Attached files
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| 8-K - FORM 8-K - FIRST BUSINESS FINANCIAL SERVICES, INC. | c24375e8vk.htm |
Exhibit 99.1
Dear Shareholders and Friends of First Business:
“Your Success Comes First” at First Business. I’m proud to report that in the first nine months of
2011 we continued to deliver first-rate results, and that means success for each of us —
shareholder, client, and employee alike.
The strength of our franchise can be seen across the board. We’ve seen robust net interest margin
expansion and double-digit revenue growth, despite the sobering economic environment. We’ve become
more efficient by containing costs, and our asset quality is improving significantly. We achieved
this success, in part, by capitalizing on the disruption in the Wisconsin banking industry, earning
new client business through our talented, experienced bankers who are dedicated to providing
unparalleled service to our new and existing client base. While other banks retreated, we’ve been
on the ground, taking deposits, making loans — growing shareholder value.
First Business’ core earnings for the first nine months of 2011 grew 27%, or $2.5 million, over the
same period last year. After tax expense and loan and lease loss provision, our net income of $6.0
million grew by $5.7 million over the first nine months of 2010. Excluding the impact of last
year’s $2.7 million goodwill impairment, net income for the nine months ended September 30, 2011
grew $3.0 million or 99% over the prior year.
Our success in achieving this bottom-line growth is driven by meaningful improvement in top-line
revenue, which grew more than 10% over the first nine months of 2010. We achieved solid,
sustainable results in virtually every aspect of our business, a testament to the strength of our
organic business development efforts.
During the first nine months of 2011 net interest income grew
12%, reflective of 8% growth in in-market deposits and a 38 basis point decline in the rate paid on
interest-bearing deposits compared to the same period of 2010. As a result of these factors, our
net interest margin jumped 28 basis points to 3.31% in the first nine months of this year. Despite
deposit rates that remain historically low, our existing clients and many new clients have trusted
even more deposits to us in 2011. We’re pleased and humbled that they view First Business as a
trusted partner and a safe haven for their critical cash balances and operating accounts.
We’ve also built a first-class Trust & Investment Services team, and we’re proud to report that our
clients have entrusted $582 million in assets under management and administration to their care —
that’s 18%, or $90 million, more than just one year ago. These services generated over $1.9 million
in fee income during the first nine months of this year — 10% higher than in the same period of
2010.
Double-digit revenue growth coupled with disciplined cost containment efforts significantly
improved our efficiency ratio for the first nine months of 2011, bringing it down to 63.0%. This
efficiency ratio — which measures operating expense as a percentage of operating revenue — is
considerably better than each of the preceding five years, which ranged from a high of 71.0% in
2007 to a low of 65.8% in 2010. This is truly a testament to our balanced and measured approach to
business.
It’s an approach that has served us well in this uncertain economic environment. As bankers, we
have little control over many of the core drivers of and challenges to our profitability — loan
demand, interest rate policy, regulation, unemployment levels, GDP growth. At First Business it’s
part of our culture to focus squarely on those factors within our control, and we’ve done that very
well over the last year.
We’ve closely managed our problem assets by working on a loan by loan, client by client basis.
We’re proud of our ability to work with clients through all phases of their financial health. We
ensure we’re doing everything we can to support struggling borrowers while safeguarding the health
of our balance sheet — and our asset quality metrics demonstrate the significant progress we’ve
made.
Our ratio of non-accrual loans and leases to total loans and leases fell from 4.37% at December 31,
2010 to 3.14% at September 30, 2011. The improvement reflects a 30% decline in non-accrual loans
and leases over the past nine months, as non-accrual outflows far outpaced non-accrual inflows.
Certain reductions reflect paydowns as clients dispose of assets serving as collateral; in other
cases we’re helping troubled borrowers find alternative financing that better suits their current
financial condition. Even better, others have regained some ability to pay down their outstanding
balances.
I’m very pleased to report that our financial strength has been further reflected in our stock’s
performance. In June our stock joined the Russell Microcap Index, an addition we’re excited about
for the increased market exposure it brings. Our stock price growth combined with our consistent
dividend has delivered impressive returns to our shareholders. In fact, over the twelve months
ended September 30, 2011, FBIZ stock provided a total return to shareholders of 75.8%, compared to
declines of 21.0% and 14.7% returned by the SNL U.S. Bank Index and SNL U.S. Bank $1B-$5B Index,
respectively.
At First Business we like to say, “Your Success Comes First”. We’re proud to partner
with each of you, and we’re excited for the future. We thank you for your continued support and
appreciate your help in spreading the word about First Business.
Sincerely,
Corey Chambas, President and CEO
Financial Highlights
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| Income Statement Data | 9/30/11 | 9/30/10 | % Change | 9/30/11 | 9/30/10 | % Change | ||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
Net interest income |
$ | 14,119 | $ | 14,176 | -0.4 | % | $ | 42,364 | $ | 42,482 | -0.3 | % | ||||||||||||
Non-interest income |
1,728 | 1,671 | 3.4 | % | 5,145 | 4,986 | 3.2 | % | ||||||||||||||||
Non-interest expense |
6,750 | 6,379 | 5.8 | % | 20,148 | 22,146 | -9.0 | % | ||||||||||||||||
Net income |
$ | 2,179 | $ | 969 | 124.9 | % | $ | 6,040 | $ | 343 | NM | |||||||||||||
Common Per Share Data |
||||||||||||||||||||||||
Earnings — Diluted |
$ | 0.83 | $ | 0.38 | 118.4 | % | $ | 2.32 | $ | 0.14 | NM | |||||||||||||
Cash dividend declared |
0.07 | 0.07 | 0.0 | % | 0.21 | 0.21 | 0.0 | % | ||||||||||||||||
Period end tangible book value |
23.48 | 21.88 | 7.3 | % | ||||||||||||||||||||
| Balance Sheet Data | 9/30/11 | 9/30/10 | % Change | |||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||
Total gross loans and leases |
$ | 861 | $ | 879 | -2.1 | % | ||||||||||||||||||
Total assets |
1,136 | 1,123 | 1.1 | % | ||||||||||||||||||||
In-market deposits* |
530 | 506 | 4.7 | % | ||||||||||||||||||||
Stockholders’ equity |
62 | 56 | 11.2 | % | ||||||||||||||||||||
| * | Total Deposits excluding Brokered CDs | |
| NM = | not meaningful |
Stock Performance
This table shows the high, low, and closing price for FBIZ’s common stock in recent quarters as
reported by NASDAQ.
| Quarter | Trade Price | Closing | ||||||||||||||
| Ending | High | Low | Price | Volume | ||||||||||||
9/30/11 |
17.23 | 13.32 | 15.93 | 235,105 | ||||||||||||
6/30/11 |
15.00 | 11.48 | 14.75 | 329,611 | ||||||||||||
3/31/11 |
13.50 | 11.19 | 11.70 | 870,087 | ||||||||||||
12/31/10 |
14.90 | 8.80 | 13.42 | 170,739 | ||||||||||||
9/30/10 |
10.35 | 8.67 | 9.25 | 59,198 | ||||||||||||
Investor Materials
Annual and quarterly shareholder reports, regulatory filings, press releases, and articles about
the corporation which have appeared in various publications are generally available in the
“Investor Relations” section of our website, www.firstbusiness.com, or may be obtained from Mr.
James F. Ropella by calling (608) 232-5970 or via e-mail at jropella@firstbusiness.com.
Dividend Reinvestment and Stock Purchase Plan
The corporation offers its shareholders a convenient and economical plan to increase their
investment in First Business Financial Services common stock. This plan provides a method of
investing cash dividends and voluntary cash payments in additional shares of common stock without
payment of brokerage commissions or service charges.
Individuals who wish to purchase FBIZ stock for the first time may also participate in this plan.
For additional information about the plan and a brochure, please contact:
Computershare CIP
c/o Computershare Investor Services
P.O. Box 43078
Providence, RI 02940-3078
www.computershare.com/investor
c/o Computershare Investor Services
P.O. Box 43078
Providence, RI 02940-3078
www.computershare.com/investor
1-800-893-4698 (U.S. and Canada)
1-781-575-3120 (Outside U.S. and Canada)
1-781-575-3120 (Outside U.S. and Canada)
