First Business(US:FBIZ)2022-07-28 16:00Financial Performance - Net income available to common shareholders for Q2 2022 was $11.0 million, or diluted earnings per share of $1.29, compared to $8.2 million, or $0.95 per share in Q2 2021, representing a 34.1% increase in net income [186]. - Pre-tax, pre-provision adjusted earnings for Q2 2022 totaled $10.8 million, an increase of $835,000, or 8.3%, from Q2 2021 [186]. - Net interest income for the three months ended June 30, 2022, was $23,660,000, an increase of 9.3% from $21,652,000 in the same period of 2021 [193]. - Non-interest income for the three months ended June 30, 2022, was $6,872,000, reflecting an 8.7% increase from $6,321,000 in the prior year [193]. - Total operating revenue for the six months ended June 30, 2022, was $59,345,000, a 5.9% increase from $56,031,000 for the same period in 2021 [193]. Asset and Loan Growth - Total assets increased by $124.1 million, or 9.4% annualized, to $2.777 billion as of June 30, 2022, compared to $2.653 billion at the end of 2021 [188]. - Period-end gross loans and leases receivable rose by $50.1 million, or 4.5% annualized, to $2.291 billion as of June 30, 2022 [188]. - Total loans and leases receivable increased to $2,272,946, generating interest income of $25,687 with an average yield of 4.52% [213]. - Total commercial real estate loans increased by $33.9 million to $1.488 billion as of June 30, 2022, compared to $1.455 billion at December 31, 2021 [256]. - Excluding PPP loans, C&I loans increased by $30.1 million to $733.1 million as of June 30, 2022, from $703.0 million at December 31, 2021 [258]. Efficiency and Expense Management - Total non-interest expense for the three months ended June 30, 2022, was $19,456,000, a 7.0% increase from $18,184,000 in the prior year [200]. - The efficiency ratio for the three months ended June 30, 2022, was 64.47%, slightly up from 64.17% in the same period of 2021 [200]. - Total operating expense for the first half of 2022 was $38,573 thousand, reflecting a 9.0% increase from $35,383 thousand in the same period of 2021 [205]. - Non-interest expense increased by $1.3 million, or 7.0%, for the three months ended June 30, 2022, and by $2.8 million, or 7.8%, for the six months ended June 30, 2022, compared to the same periods in 2021 [239]. Asset Quality and Loan Losses - Non-performing assets decreased to $5.7 million, or 0.21% of total assets, down from $6.5 million, or 0.25% of total assets at the end of 2021 [188]. - The allowance for loan and lease losses decreased to 1.05% of total loans as of June 30, 2022, compared to 1.09% at the end of 2021 [188]. - Total impaired assets decreased to $5.897 billion as of June 30, 2022, from $6.739 billion as of December 31, 2021, representing a reduction of approximately 12.5% [280]. - The ratio of allowance for loan and lease losses to gross loans and leases was 1.05% as of June 30, 2022, down from 1.09% as of December 31, 2021 [286]. - The net recoveries on impaired loans and leases for the six months ended June 30, 2022, were $4.4 million, consisting of $107,000 in charge-offs and $4.5 million in recoveries [289]. Deposits and Funding - Average in-market deposits increased by $187.8 million, or 10.9%, for the six months ended June 30, 2022, compared to the same period in 2021 [188]. - As of June 30, 2022, deposits decreased by $88.6 million to $1.869 billion from $1.958 billion at December 31, 2021, primarily due to a decrease in transaction accounts and money market accounts [263]. - FHLB advances and other borrowings increased by $193.2 million, or 47.9%, to $596.6 million as of June 30, 2022, from $403.5 million at December 31, 2021 [265]. - Outstanding wholesale funds increased to $566.4 million, representing 23.4% of total bank funding, up from 17.1% at the end of 2021 [300]. Strategic Initiatives - The corporation aims to enhance long-term efficiency through strategic initiatives focused on revenue growth and process improvement [206]. - The corporation anticipates generating positive operating leverage on an annual basis, excluding the impact of PPP loans [206]. - Management aims to maintain a net interest margin of at least 3.50% over the long term, despite expected volatility from loan fees in lieu of interest [221].