— Loan growth, net interest margin expansion and strong asset quality support continued tangible book value growth —
Madison, Wis., January 26, 2023–(BUSINESS WIRE)–First Business Financial Services Inc. (the “Company”, “Bank” or “First Business Bank”) (Nasdaq:FBIZ) reported quarterly net income to common shareholders of $9.9 million. or $1.18 diluted earnings per share. This compares to $10.6 million, or $1.25 per share, or $1.01 per share, available to common shareholders in the third quarter of 2022 and $8.6 million, or $1.01 per share, in the fourth quarter of 2021. For the full year 2022, the company reported a net Earnings attributable to common shareholders in 2021 of $35.8 million, or $4.17 per share, to $40.2 million, or $4.75 per share.
“The excellent performance of our commercial lending business continued into the fourth quarter, highlighted by 20% year-over-year loan growth,” said CEO Corey Chambas. “The impact of growth rates and strong balance sheet management contributed to a net interest margin of 4.15”. Given the current interest rate environment, we believe our core net interest margin will remain relatively stable in the near term. We have strengthened our financial position. Along with strong income bond expansion, we continue to leverage bulk deposits as part of our long-term strategy to fund our fixed rate loans. Chambas added, “This is an important part of our interest rate risk management strategy that has resulted in favorable margin expansion compared to peer banks. Outstanding performance led to 9% year-on-year share growth in real book value, which is excellent compared to the industry. We enter 2023 with double-digit loan, deposit and income growth, showing strong earnings performance.
Highlights of the quarter
-
Strong credit growth. Loans, excluding Net Payroll Protection Program (“PPP”) loans, grew by $114.2 million, or 19.6% annualized, from the third quarter of 2022 and $230.4 million, or 10.4%, from the fourth quarter of 2021, reflecting consistent growth across the company. Commercial and Industrial (“C&I”) and Commercial Real Estate (“CRE”) portfolios.
-
Strong deposit growth. Total deposits rose to $2.168 billion, up 15.5% year-on-year from the quarter ended and 10.7% from the fourth quarter of 2021. Deposits in the market grew to $1.966 billion, up $36.7 million from the prior quarter, or 7.6% annualized.
-
Record net interest income. Net interest income increased to a record $27.5 million, up $1.6 million, or 6.1 percent, from the prior-year quarter and $6.5 million, or 31.2 percent, from the prior-year quarter. This was combined with an 11.6% annual average loan and lease increase and a 4.15% net interest margin.
-
Exceptional property quality. Continued positive asset quality trends resulted in $3.8 million in non-performing assets, which measured a historical low of 0.13% of total assets and an improvement of 0.25% of total assets at December 31, 2021.
|
Quarterly financial results |
||||||||||||||||||||
|
(unconfirmed) |
It’s up to three months |
as and for the year ended |
||||||||||||||||||
|
(in thousands of dollars except for each share) |
December 31st, |
September 30 |
December 31st, |
December 31st, |
December 31st, |
|||||||||||||||
|
Net interest income |
$ |
27,452 |
$ |
25,884 |
$ |
20,924 |
$ |
98,422 |
$ |
84,662 |
||||||||||
|
Adjusted non-interest income (1) |
6,164 |
8,197 |
7,569 |
28,619 |
28,071 |
|||||||||||||||
|
Operating income (1) |
33,616 |
34,081 |
28,493 |
127,041 |
112,733 |
|||||||||||||||
|
Operating cost (1) |
20,658 |
19,925 |
17,644 |
79,155 |
71,571 |
|||||||||||||||
|
Pre-tax, pre-provision adjusted earnings (1) |
12,958 |
14,156 |
10,849 |
47,886 |
41,162 |
|||||||||||||||
|
Less: |
||||||||||||||||||||
|
Loan and rental loss provision |
702 |
12 |
(508 |
) |
(3,868 |
) |
(5,803 |
) |
||||||||||||
|
Net loss on closed assets |
22 |
7 |
7 |
49 |
15 |
|||||||||||||||
|
Amortization of other intangible assets |
– |
– |
2 |
– |
25 |
|||||||||||||||
|
Contribution to the first business charity foundation |
809 |
– |
– |
809 |
– |
|||||||||||||||
|
SBA recovery (benefit) provision |
(322 |
) |
96 |
(122 |
) |
(188 |
) |
(76 |
) |
|||||||||||
|
Tax credit investment impairment recovery |
– |
– |
– |
(351 |
) |
– |
||||||||||||||
|
Add: |
||||||||||||||||||||
|
A bank-owned life insurance claim |
809 |
– |
– |
809 |
– |
|||||||||||||||
|
Net profit on sale of securities |
– |
– |
– |
– |
29 |
|||||||||||||||
|
Income before income tax expense |
12,556 |
14,041 |
11,470 |
52,244 |
47,030 |
|||||||||||||||
|
Income tax expense |
2,400 |
3,215 |
2,879 |
11,386 |
11,275 |
|||||||||||||||
|
net income |
$ |
10,156 |
$ |
10,826 |
$ |
8,591 |
$ |
40,858 |
$ |
35,755 |
||||||||||
|
Preferred stock |
219 |
218 |
– |
683 |
– |
|||||||||||||||
|
Net income available to common shareholders. |
$ |
9,937 |
$ |
10,608 |
$ |
8,591 |
$ |
40,175 |
$ |
35,755 |
||||||||||
|
Earnings per share, diluted. |
$ |
1.18 |
$ |
1.25 |
$ |
1.01 |
$ |
4.75 |
$ |
4.17 |
||||||||||
|
Book value per share |
$ |
29.74 |
$ |
28.58 |
$ |
27.48 |
$ |
29.74 |
$ |
27.48 |
||||||||||
|
Tangible book value per share (1) |
$ |
28.28 |
$ |
27.13 |
$ |
26.03 |
$ |
28.28 |
$ |
26.03 |
||||||||||
|
Net interest margin (2) |
4.15 |
% |
4.01 |
% |
3.39 |
% |
3.82 |
% |
3.44 |
% |
||||||||||
|
Adjusted net interest margin (1) (2) |
3.94 |
% |
3.89 |
% |
3.23 |
% |
3.64 |
% |
3.21 |
% |
||||||||||
|
Payment Income Ratio (Non-Interest Income / Total Income) |
20.26 |
% |
24.05 |
% |
26.56 |
% |
23.02 |
% |
24.92 |
% |
||||||||||
|
Efficiency ratio (1) |
61.45 |
% |
58.46 |
% |
61.92 |
% |
62.31 |
% |
63.49 |
% |
||||||||||
|
Return on average properties (2) |
1.39 |
% |
1.54 |
% |
1.32 |
% |
1.46 |
% |
1.37 |
% |
||||||||||
|
Pre-tax, pre-supply adjusted return on average assets (1) (2) |
1.81 |
% |
2.05 |
% |
1.66 |
% |
1.74 |
% |
1.58 |
% |
||||||||||
|
Return on average common equity (2) |
16.26 |
% |
17.44 |
% |
15.04 |
% |
16.79 |
% |
16.21 |
% |
||||||||||
|
Term-end loans and leases |
$ |
2,443,066 |
$ |
2,330,700 |
$ |
2,239,408 |
$ |
2,443,066 |
$ |
2,239,408 |
||||||||||
|
Average loans and lease payments |
$ |
2,384,091 |
$ |
2,316,621 |
$ |
2,179,769 |
$ |
2,304,990 |
$ |
2,179,154 |
||||||||||
|
Period-end deposits in the market |
$ |
1,965,970 |
$ |
1,929,224 |
$ |
1,928,285 |
$ |
1,965,970 |
$ |
1,928,285 |
||||||||||
|
Average deposits in the market |
$ |
1,950,625 |
$ |
1,930,995 |
$ |
1,866,875 |
$ |
1,928,815 |
$ |
1,784,302 |
||||||||||
|
Allowance for loan and rental losses |
$ |
24,230 |
$ |
24,143 |
$ |
24,336 |
$ |
24,230 |
$ |
24,336 |
||||||||||
|
Non-performing assets |
$ |
3,754 |
$ |
3,796 |
$ |
6,522 |
$ |
3,754 |
$ |
6,522 |
||||||||||
|
Allowance for loan and lease losses as a percentage of total loans and leases |
0.99 |
% |
1.04 |
% |
1.09 |
% |
0.99 |
% |
1.09 |
% |
||||||||||
|
Non-performing assets as a percentage of total assets |
0.13 |
% |
0.13 |
% |
0.25 |
% |
0.13 |
% |
0.25 |
% |
||||||||||
|
(1) |
This is a non-GAAP financial measure. Management believes that these measures are meaningful because they reflect how management, investors, regulators and analysts evaluate financial performance, provide greater understanding of ongoing operations, and compare results to prior periods. For a reconciliation of GAAP financial measures to non-GAAP financial measures, see the section titled Non-GAAP Reconciliation at the end of this publication. |
|
(2) |
Calculation is annual. |
|
Quarterly financial results – excluding PPP loans, interest income and fees |
||||||||||||||||||||
|
(unconfirmed) |
It’s up to three months |
as and for the year ended |
||||||||||||||||||
|
(in thousands of dollars except for each share) |
December 31st, |
September 30 |
December 31st, |
December 31st, |
December 31st, |
|||||||||||||||
|
Net interest income |
$ |
27,444 |
$ |
25,812 |
$ |
19,898 |
$ |
97,816 |
$ |
75,826 |
||||||||||
|
Adjusted non-interest income (1) |
6,164 |
8,197 |
7,569 |
28,619 |
28,071 |
|||||||||||||||
|
Operating income (1) |
33,608 |
34,009 |
27,467 |
126,435 |
103,897 |
|||||||||||||||
|
Operating cost (1) |
20,658 |
19,925 |
17,644 |
79,155 |
71,571 |
|||||||||||||||
|
Pre-tax, pre-provision adjusted earnings (1) |
$ |
12,950 |
$ |
14,084 |
$ |
9,823 |
$ |
47,280 |
$ |
32,326 |
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|
… |
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