MADISON, WI - First Business Financial (NASDAQ:FBIZ) Services, Inc. ("the Company"), a state commercial bank headquartered in Wisconsin, has issued $20 million in subordinated debentures, according to a recent SEC filing. The debentures were sold to accredited investors on Thursday, September 13, 2024, under exemptions provided by the Securities Act of 1933.
These debentures carry a 7.5% fixed interest rate and are set to mature on September 13, 2034. They have been structured to qualify as Tier 2 capital for regulatory purposes. The Company has the option to redeem the debentures, in whole or in part, after five years from the issuance, at 100% of their principal amount plus any accrued interest, pending approval from the Federal Reserve Board.
The proceeds from this issuance will primarily be used to repay the Company's outstanding indebtedness from the redemption of its $15 million 2019 Fixed-to-Floating Rate Subordinated Notes, which were due on August 15, 2029. Any remaining funds will be directed towards supporting anticipated future loan growth.
The terms of the debentures stipulate that holders can only accelerate payment upon bankruptcy or receivership of the Company or its wholly-owned subsidiary, First Business Bank. There are no provisions for acceleration in cases of default in interest payment or other obligations under the debentures.
This financial move comes as part of the Company's broader strategy to manage its capital requirements and growth objectives. The details of the debentures are outlined in the form of 7.5% Subordinated Debenture attached to the SEC filing, which serves as the source of this information.
In other recent news, First Business Financial Services has been the subject of significant attention from investment firms. The company reported strong earnings of $1.23 per share, exceeding expectations due to a robust pre-provision net revenue, a lower provision for credit losses, and a reduced tax rate.
This positive financial performance led DA Davidson to upgrade the stock from Neutral to Buy and increase the price target to $50. Keefe, Bruyette & Woods also increased its price target for the company to $51, while maintaining an Outperform rating on the stock.
Amid these developments, First Business Financial also experienced a 10% increase in loan growth on a linked quarter annualized basis, primarily driven by growth in commercial and industrial loans. The company's net interest margin rose by 7 basis points quarter over quarter, which, along with a lower provision for credit losses and stable expenses, is expected to continue supporting a positive outlook for the company's net interest income.
These positive developments led to an increase in earnings estimates by 1% for 2024 and 2% for 2025 by Keefe, Bruyette & Woods. Lastly, First Business Financial maintained its quarterly cash dividend at $0.25 per common share, indicating a stable return for its investors.
InvestingPro Insights
As First Business Financial Services, Inc. continues to manage its capital and pursue growth strategies, the company's financial health and market performance provide critical context for investors. According to InvestingPro data, First Business Financial Services has a market capitalization of $377.57 million and trades at a P/E ratio of 9.88, reflecting investor sentiment about its earnings capacity.
Notably, the company has demonstrated a commitment to shareholder returns, having raised its dividend for 11 consecutive years, and maintained dividend payments for 20 years, which may appeal to income-focused investors.
InvestingPro Tips highlight that analysts have revised their earnings upwards for the upcoming period, suggesting optimism regarding the company's financial prospects. Additionally, the company's stock has experienced a significant return over the last year, with a 56.37% price total return, indicating robust market performance.
This performance is further underscored by a strong return over the last three months, with a 34.51% price total return. These metrics, along with the company's profitability over the last twelve months, provide a comprehensive view of First Business Financial Services' recent financial trajectory.
For those interested in a deeper analysis, additional InvestingPro Tips are available, offering further insights into First Business Financial Services' financial metrics and market performance. Visit https://www.investing.com/pro/FBIZ for more detailed information and to explore the full range of available tips.
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