FBIZ: Debt Issue and Board Changes
Ann Heffron, CFA
First Business Financial Services, Inc. (FBIZ - Snapshot Report) made several announcements On January 31, 2012 concerning changes to its Board of Directors and the issuance on a new subordinated debt issue.
On January 30, 2012, FBIZ increased the size of its Board of Directors from a fixed nine members to a range of seven to eleven members. The following day, the Board was increased to ten members to accommodate the addition of Mr. John J. Harris to the Board. Mr. Harris, a senior financial services executive with over 25 years of experience providing financial advisory services to publicly traded companies, has extensive experience with mergers and acquisitions and the execution of public capital raises. While Mr. Harris’s expertise regarding public companies expands the Company’s knowledge base, it does not signal a change in strategy. FBIZ intends to focus on organic growth and does not expect to issue any new equity over the intermediate term.
At the same time, FBIZ announced the retirement of Mr. Gary Zimmerman on May 14, 2012 when he reaches the mandatory retirement age of 70, in accordance with the Company’s director retirement policy. At that time, it is expected that the Board of Directors will decline to nine members, within the newly established range of seven to eleven members.
On January 26, 2012, FBIZ sold $3.06 million of 7.50% 10-year subordinated debentures, maturing on January 15, 2022, to certain accredited investors and may sell additional debentures upon the same terms and conditions prior to February 29, 2012. The debentures, which have been structured to qualify as Tier 2 capital, repaid a portion of FBIZ’s existing $39.0 million of subordinated debt that matures in five years. Though the interest rate on the new debt is a bit higher (7.50% interest rate on the new debt versus 7.00% on the old debt), FBIZ extended the maturity structure of is debt obligations.
We do not expect this change to have any impact on our diluted EPS estimates, which remain at $2.90 for 2011 and $3.40 for 2012, representing year-over-year gains of 104% in 2011 and 17% in 2012.
First Business Financial Services, Inc. is a bank holding company headquartered in Madison, Wisconsin, with $1.1 billion in total assets at September 30, 2011. FBIZ specializes in business lending for small-medium-sized companies with sales ranging from $2-50 million. As an adjunct to these services, FBIZ also offers banking services to business owners, executives, professionals, and high net worth individuals, though this is a less significant part of its business.
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