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     101  0 Kommentare First Business Bank Reports Third Quarter 2023 Net Income of $9.7 Million

    First Business Financial Services, Inc. (the “Company”, the “Bank”, or “First Business Bank”) (Nasdaq:FBIZ) reported quarterly net income available to common shareholders of $9.7 million, or earnings per share of $1.17 on a diluted basis. This compares to net income available to common shareholders of $8.1 million, or $0.98 per share, in the second quarter of 2023 and $10.6 million, or $1.25 per share, in the third quarter of 2022.

    “First Business Bank again delivered exceptional double-digit loan and in-market deposit growth during the third quarter, which supports our long-term objectives of revenue expansion and deepening client relationships,” said Corey Chambas, Chief Executive Officer. “We continue to diversify our drivers of profitability, including client deposit initiatives to grow treasury management sales and tax credit opportunities with commercial real estate clients, which have effectively lowered our tax rate while also benefiting the communities where we live and serve. With bottom line earnings up nearly 20% from the second quarter, we are pleased to have generated 13% annualized growth in tangible book value per share, a key measure of shareholder value.”

    “Solid strategic planning and outstanding execution have allowed us to grow both loans and deposits in excess of 10% over the last several years,” Chambas added. “Our recent completion of a $15 million subordinated debt offering bolstered our capacity to continue pursuing quality loan and deposit growth. We continue to evaluate loan sale strategies, and we expect overall loan growth to moderate in 2024 as we manage to our long-term target of 10%.”

    Quarterly Highlights

    • Strong Deposit Growth. Total deposits grew $128.2 million, increasing 20.3% annualized from the second quarter and $569.5 million, or 27.3% from the third quarter of 2022. In-market deposits grew to a record $2.189 billion, up $115.5 million, or 22.3% annualized, from the second quarter and $260.0 million, or 13.5% from the third quarter of 2022. Strong seasonal client deposit activity contributed to increased gross treasury management service charges, which grew 14.5% to $1.5 million, compared to the third quarter of 2022.
    • Robust Loan Growth. Loans grew $89.4 million, or 13.4% annualized, from the second quarter of 2023, and $433.3 million, or 18.6%, from the third quarter of 2022, reflecting ongoing expansion across the Company’s products and geographies in the third quarter.
    • Net Interest Income Expansion. Net interest income grew 3.1% from the linked quarter and 10.5% from the prior year quarter. Consistent execution of the Company’s strategy to drive diversified loan portfolio growth supported this expansion even as industry-wide net interest margin compression continued. Net interest margin of 3.76% declined five basis points from the linked quarter. Importantly, adjusted1 net interest margin of 3.66% increased three basis points from the linked quarter.
    • Strong Pre-Tax, Pre-Provision (“PTPP”) Income. PTPP income grew to $14.1 million, up 4.5% from the prior quarter. This performance reflects solid growth across the Company’s balance sheet and diversified sources of non-interest income. PTPP adjusted return on average assets measured 1.72% for the current and linked quarter.
    • Tangible Book Value Growth. The Company’s strong earnings generation produced a 13.0% annualized increase in tangible book value per share compared to the linked quarter and 13.8% compared to the prior year quarter.

    Quarterly Financial Results

    (Unaudited)

     

    As of and for the Three Months Ended

     

    As of and for the Nine Months Ended

    (Dollars in thousands, except per share amounts)

     

    September 30,
    2023

     

    June 30,
    2023

     

    September 30,
    2022

     

    September 30,
    2023

     

    September 30,
    2022

    Net interest income

     

    $

    28,596

     

     

    $

    27,747

     

     

    $

    25,884

     

     

    $

    83,049

     

     

    $

    70,971

     

    Adjusted non-interest income (1)

     

     

    8,430

     

     

     

    7,419

     

     

     

    8,197

     

     

     

    24,259

     

     

     

    22,455

     

    Operating revenue (1)

     

     

    37,026

     

     

     

    35,166

     

     

     

    34,081

     

     

     

    107,308

     

     

     

    93,426

     

    Operating expense (1)

     

     

    22,943

     

     

     

    21,692

     

     

     

    19,925

     

     

     

    66,414

     

     

     

    58,497

     

    Pre-tax, pre-provision adjusted earnings (1)

     

     

    14,083

     

     

     

    13,474

     

     

     

    14,156

     

     

     

    40,894

     

     

     

    34,929

     

    Less:

     

     

     

     

     

     

     

     

     

     

    Provision for credit losses

     

     

    1,817

     

     

     

    2,231

     

     

     

    12

     

     

     

    5,610

     

     

     

    (4,569

    )

    Net loss (gain) on repossessed assets

     

     

    4

     

     

     

    (2

    )

     

     

    7

     

     

     

    8

     

     

     

    27

     

    SBA recourse provision

     

     

    242

     

     

     

    341

     

     

     

    96

     

     

     

    565

     

     

     

    134

     

    Tax credit investment impairment recovery

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    (351

    )

    Add:

     

     

     

     

     

     

     

     

     

     

    Net loss on sale of securities

     

     

     

     

     

    (45

    )

     

     

     

     

     

    (45

    )

     

     

     

    Income before income tax expense

     

     

    12,020

     

     

     

    10,859

     

     

     

    14,041

     

     

     

    34,666

     

     

     

    39,688

     

    Income tax expense

     

     

    2,079

     

     

     

    2,522

     

     

     

    3,215

     

     

     

    7,409

     

     

     

    8,986

     

    Net income

     

    $

    9,941

     

     

    $

    8,337

     

     

    $

    10,826

     

     

    $

    27,257

     

     

    $

    30,702

     

    Preferred stock dividends

     

     

    218

     

     

     

    219

     

     

     

    218

     

     

     

    656

     

     

     

    464

     

    Net income available to common shareholders

     

    $

    9,723

     

     

    $

    8,118

     

     

    $

    10,608

     

     

    $

    26,601

     

     

    $

    30,238

     

    Earnings per share, diluted

     

    $

    1.17

     

     

    $

    0.98

     

     

    $

    1.25

     

     

    $

    3.19

     

     

    $

    3.57

     

    Book value per share

     

    $

    32.32

     

     

    $

    31.34

     

     

    $

    28.58

     

     

    $

    32.32

     

     

    $

    28.58

     

    Tangible book value per share (1)

     

    $

    30.87

     

     

    $

    29.89

     

     

    $

    27.13

     

     

    $

    30.87

     

     

    $

    27.13

     

     

     

     

     

     

     

     

     

     

     

     

    Net interest margin (2)

     

     

    3.76

    %

     

     

    3.81

    %

     

     

    4.01

    %

     

     

    3.81

    %

     

     

    3.71

    %

    Adjusted net interest margin (1)(2)

     

     

    3.66

    %

     

     

    3.63

    %

     

     

    3.89

    %

     

     

    3.68

    %

     

     

    3.53

    %

    Fee income ratio (non-interest income / total revenue)

     

     

    22.77

    %

     

     

    21.00

    %

     

     

    24.05

    %

     

     

    22.57

    %

     

     

    24.04

    %

    Efficiency ratio (1)

     

     

    61.96

    %

     

     

    61.68

    %

     

     

    58.46

    %

     

     

    61.89

    %

     

     

    62.61

    %

    Return on average assets (2)

     

     

    1.19

    %

     

     

    1.04

    %

     

     

    1.54

    %

     

     

    1.13

    %

     

     

    1.49

    %

    Pre-tax, pre-provision adjusted return on average assets (1)(2)

     

     

    1.72

    %

     

     

    1.72

    %

     

     

    2.05

    %

     

     

    1.74

    %

     

     

    1.72

    %

    Return on average common equity (2)

     

     

    14.62

    %

     

     

    12.58

    %

     

     

    17.44

    %

     

     

    13.72

    %

     

     

    16.97

    %

     

     

     

     

     

     

     

     

     

     

     

    Period-end loans and leases receivable

     

    $

    2,764,014

     

     

    $

    2,674,583

     

     

    $

    2,330,700

     

     

    $

    2,764,014

     

     

    $

    2,330,700

     

    Average loans and leases receivable

     

    $

    2,711,851

     

     

    $

    2,583,237

     

     

    $

    2,316,621

     

     

    $

    2,592,941

     

     

    $

    2,278,333

     

    Period-end in-market deposits

     

    $

    2,189,264

     

     

    $

    2,073,744

     

     

    $

    1,929,224

     

     

    $

    2,189,264

     

     

    $

    1,929,224

     

    Average in-market deposits

     

    $

    2,105,716

     

     

    $

    2,035,856

     

     

    $

    1,930,995

     

     

    $

    2,047,776

     

     

    $

    1,921,465

     

    Allowance for credit losses, including unfunded commitment reserves

     

    $

    31,036

     

     

    $

    29,697

     

     

    $

    24,143

     

     

    $

    31,036

     

     

    $

    24,143

     

    Non-performing assets

     

    $

    17,689

     

     

    $

    15,786

     

     

    $

    3,796

     

     

    $

    17,689

     

     

    $

    3,796

     

    Allowance for credit losses as a percent of total gross loans and leases

     

     

    1.12

    %

     

     

    1.11

    %

     

     

    1.04

    %

     

     

    1.12

    %

     

     

    1.04

    %

    Non-performing assets as a percent of total assets

     

     

    0.52

    %

     

     

    0.48

    %

     

     

    0.13

    %

     

     

    0.52

    %

     

     

    0.13

    %

    (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.

    Third Quarter 2023 Compared to Second Quarter 2023

    Net interest income increased $849,000, or 3.1%, to $28.6 million.

    • The increase in net interest income was driven by an increase in average loans and leases receivable, partially offset by a decrease in fees in lieu of interest. Average loans and leases receivable increased $128.6 million, or 19.9% annualized, to $2.712 billion. Fees in lieu of interest, which vary from quarter to quarter based on client-driven activity, totaled $582,000, compared to $936,000 in the prior quarter. Excluding fees in lieu of interest, net interest income increased $1.2 million, or 4.5%.
    • The yield on average interest-earning assets increased 24 basis points to 6.71% from 6.47%. Excluding fees in lieu of interest, the yield earned on average interest-earning assets increased 28 basis points to 6.63% from 6.35%. The daily average effective federal funds rate increased 27 basis points compared to the linked quarter, which equates to an average adjusted interest-earning asset beta of 104.8% for the three months ended September 30, 2023, compared to 73.9% in the linked quarter. The cumulative adjusted interest-earning asset beta since December 31, 2021 was 59.7%. 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.
    • The rate paid for average interest-bearing, in-market deposits increased 49 basis points to 3.74% from 3.25% due to the acceleration of exception pricing and the shift of client balances from non-interest bearing deposits to certificates of deposit and interest-bearing demand deposit accounts. Similarly, the rate paid for average total bank funding increased 29 basis points to 3.07% from 2.78%. Total bank funding is defined as total deposits plus Federal Home Loan Bank (“FHLB”) advances. The total bank funding beta was 107.5% for the three months ended September 30, 2023, compared to 98.9% in the linked quarter. The cumulative bank funding beta since December 31, 2021 was 52.9%.
    • Net interest margin was 3.76%, down 5 basis points compared to 3.81% in the linked quarter. Adjusted net interest margin1 was 3.66%, up 3 basis points compared to 3.63% in the linked quarter. The increase in adjusted net interest margin was due to an increase in the yield on average adjusted interest earning assets, partially offset by the rate paid on total bank funding.
    • The Bank anticipates deposit betas may continue to rise and net interest margin may continue to decline at a gradual pace in coming quarters as the Federal Open Market Committee approaches a terminal federal funds rate. Based on current trends, we believe our net interest margin should stabilize above our existing strategic plan goal of 3.50%.

    The Bank reported a provision expense of $1.8 million, compared to $2.2 million in the second quarter of 2023. The third quarter provision expense included increases of $1.3 million in net specific reserves, $817,000 due to exceptional loan growth, net charge-offs of $478,000, and qualitative factor changes of $506,000. This expense was partially offset by a $1.4 million reduction in general reserve due to an improved economic outlook in our model forecast compared to the prior period. Similar to the second quarter, the increase in specific reserves, charge-offs, and qualitative factors was primarily related to the Equipment Finance and SBA Lending loan pools, which management believes is consistent with the cyclical nature of these commercial lending niches.

    Non-interest income increased $1.1 million, or 14.3%, to $8.4 million.

    • Private Wealth and Company Retirement Plan (“Private Wealth”) fee income increased $52,000, or 1.8% to $2.9 million. Private Wealth assets under management and administration measured $2.915 billion on September 30, 2023, up $7.5 million from the prior quarter.
    • Gains on sale of SBA loans increased $407,000, or 91.7%, to $851,000 driven by volume of loan sales.
    • Other fee income increased $587,000 to $2.0 million, compared to $1.4 million in the prior quarter. The increase was primarily due to higher returns on the Company’s investments in mezzanine funds in the third quarter. Income from mezzanine funds was $1.2 million in the third quarter, compared to $389,000 in the linked quarter. Income from mezzanine funds varies from period to period based on changes in the value of underlying investments. Investment values are primarily reflected in our results semiannually, in the first and third quarters.
    • Loan fee income decreased $119,000, or 13.1%, to $786,000 primarily due to a decrease in Asset-Based Lending (“ABL”) audit fee income.
    _____________

    1 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 $1.2 million, or 5.3%, to $23.2 million, while operating expense increased $1.3 million, or 5.8%, to $22.9 million.

    • Compensation expense was $15.6 million, reflecting an increase of $444,000, or 2.9%, from the linked quarter primarily due to a $510,000 increase in the annual cash incentive bonus and profit sharing accruals and an increase in employee salaries. This increase was partially offset by a decrease in share-based compensation following the second quarter vesting of performance-based restricted stock units (“PRSU”). Average full-time equivalents (FTEs) for the third quarter of 2023 were 349, up from 341 in the linked quarter.
    • Professional fees were $1.4 million, increasing $189,000, or 15.2%, from the linked quarter primarily due to an increase in recruiting expenses.
    • FDIC insurance expense was $680,000, increasing $100,000, or 17.2%, from the linked quarter primarily due to an increase in the assessment rate and the assessable base.
    • Other non-interest expense increased $496,000, or 45.6%, to $1.6 million from the linked quarter primarily due to a $693,000 increase in liquidation expense related to an ABL loan relationship. In past resolutions, the Bank has been able to recover similar liquidation expenses. These increases were partially offset by a decrease in travel expense and a loss on disposal of fixed assets in the prior quarter.

    Income tax expense decreased $443,000, or 17.6%, to $2.1 million. The effective tax rate was 17.3% for the three months ended September 30, 2023, compared to 23.2% for the linked quarter. Both periods benefited from net tax credits of $797,000 and $150,000 in the current and linked quarters, respectively. Based on expected earnings and future tax credit investments, the Company expects to report an effective tax rate between 21% and 22% for 2023 and between 20% and 21% for 2024.

    Total period-end loans and leases receivable increased $89.4 million, or 13.4% annualized, to $2.764 billion. Management expects loan growth to moderate to our long term target of 10% in future quarters. Additionally, management is evaluating loan sale and participation strategies as a means of adding to and further diversifying fee income. The average rate earned on average loans and leases receivable was 7.06%, up 20 basis points from 6.86% in the prior quarter.

    • Commercial Real Estate (“CRE”) loans increased by $43.6 million, or 11.0% annualized, to $1.635 billion. The increase was primarily due to an increase in non-owner occupied CRE and multi-family loans.
    • Commercial & Industrial (“C&I”) loans increased $46.8 million, or 18.0% annualized, to $1.084 billion. The increase was due to growth across the majority of the Bank’s C&I products and geographies.

    Total period-end in-market deposits increased $115.5 million, or 22.3% annualized, to $2.189 billion, compared to $2.074 billion. The average rate paid was 2.97%, up 41 basis points from 2.56% in the prior quarter.

    • The increase was due to growth in interest-bearing transaction accounts, money market accounts, and non-interest bearing transaction accounts, partially offset by a decrease in certificates of deposit.

    Period-end wholesale funding, including FHLB advances, brokered deposits, and deposits gathered through internet deposit listing services, decreased $8.6 million, or 4.4% annualized, to $782.2 million.

    • Wholesale deposits increased $12.6 million to $467.7 million, compared to $455.1 million as the Bank continued to replace FHLB advances with wholesale deposits consistent with the Company’s long-held philosophy to manage interest rate risk by utilizing the most efficient and cost-effective source of wholesale funds to match-fund fixed-rate loans. The average rate paid on wholesale deposits decreased 17 basis points to 4.07% and the weighted average original maturity increased to 4.0 years from 3.7 years.
    • FHLB advances decreased $21.2 million to $314.5 million. The average rate paid on FHLB advances decreased 19 basis points to 2.48% and the weighted average original maturity was 5.2 years for both periods.

    Non-performing assets increased $1.9 million to $17.7 million, or 0.52% of total assets, up from 0.48% in the prior quarter driven by Equipment Finance loans within the C&I portfolio. We continue to expect full repayment of the one ABL loan that defaulted during the second quarter of 2023. Excluding the ABL loan, non-performing assets totaled $8.1 million, or 0.24% of total assets in the current quarter and $4.9 million, or 0.15% of total assets in the linked quarter. The increase in the Equipment Finance pool, for which defaults and liquidations are not atypical, was due to a cyclical increase in past-due balances.

    The allowance for credit losses, including unfunded credit commitments reserve, increased $1.3 million, or 4.5%, as increases in specific reserves, the general reserve from loan growth, and qualitative factors were partially offset by a decrease in the general reserve due to an improved economic outlook in our model forecast. The allowance for credit losses, including unfunded credit commitment reserves, as a percent of total gross loans and leases was 1.12% compared to 1.11% in the prior quarter.

    Third Quarter 2023 Compared to Third Quarter 2022

    Net interest income increased $2.7 million, or 10.5%, to $28.6 million.

    • The increase in net interest income primarily reflects an increase in average gross loans and leases, partially offset by lower fees in lieu of interest and net interest margin compression. Fees in lieu of interest decreased from $807,000 to $582,000. Excluding fees in lieu of interest, net interest income increased $2.9 million, or 11.7%.
    • The yield on average interest-earning assets measured 6.71% compared to 4.92%. Excluding fees in lieu of interest, the yield on average interest-earning assets measured 6.63%, compared to 4.80%. This increase in yield was primarily due to the increase in short-term market rates and the reinvestment of cash flows from the securities and fixed rate loan portfolios in a rising rate environment. The daily average effective federal funds rate increased 308 basis points compared to the prior year quarter, which equates to an average adjusted interest-earning asset beta of 59.5% for the three months ended September 30, 2023, compared to the prior year period.
    • The rate paid for average interest-bearing in-market deposits increased 286 basis points to 3.74% from 0.88%. The rate paid for average total bank funding increased 218 basis points to 3.07% from 0.89%. The total bank funding beta was 70.8% for the three months ended September 30, 2023, compared to the prior year period.
    • Net interest margin decreased 25 basis points to 3.76% from 4.01%. Adjusted net interest margin decreased 23 basis points to 3.66% from 3.89%.

    The Company reported a provision expense of $1.8 million, compared to $12,000 in the third quarter of 2022. The prior year period provision benefited from net recoveries.

    Non-interest income of $8.4 million increased by $233,000, or 2.8%, from $8.2 million in the prior year period.

    • Private Wealth fee income increased $327,000, or 12.5%, to $2.9 million. Private Wealth assets under management and administration measured $2.915 billion at September 30, 2023, up $422.0 million, or 16.9%.
    • Commercial loan swap fee income of $992,000 increased by $651,000, or 190.9%. Swap fee income varies from period to period based on loan activity and the interest rate environment.
    • Gain on sale of SBA loans increased $119,000, or 16.3%, to $851,000.
    • Service charges on deposits decreased $183,000, or 18.0%, to $835,000, driven by an increase in the earnings credit rate commensurate with the rising rate environment.
    • Other fee income decreased $653,000, or 24.4%, to $2.0 million, primarily due to higher returns on the Company’s investments in mezzanine funds and a gain on customer lease restructuring in the prior year quarter. Income from mezzanine funds was $1.2 million in the third quarter, compared to $1.4 million in the prior year quarter. Income on mezzanine funds varies from period to period based on changes in the value of underlying investments.

    Non-interest expense increased $3.2 million, or 15.8%, to $23.2 million. Operating expense increased $3.0 million, or 15.1%, to $22.9 million.

    • Compensation expense increased $756,000, or 5.1%, to $15.6 million. The increase in compensation expense was primarily due to an increase in average FTEs, annual merit increases and promotions, and incentive compensation due to outstanding production, partially offset by a lower estimated annual incentive cash bonus program accrual. Average FTEs increased 5% to 349 in the third quarter of 2023, compared to 333 in the third quarter of 2022, as a result of expanded hiring efforts that have successfully driven growth while maintaining positive operating leverage.
    • FDIC insurance increased $450,000, or 195.7%, to $680,000, primarily due to an increase in the assessment rate and the assessable base.
    • Data processing expense increased $234,000, or 32.5%, to $953,000, primarily due to an increase in core processing costs commensurate with loan and deposit account growth, as well as various project implementations.
    • Professional fees expense increased $226,000, or 18.8%, to $1.4 million, primarily due to an increase in recruiting expense and a general increase in other professional consulting services for various projects.
    • Marketing expense increased $215,000, or 39.6%, to $758,000, primarily due to an increase in business development efforts and advertising projects commensurate with our expanded sales force.

    Total period-end loans and leases receivable increased $433.3 million, or 18.6%, to $2.764 billion.

    • C&I loans increased $283.6 million, or 35.4% to $1.084 billion, due to growth across all products and geographies.
    • CRE loans increased $150.4 million, or 10.1%, to $1.635 billion, primarily due to increases in non-owner occupied CRE and multi-family loans.

    Total period-end in-market deposits grew $260.0 million, or 13.5%, to $2.189 billion, and the average rate paid increased 236 basis points to 2.97%. The increase in in-market deposits was principally due to a $317.9 million and $124.6 million increase in interest bearing transaction accounts and certificates of deposits, respectively. This increase was partially offset by a $134.1 million and $48.3 million decrease in non-interest bearing deposit accounts and money market accounts, respectively.

    Period-end wholesale funding increased $246.1 million to $782.2 million.

    • Wholesale deposits increased $309.4 million to $467.7 million, as the Bank utilized more wholesale deposits in lieu of FHLB advances to build excess liquidity and to match-fund fixed rate assets. The average rate paid on wholesale deposits increased 161 basis points to 4.07% and the weighted average original maturity increased to 4.0 years from 0.3 years. Consistent with our balance sheet strategy to use the most efficient and cost effective source of wholesale funding, the Company has entered into several derivative contracts hedging a portion of the wholesale deposits to reduce the fixed rate funding costs.
    • FHLB advances decreased $63.3 million to $314.5 million. The average rate paid on FHLB advances increased 47 basis points to 2.48% and the weighted average original maturity increased to 5.2 years from 4.8 years.

    Non-performing assets increased to $17.7 million, or 0.52% of total assets, compared to $3.8 million, or 0.13% of total assets, driven by one loan in the ABL portfolio and Equipment Finance loans within the C&I portfolio. Excluding the one ABL loan, which defaulted during the second quarter of 2023, non-performing assets totaled $8.1 million, or 0.24% of total assets.

    The allowance for credit losses, including unfunded commitment reserves, increased $6.9 million to $31.0 million, compared to $24.1 million due to loan growth, an increase in specific reserves, and a change in accounting standard. The allowance for credit losses as a percent of total gross loans and leases was 1.12%, compared to the allowance for loan losses of 1.04% under the incurred loss model.

    Share Repurchase Program Update

    As previously announced, effective January 27, 2023, the Company’s Board of Directors authorized the repurchase by the Company of shares of its common stock with a maximum aggregate purchase price of $5.0 million, effective January 31, 2023 through January 31, 2024. As of September 30, 2023, the Company had repurchased a total of 65,112 shares for approximately $2.0 million at an average cost of $30.72 per share. The Company expects to continue its pause of the repurchase program, instead allocating capital to support continued exceptional balance sheet growth.

    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 October 27, 2023.

    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:

    • Adverse changes in the economy or business conditions, either nationally or in our markets including, without limitation, inflation, supply chain issues, labor shortages, or any future public health epidemics.
    • Competitive pressures among depository and other financial institutions nationally and in the Company’s markets.
    • Increases in defaults by borrowers and other delinquencies.
    • Management’s ability to manage growth effectively, including the successful expansion of our client service, administrative infrastructure, and internal management systems.
    • Fluctuations in interest rates and market prices.
    • Changes in legislative or regulatory requirements applicable to the Company and its subsidiaries.
    • Changes in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations.
    • Fraud, including client and system failure or breaches of our network security, including the Company’s internet banking activities.
    • Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portion of SBA loans.
    • Recent volatility in the banking sector may result in new legislation, regulations or policy changes that could subject the Corporation and the Bank to increased government regulation and supervision.
    • The proportion of the Corporation’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk.
    • The Corporation may be subject to increases in FDIC insurance assessments as a result of the recent bank failures.

    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, 2022 and other filings with the Securities and Exchange Commission.

    SELECTED FINANCIAL CONDITION DATA

     

    (Unaudited)

     

    As of

    (in thousands)

     

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

    Assets

     

     

     

     

     

     

     

     

     

     

    Cash and cash equivalents

     

    $

    132,915

     

     

    $

    112,809

     

     

    $

    185,973

     

     

    $

    102,682

     

     

    $

    110,965

     

    Securities available-for-sale, at fair value

     

     

    272,163

     

     

     

    253,626

     

     

     

    236,989

     

     

     

    212,024

     

     

     

    196,566

     

    Securities held-to-maturity, at amortized cost

     

     

    8,689

     

     

     

    9,830

     

     

     

    11,461

     

     

     

    12,635

     

     

     

    13,531

     

    Loans held for sale

     

     

    4,168

     

     

     

    2,191

     

     

     

    2,697

     

     

     

    2,632

     

     

     

    773

     

    Loans and leases receivable

     

     

    2,764,014

     

     

     

    2,674,583

     

     

     

    2,539,363

     

     

     

    2,443,066

     

     

     

    2,330,700

     

    Allowance for credit losses

     

     

    (29,331

    )

     

     

    (28,115

    )

     

     

    (26,140

    )

     

     

    (24,230

    )

     

     

    (24,143

    )

    Loans and leases receivable, net

     

     

    2,734,683

     

     

     

    2,646,468

     

     

     

    2,513,223

     

     

     

    2,418,836

     

     

     

    2,306,557

     

    Premises and equipment, net

     

     

    6,157

     

     

     

    5,094

     

     

     

    4,933

     

     

     

    4,340

     

     

     

    3,143

     

    Repossessed assets

     

     

    61

     

     

     

    65

     

     

     

    89

     

     

     

    95

     

     

     

    151

     

    Right-of-use assets

     

     

    6,800

     

     

     

    7,049

     

     

     

    7,355

     

     

     

    7,690

     

     

     

    5,424

     

    Bank-owned life insurance

     

     

    55,123

     

     

     

    54,747

     

     

     

    54,383

     

     

     

    54,018

     

     

     

    54,683

     

    Federal Home Loan Bank stock, at cost

     

     

    13,528

     

     

     

    14,482

     

     

     

    13,088

     

     

     

    17,812

     

     

     

    15,701

     

    Goodwill and other intangible assets

     

     

    12,110

     

     

     

    12,073

     

     

     

    12,160

     

     

     

    12,159

     

     

     

    12,218

     

    Derivatives

     

     

    93,702

     

     

     

    70,440

     

     

     

    54,612

     

     

     

    68,581

     

     

     

    73,718

     

    Accrued interest receivable and other assets

     

     

    78,751

     

     

     

    76,864

     

     

     

    67,448

     

     

     

    63,107

     

     

     

    57,372

     

    Total assets

     

    $

    3,418,850

     

     

    $

    3,265,738

     

     

    $

    3,164,411

     

     

    $

    2,976,611

     

     

    $

    2,850,802

     

    Liabilities and Stockholders’ Equity

     

     

     

     

     

     

     

     

     

     

    In-market deposits

     

    $

    2,189,264

     

     

    $

    2,073,744

     

     

    $

    2,054,752

     

     

    $

    1,965,970

     

     

    $

    1,929,224

     

    Wholesale deposits

     

     

    467,743

     

     

     

    455,108

     

     

     

    422,088

     

     

     

    202,236

     

     

     

    158,321

     

    Total deposits

     

     

    2,657,007

     

     

     

    2,528,852

     

     

     

    2,476,840

     

     

     

    2,168,206

     

     

     

    2,087,545

     

    Federal Home Loan Bank advances and other borrowings

     

     

    363,891

     

     

     

    370,113

     

     

     

    341,859

     

     

     

    456,808

     

     

     

    420,297

     

    Lease liabilities

     

     

    9,236

     

     

     

    9,499

     

     

     

    9,822

     

     

     

    10,175

     

     

     

    6,827

     

    Derivatives

     

     

    78,696

     

     

     

    61,147

     

     

     

    49,012

     

     

     

    61,419

     

     

     

    66,162

     

    Accrued interest payable and other liabilities

     

     

    29,262

     

     

     

    23,495

     

     

     

    20,297

     

     

     

    19,363

     

     

     

    16,967

     

    Total liabilities

     

     

    3,138,092

     

     

     

    2,993,106

     

     

     

    2,897,830

     

     

     

    2,715,971

     

     

     

    2,597,798

     

    Total stockholders’ equity

     

     

    280,758

     

     

     

    272,632

     

     

     

    266,581

     

     

     

    260,640

     

     

     

    253,004

     

    Total liabilities and stockholders’ equity

     

    $

    3,418,850

     

     

    $

    3,265,738

     

     

    $

    3,164,411

     

     

    $

    2,976,611

     

     

    $

    2,850,802

     

    STATEMENTS OF INCOME

     

    (Unaudited)

     

    As of and for the Three Months Ended

     

    As of and for the Nine Months Ended

    (Dollars in thousands, except per share amounts)

     

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

     

    September 30,
    2023

     

    September 30,
    2022

    Total interest income

     

    $

    50,941

     

    $

    47,161

     

     

    $

    42,064

     

    $

    38,319

     

    $

    31,786

     

    $

    140,167

     

     

    $

    83,053

     

    Total interest expense

     

     

    22,345

     

     

    19,414

     

     

     

    15,359

     

     

    10,867

     

     

    5,902

     

     

    57,118

     

     

     

    12,082

     

    Net interest income

     

     

    28,596

     

     

    27,747

     

     

     

    26,705

     

     

    27,452

     

     

    25,884

     

     

    83,049

     

     

     

    70,971

     

    Provision for credit losses

     

     

    1,817

     

     

    2,231

     

     

     

    1,561

     

     

    702

     

     

    12

     

     

    5,610

     

     

     

    (4,569

    )

    Net interest income after provision for credit losses

     

     

    26,779

     

     

    25,516

     

     

     

    25,144

     

     

    26,750

     

     

    25,872

     

     

    77,439

     

     

     

    75,540

     

    Private wealth management service fees

     

     

    2,945

     

     

    2,893

     

     

     

    2,654

     

     

    2,570

     

     

    2,618

     

     

    8,492

     

     

     

    8,311

     

    Gain on sale of SBA loans

     

     

    851

     

     

    444

     

     

     

    476

     

     

    269

     

     

    732

     

     

    1,771

     

     

     

    2,269

     

    Service charges on deposits

     

     

    835

     

     

    766

     

     

     

    682

     

     

    791

     

     

    1,018

     

     

    2,283

     

     

     

    3,058

     

    Loan fees

     

     

    786

     

     

    905

     

     

     

    803

     

     

    847

     

     

    814

     

     

    2,495

     

     

     

    2,163

     

    Loss on sale of securities

     

     

     

     

    (45

    )

     

     

     

     

     

     

     

     

    (45

    )

     

     

     

    Swap fees

     

     

    992

     

     

    977

     

     

     

    557

     

     

    756

     

     

    341

     

     

    2,526

     

     

     

    1,038

     

    Other non-interest income

     

     

    2,021

     

     

    1,434

     

     

     

    3,238

     

     

    1,740

     

     

    2,674

     

     

    6,692

     

     

     

    5,616

     

    Total non-interest income

     

     

    8,430

     

     

    7,374

     

     

     

    8,410

     

     

    6,973

     

     

    8,197

     

     

    24,214

     

     

     

    22,455

     

    Compensation

     

     

    15,573

     

     

    15,129

     

     

     

    15,908

     

     

    15,267

     

     

    14,817

     

     

    46,610

     

     

     

    42,475

     

    Occupancy

     

     

    575

     

     

    603

     

     

     

    631

     

     

    669

     

     

    566

     

     

    1,809

     

     

     

    1,689

     

    Professional fees

     

     

    1,429

     

     

    1,240

     

     

     

    1,343

     

     

    1,210

     

     

    1,203

     

     

    4,012

     

     

     

    3,671

     

    Data processing

     

     

    953

     

     

    1,061

     

     

     

    875

     

     

    806

     

     

    719

     

     

    2,889

     

     

     

    2,391

     

    Marketing

     

     

    758

     

     

    779

     

     

     

    628

     

     

    641

     

     

    543

     

     

    2,165

     

     

     

    1,713

     

    Equipment

     

     

    349

     

     

    355

     

     

     

    295

     

     

    359

     

     

    253

     

     

    1,000

     

     

     

    732

     

    Computer software

     

     

    1,289

     

     

    1,197

     

     

     

    1,183

     

     

    1,089

     

     

    1,128

     

     

    3,668

     

     

     

    3,327

     

    FDIC insurance

     

     

    680

     

     

    580

     

     

     

    394

     

     

    203

     

     

    230

     

     

    1,653

     

     

     

    840

     

    Other non-interest expense

     

     

    1,583

     

     

    1,087

     

     

     

    510

     

     

    923

     

     

    569

     

     

    3,181

     

     

     

    1,469

     

    Total non-interest expense

     

     

    23,189

     

     

    22,031

     

     

     

    21,767

     

     

    21,167

     

     

    20,028

     

     

    66,987

     

     

     

    58,307

     

    Income before income tax expense

     

     

    12,020

     

     

    10,859

     

     

     

    11,787

     

     

    12,556

     

     

    14,041

     

     

    34,666

     

     

     

    39,688

     

    Income tax expense

     

     

    2,079

     

     

    2,522

     

     

     

    2,808

     

     

    2,400

     

     

    3,215

     

     

    7,409

     

     

     

    8,986

     

    Net income

     

    $

    9,941

     

    $

    8,337

     

     

    $

    8,979

     

    $

    10,156

     

    $

    10,826

     

    $

    27,257

     

     

    $

    30,702

     

    Preferred stock dividends

     

     

    218

     

     

    219

     

     

     

    219

     

     

    219

     

     

    218

     

     

    656

     

     

     

    464

     

    Net income available to common shareholders

     

    $

    9,723

     

    $

    8,118

     

     

    $

    8,760

     

    $

    9,937

     

    $

    10,608

     

    $

    26,601

     

     

    $

    30,238

     

    Per common share:

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Basic earnings

     

    $

    1.17

     

    $

    0.98

     

     

    $

    1.05

     

    $

    1.18

     

    $

    1.25

     

    $

    3.19

     

     

    $

    3.57

     

    Diluted earnings

     

     

    1.17

     

     

    0.98

     

     

     

    1.05

     

     

    1.18

     

     

    1.25

     

     

    3.19

     

     

     

    3.57

     

    Dividends declared

     

     

    0.2275

     

     

    0.2275

     

     

     

    0.2275

     

     

    0.1975

     

     

    0.1975

     

     

    0.6825

     

     

     

    0.5925

     

    Book value

     

     

    32.32

     

     

    31.34

     

     

     

    30.65

     

     

    29.74

     

     

    28.58

     

     

    32.32

     

     

     

    28.58

     

    Tangible book value

     

     

    30.87

     

     

    29.89

     

     

     

    29.19

     

     

    28.28

     

     

    27.13

     

     

    30.87

     

     

     

    27.13

     

    Weighted-average common shares outstanding(1)

     

     

    8,107,641

     

     

    8,061,841

     

     

     

    8,148,525

     

     

    8,180,531

     

     

    8,230,902

     

     

    8,134,587

     

     

     

    8,237,879

     

    Weighted-average diluted common shares outstanding(1)

     

     

    8,107,641

     

     

    8,061,841

     

     

     

    8,148,525

     

     

    8,180,531

     

     

    8,230,902

     

     

    8,134,587

     

     

     

    8,237,879

     

    (1)  

    Excluding participating securities.

    NET INTEREST INCOME ANALYSIS

     

    (Unaudited)

     

    For the Three Months Ended

    (Dollars in thousands)

     

    September 30, 2023

     

    June 30, 2023

     

    September 30, 2022

     

     

    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)

     

    $

    1,605,464

     

    $

    25,623

     

    6.38

    %

     

    $

    1,546,487

     

    $

    23,671

     

    6.12

    %

     

    $

    1,486,530

     

    $

    17,280

     

    4.65

    %

    Commercial and industrial loans(1)

     

     

    1,059,512

     

     

    21,635

     

    8.17

    %

     

     

    987,534

     

     

    20,020

     

    8.11

    %

     

     

    780,533

     

     

    12,426

     

    6.37

    %

    Consumer and other loans(1)

     

     

    46,875

     

     

    610

     

    5.21

    %

     

     

    49,216

     

     

    588

     

    4.78

    %

     

     

    49,558

     

     

    468

     

    3.78

    %

    Total loans and leases receivable(1)

     

     

    2,711,851

     

     

    47,868

     

    7.06

    %

     

     

    2,583,237

     

     

    44,279

     

    6.86

    %

     

     

    2,316,621

     

     

    30,174

     

    5.21

    %

    Mortgage-related securities(2)

     

     

    204,291

     

     

    1,681

     

    3.29

    %

     

     

    192,564

     

     

    1,421

     

    2.95

    %

     

     

    168,433

     

     

    915

     

    2.17

    %

    Other investment securities(3)

     

     

    67,546

     

     

    517

     

    3.06

    %

     

     

    60,790

     

     

    392

     

    2.58

    %

     

     

    51,812

     

     

    250

     

    1.93

    %

    FHLB stock

     

     

    14,770

     

     

    323

     

    8.75

    %

     

     

    15,844

     

     

    302

     

    7.62

    %

     

     

    18,167

     

     

    289

     

    6.36

    %

    Short-term investments

     

     

    40,318

     

     

    552

     

    5.48

    %

     

     

    61,316

     

     

    767

     

    5.00

    %

     

     

    27,912

     

     

    158

     

    2.26

    %

    Total interest-earning assets

     

     

    3,038,776

     

     

    50,941

     

    6.71

    %

     

     

    2,913,751

     

     

    47,161

     

    6.47

    %

     

     

    2,582,945

     

     

    31,786

     

    4.92

    %

    Non-interest-earning assets

     

     

    237,464

     

     

     

     

     

     

    213,483

     

     

     

     

     

     

    176,016

     

     

     

     

    Total assets

     

    $

    3,276,240

     

     

     

     

     

    $

    3,127,234

     

     

     

     

     

    $

    2,758,961

     

     

     

     

    Interest-bearing liabilities

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Transaction accounts

     

    $

    731,529

     

     

    6,774

     

    3.70

    %

     

    $

    670,698

     

     

    5,455

     

    3.25

    %

     

    $

    486,704

     

     

    1,005

     

    0.83

    %

    Money market

     

     

    657,183

     

     

    5,871

     

    3.57

    %

     

     

    633,817

     

     

    4,617

     

    2.91

    %

     

     

    746,227

     

     

    1,610

     

    0.86

    %

    Certificates of deposit

     

     

    282,674

     

     

    2,986

     

    4.23

    %

     

     

    295,785

     

     

    2,946

     

    3.98

    %

     

     

    113,529

     

     

    340

     

    1.20

    %

    Wholesale deposits

     

     

    410,494

     

     

    4,172

     

    4.07

    %

     

     

    332,387

     

     

    3,523

     

    4.24

    %

     

     

    36,702

     

     

    226

     

    2.46

    %

    Total interest-bearing deposits

     

     

    2,081,880

     

     

    19,803

     

    3.80

    %

     

     

    1,932,687

     

     

    16,541

     

    3.42

    %

     

     

    1,383,162

     

     

    3,181

     

    0.92

    %

    FHLB advances

     

     

    342,117

     

     

    2,117

     

    2.48

    %

     

     

    367,129

     

     

    2,452

     

    2.67

    %

     

     

    432,528

     

     

    2,173

     

    2.01

    %

    Other borrowings

     

     

    34,745

     

     

    425

     

    4.89

    %

     

     

    34,538

     

     

    421

     

    4.88

    %

     

     

    42,800

     

     

    548

     

    5.12

    %

    Total interest-bearing liabilities

     

     

    2,458,742

     

     

    22,345

     

    3.64

    %

     

     

    2,334,354

     

     

    19,414

     

    3.33

    %

     

     

    1,858,490

     

     

    5,902

     

    1.27

    %

    Non-interest-bearing demand deposit accounts

     

     

    434,330

     

     

     

     

     

     

    435,556

     

     

     

     

     

     

    584,535

     

     

     

     

    Other non-interest-bearing liabilities

     

     

    105,079

     

     

     

     

     

     

    87,148

     

     

     

     

     

     

    60,705

     

     

     

     

    Total liabilities

     

     

    2,998,151

     

     

     

     

     

     

    2,857,058

     

     

     

     

     

     

    2,503,730

     

     

     

     

    Stockholders’ equity

     

     

    278,089

     

     

     

     

     

     

    270,176

     

     

     

     

     

     

    255,231

     

     

     

     

    Total liabilities and stockholders’ equity

     

    $

    3,276,240

     

     

     

     

     

    $

    3,127,234

     

     

     

     

     

    $

    2,758,961

     

     

     

     

    Net interest income

     

     

     

    $

    28,596

     

     

     

     

     

    $

    27,747

     

     

     

     

     

    $

    25,884

     

     

    Interest rate spread

     

     

     

     

     

    3.07

    %

     

     

     

     

     

    3.15

    %

     

     

     

     

     

    3.65

    %

    Net interest-earning assets

     

    $

    580,034

     

     

     

     

     

    $

    579,397

     

     

     

     

     

    $

    724,455

     

     

     

     

    Net interest margin

     

     

     

     

     

    3.76

    %

     

     

     

     

     

    3.81

    %

     

     

     

     

     

    4.01

    %

    (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.

    NET INTEREST INCOME ANALYSIS

     

    (Unaudited)

     

    For the Nine Months Ended

    (Dollars in thousands)

     

    September 30, 2023

     

    September 30, 2022

     

     

    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)

     

    $

    1,556,988

     

    $

    71,011

     

    6.08

    %

     

    $

    1,472,930

     

    $

    45,969

     

    4.16

    %

    Commercial and industrial loans(1)

     

     

    988,359

     

     

    59,213

     

    7.99

    %

     

     

    755,254

     

     

    31,603

     

    5.58

    %

    Consumer and other loans(1)

     

     

    47,594

     

     

    1,738

     

    4.87

    %

     

     

    50,149

     

     

    1,362

     

    3.62

    %

    Total loans and leases receivable(1)

     

     

    2,592,941

     

     

    131,962

     

    6.79

    %

     

     

    2,278,333

     

     

    78,934

     

    4.62

    %

    Mortgage-related securities(2)

     

     

    193,196

     

     

    4,372

     

    3.02

    %

     

     

    176,654

     

     

    2,479

     

    1.87

    %

    Other investment securities(3)

     

     

    61,396

     

     

    1,229

     

    2.67

    %

     

     

    52,324

     

     

    725

     

    1.85

    %

    FHLB stock

     

     

    15,904

     

     

    952

     

    7.98

    %

     

     

    16,523

     

     

    688

     

    5.55

    %

    Short-term investments

     

     

    43,437

     

     

    1,652

     

    5.07

    %

     

     

    29,509

     

     

    227

     

    1.03

    %

    Total interest-earning assets

     

     

    2,906,874

     

     

    140,167

     

    6.43

    %

     

     

    2,553,343

     

     

    83,053

     

    4.34

    %

    Non-interest-earning assets

     

     

    223,552

     

     

     

     

     

     

    160,966

     

     

     

     

    Total assets

     

    $

    3,130,426

     

     

     

     

     

    $

    2,714,309

     

     

     

     

    Interest-bearing liabilities

     

     

     

     

     

     

     

     

     

     

     

     

    Transaction accounts

     

    $

    657,155

     

     

    16,070

     

    3.26

    %

     

    $

    507,402

     

     

    1,602

     

    0.42

    %

    Money market

     

     

    663,284

     

     

    14,984

     

    3.01

    %

     

     

    765,839

     

     

    2,458

     

    0.43

    %

    Certificates of deposit

     

     

    271,684

     

     

    8,049

     

    3.95

    %

     

     

    80,093

     

     

    509

     

    0.85

    %

    Wholesale deposits

     

     

    311,038

     

     

    9,671

     

    4.14

    %

     

     

    21,838

     

     

    436

     

    2.66

    %

    Total interest-bearing deposits

     

     

    1,903,161

     

     

    48,774

     

    3.42

    %

     

     

    1,375,172

     

     

    5,005

     

    0.49

    %

    FHLB advances

     

     

    368,913

     

     

    7,030

     

    2.54

    %

     

     

    422,576

     

     

    4,875

     

    1.54

    %

    Other borrowings

     

     

    35,351

     

     

    1,314

     

    4.96

    %

     

     

    44,719

     

     

    1,698

     

    5.06

    %

    Junior subordinated notes(5)

     

     

     

     

     

    %

     

     

    3,247

     

     

    504

     

    20.69

    %

    Total interest-bearing liabilities

     

     

    2,307,425

     

     

    57,118

     

    3.30

    %

     

     

    1,845,714

     

     

    12,082

     

    0.87

    %

    Non-interest-bearing demand deposit accounts

     

     

    455,653

     

     

     

     

     

     

    568,131

     

     

     

     

    Other non-interest-bearing liabilities

     

     

    96,883

     

     

     

     

     

     

    53,685

     

     

     

     

    Total liabilities

     

     

    2,859,961

     

     

     

     

     

     

    2,467,530

     

     

     

     

    Stockholders’ equity

     

     

    270,465

     

     

     

     

     

     

    246,779

     

     

     

     

    Total liabilities and stockholders’ equity

     

    $

    3,130,426

     

     

     

     

     

    $

    2,714,309

     

     

     

     

    Net interest income

     

     

     

    $

    83,049

     

     

     

     

     

    $

    70,971

     

     

    Interest rate spread

     

     

     

     

     

    3.13

    %

     

     

     

     

     

    3.46

    %

    Net interest-earning assets

     

    $

    599,449

     

     

     

     

     

    $

    707,629

     

     

     

     

    Net interest margin

     

     

     

     

     

    3.81

    %

     

     

     

     

     

    3.71

    %

    (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.

    (5)  

    The calculation for the nine months ended September 30, 2022, includes $236,000 in accelerated amortization of debt issuance costs.

    ASSET AND LIABILITY BETA ANALYSIS

     

     

    For the Three Months Ended

     

    For the Nine Months Ended

    (Unaudited)

    September
    30, 2023

     

    June 30,
    2023

     

     

     

    September
    30, 2022

     

     

     

    September
    30, 2023

     

    September
    30, 2022

     

     

     

    Average
    Yield/Rate (3)

     

    Average
    Yield/Rate (3)

     

    Increase
    (Decrease)

     

    Average
    Yield/Rate (3)

     

    Increase
    (Decrease)

     

    Average
    Yield/Rate

     

    Average
    Yield/Rate

     

    Increase
    (Decrease)

    Total loans and leases receivable (a)

    7.06

    %

     

    6.86

    %

     

    0.20

    %

     

    5.21

    %

     

    1.85

    %

     

    6.79

    %

     

    4.62

    %

     

    2.17

    %

    Total interest-earning assets(b)

    6.71

    %

     

    6.47

    %

     

    0.24

    %

     

    4.92

    %

     

    1.79

    %

     

    6.43

    %

     

    4.34

    %

     

    2.09

    %

    Adjusted total loans and leases receivable (1)(c)

    6.97

    %

     

    6.71

    %

     

    0.26

    %

     

    5.07

    %

     

    1.90

    %

     

    6.67

    %

     

    4.39

    %

     

    2.28

    %

    Adjusted total interest-earning assets (1)(d)

    6.63

    %

     

    6.35

    %

     

    0.28

    %

     

    4.80

    %

     

    1.83

    %

     

    6.33

    %

     

    4.13

    %

     

    2.20

    %

    Total in-market deposits(e)

    2.97

    %

     

    2.56

    %

     

    0.41

    %

     

    0.61

    %

     

    2.36

    %

     

    2.55

    %

     

    0.32

    %

     

    2.23

    %

    Total bank funding(f)

    3.07

    %

     

    2.78

    %

     

    0.29

    %

     

    0.89

    %

     

    2.18

    %

     

    2.73

    %

     

    0.56

    %

     

    2.17

    %

    Net interest margin(g)

    3.76

    %

     

    3.81

    %

     

    (0.05

    )%

     

    4.01

    %

     

    (0.25

    )%

     

    3.81

    %

     

    3.71

    %

     

    0.10

    %

    Adjusted net interest margin(h)

    3.66

    %

     

    3.63

    %

     

    0.03

    %

     

    3.89

    %

     

    (0.23

    )%

     

    3.68

    %

     

    3.53

    %

     

    0.15

    %

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Effective fed funds rate (2)(i)

    5.26

    %

     

    4.99

    %

     

    0.27

    %

     

    2.18

    %

     

    3.08

    %

     

    4.92

    %

     

    1.03

    %

     

    3.89

    %

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Beta Calculations:

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Total loans and leases receivable(a)/(i)

     

     

     

     

    75.6

    %

     

     

     

    60.1

    %

     

     

     

     

     

    55.78

    %

    Total interest-earning assets(b)/(i)

     

     

     

     

    85.6

    %

     

     

     

    57.9

    %

     

     

     

     

     

    53.77

    %

    Adjusted total loans and leases receivable (1)(c)/(i)

     

     

     

     

    97.5

    %

     

     

     

    61.8

    %

     

     

     

     

     

    58.61

    %

    Adjusted total interest-earning assets (1)(d)/(i)

     

     

     

     

    104.8

    %

     

     

     

    59.5

    %

     

     

     

     

     

    56.53

    %

    Total in-market deposits(e/i)

     

     

     

     

    151.9

    %

     

     

     

    76.6

    %

     

     

     

     

     

    57.33

    %

    Total bank funding(f)/(i)

     

     

     

     

    107.5

    %

     

     

     

    70.8

    %

     

     

     

     

     

    55.78

    %

    Net interest margin(g/i)

     

     

     

     

    (18.5

    )%

     

     

     

    (8.1

    )%

     

     

     

     

     

    2.57

    %

    Adjusted net interest margin(h/i)

     

     

     

     

    11.1

    %

     

     

     

    (7.5

    )%

     

     

     

     

     

    3.86

    %

    (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 Nine Months Ended

    (Dollars in thousands)

     

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

     

    September 30,
    2023

     

    September 30,
    2022

    Change due to qualitative factor changes

     

    $

    506

     

     

    $

    (50

    )

     

    $

    9

     

     

    $

    85

     

     

    $

    132

     

     

    $

    465

     

     

    $

    (469

    )

    Change due to quantitative factor changes

     

     

    (1,372

    )

     

     

    (295

    )

     

     

    474

     

     

     

    (930

    )

     

     

    (940

    )

     

     

    (1,193

    )

     

     

    (1,082

    )

    Charge-offs

     

     

    562

     

     

     

    329

     

     

     

    166

     

     

     

    818

     

     

     

    54

     

     

     

    1,057

     

     

     

    161

     

    Recoveries

     

     

    (84

    )

     

     

    (245

    )

     

     

    (107

    )

     

     

    (203

    )

     

     

    (81

    )

     

     

    (435

    )

     

     

    (4,537

    )

    Change in reserves on individually evaluated loans, net

     

     

    1,265

     

     

     

    1,093

     

     

     

    (36

    )

     

     

    (50

    )

     

     

    447

     

     

     

    2,322

     

     

     

    196

     

    Change due to loan growth, net

     

     

    817

     

     

     

    1,227

     

     

     

    979

     

     

     

    982

     

     

     

    400

     

     

     

    3,023

     

     

     

    1,162

     

    Change in unfunded commitment reserves

     

     

    123

     

     

     

    172

     

     

     

    76

     

     

     

     

     

     

     

     

     

    371

     

     

     

     

    Total provision for credit losses

     

    $

    1,817

     

     

    $

    2,231

     

     

    $

    1,561

     

     

    $

    702

     

     

    $

    12

     

     

    $

    5,610

     

     

    $

    (4,569

    )

    PERFORMANCE RATIOS

     

     

     

    For the Three Months Ended

     

    For the Nine Months Ended

    (Unaudited)

     

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

     

    September 30,
    2023

     

    September 30,
    2022

    Return on average assets (annualized)

     

    1.19

    %

     

    1.04

    %

     

    1.17

    %

     

    1.39

    %

     

    1.54

    %

     

    1.13

    %

     

    1.49

    %

    Return on average common equity (annualized)

     

    14.62

    %

     

    12.58

    %

     

    13.96

    %

     

    16.26

    %

     

    17.44

    %

     

    13.72

    %

     

    16.97

    %

    Efficiency ratio

     

    61.96

    %

     

    61.68

    %

     

    62.02

    %

     

    61.45

    %

     

    58.46

    %

     

    61.89

    %

     

    62.61

    %

    Interest rate spread

     

    3.07

    %

     

    3.15

    %

     

    3.19

    %

     

    3.56

    %

     

    3.65

    %

     

    3.13

    %

     

    3.46

    %

    Net interest margin

     

    3.76

    %

     

    3.81

    %

     

    3.86

    %

     

    4.15

    %

     

    4.01

    %

     

    3.81

    %

     

    3.71

    %

    Average interest-earning assets to average interest-bearing liabilities

     

    123.59

    %

     

    124.82

    %

     

    130.09

    %

     

    135.90

    %

     

    138.98

    %

     

    125.98

    %

     

    138.34

    %

    ASSET QUALITY RATIOS

     

    (Unaudited)

     

    As of

    (Dollars in thousands)

     

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

    Non-accrual loans and leases

     

    $

    17,628

     

     

    $

    15,721

     

     

    $

    3,412

     

     

    $

    3,659

     

     

    $

    3,645

     

    Repossessed assets

     

     

    61

     

     

     

    65

     

     

     

    89

     

     

     

    95

     

     

     

    151

     

    Total non-performing assets

     

     

    17,689

     

     

     

    15,786

     

     

     

    3,501

     

     

     

    3,754

     

     

     

    3,796

     

     

     

     

     

     

     

     

     

     

     

     

    Non-accrual loans and leases as a percent of total gross loans and leases

     

     

    0.64

    %

     

     

    0.59

    %

     

     

    0.13

    %

     

     

    0.15

    %

     

     

    0.16

    %

    Non-performing assets as a percent of total gross loans and leases plus repossessed assets

     

     

    0.64

    %

     

     

    0.59

    %

     

     

    0.14

    %

     

     

    0.15

    %

     

     

    0.16

    %

    Non-performing assets as a percent of total assets

     

     

    0.52

    %

     

     

    0.48

    %

     

     

    0.11

    %

     

     

    0.13

    %

     

     

    0.13

    %

    Allowance for credit losses as a percent of total gross loans and leases

     

     

    1.12

    %

     

     

    1.11

    %

     

     

    1.08

    %

     

     

    0.99

    %

     

     

    1.04

    %

    Allowance for credit losses as a percent of non-accrual loans and leases

     

     

    176.06

    %

     

     

    188.90

    %

     

     

    807.44

    %

     

     

    662.20

    %

     

     

    662.36

    %

    NET CHARGE-OFFS (RECOVERIES)

     

    (Unaudited)

     

    For the Three Months Ended

     

    For the Nine Months Ended

    (Dollars in thousands)

     

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

     

    September 30,
    2023

     

    September 30,
    2022

    Charge-offs

     

    $

    562

     

     

    $

    329

     

     

    $

    166

     

     

    $

    818

     

     

    $

    54

     

     

    $

    1,057

     

     

    $

    161

     

    Recoveries

     

     

    (84

    )

     

     

    (245

    )

     

     

    (107

    )

     

     

    (203

    )

     

     

    (81

    )

     

     

    (435

    )

     

     

    (4,537

    )

    Net charge-offs (recoveries)

     

    $

    478

     

     

    $

    84

     

     

    $

    59

     

     

    $

    615

     

     

    $

    (27

    )

     

    $

    622

     

     

    $

    (4,376

    )

    Net charge-offs (recoveries) as a percent of average gross loans and leases (annualized)

     

     

    0.07

    %

     

     

    0.01

    %

     

     

    0.01

    %

     

     

    0.10

    %

     

     

    %

     

     

    0.03

    %

     

     

    (0.26

    )%

    CAPITAL RATIOS

     

     

     

    As of and for the Three Months Ended

    (Unaudited)

     

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

    Total capital to risk-weighted assets

     

    11.20

    %

     

    10.70

    %

     

    11.04

    %

     

    11.26

    %

     

    11.66

    %

    Tier I capital to risk-weighted assets

     

    8.74

    %

     

    8.70

    %

     

    9.01

    %

     

    9.20

    %

     

    9.48

    %

    Common equity tier I capital to risk-weighted assets

     

    8.37

    %

     

    8.32

    %

     

    8.61

    %

     

    8.79

    %

     

    9.04

    %

    Tier I capital to adjusted assets

     

    8.65

    %

     

    8.80

    %

     

    9.00

    %

     

    9.17

    %

     

    9.34

    %

    Tangible common equity to tangible assets

     

    7.53

    %

     

    7.64

    %

     

    7.69

    %

     

    7.98

    %

     

    8.06

    %

    LOAN AND LEASE RECEIVABLE COMPOSITION

     

    (Unaudited)

     

    As of

    (in thousands)

     

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

    Commercial real estate:

     

     

     

     

     

     

     

     

     

     

    Commercial real estate - owner occupied (1)

     

    $

    236,058

     

     

    $

    244,039

     

     

    $

    233,725

     

     

    $

    268,354

     

    $

    265,989

    Commercial real estate - non-owner occupied (1)

     

     

    753,517

     

     

     

    715,309

     

     

     

    675,087

     

     

     

    687,091

     

     

    657,975

    Construction (1)

     

     

    211,828

     

     

     

    217,069

     

     

     

    212,916

     

     

     

    218,751

     

     

    211,509

    Multi-family (1)

     

     

    409,714

     

     

     

    392,297

     

     

     

    384,043

     

     

     

    350,026

     

     

    332,782

    1-4 family (1)

     

     

    24,235

     

     

     

    23,063

     

     

     

    23,404

     

     

     

    17,728

     

     

    16,678

    Total commercial real estate

     

     

    1,635,352

     

     

     

    1,591,777

     

     

     

    1,529,175

     

     

     

    1,541,950

     

     

    1,484,933

    Commercial and industrial (1)

     

     

    1,083,698

     

     

     

    1,036,921

     

     

     

    963,328

     

     

     

    853,327

     

     

    800,092

    Consumer and other (1)

     

     

    44,808

     

     

     

    45,743

     

     

     

    46,773

     

     

     

    47,938

     

     

    46,123

    Total gross loans and leases receivable

     

     

    2,763,858

     

     

     

    2,674,441

     

     

     

    2,539,276

     

     

     

    2,443,215

     

     

    2,331,148

    Less:

     

     

     

     

     

     

     

     

     

     

    Allowance for credit losses

     

     

    29,331

     

     

     

    28,115

     

     

     

    26,140

     

     

     

    24,230

     

     

    24,143

    Deferred loan fees

     

     

    (156

    )

     

     

    (142

    )

     

     

    (87

    )

     

     

    149

     

     

    448

    Loans and leases receivable, net

     

    $

    2,734,683

     

     

    $

    2,646,468

     

     

    $

    2,513,223

     

     

    $

    2,418,836

     

    $

    2,306,557

    (1)  

    On January 1, 2023, the Bank adopted ASU 2016-03 Financial Instruments - Credit losses (“ASC 326”). The Bank adopted ASC 326 using the modified retrospective method which does not require restatement of prior periods. The balances as of March 31, 2023 reflect a reclassification of $43 million to commercial and industrial from commercial real estate, and $7 million from consumer and other to commercial real estate.

    DEPOSIT COMPOSITION

     

    (Unaudited)

     

    As of

    (in thousands)

     

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

    Non-interest-bearing transaction accounts

     

    $

    430,011

     

     

    $

    419,294

     

     

    $

    471,904

     

     

    $

    537,107

     

     

    $

    564,141

     

    Interest-bearing transaction accounts

     

     

    779,789

     

     

     

    719,198

     

     

     

    612,500

     

     

     

    576,601

     

     

     

    461,883

     

    Money market accounts

     

     

    694,199

     

     

     

    641,969

     

     

     

    662,157

     

     

     

    698,505

     

     

     

    742,545

     

    Certificates of deposit

     

     

    285,265

     

     

     

    293,283

     

     

     

    308,191

     

     

     

    153,757

     

     

     

    160,655

     

    Wholesale deposits

     

     

    467,743

     

     

     

    455,108

     

     

     

    422,088

     

     

     

    202,236

     

     

     

    158,321

     

    Total deposits

     

    $

    2,657,007

     

     

    $

    2,528,852

     

     

    $

    2,476,840

     

     

    $

    2,168,206

     

     

    $

    2,087,545

     

     

     

     

     

     

     

     

     

     

     

     

    Uninsured deposits

     

    $

    916,083

     

     

    $

    867,397

     

     

    $

    974,242

     

     

    $

    967,465

     

     

    $

    1,007,935

     

    Less: uninsured deposits collateralized by pledged assets

     

     

    28,873

     

     

     

    37,670

     

     

     

    32,468

     

     

     

    14,326

     

     

     

    34,264

     

    Total uninsured, net of collateralized deposits

     

     

    887,210

     

     

     

    829,727

     

     

     

    941,774

     

     

     

    953,139

     

     

     

    973,671

     

    % of total deposits

     

     

    33.4

    %

     

     

    32.8

    %

     

     

    38.0

    %

     

     

    44.0

    %

     

     

    46.6

    %

    SOURCES OF LIQUIDITY

     

    (Unaudited)

     

    As of

    (in thousands)

     

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

    Short-term investments

     

    $

    109,612

     

    $

    80,510

     

    $

    159,859

     

    $

    76,871

     

    $

    86,707

    Collateral value of unencumbered pledged loans

     

     

    315,067

     

     

    265,884

     

     

    296,393

     

     

    184,415

     

     

    289,513

    Market value of unencumbered securities

     

     

    236,618

     

     

    217,074

     

     

    200,332

     

     

    188,353

     

     

    173,013

    Readily available liquidity

     

     

    661,297

     

     

    563,468

     

     

    656,584

     

     

    449,639

     

     

    549,233

     

     

     

     

     

     

     

     

     

     

     

    Fed fund lines

     

     

    45,000

     

     

    45,000

     

     

    45,000

     

     

    45,000

     

     

    45,000

    Excess brokered CD capacity(1)

     

     

    1,090,864

     

     

    1,017,590

     

     

    1,027,869

     

     

    1,162,241

     

     

    1,100,369

    Total liquidity

     

    $

    1,797,161

     

    $

    1,626,058

     

    $

    1,729,453

     

    $

    1,656,880

     

    $

    1,694,602

    Total uninsured, net of collateralized deposits

     

     

    887,210

     

     

    829,727

     

     

    941,774

     

     

    953,139

     

     

    973,671

    (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)

     

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

    Trust assets under management

     

    $

    2,715,801

     

    $

    2,707,390

     

    $

    2,615,670

     

    $

    2,483,811

     

    $

    2,332,448

    Trust assets under administration

     

     

    198,864

     

     

    199,729

     

     

    188,458

     

     

    176,225

     

     

    160,171

    Total trust assets

     

    $

    2,914,665

     

    $

    2,907,119

     

    $

    2,804,128

     

    $

    2,660,036

     

    $

    2,492,619

    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)

     

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

    Common stockholders’ equity

     

    $

    268,766

     

     

    $

    260,640

     

     

    $

    254,589

     

     

    $

    248,648

     

     

    $

    241,012

     

    Less: Goodwill and other intangible assets

     

     

    (12,110

    )

     

     

    (12,073

    )

     

     

    (12,160

    )

     

     

    (12,159

    )

     

     

    (12,218

    )

    Tangible common equity

     

    $

    256,656

     

     

    $

    248,567

     

     

    $

    242,429

     

     

    $

    236,489

     

     

    $

    228,794

     

    Common shares outstanding

     

     

    8,315,186

     

     

     

    8,315,465

     

     

     

    8,306,270

     

     

     

    8,362,085

     

     

     

    8,432,048

     

    Book value per share

     

    $

    32.32

     

     

    $

    31.34

     

     

    $

    30.65

     

     

    $

    29.74

     

     

    $

    28.58

     

    Tangible book value per share

     

     

    30.87

     

     

     

    29.89

     

     

     

    29.19

     

     

     

    28.28

     

     

     

    27.13

     

    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, 2022. 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)

     

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

    Common stockholders’ equity

     

    $

    268,766

     

     

    $

    260,640

     

     

    $

    254,589

     

     

    $

    248,648

     

     

    $

    241,012

     

    Less: Goodwill and other intangible assets

     

     

    (12,110

    )

     

     

    (12,073

    )

     

     

    (12,160

    )

     

     

    (12,159

    )

     

     

    (12,218

    )

    Tangible common equity (a)

     

    $

    256,656

     

     

    $

    248,567

     

     

    $

    242,429

     

     

    $

    236,489

     

     

    $

    228,794

     

    Total assets

     

    $

    3,418,850

     

     

    $

    3,265,738

     

     

    $

    3,164,411

     

     

    $

    2,976,611

     

     

    $

    2,850,802

     

    Less: Goodwill and other intangible assets

     

     

    (12,110

    )

     

     

    (12,073

    )

     

     

    (12,160

    )

     

     

    (12,159

    )

     

     

    (12,218

    )

    Tangible assets (b)

     

    $

    3,406,740

     

     

    $

    3,253,665

     

     

    $

    3,152,251

     

     

    $

    2,964,452

     

     

    $

    2,838,584

     

    Tangible common equity to tangible assets

     

     

    7.53

    %

     

     

    7.64

    %

     

     

    7.69

    %

     

     

    7.98

    %

     

     

    8.06

    %

     

     

     

     

     

     

     

     

     

     

     

    Fair Value Adjustments:

     

     

     

     

     

     

     

     

     

     

    Financial assets - MTM (c)

     

    $

    (45,489

    )

     

    $

    (43,403

    )

     

    $

    (24,764

    )

     

    $

    (24,302

    )

     

    $

    (7,650

    )

    Financial liabilities - MTM (d)

     

    $

    23,436

     

     

    $

    21,916

     

     

    $

    17,334

     

     

    $

    17,328

     

     

    $

    11,230

     

    Net MTM, after-tax e = (c-d)*(1-21%)

     

    $

    (17,422

    )

     

    $

    (16,975

    )

     

    $

    (5,870

    )

     

    $

    (5,509

    )

     

    $

    2,828

     

     

     

     

     

     

     

     

     

     

     

     

    Adjusted tangible equity f = (a-e)

     

    $

    239,234

     

     

    $

    231,592

     

     

    $

    236,559

     

     

    $

    230,980

     

     

    $

    231,622

     

    Adjusted tangible assets g = (b-c)

     

    $

    3,361,251

     

     

    $

    3,210,262

     

     

    $

    3,127,487

     

     

    $

    2,940,150

     

     

    $

    2,830,934

     

    Adjusted TCE ratio (f/g)

     

     

    7.12

    %

     

     

    7.21

    %

     

     

    7.56

    %

     

     

    7.86

    %

     

     

    8.18

    %

    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 Nine Months Ended

    (Dollars in thousands)

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

     

    September 30,
    2023

     

    September 30,
    2022

    Total non-interest expense

    $

    23,189

     

     

    $

    22,031

     

     

    $

    21,767

     

     

    $

    21,167

     

     

    $

    20,028

     

     

    $

    66,987

     

     

    $

    58,307

     

    Less:

     

     

     

     

     

     

     

     

     

     

     

     

     

    Net loss (gain) on repossessed assets

     

    4

     

     

     

    (2

    )

     

     

    6

     

     

     

    22

     

     

     

    7

     

     

     

    8

     

     

     

    27

     

    SBA recourse provision (benefit)

     

    242

     

     

     

    341

     

     

     

    (18

    )

     

     

    (322

    )

     

     

    96

     

     

     

    565

     

     

     

    134

     

    Contribution to First Business Charitable Foundation

     

     

     

     

     

     

     

     

     

     

    809

     

     

     

     

     

     

     

     

     

     

    Tax credit investment impairment recovery

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    (351

    )

    Total operating expense (a)

    $

    22,943

     

     

    $

    21,692

     

     

    $

    21,779

     

     

    $

    20,658

     

     

    $

    19,925

     

     

    $

    66,414

     

     

    $

    58,497

     

    Net interest income

    $

    28,596

     

     

    $

    27,747

     

     

    $

    26,705

     

     

    $

    27,452

     

     

    $

    25,884

     

     

    $

    83,049

     

     

    $

    70,971

     

    Total non-interest income

     

    8,430

     

     

     

    7,374

     

     

     

    8,410

     

     

     

    6,973

     

     

     

    8,197

     

     

     

    24,214

     

     

     

    22,455

     

    Less:

     

     

     

     

     

     

     

     

     

     

     

     

     

    Bank-owned life insurance claim

     

     

     

     

     

     

     

     

     

     

    809

     

     

     

     

     

     

     

     

     

     

    Net loss on sale of securities

     

     

     

     

    (45

    )

     

     

     

     

     

     

     

     

     

     

     

    (45

    )

     

     

     

    Adjusted non-interest income

     

    8,430

     

     

     

    7,419

     

     

     

    8,410

     

     

     

    6,164

     

     

     

    8,197

     

     

     

    24,259

     

     

     

    22,455

     

    Total operating revenue (b)

    $

    37,026

     

     

    $

    35,166

     

     

    $

    35,115

     

     

    $

    33,616

     

     

    $

    34,081

     

     

    $

    107,308

     

     

    $

    93,426

     

    Efficiency ratio

     

    61.96

    %

     

     

    61.68

    %

     

     

    62.02

    %

     

     

    61.45

    %

     

     

    58.46

    %

     

     

    61.89

    %

     

     

    62.61

    %

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Pre-tax, pre-provision adjusted earnings (b - a)

    $

    14,083

     

     

    $

    13,474

     

     

    $

    13,336

     

     

    $

    12,958

     

     

    $

    14,156

     

     

    $

    40,894

     

     

    $

    34,929

     

    Average total assets

    $

    3,276,240

     

     

    $

    3,127,234

     

     

    $

    2,984,600

     

     

    $

    2,867,475

     

     

    $

    2,758,961

     

     

    $

    3,130,426

     

     

    $

    2,714,309

     

    Pre-tax, pre-provision adjusted return on average assets

     

    1.72

    %

     

     

    1.72

    %

     

     

    1.79

    %

     

     

    1.81

    %

     

     

    2.05

    %

     

     

    1.74

    %

     

     

    1.72

    %

    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 Nine Months Ended

    (Dollars in thousands)

    September 30,
    2023

     

    June 30,
    2023

     

    March 31,
    2023

     

    December 31,
    2022

     

    September 30,
    2022

     

    September 30,
    2023

     

    September 30,
    2022

    Interest income

    $

    50,941

     

     

    $

    47,161

     

     

    $

    42,064

     

     

    $

    38,319

     

     

    $

    31,786

     

     

    $

    140,167

     

     

    $

    83,053

     

    Interest expense

     

    22,345

     

     

     

    19,414

     

     

     

    15,359

     

     

     

    10,867

     

     

     

    5,902

     

     

     

    57,118

     

     

     

    12,082

     

    Net interest income (a)

     

    28,596

     

     

     

    27,747

     

     

     

    26,705

     

     

     

    27,452

     

     

     

    25,884

     

     

     

    83,049

     

     

     

    70,971

     

    Less:

     

     

     

     

     

     

     

     

     

     

     

     

     

    Fees in lieu of interest

     

    582

     

     

     

    936

     

     

     

    651

     

     

     

    1,318

     

     

     

    807

     

     

     

    2,169

     

     

     

    3,962

     

    FRB interest income and FHLB dividend income

     

    870

     

     

     

    1,064

     

     

     

    656

     

     

     

    613

     

     

     

    445

     

     

     

    2,590

     

     

     

    913

     

    Adjusted net interest income (b)

    $

    27,144

     

     

    $

    25,747

     

     

    $

    25,398

     

     

    $

    25,521

     

     

    $

    24,632

     

     

    $

    78,290

     

     

    $

    66,096

     

    Average interest-earning assets (c)

    $

    3,038,776

     

     

    $

    2,913,751

     

     

    $

    2,765,087

     

     

    $

    2,649,149

     

     

    $

    2,582,945

     

     

    $

    2,906,874

     

     

    $

    2,553,343

     

    Less:

     

     

     

     

     

     

     

     

     

     

     

     

     

    Average FRB cash and FHLB stock

     

    54,677

     

     

     

    76,678

     

     

     

    45,150

     

     

     

    50,522

     

     

     

    45,351

     

     

     

    58,870

     

     

     

    45,423

     

    Average non-accrual loans and leases

     

    15,775

     

     

     

    3,781

     

     

     

    3,536

     

     

     

    3,591

     

     

     

    4,416

     

     

     

    7,702

     

     

     

    5,532

     

    Adjusted average interest-earning assets (d)

    $

    2,968,324

     

     

    $

    2,833,292

     

     

    $

    2,716,401

     

     

    $

    2,595,036

     

     

    $

    2,533,178

     

     

    $

    2,840,302

     

     

    $

    2,502,388

     

    Net interest margin (a / c)

     

    3.76

    %

     

     

    3.81

    %

     

     

    3.86

    %

     

     

    4.15

    %

     

     

    4.01

    %

     

     

    3.81

    %

     

     

    3.71

    %

    Adjusted net interest margin (b / d)

     

    3.66

    %

     

     

    3.63

    %

     

     

    3.74

    %

     

     

    3.93

    %

     

     

    3.89

    %

     

     

    3.68

    %

     

     

    3.52

    %

     


    The First Business Financial Services Stock at the time of publication of the news with a raise of +2,53 % to 28,40EUR on Lang & Schwarz stock exchange (26. Oktober 2023, 22:24 Uhr).


    Business Wire (engl.)
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    First Business Bank Reports Third Quarter 2023 Net Income of $9.7 Million First Business Financial Services, Inc. (the “Company”, the “Bank”, or “First Business Bank”) (Nasdaq:FBIZ) reported quarterly net income available to common shareholders of $9.7 million, or earnings per share of $1.17 on a diluted basis. This …