FBIZ: Best-Ever Margin and Strong Growth in Noninterest
Income Drive Record EPS
By Ann Heffron, CFA
First Business Financial Services, Inc. (
FBIZ
)
posted record diluted EPS in the third quarter of $0.99, up 19%
from the $0.83 EPS posted last year, and $0.11 above our $0.88
estimate.
Relative to our estimate, this largely reflected: (1) net
interest income that was $0.4 million higher than our estimate
due both to better-than expected loan growth and a record net
interest margin of 3.50% and (2) other noninterest income that
was $0.3 million higher than we had anticipated, including a
$144,000 one-time gain on the sale on a credit card portfolio.
These items were partly offset by: (1) a loan loss provision that
was $0.1 million more than expectations and (2) a 35.5% effective
tax rate that was 2 points higher the 33.5% we had
projected.
Compared to the year-ago quarter, third quarter results were
boosted by a 9% gain in net interest income due to 6% growth in
average interest-earning assets and a 10 basis-point rise in the
net interest margin, as well as a 30% jump in noninterest income.
This was partly offset by a 7% increase in total noninterest
expense, largely the result of higher compensation costs, a 95%
surge in the loan loss provision, and an effective tax rate that
was almost 5 points lower than the unusually high 40.3% posted in
the prior-year quarter.
The Company continued to reduce problem assets. Nonaccrual
loans fell $2.6 million, or 17%, sequentially to $12.8 million,
while foreclosed assets increased by $0.3 million, or 13%, to
$2.2 million. As a percentage of total loans and OREO,
nonperforming assets fell 30 basis points sequentially to 1.71%
from 2.01% at the end of the second quarter and 166 basis points
year over year from the 3.37% at the end of 2011's September
quarter.
We are raising our 2012 and 2013 diluted EPS estimate by $0.15
each, to $3.40 from $3.25 and to $3.75 from $3.60, respectively.
These increases primarily reflect changes to our estimates for
the net interest margin (NIM) and effective income tax rates in
both years.
We note that the ABA Banking Journal recently ranked FBIZ 15
th
among all publicly traded banks with $1-10 billion in total
assets (of which there are about 250 companies in the US), based
upon ROE in 2011, which was 12.8% for FBIZ. It is the first time
FBIZ has made this list, and speaks to the tremendous improvement
in operating performance the Company has made over the last few
years.
First Business Financial Services, Inc. (FBIZ or the Company)
is a bank holding company headquartered in Madison, Wisconsin,
with $1.2 billion in total assets at June 30, 2012. FBIZ
specializes in business lending for small-medium-sized companies
with sales ranging from $2-50 million. As an adjunct to these
services, FBIZ also offers banking services to business owners,
executives, professionals, and high net worth individuals, though
this is a less significant part of its business.
To view a free copy of our most recent research report on
FBIZ, visit
Ann Heffron's page
at
Zacks Small-Cap Research
.
FIRST BUS FINL (FBIZ): Free Stock Analysis
Report
To read this article on Zacks.com click here.