First Business Bank Completes $32.5 Million Fundraising and Announces $5.0 Million Buyback Program
MADISON, Wis.–(BUSINESS WIRE)–First Business Financial Services, Inc. (the “Company”, the “Bank” or “First Business Bank”) (Nasdaq: FBIZ) announced the successful private placement of $32.5 million in new capital consisting of 20, $0 million of subordinated debt and $12.5 million of preferred stock announced to institutional investors (both described in more detail below) and the redemption of $19.4 million of higher-priced trust preferred and subordinated debt.
The Company issued 7.00% fixed-to-floating rate non-cumulative perpetual Series A Preferred Stock with a par value of $0.01 (the “Series A Preferred Stock”) for an aggregate offering price of $12.5 million. The Series A Preferred Stock will pay quarterly dividends at an initial annual rate of 7.00% for five years if declared. Thereafter, the annual dividend rate, if declared, will reset quarterly to a floating rate equal to the reference rate (expected to be the three-month Secured Overnight Funding Rate (SOFR)) plus 539 basis points. In addition, the Company has issued 3.50% fixed to floating rate subordinated notes (the “Subordinated Notes”) with a principal amount of $20.0 million. The Notes will initially bear interest at a rate of 3.50% per annum for a period of five years. Thereafter, until maturity on March 15, 2032, the interest rate will reset quarterly to a variable interest rate equal to the reference interest rate (expected to be SOFR) plus 189 basis points.
The Company intends to use a portion of the net proceeds of these offerings to redeem its 10.50% Fixed Rate Trust Preferred Stock for $10.3 million, which matures in September 2038, and its Subordinated Debentures for $10.3 million $9.1 million with a 6.00% fixed interest rate and a maturity to be used April 2027.
It is expected that the remaining net proceeds from the sale of the Series A Preferred Stock and Subordinated Debentures will be used for general corporate purposes, including to support the Bank’s growth strategy.
“We believe that First Business Bank’s track record and proven ability to execute the company’s growth strategy are key factors in successfully raising capital at attractive prices,” said President and Chief Executive Officer Corey Chambas. “With our strengthened capital position, we are focused on enhancing shareholder returns through the repayment of higher-priced trust preferred securities and subordinated debt, while supporting our strategy to deliver double-digit annual loan growth in 2022.”
The Series A Preferred Stock and Subordinated Debentures qualify as Tier I and Tier II capital, respectively, for regulatory risk-based capital purposes.
Keefe, Bruyette & Woods, A pen company, acted as the exclusive placement agent for the Series A Preferred Stock and Subordinated Debentures. Godfrey & Kahn, SC acted as legal counsel to the Company. Squire Patton Boggs (US) LLP acted as legal counsel to the placement agent.
New buyback authorization and shelf registration
Effective March 4, 2022, the Company’s Board of Directors authorized the repurchase of common shares of the Company for a maximum aggregate purchase price of $5.0 million in such amounts, at such prices and on such other terms as those of the Company’s Chief Executive Officer or Chief Financial Officer Officers, in their sole discretion, will choose to act in the best interests of the Company and its shareholders at any time from the Effective Date through March 4, 2023.
In addition, the Company recently filed a Shelf Registration Statement on Form S-3. The purpose of the shelf registration statement was to renew the previously submitted shelf registration, which expired in November 2020. The shelf registration was not used in connection with the sale of the Series A Preferred Stock and Subordinated Debentures.
About First Business Financial Services, Inc.
First Business Financial Services, Inc., (Nasdaq: FBIZ) is the parent company of First Business Bank. First Business Bank specializes in business banking, including commercial banking and specialized lending, private wealth and bank consulting services, and through its refined focus offers unmatched expertise, accessibility and responsiveness. Specialty lending solutions are provided through First Business Bank’s wholly owned subsidiary, First Business Specialty Finance, LLC. Visit firstbusiness.bank for more information.
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which reflect First Business Bank’s current views with respect to future events and financial performance. Forward-looking statements are not based on historical information, but address future operations, strategy, financial results or other developments. Forward-looking statements are based on management’s expectations, certain assumptions and estimates made by management and information available to management at the time the statements are made. These statements are based on general assumptions and are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from the views, beliefs and projections expressed in such statements. Such statements are subject to risks and uncertainties, including, without limitation: (i) adverse changes in the economy or business conditions, either nationally or in our markets, including but not limited to inflation, supply chain issues, labor shortages and the like effects of the COVID 19 pandemic to the global, national and local economies, which may affect the Company’s credit quality, revenue and operations; (ii) competitive pressures between custodians and other financial institutions domestically and in our markets; (iii) increases in borrower defaults and other arrears; (iv) management’s ability to effectively manage growth, including the successful expansion of our customer service, administrative infrastructure and internal management systems; (v) fluctuations in interest rates and market prices; (vi) changes in legal or regulatory requirements applicable to the Company and its subsidiaries; (vii) changes in tax regulations, including changes in tax rates, new tax laws and revised interpretations of tax laws; (viii) fraud, including customer and system errors, or breaches of our network security, including the Company’s internet banking activities; or (ix) failure to comply with applicable SBA regulations to maintain eligibility for the guaranteed portion of SBA loans. Please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and other filings with the Securities and Exchange Commission for additional information about the factors that could affect the Company’s future results.