FIRST BUSINESS FINANCIAL SERVICES, INC. (FBIZ) SPO
|Company Name||FIRST BUSINESS FINANCIAL SERVICES, INC.|
|Company Address||401 CHARMANY DRIVE
MADISON, WI 53719
|CEO||Corey A. Chambas|
|Employees (as of 9/30/2012)||156|
|State of Inc||WI|
|Fiscal Year End||12/31|
|Exchange||Nasdaq National Market|
|Shares Over Alloted||0|
|Shareholder Shares Offered||--|
|Lockup Period (days)||180|
|Quiet Period Expiration||1/14/2013|
We estimate that the net proceeds to us, after underwriting discounts and estimated offering expenses, from the sale of the shares of our common stock offered hereby will be approximately $23.5 million (or approximately $27.1 million if the underwriters exercise in full their option to purchase additional shares). We expect that the net proceeds from this offering will support the future growth of our organization by allowing us to accelerate our organic growth in existing or new markets and to potentially pursue opportunistic acquisitions of similar or complementary financial services organizations. The immediate use of our net proceeds from this offering will be to repay a portion of two tranches of our existing subordinated debt. As of September 30, 2012, these tranches consisted of: (i) $1.8 million of 2015 Subordinated Debt, bearing interest at a rate equal to one-month LIBOR plus 4.25%; and (ii) $31.0 million of 2018 Subordinated Debt, bearing interest at a rate equal to one-month LIBOR plus 4.75% with a floor of 7.00%. As of September 30, 2012, the interest rates of the 2015 Subordinated Debt and the 2018 Subordinated Debt were 4.48% and 7.00%, respectively. Pursuant to the rules of the Federal Reserve, in each of the five years preceding the maturity of subordinated debt issued by a bank holding company, one-fifth of the amount of such subordinated debt originally issued becomes ineligible for treatment as Tier 2 capital. Accordingly, the amount of the 2015 Subordinated Debt eligible for Tier 2 capital treatment has decreased in recent years and will continue to do so. Thus, our board of directors anticipates using the net proceeds from this offering, which will qualify for Tier 1 capital treatment, to first pay down $1.8 million of our 2015 Subordinated Debt with the remainder, approximately $21.7 million or $25.3 million if the underwriters exercise their over-allotment option in full, being used to pay down a portion of the outstanding balance of our 2018 Subordinated Debt. We expect the prepayment of a portion of our subordinated debt to benefit us in a number of ways, including by: (i) reducing our interest expense; (ii) reducing our holding company leverage; (iii) enhancing our regulatory capital position by replacing funds qualifying as Tier 2 capital with funds qualifying as Tier 1 capital; and (iv) supporting the future growth of our organization by freeing additional resources that may be used to accelerate organic growth in our existing or new markets and to potentially pursue opportunistic acquisitions of similar or complementary financial services organizations. We do not have any agreements or commitments with respect to any acquisitions at this time.
The Banks encounter strong competition in attracting commercial loan, equipment finance and deposit clients as well as trust and investment clients. Such competition includes banks, savings institutions, mortgage banking companies, credit unions, finance companies, equipment finance companies, mutual funds, insurance companies, brokerage firms and investment banking firms. The Banks' market areas include branches of several commercial banks that are substantially larger in terms of loans and deposits. Furthermore, tax-exempt credit unions operate in the Banks' market areas and aggressively price their products and services to a large portion of the market. The Banks also compete with regional and national financial institutions, many of which have greater liquidity, higher lending limits, greater access to capital, more established market recognition and more resources and collective experience than the Banks. We believe that the strength of our executive management team, the experience and capabilities of our front-line banking professionals, the range and quality of the products that we offer and our emphasis on building long-lasting relationships sets us apart from our competitors. The following table lists the counties in which the Banks have their main offices as well as certain other information: Total Number Total Number Total Deposits First Business of Banking of Banking in County First Business Market Deposit County Organizations Offices (in thousands) Market Share Rank Share Dane County 38 185 13,445,819 5 6.31 % Waukesha County 38 194 10,382,624 16 1.87 %
We are a registered bank holding company originally incorporated in 1986 under the laws of the State of Wisconsin and engaged in the commercial banking business through our two wholly-owned bank subsidiaries, First Business Bank, headquartered in Madison, Wisconsin, and First Business
Bank—Milwaukee, headquartered in Brookfield, Wisconsin. All of our operations are conducted through the Banks and certain subsidiaries of FBB. The Banks operate as business banks focusing on delivering a full line of commercial banking products, including commercial loans and commercial real estate loans, and services tailored to meet the specific needs of small- and medium-sized businesses, business owners, executives, professionals and high net worth individuals. The Banks generally target businesses with annual sales between $2.0 million and $50.0 million. Because of their focus on business banking, the Banks do not utilize branch networks to attract retail clients and, to supplement their business banking deposit base, the Banks utilize wholesale funding alternatives to fund a portion of their assets. As of September 30, 2012, on a consolidated basis, we had total assets of $1.2 billion, total deposits of $1.1 billion and total stockholders' equity of $70.5 million. Our Business Lines Commercial Lending We strive to meet the specific commercial-lending needs of small- to medium-sized companies in our target market areas of Wisconsin, primarily through lines of credit for working capital needs and term loans to businesses with annual sales between $2.0 million and $50.0 million. Through FBB, we have a strong presence in Madison and its surrounding areas. In 2000, we opened FBB—Milwaukee to take advantage of the strong commercial base located in Milwaukee and the surrounding communities. In 2006, FBB opened a loan production office in Appleton to take advantage of the strong commercial environment in Northeast Wisconsin. Since then, we have opened offices in Oshkosh and Green Bay and we believe that there are significant growth opportunities in commercial lending in Northeastern Wisconsin. Our commercial loans are typically secured by various types of business assets, including inventory, receivables and equipment. We also originate loans secured by commercial real estate, including non-residential owner-occupied commercial facilities, multi-family housing, office buildings, retail centers, and, to a lesser extent, commercial real estate construction loans. In very limited cases, we may originate loans on an unsecured basis. As of September 30, 2012, our commercial real estate and commercial loans, excluding asset-based lending and equipment financing, represented approximately 79.7% of our total gross loans and leases receivable. Asset-Based Lending First Business Capital Corp., a wholly-owned subsidiary of FBB, is focused on asset-based lending to small- to medium-sized companies with credit requirements of $1.0 million to over $7.0 million. With its seven sales offices throughout the Midwest and Colorado, First Business Capital Corp. does not limit itself to conducting business in Wisconsin. First Business Capital Corp. primarily provides revolving lines of credit and term loans for financial and strategic acquisitions (e.g., leveraged or management buyouts), capital expenditures, rapid growth, bank debt refinancing, debt restructuring, corporate turnaround strategies, and debtor obligations in the course of bankruptcy proceedings or the exit therefrom. As a bank-owned, asset-based lender with strong underwriting standards, First Business Capital Corp. is positioned to provide cost-effective financing solutions to companies with borrowing needs that do not have the established stable cash flows necessary to facilitate a more traditional commercial lending product. Asset-based lending is generally more profitable than traditional commercial lending, and this line of business complements our traditional commercial loan portfolio and provides us with more diverse income opportunities. We recently started First Business Factors as a division of First Business Capital Corp. which offers factoring products as additional financing options to our clients. As of September 30, 2012, our asset-based lending line represented approximately 15.1% of our total gross loans and leases receivable. Equipment Financing First Business Equipment Finance, LLC, a wholly-owned subsidiary of FBB, delivers a broad range of equipment finance products, including leases and loans, to address the financing needs of commercial clients in a variety of industries. First Business Equipment Finance's focus includes manufacturing equipment, industrial assets, construction and transportation equipment, and drilling and oil field equipment, in addition to a wide variety of other commercial equipment. These financings generally range between $2.0 million and $10.0 million with terms of 36 to 84 months. We believe that we can continue to grow this business through our existing offices in Wisconsin and our recently opened office in Kansas City, Kansas. As of September 30, 2012, our equipment financing business line represented approximately 3.3% of our total gross loans and leases receivable. Treasury Management Services The Banks provide comprehensive services for commercial clients to manage their cash and liquidity, including lock box, accounts receivable collection services, electronic payment solutions, fraud protection, information reporting, reconciliation and data integration solutions. The Banks also offer demand deposit account and balance optimization solutions. As we continue to seek to diversify our income and increase our non-interest income, we have focused on increasing these services and have emphasized these offerings with new and existing business clients. Trust and Investment Services FBB, through its First Business Trust & Investments division, acts as fiduciary and investment manager for individual and corporate clients, creating asset allocation strategies tailored to each client's unique situation while using third-party investment managers to execute overarching strategies. For managed assets, First Business Trust & Investments offers financial advice and acts either in a trustee or agency capacity. First Business Trust & Investments also provides custody services, for which it administers and safeguards assets but does not provide financial advice. At September 30, 2012, First Business Trust & Investments had $746.1 million of assets under management and administration. ------ Our principal executive offices are located at 401 Charmany Drive, Madison, Wisconsin 53719 and our telephone number is (608) 238-8008. We maintain an Internet website at www.firstbusiness.com.
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