First Business(US:FBIZ)2025-04-25 19:00Financial Data and Key Metrics Changes - Pre-tax pre-provision adjusted earnings increased by 23% year-over-year, with earnings per share rising by 27% to $1.32 [6][12] - Tangible book value per share grew by 14% [6] - Net interest margin for the first quarter was 3.69%, reflecting strong balance sheet management [17][18] - Total deposits grew by $488 million, or 18%, compared to the same quarter last year [9] - Loan balances increased by approximately $275 million, or nearly 10% year-over-year [8] Business Line Data and Key Metrics Changes - Core deposits grew by $66 million, or over 11% [9] - Commercial and Industrial (C&I) loans led growth with balances expanding by $77 million, or 27% annualized [10] - Private wealth management assets and fees also saw growth [6] Market Data and Key Metrics Changes - Non-performing assets (NPAs) declined by $4.3 million from the linked quarter [13] - The weighted average risk rating of the portfolio remained stable, indicating no significant deterioration [14] Company Strategy and Development Direction - The company aims for 10% annual growth, focusing on relationship-based deposit growth and loan expansion [5][24] - The strategic plan emphasizes controlling the controllable and delivering shareholder returns that exceed peers [24][25] - The company is optimistic about 2025 and believes its strategic initiatives will support future growth [25] Management's Comments on Operating Environment and Future Outlook - Management noted rising uncertainty related to U.S. trade policy and potential economic recession but remains confident in outperforming peers [15][16] - The company is positioned to capture growth opportunities in countercyclical lending areas, such as asset-based lending [10][11] Other Important Information - Total expenses increased by $1.6 million compared to the fourth quarter, primarily due to workforce-related costs [21] - The effective tax rate for the first quarter returned to a normalized level of 17% [22] Q&A Session Summary Question: Inquiry about new loan yields and spread tightening - Management indicated that new loan yields were consistent with the prior quarter, with slight narrowing of spreads for competitive credits [29][30] Question: Impact of tariffs on clients - Management reported no significant impact from tariffs on clients, although there is ongoing uncertainty [38][40] Question: Equipment finance losses and charge-offs - Management confirmed that the increase in net charge-offs was a one-quarter anomaly, with expectations of continued credit costs in the equipment finance portfolio [42][43] Question: Provision expectations related to loan growth - Management acknowledged a correlation between increased provisions and charge-offs, with expectations for provisions to remain in line with recent quarters [46][48] Question: Cash and securities balances strategy - Management stated that the high cash and securities balances were intentional but temporary, aimed at maintaining liquidity [49][50] Question: SBA lending changes and revenue impact - Management does not foresee significant changes in volume due to recent SBA underwriting changes, attributing volume growth to the sales team [64][65] Question: Credit quality and migration trends - Management reported benign trends in credit quality with little change quarter-over-quarter [69][70] Question: Loan deposit ratio target - Management indicated a focus on maintaining a loan-to-deposit ratio below 100, with a target of 75% core funding to total bank funding [75][77]