In This Article:
Release Date: January 31, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
-
First Business Financial Services Inc (NASDAQ:FBIZ) reported record earnings, with a 15% increase from the third quarter and a 24% increase from Q4 2023.
-
The company achieved strong loan growth, with loan balances increasing by 10% year-over-year.
-
Total deposits grew by 11% from the previous year's fourth quarter, indicating strong deposit growth.
-
The efficiency ratio improved to its lowest level since Q4 2013, showcasing operational efficiency.
-
FBIZ's net promoter score of 70 is nearly three times the banking industry average, reflecting strong client satisfaction.
Negative Points
-
There was a tick-up in non-performing assets (NPAs), which the company attributes to normalization from unusually low levels in recent years.
-
The transportation sector within the equipment finance portfolio continues to show isolated weakness.
-
A $16.9 million loan to a borrower in the equipment wholesale business was moved to non-performing status during the quarter.
-
The company experienced a modest uptick in accruing past due loans due to a delayed payment from one client.
-
Swap fee income and returns on SBIC funds are expected to continue experiencing variability.
Q & A Highlights
Q: Can you provide more details on the 10% annual loan growth guidance, particularly regarding the C&I bucket which was down in the fourth quarter? A: (Unidentified_6) We expect C&I to be the larger portion of growth next year, as CRE activity has slowed. The decline in the fourth quarter was due to some asset-based lending loans paying off, which is not typical.
Q: What are your plans for growing core deposits, and how do you see the mix between core and wholesale deposits evolving? A: (Unidentified_6) We aim to maintain a mix where 70-80% of our funding is from in-market deposits and 20-30% from wholesale to match fund. (Unidentified_3) We focus on adding new relationships through treasury management, which has grown at an 11% annual rate over the last five years.
Q: How do you view loan yields and the potential for repricing in the current environment? A: (Unidentified_4) We have opportunities to improve yields through reinvestment and a better C&I lending mix. We aim to maintain a stable net interest margin in the 360 to 365 basis points range.
Q: Can you discuss your capital deployment strategy, particularly regarding share repurchases and dividends? A: (Unidentified_6) Our priority is organic growth, aiming for 10% balance sheet growth. We consistently increase dividends and will consider share buybacks if we generate capital beyond growth and dividend needs.