Fourth Quarter EPS on Target; Raising 2013 EPS Estimate
by a Nickel
By Ann Hefforn, CFA
First Business Financial Services, Inc.
posted net income of $2.5 million up 6% from the $2.4 million
earned in the year-ago quarter.
Diluted earnings per share fell 5% to $0.86 (matching our
estimate) from $0.90 in last year's fourth quarter due to an
increased number of average shares outstanding. In December 2012,
FBIZ sold 1.265 million common shares, raising $29.1 million,
which it used to retire subordinated debt.
Compared to the year-ago quarter, fourth quarter results were
boosted by a 6% gain in net interest income due to 3% growth in
average interest-earning assets and an 8 basis-point rise in the
net interest margin, as well as a 41% jump in noninterest income
and a 10% drop in the loan loss provision.
This was partly offset by a 19% increase in total noninterest
expense, largely reflecting 31% higher compensation costs due to
the hiring of additional business development officers and the
start-up of First Business Factors, and a 13% increase in average
diluted shares outstanding.
For the year, FBIZ earned $8.9 million, or $3.29 per diluted
share, up 16% from the $7.7 million, or $2.94 per diluted share
in 2011, which excludes a $0.7 million, or $0.29 per diluted
share, one-time tax benefit related to a change in regulation for
net operating loss carryforwards by the state of Wisconsin.
We are raising our 2013 diluted EPS estimate by a nickel to
$3.05 from $3.00. This increase primarily reflects changes to our
estimates for net interest income, the loan loss provision, and
effective income tax rate.
We note that the ABA Banking Journal ranked FBIZ 15
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
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 December 31, 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.
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