FBIZ: Shaving 2012 Estimate, but Continuing Outperform - Analyst Blog
March 15 2012 - 12:23PM
Zacks
FBIZ: Shaving 2012 Estimate, but Continuing Outperform
Ann Heffron, CFA
First Business Financial Services, Inc.
(FBIZ) posted fourth quarter diluted EPS
of $0.90, up 275% from the $0.24 EPS reported last year, and $0.03
above our $0.87 estimate. Relative to our estimate, this largely
reflected lower-than-expected compensation expense due to reduced
bonus accruals as some divisions fell short of their targets,
partly offset by a higher-than-expected loss provision.
Compared to the year-ago quarter, fourth quarter results were
boosted by a gain in net interest income from a higher net interest
margin, sharp growth in service charges on deposits and loan fees,
a significantly reduced loan loss provision, strong control over
operating costs, and a lower effective tax rate.
The Company continued to make excellent progress in reducing
problem assets and indications are that it has turned the corner
regarding asset quality. Nonaccrual loans fell $5.2 million, or
19%, sequentially to $21.8 million, while foreclosed assets rose
$0.2 million, or 9%, to $2.2 million. As a percentage of total
loans and OREO, nonperforming assets fell 56 basis points
sequentially to 2.81% from 3.37% at the end of the third quarter
and 175 basis points year over year from the 4.56% at the end of
2010.
For the year, FBIZ earned $7.7 million before a $0.7 million
one-time tax benefit related to a change in regulation for net
operating loss carryforwards by the state of Wisconsin, or $2.94
per diluted share, up 107% from the $3.6 million before a $2.7
million goodwill impairment charge, or $1.42 per diluted share,
posted in 2010.
This year-over-year gain primarily stemmed from an 11% rise in net
interest income to $35.5 million on a 25 basis-point increase in
the net interest margin (average loans rose only 0.5%), a 40%
decline in the loan loss provision to $4.3 million, and modest 3%
growth in noninterest expense, largely due to lower credit costs
from collateral liquidations and foreclosures, which combined fell
about 12 % to $1.2 million, and a 21% drop in FDIC insurance
premiums to $2.5 million, due to changes in premium calculations
required by the Dodd-Frank Act that became effective on April 1,
2011. This was partly offset by a 12% increase in compensation
expense to $14.9 million stemming from FBIZ’s better operating
performance, as well as a 33% jump in marketing costs to $1.0
million, reflecting increased emphasis on gathering in-market core
deposits.
We are reducing our 2012 diluted EPS estimate to $3.25 from $3.40,
principally due to three factors: (1) increased compensation
expense as the Company intends to hire new business development
officers during 2012 to drum up new business, (2) a higher
effective tax rate than we estimated previously, and (3) a modestly
higher loan loss provision than our prior estimate. Despite the
reduction, our $3.25 estimate in 2012 still represents an 11% gain
over 2011’s $2.94.
First Business Financial Services, Inc. (FBIZ or the Company) is a
bank holding company headquartered in Madison, Wisconsin, with $1.1
billion in total assets at December 31, 2011. FBIZ specializes in
business lending for small-medium-sized companies with sales
ranging from $2-50 million. As an adjunct to these services, FBIZ
also offers banking services to business owners, executives,
professionals, and high net worth individuals, though this is a
less significant part of its business.
To view a free copy of our most recent research report on
FBIZ, visit Ann Heffron's page at
http://scr.zacks.com/ .
FIRST BUS FINL (FBIZ): Free Stock Analysis Report
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