First Business Financial Services Inc. has reported a lower third quarter profit on a some bad loans at its Alterra Bank subsidiary.
Madison-based First Business Financial, the parent company of First Business Bank-Milwaukee, reported third quarter net income of $2.5 million, or 29 cents per diluted share, down from $4.4 million, or 50 cents per diluted share, in the third quarter of 2015. The company also owns First Business Bank and Alterra Bank.
Net interest income was $15.3 million in the third quarter, up from $14.6 million in the same period a year ago. Non-interest income was $3.6 million, down from $4.1 million in the third quarter of 2015. Revenue was $18.9 million, up from $18.7 million in the third quarter of 2015.
First Business Financial significantly increased its provision for loan and lease losses in the third quarter, to $3.5 million, from $287,000 in the same period a year ago. Its non-performing loans and leases increased to $25.7 million in the third quarter, compared with $9.7 million in the third quarter of 2015.
The company attributed the loan changes to three loan relationships at Alterra that had caused specific reserves and charge offs to increase. First Business Financial emphasized that First Business Bank and First Business Bank-Milwaukee have strong asset quality.
The company took a $2.9 million income tax benefit in the third quarter, compared with a $2.1 million income tax expense in the year-ago quarter.
First Business Financial had $1.6 billion in total deposits at the end of the third quarter, up from $1.5 billion in the same period a year ago.
“First Business has long delivered superior asset quality as a result of our talented employees, deep commercial client relationships and disciplined underwriting,” said Corey Chambas, president and chief executive officer. “Unfortunately, the increased reserves on certain loans at our Alterra subsidiary significantly impacted our bottom line. We are taking action to further enhance our policies, processes, controls, training, talent and reporting structures to help ensure First Business’ proven credit culture and discipline are instilled throughout the company. In order to meet market demand and drive high-quality growth in 2017 and beyond, we are working to ensure future growth is achieved in the way that has historically served our company and shareholders well. Consequently, we have temporarily slowed our SBA production while making investments to enhance the infrastructure, processes, capacity and scalability of the SBA platform.”
