First Business(FBIZ) - 2021 Q3 - Quarterly Report

Financial Performance - Net income for Q3 2021 was $9.2 million, or diluted earnings per share of $1.07, compared to $4.3 million, or $0.50 per share in Q3 2020, representing a 113.95% increase [188]. - Top line revenue for Q3 2021 was $28.2 million, an increase of 8.5% from the same period in 2020 [188]. - Net interest income for the three months ended September 30, 2021, was $21,223,000, reflecting a 14.0% increase from $18,621,000 in the prior year [214]. - Total operating revenue for the three months ended September 30, 2021, was $28,238,000, an increase of 8.5% compared to $26,029,000 for the same period in 2020 [214]. - Non-interest income for the nine months ended September 30, 2021, was $20,531 thousand, reflecting a $390 thousand, or 1.9%, increase compared to the same period in 2020 [204]. Asset and Loan Growth - Total assets increased by $16.6 million to $2.584 billion as of September 30, 2021, from $2.568 billion at December 31, 2020 [190]. - Average gross loans and leases increased by $226.2 million, or 11.6%, to $2.179 billion for the nine months ended September 30, 2021, compared to $1.953 billion for the same period in 2020 [190]. - Total commercial real estate loans increased $28.6 million to $1.388 billion as of September 30, 2021, with non-owner occupied CRE loans driving the growth [276]. - The average balance of total loans and leases receivable was $2,131,099 thousand in 2021, slightly down from $2,139,439 thousand in 2020, reflecting a decrease of 0.39% [223]. Asset Quality and Non-Performing Loans - Non-performing assets decreased to $7.6 million, or 0.29% of total assets, as of September 30, 2021, down from $26.7 million, or 1.04% of total assets at December 31, 2020 [190]. - Total impaired assets amounted to $7.658 million as of September 30, 2021, down from $26.697 million at December 31, 2020 [291]. - Non-accrual loans decreased by $19.2 million, or 72.1%, to $7.4 million at September 30, 2021, compared to $26.6 million at December 31, 2020 [291]. - The allowance for loan and lease losses decreased by $3.8 million, or 13.5%, to $24.7 million as of September 30, 2021, from $28.5 million as of December 31, 2020 [298]. Efficiency and Expenses - The efficiency ratio was 65.68% for the three months ended September 30, 2021, compared to 64.16% for the same period in 2020 [209]. - Total non-interest expense for the three months ended September 30, 2021, was $18,490,000, representing a 10.3% increase from $16,758,000 in the same period of 2020 [214]. - The increase in operating revenue was partially offset by a $5.6 million, or 16.5%, increase in compensation expense for the nine months ended September 30, 2021 [209]. - Compensation expense for the three and nine months ended September 30, 2021 was $13.4 million, an increase of $1.5 million, or 12.6%, and $39.3 million, an increase of $5.6 million, or 16.5%, respectively, compared to the same periods in 2020 [258]. Capital and Dividends - The Corporation declared a regular quarterly dividend of $0.18 per share, representing a payout ratio of 16.8% against diluted earnings per share of $1.07 [320]. - As of September 30, 2021, total capital to risk-weighted assets was 11.14%, exceeding regulatory requirements [318]. - Stockholders' equity increased to $224,489 thousand in 2021, up from $200,175 thousand in 2020, representing a growth of 12.1% [223]. Deposits and Borrowings - Average in-market deposits increased by $228.9 million, or 15.0%, to $1.756 billion for the nine months ended September 30, 2021, compared to $1.528 billion for the same period in 2020 [190]. - Period-end in-market deposits increased by $146.6 million, or 11.6% annualized, reaching $1.830 billion as of September 30, 2021 [314]. - FHLB advances and other borrowings decreased by $25.1 million, or 6.0%, to $394.1 million as of September 30, 2021, from $419.2 million at December 31, 2020 [282]. Future Outlook - Management expects to achieve a net interest margin of at least 3.50% on average over the long term, despite near-term expectations of slightly lower margins [234]. - The long-term impact of COVID-19 on the economy is uncertain, but management believes the long-term impact on the loan portfolio will be limited [237].