
Other non-interest expense
1,065
798
1,352
1,583
1,087
1,863
1,598
Total non-interest expense
23,879
23,342
21,588
23,189
22,031
47,222
43,798
Income before income tax expense
12,373
10,600
12,473
12,020
10,859
22,972
22,646
Income tax expense
1,917
1,752
2,703
2,079
2,522
3,668
5,330
Net income
$
10,456
$
8,848
$
9,770
$
9,941
$
8,337
$
19,304
$
17,316
Preferred stock dividends
219
219
219
218
219
438
438
Net income available to common shareholders
$
10,237
$
8,629
$
9,551
$
9,723
$
8,118
$
18,866
$
16,878
Per common share:
Basic earnings
$
1.23
$
1.04
$
1.15
$
1.17
$
0.98
$
2.26
$
2.02
Diluted earnings
1.23
1.04
1.15
1.17
0.98
2.26
2.02
Dividends declared
0.2500
0.2500
0.2275
0.2275
0.2275
0.5000
0.4550
Book value
35.35
34.41
33.39
32.32
31.34
35.35
31.34
Tangible book value
33.92
32.97
31.94
30.87
29.89
33.92
29.89
Weighted-average common shares outstanding(1)
8,113,246
8,125,319
8,110,462
8,107,641
8,061,841
8,154,445
8,140,831
Weighted-average diluted common shares outstanding(1)
8,113,246
8,125,319
8,110,462
8,107,641
8,061,841
8,154,445
8,140,831
(1)
Excluding participating securities.
NET INTEREST INCOME ANALYSIS
(Unaudited)
For the Three Months Ended
(Dollars in thousands)
June 30, 2024
March 31, 2024
June 30, 2023
Average Balance
Interest
Average Yield/Rate(4)
Average Balance
Interest
Average Yield/Rate(4)
Average Balance
Interest
Average Yield/Rate(4)
Interest-earning assets
Commercial real estate and other mortgage loans(1)
$
1,765,743
$
29,299
6.64
%
$
1,721,186
$
28,120
6.54
%
$
1,546,487
$
23,671
6.12
%
Commercial and industrial loans(1)
1,146,312
23,869
8.33
1,115,724
22,724
8.15
987,534
20,020
8.11
Consumer and other loans(1)
50,872
725
5.70
50,544
705
5.58
49,216
588
4.78
Total loans and leases receivable(1)
2,962,927
53,893
7.28
2,887,454
51,549
7.14
2,583,237
44,279
6.86
Mortgage-related securities(2)
261,828
2,609
3.99
241,940
2,276
3.76
192,564
1,421
2.95
Other investment securities(3)
60,780
443
2.92
67,980
518
3.05
60,790
392
2.58
FHLB stock
12,656
291
9.20
12,271
282
9.19
15,844
302
7.62
Short-term investments
48,836
674
5.52
85,072
1,158
5.44
61,316
767
5.00
Total interest-earning assets
3,347,027
57,910
6.92
3,294,717
55,783
6.77
2,913,751
47,161
6.47
Non-interest-earning assets
245,188
233,224
213,483
Total assets
$
3,592,215
$
3,527,941
$
3,127,234
Interest-bearing liabilities
Transaction accounts
$
880,752
8,737
3.97
$
862,896
8,447
3.92
$
670,698
5,455
3.25
Money market
815,846
8,264
4.05
761,893
7,565
3.97
633,817
4,617
2.91
Certificates of deposit
241,535
2,803
4.64
278,248
3,210
4.61
295,785
2,946
3.98
Wholesale deposits
476,149
4,871
4.09
457,536
4,615
4.03
332,387
3,523
4.24
Total interest-bearing deposits
2,414,282
24,675
4.09
2,360,573
23,837
4.04
1,932,687
16,541
3.42
FHLB advances
294,043
1,974
2.69
287,307
1,717
2.39
367,129
2,452
2.67
Other borrowings
49,481
721
5.83
49,457
718
5.81
34,538
421
4.88
Total interest-bearing liabilities
2,757,806
27,370
3.97
2,697,337
26,272
3.90
2,334,354
19,414
3.33
Non-interest-bearing demand deposit accounts
436,968
443,416
435,556
Other non-interest-bearing liabilities
95,484
93,307
87,148
Total liabilities
3,290,258
3,234,060
2,857,058
Stockholders’ equity
301,957
293,881
270,176
Total liabilities and stockholders’ equity
$
3,592,215
$
3,527,941
$
3,127,234
Net interest income
$
30,540
$
29,511
$
27,747
Interest rate spread
2.95
%
2.88
%
3.15
%
Net interest-earning assets
$
589,221
$
597,380
$
579,397
Net interest margin
3.65
%
3.58
%
3.81
%
(1)
The average balances of loans and leases include non-accrual loans and leases and loans held for sale. Interest income related to non-accrual loans and leases is recognized when collected. Interest income includes net loan fees collected in lieu of interest.
(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.
(4)
Represents annualized yields/rates.
For the Six Months Ended June 30,
2024
2023
Average Balance
Interest
Average Yield/Rate(4)
Average Balance
Interest
Average Yield/Rate(4)
(Dollars in Thousands)
Interest-earning assets
Commercial real estate and other mortgage loans(1)
$
1,743,465
$
57,419
6.59
%
$
1,532,348
$
45,389
5.92
%
Commercial and industrial loans(1)
1,131,018
46,593
8.24
952,192
37,577
7.89
Consumer and other loans(1)
50,708
1,430
5.64
47,960
1,128
4.70
Total loans and leases receivable(1)
2,925,191
105,442
7.21
2,532,500
84,094
6.64
Mortgage-related securities(2)
251,884
4,885
3.88
187,556
2,691
2.87
Other investment securities(3)
64,380
961
2.99
58,270
712
2.44
FHLB and FRB stock
12,464
574
9.21
16,481
629
7.63
Short-term investments
66,953
1,831
5.47
45,022
1,100
4.89
Total interest-earning assets
3,320,872
113,693
6.85
2,839,829
89,226
6.28
Non-interest-earning assets
239,206
216,482
Total assets
$
3,560,078
$
3,056,311
Interest-bearing liabilities
Transaction accounts
$
871,824
17,184
3.94
$
619,352
9,295
3.00
Money market accounts
788,869
15,829
4.01
666,385
9,114
2.74
Certificates of deposit
259,891
6,013
4.63
266,099
5,064
3.81
Wholesale deposits
466,843
9,486
4.06
260,485
5,498
4.22
Total interest-bearing deposits
2,387,427
48,512
4.06
1,812,321
28,971
3.20
FHLB advances
290,675
3,691
2.54
382,533
4,913
2.57
Other borrowings
49,469
1,439
5.82
35,660
889
4.99
Total interest-bearing liabilities
2,727,571
53,642
3.93
2,230,514
34,773
3.12
Non-interest-bearing demand deposit accounts
440,192
466,491
Other non-interest-bearing liabilities
94,396
92,716
Total liabilities
3,262,159
2,789,721
Stockholders’ equity
297,919
266,590
Total liabilities and stockholders’ equity
$
3,560,078
$
3,056,311
Net interest income
$
60,051
$
54,453
Interest rate spread
2.91
%
3.17
%
Net interest-earning assets
$
593,301
$
609,315
Net interest margin
3.62
%
3.83
%
ASSET AND LIABILITY BETA ANALYSIS
For the Three Months Ended
(Unaudited)
June 30, 2024
March 31, 2024
June 30, 2023
December 31, 2021
Average Yield/Rate(3)
Average Yield/Rate(3)
Increase (Decrease)
Average Yield/Rate(3)
Increase (Decrease)
Average Yield/Rate(3)
Increase (Decrease)
Total loans and leases receivable (a)
7.28
%
7.21
%
0.07
%
6.86
%
0.42
%
4.13
%
3.15
%
Total interest-earning assets(b)
6.92
%
6.85
%
0.07
%
6.47
%
0.45
%
3.81
%
3.11
%
Adjusted total loans and leases receivable (1)(c)
7.11
%
7.06
%
0.05
%
6.71
%
0.40
%
3.82
%
3.29
%
Adjusted total interest-earning assets (1)(d)
6.77
%
6.71
%
0.06
%
6.35
%
0.42
%
3.54
%
3.23
%
Total core deposits(e)
3.34
%
3.20
%
0.14
%
2.56
%
0.78
%
0.13
%
3.21
%
Total bank funding(f)
3.39
%
3.27
%
0.12
%
2.78
%
0.61
%
0.33
%
3.06
%
Net interest margin(g)
3.65
%
3.69
%
(0.04
)%
3.81
%
(0.16
)%
3.39
%
0.26
%
Adjusted net interest margin(h)
3.47
%
3.50
%
(0.03
)%
3.63
%
(0.16
)%
3.18
%
0.29
%
Effective fed funds rate (2)(i)
5.33
%
5.33
%
—
4.99
%
0.34
%
0.08
%
5.25
%
Beta Calculations:
Total loans and leases receivable(a)/(i)
122.2
%
59.9
%
Total interest-earning assets(b)/(i)
132.6
%
59.3
%
Adjusted total loans and leases receivable (1)(c)/(i)
117.6
%
62.7
%
Adjusted total interest-earning assets (1)(d)/(i)
123.5
%
61.5
%
Total core deposits(e/i)
229.4
%
61.1
%
Total bank funding(f)/(i)
179.4
%
58.3
%
Net interest margin(g/i)
(47.1
)%
5.0
%
Adjusted net interest margin(h/i)
(47.1
)%
5.5
%
(1)
Excluding fees in lieu of interest.
(2)
Board of Governors of the Federal Reserve System (US), Effective Federal Funds Rate [DFF]. Retrieved from FRED, Federal Reserve Bank of St. Louis. Represents average daily rate.
(3)
Represents annualized yields/rates.
PROVISION FOR CREDIT LOSS COMPOSITION
(Unaudited)
For the Three Months Ended
For the Six Months Ended
(Dollars in thousands)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
June 30, 2024
June 30, 2023
Change due to qualitative factor changes
$
496
$
740
$
(432
)
$
506
$
(50
)
$
1,237
$
(41
)
Change due to quantitative factor changes
150
(199
)
(260
)
(1,372
)
(295
)
(49
)
179
Charge-offs
1,583
921
724
562
329
2,504
495
Recoveries
(191
)
(227
)
(114
)
(84
)
(245
)
(418
)
(351
)
Change in reserves on individually evaluated loans, net
(1,037
)
629
2,008
1,265
1,093
(409
)
1,057
Change due to loan growth, net
680
354
629
817
1,227
1,035
2,206
Change in unfunded commitment reserves
32
108
17
123
172
139
248
Total provision for credit losses
$
1,713
$
2,326
$
2,572
$
1,817
$
2,231
$
4,039
$
3,793
PERFORMANCE RATIOS
For the Three Months Ended
For the Six Months Ended
(Unaudited)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
June 30, 2024
June 30, 2023
Return on average assets (annualized)
1.14
%
0.98
%
1.11
%
1.19
%
1.04
%
1.06
%
1.10
%
Return on average common equity (annualized)
14.12
%
12.24
%
13.99
%
14.62
%
12.58
%
13.20
%
13.26
%
Efficiency ratio
62.75
%
63.76
%
58.34
%
61.96
%
61.68
%
63.25
%
61.85
%
Interest rate spread
2.95
%
2.88
%
2.97
%
3.07
%
3.15
%
2.91
%
3.17
%
Net interest margin
3.65
%
3.58
%
3.69
%
3.76
%
3.81
%
3.62
%
3.83
%
Average interest-earning assets to average interest-bearing liabilities
121.37
%
122.15
%
123.02
%
123.59
%
124.82
%
121.75
%
127.32
%
ASSET QUALITY RATIOS
(Unaudited)
As of
(Dollars in thousands)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Non-accrual loans and leases
$
18,999
$
19,829
$
20,597
$
17,628
$
15,721
Repossessed assets
54
317
247
61
65
Total non-performing assets
$
19,053
$
20,146
$
20,844
$
17,689
$
15,786
Non-accrual loans and leases as a percent of total gross loans and leases
0.64
%
0.68
%
0.72
%
0.64
%
0.59
%
Non-performing assets as a percent of total gross loans and leases plus repossessed assets
0.64
%
0.69
%
0.73
%
0.64
%
0.59
%
Non-performing assets as a percent of total assets
0.53
%
0.57
%
0.59
%
0.52
%
0.48
%
Allowance for credit losses as a percent of total gross loans and leases
1.17
%
1.19
%
1.16
%
1.12
%
1.11
%
Allowance for credit losses as a percent of non-accrual loans and leases
183.96
%
174.64
%
160.21
%
176.06
%
188.90
%
NET CHARGE-OFFS (RECOVERIES)
(Unaudited)
For the Three Months Ended
For the Six Months Ended
(Dollars in thousands)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
June 30, 2024
June 30, 2023
Charge-offs
$
1,583
$
921
$
724
$
562
$
329
$
2,504
$
495
Recoveries
(191
)
(227
)
(114
)
(84
)
(245
)
(418
)
(351
)
Net charge-offs (recoveries)
$
1,392
$
694
$
610
$
478
$
84
$
2,086
$
144
Net charge-offs (recoveries) as a percent of average gross loans and leases (annualized)
0.19
%
0.10
%
0.09
%
0.07
%
0.01
%
0.07
%
0.01
%
CAPITAL RATIOS
As of and for the Three Months Ended
(Unaudited)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Total capital to risk-weighted assets
11.45
%
11.36
%
11.19
%
11.20
%
10.70
%
Tier I capital to risk-weighted assets
8.99
%
8.86
%
8.74
%
8.74
%
8.70
%
Common equity tier I capital to risk- weighted assets
8.64
%
8.51
%
8.38
%
8.37
%
8.32
%
Tier I capital to adjusted assets
8.51
%
8.45
%
8.43
%
8.65
%
8.80
%
Tangible common equity to tangible assets
7.80
%
7.78
%
7.60
%
7.53
%
7.64
%
LOAN AND LEASE RECEIVABLE COMPOSITION
(Unaudited)
As of
(in thousands)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Commercial real estate:
Commercial real estate - owner occupied
$
258,636
$
263,748
$
256,479
$
236,058
$
244,039
Commercial real estate - non-owner occupied
777,704
792,858
773,494
753,517
715,309
Construction
229,181
202,382
193,080
211,828
217,069
Multi-family
470,176
453,321
450,529
409,714
392,297
1-4 family
39,680
27,482
26,289
24,235
23,063
Total commercial real estate
1,775,377
1,739,791
1,699,871
1,635,352
1,591,777
Commercial and industrial
1,161,711
1,120,779
1,105,835
1,083,698
1,036,921
Consumer and other
48,145
50,020
44,312
44,808
45,743
Total gross loans and leases receivable
2,985,233
2,910,590
2,850,018
2,763,858
2,674,441
Less:
Allowance for credit losses
33,088
32,799
31,275
29,331
28,115
Deferred loan fees
(181
)
(274
)
(243
)
(156
)
(142
)
Loans and leases receivable, net
$
2,952,326
$
2,878,065
$
2,818,986
$
2,734,683
$
2,646,468
DEPOSIT COMPOSITION
(Unaudited)
As of
(in thousands)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Non-interest-bearing transaction accounts
$
406,804
$
400,267
$
445,376
$
430,011
$
419,294
Interest-bearing transaction accounts
841,146
818,080
895,319
779,789
719,198
Money market accounts
837,569
813,467
711,245
694,199
641,969
Certificates of deposit
224,116
266,029
287,131
285,265
293,283
Wholesale deposits
575,548
457,563
457,708
467,743
455,108
Total deposits
$
2,885,183
$
2,755,406
$
2,796,779
$
2,657,007
$
2,528,852
Uninsured deposits
$
1,011,977
$
995,428
$
994,687
$
916,083
$
867,397
Less: uninsured deposits collateralized by pledged assets
34,810
16,622
17,051
28,873
37,670
Total uninsured, net of collateralized deposits
977,167
978,806
977,636
887,210
829,727
% of total deposits
33.9
%
35.5
%
35.0
%
33.4
%
32.8
%
SOURCES OF LIQUIDITY
(Unaudited)
As of
(in thousands)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Short-term investments
$
54,680
$
46,984
$
107,162
$
109,612
$
80,510
Collateral value of unencumbered pledged loans
401,602
340,639
367,471
315,067
265,884
Market value of unencumbered securities
289,104
288,965
259,791
236,618
217,074
Readily accessible liquidity
745,386
676,588
734,424
661,297
563,468
Fed fund lines
45,000
45,000
45,000
45,000
45,000
Excess brokered CD capacity(1)
1,051,678
1,166,661
1,231,791
1,090,864
1,017,590
Total liquidity
$
1,842,064
$
1,888,249
$
2,011,215
$
1,797,161
$
1,626,058
Total uninsured, net of collateralized deposits
977,167
978,806
977,636
887,210
829,727
(1)
Bank internal policy limits brokered CDs to 50% of total bank funding when combined with FHLB advances.
PRIVATE WEALTH OFF-BALANCE SHEET COMPOSITION
(Unaudited)
As of
(in thousands)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Trust assets under management
$
3,008,897
$
3,080,951
$
2,898,516
$
2,715,801
$
2,707,390
Trust assets under administration
239,766
239,249
223,013
198,864
199,729
Total trust assets
$
3,248,663
$
3,320,200
$
3,121,529
$
2,914,665
$
2,907,119
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’s management 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
(Dollars in thousands, except per share amounts)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Common stockholders’ equity
$
293,178
$
285,796
$
277,596
$
268,766
$
260,640
Less: Goodwill and other intangible assets
(11,841
)
(11,950
)
(12,023
)
(12,110
)
(12,073
)
Tangible common equity
$
281,337
$
273,846
$
265,573
$
256,656
$
248,567
Common shares outstanding
8,294,589
8,306,573
8,314,778
8,315,186
8,315,465
Book value per share
$
35.35
$
34.41
$
33.39
$
32.32
$
31.34
Tangible book value per share
33.92
32.97
31.94
30.87
29.89
TANGIBLE COMMON EQUITY TO TANGIBLE ASSETS
“Tangible common equity to tangible assets” (“TCE”) 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. Adjusted TCE ratio is defined as TCE adjusted for net fair value adjustments of financial assets and liabilities. For more information on fair value adjustments please refer to Note 19 - Fair Value Disclosures in the annual report on Form 10-K for the year ended December 31, 2023. 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
(Dollars in thousands)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
Common stockholders’ equity
$
293,178
$
285,796
$
277,596
$
268,766
$
260,640
Less: Goodwill and other intangible assets
(11,841
)
(11,950
)
(12,023
)
(12,110
)
(12,073
)
Tangible common equity (a)
$
281,337
$
273,846
$
265,573
$
256,656
$
248,567
Total assets
$
3,617,061
$
3,531,358
$
3,507,846
$
3,418,850
$
3,265,738
Less: Goodwill and other intangible assets
(11,841
)
(11,950
)
(12,023
)
(12,110
)
(12,073
)
Tangible assets (b)
$
3,605,220
$
3,519,408
$
3,495,823
$
3,406,740
$
3,253,665
Tangible common equity to tangible assets
7.80
%
7.78
%
7.60
%
7.53
%
7.64
%
Fair Value Adjustments:
Financial assets - MTM (c)
$
(17,432
)
$
(29,019
)
$
(29,136
)
$
(45,489
)
$
(43,403
)
Financial liabilities - MTM (d)
$
(721
)
$
12,560
$
11,945
$
23,436
$
21,916
Net MTM, after-tax e = (c-d)*(1-21%)
$
(14,341
)
$
(13,003
)
$
(13,581
)
$
(17,422
)
$
(16,975
)
Adjusted tangible equity f = (a-e)
$
266,996
$
260,843
$
251,992
$
239,234
$
231,592
Adjusted tangible assets g = (b-c)
$
3,587,788
$
3,490,389
$
3,466,687
$
3,361,251
$
3,210,262
Adjusted TCE ratio (f/g)
7.44
%
7.47
%
7.27
%
7.12
%
7.21
%
EFFICIENCY RATIO & PRE-TAX, PRE-PROVISION ADJUSTED EARNINGS
“Efficiency ratio” is a non-GAAP measure representing non-interest expense excluding the effects of the SBA recourse provision, impairment of tax credit investments, losses or gains on repossessed assets, amortization of other intangible assets and other discrete items, 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. “Pre-tax, pre-provision adjusted earnings” is defined as operating revenue less operating expense. In the judgment of the Company’s management, the adjustments made to non-interest expense and non-interest income 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. The information provided below reconciles the efficiency ratio and pre-tax, pre-provision adjusted earnings to its most comparable GAAP measure.
(Unaudited)
For the Three Months Ended
For the Six Months Ended
(Dollars in thousands)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
June 30, 2024
June 30, 2023
Total non-interest expense
$
23,879
$
23,342
$
21,588
$
23,189
$
22,031
$
47,222
$
43,798
Less:
Net loss (gain) on repossessed assets
65
86
4
4
(2
)
151
4
SBA recourse provision (benefit)
(9
)
126
210
242
341
117
323
Total operating expense (a)
$
23,823
$
23,130
$
21,374
$
22,943
$
21,692
$
46,954
$
43,471
Net interest income
$
30,540
$
29,511
$
29,540
$
28,596
$
27,747
$
60,051
$
54,453
Total non-interest income
7,425
6,757
7,094
8,430
7,374
14,182
15,784
Less:
Net loss on sale of securities
0
(8
)
—
—
(45
)
(8
)
(45
)
Adjusted non-interest income
7,425
6,765
7,094
8,430
7,419
14,190
15,829
Total operating revenue (b)
$
37,965
$
36,276
$
36,634
$
37,026
$
35,166
$
74,241
$
70,282
Efficiency ratio
62.75
%
63.76
%
58.34
%
61.96
%
61.68
%
63.25
%
61.85
%
Pre-tax, pre-provision adjusted earnings (b - a)
$
14,142
$
13,146
$
15,260
$
14,083
$
13,474
$
27,287
$
26,811
Average total assets
$
3,592,215
$
3,527,941
$
3,454,652
$
3,276,240
$
3,127,234
$
3,560,078
$
3,056,311
Pre-tax, pre-provision adjusted return on average assets
1.57
%
1.49
%
1.77
%
1.72
%
1.72
%
1.53
%
1.75
%
ADJUSTED NET INTEREST MARGIN
“Adjusted Net Interest Margin” is a non-GAAP measure representing net interest income excluding the fees in lieu of interest and other recurring, but volatile, components of net interest margin divided by average interest-earning assets less other recurring, but volatile, components of average interest-earning assets. Fees in lieu of interest are defined as prepayment fees, asset-based loan fees, non-accrual interest, and loan fee amortization. In the judgment of the Company’s management, the adjustments made to net interest income allow investors and analysts to better assess the Company’s net interest income in relation to its core client-facing loan and deposit rate changes by removing the volatility that is associated with these recurring but volatile components. The information provided below reconciles the net interest margin to its most comparable GAAP measure.
(Unaudited)
For the Three Months Ended
For the Six Months Ended
(Dollars in thousands)
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
June 30, 2023
June 30, 2024
June 30, 2023
Interest income
$
57,910
$
55,783
$
54,762
$
50,941
$
47,161
$
113,693
$
89,226
Interest expense
27,370
26,272
25,222
22,345
19,414
53,642
34,773
Net interest income (a)
30,540
29,511
29,540
28,596
27,747
60,051
54,453
Less:
Fees in lieu of interest
1,227
793
1,075
582
936
2,020
1,587
FRB interest income and FHLB dividend income
959
1,436
1,466
870
1,064
2,395
1,720
Adjusted net interest income (b)
$
28,354
$
27,282
$
26,999
$
27,144
$
25,747
$
55,636
$
51,146
Average interest-earning assets (c)
$
3,347,027
$
3,294,717
$
3,199,485
$
3,038,776
$
2,913,751
$
3,320,872
$
2,839,829
Less:
Average FRB cash and FHLB stock
61,082
97,036
99,118
54,677
76,678
79,059
61,001
Average non-accrual loans and leases
19,807
20,540
18,602
15,775
3,781
20,172
3,599
Adjusted average interest-earning assets (d)
$
3,266,138
$
3,177,141
$
3,081,765
$
2,968,324
$
2,833,292
$
3,221,641
$
2,775,229
Net interest margin (a / c)
3.65
%
3.58
%
3.69
%
3.76
%
3.81
%
3.62
%
3.83
%
Adjusted net interest margin (b / d)
3.47
%
3.43
%
3.50
%
3.66
%
3.63
%
3.45
%
3.69
%
View source version on businesswire.com: https://www.businesswire.com/news/home/20240725162504/en/
First Business Financial Services, Inc. Brian D. Spielmann Chief Financial Officer 608-232-5977 bspielmann@firstbusiness.bank
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