First Business Financial Services ((FBIZ)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call from First Business Financial Services painted a generally positive picture of the company’s financial health and growth trajectory. The discussion highlighted significant growth in core deposits, Private Wealth assets, and tangible book value, underscoring a robust financial position. Despite facing challenges such as an increase in non-performing assets (NPAs) and a decrease in certain fee incomes, the company demonstrated strong loan growth, consistent revenue, and low net charge-offs, indicating a healthy outlook.
Strong Core Deposit Growth
The company reported a notable increase in core deposits, which grew by $70 million or 11% annualized from the first quarter, marking a 10% rise from last year’s second quarter. Additionally, service charges on deposits saw a 16% increase compared to the previous year’s second quarter, reflecting a solid foundation in deposit growth.
Impressive Private Wealth Growth
Private Wealth assets under management experienced an impressive 36% annualized growth during the quarter, with a 15% increase from a year ago. This highlights the company’s successful strategies in expanding its wealth management services and attracting more clients.
Tangible Book Value Increase
The tangible book value per share saw a significant rise of 14% from a year ago, showcasing the company’s ability to enhance shareholder value through effective financial management.
Consistent Revenue Growth
Operating revenue continued to grow, with pretax pre-provision adjusted earnings up 13% over last year’s second quarter and earnings per share (EPS) increasing by 10%. This consistent revenue growth underscores the company’s strong operational performance.
Loan Growth
Loan balances increased by approximately $267 million over the same period last year, representing a 9% growth. Total commercial and industrial (C&I) balances expanded by $30 million or 10% annualized, indicating robust demand for the company’s lending services.
Low Net Charge-offs
The company reported a decline in net charge-offs, particularly in the transportation and logistics segment of the small ticket equipment finance portfolio, highlighting effective risk management and credit quality.
Increase in Non-Performing Assets
There was a $4.6 million increase in NPAs due to a single credit issue in the transportation and logistics sector of the conventional C&I portfolio, which the company is actively managing.
Decrease in SBA Loan Sale Premiums and Fee Income
The company experienced a decrease in SBA loan sale premiums and fee income, attributed to the timing of closings and loans fully funding, which affected the overall fee income.
Decline in Fees in Lieu of Interest
Fees in lieu of interest, including prepayment fees and asset-based loan fees, declined by $379,000 from the first quarter, impacting the company’s fee income streams.
Decrease in SBIC Fee Income
A decrease of $369,000 in SBIC fee income was observed in the second quarter, contributing to the variability in the company’s fee income sources.
Forward-Looking Guidance
Looking ahead, First Business Bank remains committed to its strategic plan for double-digit annual growth. The company anticipates continued strength in core deposits and loan growth, with a robust net interest margin of 3.67%. Despite a competitive market, the bank expects to maintain strong asset quality and a well-collateralized loan portfolio. The diversification strategy in revenue streams is expected to support stable operating revenue, even amidst fluctuations in fee income.
In summary, the earnings call from First Business Financial Services conveyed a positive sentiment, with the company demonstrating strong financial performance and growth across key areas. The strategic focus on core deposits, Private Wealth growth, and consistent revenue generation positions the company well for future success, despite challenges in fee income and non-performing assets.