FBIZ: Fourth Quarter EPS on Target; Raising 2013 EPS Estimate by a Nickel
By Ann Heffron, CFA
First Business Financial Services, Inc. (NasdaqGM:(FBIZ - Snapshot Report) ) posted net income of $2.5 million up 6% from the $2.4 million earned in the year-ago quarter.
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Diluted earnings per share fell 5% to $0.86 (matching our estimate) from $0.90 in last year’s fourth quarter due to an increased number of average shares outstanding. In December 2012, FBIZ sold 1.265 million common shares, raising $29.1 million, which it used to retire subordinated debt.
Compared to the year-ago quarter, fourth quarter results were boosted by a 6% gain in net interest income due to 3% growth in average interest-earning assets and an 8 basis-point rise in the net interest margin, as well as a 41% jump in noninterest income and a 10% drop in the loan loss provision.
This was partly offset by a 19% increase in total noninterest expense, largely reflecting 31% higher compensation costs due to the hiring of additional business development officers and the start-up of First Business Factors, and a 13% increase in average diluted shares outstanding.
For the year, FBIZ earned $8.9 million, or $3.29 per diluted share, up 16% from the $7.7 million, or $2.94 per diluted share in 2011, which excludes a $0.7 million, or $0.29 per diluted share, one-time tax benefit related to a change in regulation for net operating loss carryforwards by the state of Wisconsin.
We are raising our 2013 diluted EPS estimate by a nickel to $3.05 from $3.00. This increase primarily reflects changes to our estimates for net interest income, the loan loss provision, and effective income tax rate.
We note that the ABA Banking Journal ranked FBIZ 15th among all publicly traded banks with $1-10 billion in total assets (of which there are about 250 companies in the US), based upon ROE in 2011, which was 12.8% for FBIZ. It is the first time FBIZ has made this list, and speaks to the tremendous improvement in operating performance the Company has made over the last few years.
First Business Financial Services, Inc. (FBIZ or the Company) is a bank holding company headquartered in Madison, Wisconsin, with $1.2 billion in total assets at December 31, 2012. FBIZ specializes in business lending for small-medium-sized companies with sales ranging from $2-50 million. As an adjunct to these services, FBIZ also offers banking services to business owners, executives, professionals, and high net worth individuals, though this is a less significant part of its business.
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