Group 1 - First Business Financial Services (FBIZ) reported quarterly earnings of $1.43 per share, exceeding the Zacks Consensus Estimate of $1.27 per share, and up from $1.15 per share a year ago [1][2] - The company achieved an earnings surprise of 12.60% for the quarter, having surpassed consensus EPS estimates three times over the last four quarters [2] - Revenues for the quarter were $41.15 million, surpassing the Zacks Consensus Estimate by 4.72%, and up from $36.63 million year-over-year [3] Group 2 - The stock has gained approximately 5.4% since the beginning of the year, outperforming the S&P 500's gain of 2.7% [4] - The current consensus EPS estimate for the upcoming quarter is $1.19 on revenues of $39.43 million, and for the current fiscal year, it is $5.24 on revenues of $164.43 million [8] - The Zacks Industry Rank for Banks - Midwest is in the top 6% of over 250 Zacks industries, indicating a favorable outlook for the industry [9]

Financial Performance - Fourth quarter 2024 net income available to common shareholders reached $14.2 million, or EPS of $1.71, compared to $10.3 million, or $1.24 per share in the third quarter of 2024[1] - Operating revenue for the fourth quarter increased to $41.2 million, representing an 8.1% increase from the third quarter and a 12.3% increase year-over-year[4] - Pre-tax, pre-provision income grew to $17.7 million, up 14.8% from the linked quarter and 16.1% from the prior year quarter[4] - Net income for Q4 2024 reached $14,415 thousand, up 47.3% from $9,770 thousand in Q4 2023[38] - Basic earnings per share for Q4 2024 were $1.71, up from $1.15 in Q4 2023, reflecting a growth of 48.7%[38] Loan and Deposit Growth - Loan growth was strong, with total loans increasing by $63.6 million, or 8.3% annualized, from the third quarter of 2024, and $263.8 million, or 9.3%, from the fourth quarter of 2023[4] - Average loans and leases receivable grew by $71.8 million, or 9.5% annualized, to $3.104 billion[11] - Total period-end loans and leases receivable increased by $263.8 million, or 9.3%, to $3.114 billion[25] - Total period-end core deposits increased by $57.4 million, or 2.5%, to $2.396 billion, with the average rate paid decreasing by 22 basis points to 2.98%[26] - Total deposits rose to $3,107,140 thousand as of December 31, 2024, an increase of 11.1% from $2,796,779 thousand a year earlier[36] Interest Income and Margin - Net interest margin improved to 3.77%, up from 3.64% in the linked quarter, while net interest income grew by 6.9% from the previous quarter[4] - Net interest income for Q4 2024 was $33,148 thousand, a 12.5% increase compared to $29,540 thousand in Q4 2023[38] - Net interest income increased by $3.6 million, or 12.2%, to $33.1 million, reflecting an increase in average gross loans and leases[20] - The net interest margin for the year ended December 31, 2024, was 3.66%, down from 3.78% in 2023[42] Asset Management - Private Wealth assets under management reached a record $3.419 billion, with Private Wealth fee income increasing by 16.8% from the prior year quarter[4] - Trust assets under management increased to $3,160,449 as of December 31, 2024, up from $3,145,789 in September 2024, reflecting a growth of 0.5%[52] - Total trust assets reached $3,418,704 as of December 31, 2024, up from $3,397,941 in September 2024, reflecting an increase of 0.6%[52] Credit Quality - Non-performing assets increased to $28.4 million, or 0.74% of total assets, compared to 0.59% in the prior quarter, primarily due to a conventional C&I loan identified as non-performing[28] - The allowance for credit losses increased by $4.3 million to $37.3 million, representing 1.20% of total gross loans and leases, up from 1.16% in the prior year[30] - The provision for credit losses was $2,701 thousand in Q4 2024, compared to $2,573 thousand in Q4 2023, indicating a 5% increase[38] - Non-accrual loans and leases rose to $28,367 thousand as of December 31, 2024, compared to $19,364 thousand in the prior quarter, indicating a significant increase of 46.5%[46] Operational Efficiency - The efficiency ratio improved to 56.94% for the three months ended December 31, 2024, down from 59.44% in the previous quarter, showing enhanced operational efficiency[45] - Total non-interest expense for the three months ended December 31, 2024, was $23,152, up from $23,107 in September 2024, indicating a rise of 0.2%[60] Future Outlook - The company expects to achieve 10% balance sheet and top line revenue growth in 2025[2]

Financial Data and Key Metrics Changes - The company reported strong loan growth of approximately $286 million, up more than 10% year-over-year, and deposit growth of $313 million, nearly 12% from the previous year [5][11] - Adjusted net interest margin (NIM) for Q3 was 3.51%, compared to 3.47% in the previous quarter, while reported NIM was 3.64% [16][21] - Return on average tangible common equity expanded, and tangible book value per share grew by 9.7% annualized from the linked quarter [21] Business Line Data and Key Metrics Changes - The accounts receivable financing business showed significant growth, and the floor plan financing business for used car dealerships experienced the strongest growth among niche C&I lending areas [9][12] - The small ticket vendor finance business continued to grow at attractive spreads, while the transportation sector of the equipment finance portfolio saw a decline from $61 million to $46 million [7][8] - Private Wealth Management assets under management grew to $3.4 billion, marking a 17% increase from the prior year [12] Market Data and Key Metrics Changes - The South Central and Southeast Wisconsin markets led loan growth, while the Kansas City market showed early signs of growth under new leadership [5][6] - Core deposits grew by more than $193 million or 9% from a year ago, despite managing down higher-priced deposits [11] Company Strategy and Development Direction - The company is focused on growing core deposits through deep business and private wealth relationships, aiming for a stable net interest margin in the range of 360 to 365 basis points [25][29] - Strategic initiatives include enhancing operational efficiency through digital transformation and technology utilization, such as robotic process automation [26][27] - The company aims to produce tangible book value growth of 10% or more per year and return on average tangible common equity of 15% or more by 2028 [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining a stable net interest margin despite competitive pressures and anticipated rate cuts [14][42] - The company expects continued growth in loan and deposit volumes, driven by strong client relationships and a focus on high-quality growth [11][29] - Management noted that the current reserve levels are appropriate and will taper as credit normalizes [49] Other Important Information - The effective tax rate for the nine months ended September 30, 2024, was 16.8%, down from 21.4% for the same period in 2023 [20] - The company issued $20 million in subordinated debt, boosting Tier 2 capital and increasing the total capital ratio by 15 basis points [21] Q&A Session Summary Question: Margin outlook and cost of funds - Management indicated that they are proactively reducing deposit costs and are comfortable operating within the 3.60% to 3.65% range [32][42] Question: Lending demand and mix - Management noted strong demand in accounts receivable finance and vendor finance, with expectations that C&I lending may outpace CRE loans in the coming quarters [39] Question: Reserve levels and normalization - Management stated that current reserve levels are appropriate and will taper as credit conditions normalize [49] Question: Fee income outlook - Management expects fee income to stabilize and improve in the coming quarters, particularly in the SBA pipeline and mezzanine fund income [45][64]

| --- | --- | --- | |-------|------------------------------|---------------------------| | | | | | | | | | | | | | | Presentation Third Quarter | FirstBusiness.Bank 2024 | Forward ‐Looking Statements When used in this presentation, and in any other oral statements made with the approval of an authorized executive officer, the words or phrases "may," "could," "should," "hope," "might," "believe," "expect," "plan," "assume," "intend," "estimate," "anticipate," "project," "likely," or similar expressions are i ...

Financial Performance - Net income available to common shareholders for Q3 2024 was $10.3 million, or diluted earnings per share of $1.24, compared to $9.7 million, or $1.17 per share in Q3 2023 [120]. - Top line revenue for Q3 2024 was $38.1 million, an increase of $1.0 million, or 2.8%, compared to $37.0 million in Q3 2023; for the nine months ended September 30, 2024, top line revenue was $112.3 million, up $5.0 million, or 4.7%, from $107.3 million in the same period in 2023 [123][126]. - Pre-tax, pre-provision adjusted earnings increased to $15.4 million for Q3 2024, up from $14.1 million in Q3 2023, representing a 9.6% increase [131]. - Net interest income rose by 8.4% to $31.0 million in Q3 2024 compared to $28.6 million in Q3 2023 [132]. - Non-interest income decreased by 16.2% to $7.1 million in Q3 2024 compared to $8.4 million in Q3 2023 [132]. Asset and Loan Growth - Total assets increased by $207.9 million, or 7.9% annualized, to $3.716 billion as of September 30, 2024, from $3.508 billion at December 31, 2023 [123]. - Period-end gross loans and leases receivable increased by $200.3 million, or 9.4% annualized, to $3.050 billion as of September 30, 2024, compared to $2.850 billion at December 31, 2023 [124]. - Total loans and leases receivable increased to $3,031,880 thousand, up from $2,711,851 thousand, representing a growth of 11.8% year-over-year [136]. - Average gross loans and leases increased by $320.0 million, or 11.8%, for the three months ended September 30, 2024, and by $368.1 million, or 14.2%, for the nine months ended September 30, 2024, compared to the same periods in 2023 [139]. Efficiency and Ratios - Efficiency ratio improved to 59.4% for Q3 2024 from 62.0% in Q3 2023, indicating better operational efficiency [130]. - The efficiency ratio for the nine months ended September 30, 2024, was 61.96%, consistent with the previous year [132]. - Return on average assets (ROAA) for Q3 2024 was 1.13%, down from 1.19% in Q3 2023; for the nine months ended September 30, 2024, ROAA was 1.08%, compared to 1.13% in the same period in 2023 [120][128]. - Return on average common equity (ROACE) for Q3 2024 was 13.83%, compared to 14.62% in Q3 2023; for the nine months ended September 30, 2024, ROACE was 13.41%, down from 13.72% in the same period in 2023 [121][129]. Non-Performing Assets and Credit Quality - Non-performing assets were $19.4 million, or 0.52% of total assets, as of September 30, 2024, down from $20.8 million, or 0.59% of total assets, at December 31, 2023 [124]. - The allowance for credit losses increased by $2.5 million, or 10.2% annualized, to $35.5 million as of September 30, 2024, maintaining a ratio of 1.16% of gross loans and leases [202]. - The ratio of non-performing assets to total assets improved to 0.52% at September 30, 2024, compared to 0.59% at December 31, 2023 [195]. - Approximately 99.4% of the total loan portfolio was in current payment status as of September 30, 2024, compared to 99.2% at December 31, 2023 [195]. Deposits and Funding - As of September 30, 2024, total period-end deposits increased by $173.2 million to $2.970 billion from $2.797 billion at December 31, 2023, driven by increases in wholesale deposits, money market accounts, and interest-bearing transaction accounts [176]. - Average core deposits increased by $317.8 million, or 15.5%, to $2.366 billion for the nine months ended September 30, 2024, compared to $2.048 billion for the same period in 2023 [178]. - Total core deposits rose by $43.7 million, or 2.5% annualized, to $2.383 billion compared to $2.339 billion at December 31, 2023, with significant contributions from money market accounts and interest-bearing transaction accounts [177]. Tax and Regulatory Compliance - The effective tax rate for the nine months ended September 30, 2024, was 16.8%, down from 21.4% in the same period in 2023 [123]. - The Bank's capital ratios met all applicable regulatory capital adequacy requirements as of September 30, 2024, in compliance with Basel III standards [211]. Interest Rate Risk Management - The Corporation's strategy focuses on managing interest rate risk through efficient use of wholesale funds, including FHLB advances and brokered certificates of deposit [182]. - The Asset/Liability Management Committee regularly reviews the sensitivity of the company's assets and liabilities to interest rate changes [224]. - The company employs a simulation model to assess interest rate risk exposure, incorporating various assumptions about future growth and pricing behavior [225].

Core Insights - First Business Financial Services (FBIZ) reported revenue of $38.07 million for Q3 2024, a year-over-year increase of 2.8% and an EPS of $1.24, up from $1.17 a year ago [1] - The revenue fell short of the Zacks Consensus Estimate of $38.8 million, resulting in a surprise of -1.88%, while the EPS exceeded expectations by 3.33% [1] Financial Performance Metrics - Efficiency ratio stood at 59.5%, better than the average estimate of 62.1% from three analysts [2] - Net Interest Margin was reported at 3.6%, matching the average estimate [2] - Net Charge-off as a percentage of average loans was 0.2%, in line with the two-analyst average estimate [2] - Total Average Interest-Earning Assets were $3.41 billion, consistent with the average estimate [2] - Total Non-Interest Income was $7.06 million, below the average estimate of $7.75 million [2] - Net Interest Income reported at $31.01 million, slightly below the average estimate of $31.06 million [2] - Service charges on deposits were $0.92 million, lower than the average estimate of $0.98 million [2] - Swap fees amounted to $0.46 million, compared to the average estimate of $0.65 million [2] - Private wealth management service fees were $3.26 million, below the average estimate of $3.76 million [2] Stock Performance - Shares of First Business Financial Services have returned +1.1% over the past month, compared to the Zacks S&P 500 composite's +1.5% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Viewpoint - First Business Financial Services reported quarterly earnings of $1.24 per share, exceeding the Zacks Consensus Estimate of $1.20 per share, and showing an increase from $1.17 per share a year ago, indicating a positive earnings surprise of 3.33% [1] Financial Performance - The company posted revenues of $38.07 million for the quarter ended September 2024, which was below the Zacks Consensus Estimate by 1.88%, but an increase from $37.03 million year-over-year [1] - Over the last four quarters, the company has surpassed consensus EPS estimates three times, while it has only topped consensus revenue estimates once [1] Stock Performance - Since the beginning of the year, First Business Financial Services shares have increased by approximately 10.7%, compared to the S&P 500's gain of 21.5% [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.25 on revenues of $39.33 million, and for the current fiscal year, it is $4.70 on revenues of $152.27 million [4] - The estimate revisions trend for the company is mixed, resulting in a Zacks Rank 3 (Hold), suggesting that shares are expected to perform in line with the market in the near future [4] Industry Context - The Banks - Midwest industry, to which First Business Financial Services belongs, is currently ranked in the top 22% of over 250 Zacks industries, indicating a favorable industry outlook [5]

Financial Performance - The company reported a net income of $10.3 million for Q3 2024, with earnings per share of $1.24, compared to $10.2 million and $1.23 per share in Q2 2024, and $9.7 million and $1.17 per share in Q3 2023[2]. - Net interest income after provision for credit losses reached $28,920 thousand for the quarter ended September 30, 2024, compared to $26,779 thousand for the same period last year, reflecting an increase of 4.3%[35]. - Net income for the quarter was $10,526 thousand, a rise from $9,941 thousand in the same quarter of the previous year, indicating a year-over-year growth of 5.9%[35]. - The company reported a diluted earnings per share of $1.24 for the quarter, compared to $1.17 for the same quarter last year, reflecting a 6.0% increase[35]. Asset and Deposit Growth - Total assets increased to $3,715,724 thousand as of September 30, 2024, up from $3,418,850 thousand a year earlier, representing a growth of 8.7%[34]. - Total deposits grew to $2,969,947 thousand as of September 30, 2024, compared to $2,657,007 thousand a year ago, marking an increase of 11.7%[34]. - Core deposits increased to $2,382,730 thousand, up from $2,189,264 thousand a year earlier, which is a growth of 8.8%[34]. - Total period-end core deposits increased by $73.1 million, or 12.7% annualized, to $2.383 billion, with new non-maturity deposit balances of $96.1 million added at a weighted average rate of 3.91%[15]. Loan Performance - Loans increased by $65.0 million, or 8.7% annualized, from Q2 2024, and by $286.1 million, or 10.3%, from Q3 2023[3]. - Total gross loans and leases receivable reached $3,050,281,000 as of September 30, 2024, compared to $2,985,233,000 in June 2024, marking an increase of 2.2%[44]. - The average balance of total loans and leases receivable was $3,031,880 thousand, yielding interest income of $55,506 thousand[36]. Interest Income and Margin - Net interest income increased by 1.5% to $31.0 million from the previous quarter, driven by a $69.0 million increase in average loans and leases receivable[5][6]. - The net interest margin was stable at 3.64%, compared to 3.65% in the previous quarter, with an adjusted net interest margin of 3.51%[6][9]. - Interest income for the three months ended September 30, 2024, was $59,327,000, an increase from $57,910,000 for the previous quarter[56]. Non-Interest Income and Expenses - Non-interest income decreased by 4.9% to $7.1 million, with a notable decline in Private Wealth fee income by 5.7% to $3.3 million[7][8]. - Non-interest expense decreased by $772,000, or 3.2%, to $23.1 million, while operating expense decreased by $1.2 million, or 4.9%, to $22.7 million[12]. - Total non-interest income for the nine months ended September 30, 2024, was $21,246 thousand, down from $24,214 thousand for the same period last year, a decrease of 12.2%[35]. Credit Quality - The provision for credit losses was $2.1 million, an increase from $1.7 million in the previous quarter, driven by higher specific reserve requirements[7]. - Non-performing assets increased slightly to $19.4 million, representing 0.52% of total assets, consistent with the previous year[3][4]. - The allowance for credit losses increased by $559,000, or 1.6%, to $35.5 million, with the allowance as a percent of total gross loans and leases at 1.16%[18]. Capital and Efficiency - Stockholders' equity increased to $310,148 thousand as of September 30, 2024, from $278,089 thousand a year earlier[36]. - Efficiency ratio improved to 59.50% for September 30, 2024, down from 62.75% for June 30, 2024, indicating better operational efficiency[39]. - Tier I capital to risk-weighted assets improved to 9.11% as of September 30, 2024, compared to 8.99% in June 2024[43]. Future Outlook - The company plans to continue focusing on expanding its client service and administrative infrastructure to manage growth effectively[33]. - The Company completed a private placement of $20.0 million in subordinated debentures to fund anticipated future loan growth[29].

Core Viewpoint - First Business Financial Services (FBIZ) has received a Zacks Rank 2 (Buy) upgrade, indicating a positive trend in earnings estimates, which is a significant factor influencing stock prices [1][4]. Earnings Estimates and Revisions - The Zacks rating system is based on the Zacks Consensus Estimate, which aggregates EPS estimates from sell-side analysts for the current and upcoming years [2]. - The recent upgrade reflects an 8.8% expected earnings per share (EPS) of $4.71 for the fiscal year ending December 2024, compared to the previous year's reported number [9]. - Over the past three months, the Zacks Consensus Estimate for First Business Financial Services has increased by 4.2% [9]. Impact of Institutional Investors - Changes in earnings estimates are closely correlated with stock price movements, largely due to institutional investors who adjust their valuations based on these estimates [5]. - An increase in earnings estimates typically leads to higher fair value calculations for stocks, prompting institutional buying or selling, which subsequently affects stock prices [5]. Zacks Rating System - The Zacks Rank system categorizes stocks into five groups based on earnings estimates, with Zacks Rank 1 (Strong Buy) to Zacks Rank 5 (Strong Sell) [8]. - The system has a strong track record, with Zacks Rank 1 stocks averaging a +25% annual return since 1988 [8]. - The upgrade of First Business Financial Services to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating a strong potential for market-beating returns in the near term [11].

First Business Financial Services (FBIZ) closed the last trading session at $41.34, gaining 16.7% over the past four weeks, but there could be plenty of upside left in the stock if short-term price targets set by Wall Street analysts are any guide. The mean price target of $52.40 indicates a 26.8% upside potential. The average comprises five short-term price targets ranging from a low of $50 to a high of $56, with a standard deviation of $2.30. While the lowest estimate indicates an increase of 21% from the ...