First Business(US:FBIZ)2025-07-25 19:00Financial Data and Key Metrics Changes - Operating revenue grew by 10% year-to-date compared to the same period in 2024, with pre-tax pre-provision earnings increasing by 18% and net income by 17% [20] - Tangible book value per share increased by 14% from a year ago, indicating strong stock valuation gains [5] - The net interest margin for the second quarter was reported at 3.67%, reflecting strong balance sheet management [15] Business Line Data and Key Metrics Changes - Core deposits increased by $70 million, or 11% annualized from the first quarter, and up 10% from last year's second quarter [7] - Loan balances grew by approximately $267 million, or 9%, year-over-year, with solid demand for conventional and niche commercial and industrial (C&I) products [8] - Private wealth assets under management grew by 36% annualized during the quarter and were up 15% from a year ago [11] Market Data and Key Metrics Changes - The company reported a 16% increase in service charges on deposits compared to last year's second quarter, indicating strong core deposit gathering [7] - The company has seen broad-based growth in its conventional markets, particularly in the Southeast and Northeast regions [25] Company Strategy and Development Direction - The company is focused on achieving a five-year strategic plan aimed at driving double-digit growth annually [4] - The strategy includes a target of 75% in-market deposits and 25% wholesale funding, with flexibility based on match funding needs [49] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, believing that strategic initiatives will continue to serve the company well into the future [20] - The management noted that while deposit competition has increased, they remain confident in maintaining their net interest margin targets [29] Other Important Information - The company reported a low level of net charge-offs during the quarter, with a slight increase in non-performing assets (NPAs) attributed to a single credit in the transportation and logistics sector [13] - The company is no longer lending to the transportation and logistics industry in its small ticket equipment finance business, which is expected to lower overall loss risk [13] Q&A Session Summary Question: Loan growth outlook - Management indicated that they are currently running at about 8.9% loan growth and are optimistic about reaching the 10% target [24][25] Question: Deposit competition and margin impact - Management acknowledged that deposit competition has increased but does not foresee negative implications for their long-term net interest margin targets [29] Question: Non-performing assets increase - The increase in NPAs was due to a specific $6 million loan, which is fully collateralized [32] Question: SBA loan sale gains outlook - Management expects SBA loan sale gains to bounce back closer to Q1 levels for the remainder of the year [36] Question: Transportation portfolio outlook - Management feels confident about the remainder of the transportation portfolio, noting that they stopped lending in that area in May 2023 [41] Question: Expense outlook - Management anticipates typical modest growth in expenses, aiming for positive operating leverage [42] Question: Provision outlook - Management indicated that the provision for loan losses should be enough to support growth while keeping reserve levels flat [44] Question: Core deposit growth targets - Management aims to grow core deposits in line with loan growth, targeting a 10% increase [53] Question: Margin sensitivity to interest rates - Management noted slight asset sensitivity and plans to redeploy cash to maintain margin targets [59]