Introduction to First Business Bank

First Business Bank was first established in the year 1909 and is among just a handful of banks in the United States that have been operating for more than a century. The bank’s main office is located in the state of Wisconsin and in the city of Madison. The Federal Deposit Insurance Corporation has provided insurance to the bank since 1934. The FDIC is one of two governmental agencies that provides deposit insurance to American depositary institutions – the other is the National Credit Union Administration (NCUA). The FDIC’s mandate is mainly to insure deposits, but the agency also examines and supervises financial institutions and manages receiverships. The FDIC is also serves as the primary federal regulator for the bank. As a result of its size and presence, the bank is considered a national bank. Based on our estimates, we believe its asset base of $2,582 million ranks it in the 90th percentile of banks in the United States. First Business Bank does not currently have any offices located outside of the United States, and functionally is a domestic bank. Within the U.S., the bank currently has 5 offices. In terms of headcount, the bank currently has 307 employees.

Overview of the Bank’s Assets and Liabilities

Some of the key components of the bank’s balance sheet are total assets of $2,582 million, total loans extended to customers of $2,104 million and customer deposits of $1,906 million. In total, 74% of the bank’s total assets are made up of domestic deposits, and domestic deposits also represent 100% of the bank’s deposit base. Overall, 52% of the bank’s domestic deposits are insured. Loans extended to customers of the bank currently comprise 83% of the bank’s total assets. Loans extended to customers for real estate purposes represented 62% of the total loans outstanding. In addition, 100% of real estate loans were domestic. First Business Bank has $18 million of outstanding 1-4 family residential loans (mortgages), which in total represents 1% of its loans outstanding. Loans to individuals and loans to commercial and industrial interests represent 0% and 32% of loans outstanding, respectively.

Contact Information For First Business Bank

  • Main Office Address: 401 Charmany Dr., Madison, WI 53719
  • Website: http://www.firstbusiness.bank
  • Total Number of Branches: 5
  • Total Number of International Branches: None
  • Number of Employees: 307
  • FDIC Certificate Number: 15229
  • FDIC Community Bank: No
  • FDIC Field Office: Madison
  • Independent or Subsidiary Bank: Independent
  • Federal Reserve ID Number: 537449
  • Bank Charter Class: NM
  • Primary Regulator: FDIC

Financial Overview

first business bank-financial-metrics-sept-21

First Business Bank has total assets of $2,582 million which compares with $2,588 million in the prior year. This implies that over the past year, the bank’s asset base has shown a decrease of 0.2%. Moving to the bank’s loan portfolio, the bank has net loans outstanding of $2,104 million based on the latest available information. Its net loans outstanding have decreased slightly over the past year, with a decrease of 2.3%. Taking a closer look at the bank’s loan portfolio, we see that residential mortgages comprise 1% of the bank’s loan book. The bank has $18 million of residential mortgages outstanding, which compares with $46 million in the prior year. This implies a decrease of 60.7% over the past year. In addition, the bank provides loans to commercial and industrial businesses, which represents 32.2% of its total lending and stood at $687 million based on the latest available information. The bank also provides loans for farm-related activities, which currently amounts to 0.2% of its total loan portfolio. Finally, the bank also engages in the provision of auto loans. These are loans provided to customers to help finance vehicle purchases. Auto loans represent 0.0% of the bank’s total lending.

Bank Liquidity and Funding

While most banks are insured by the FDIC, the insurance coverage does not always provide full protection. Therefore, understanding a banks liquidity and funding is important to help assess the riskiness of a bank’s balance sheet. Oftentimes one of the cheapest forms of funding is customer deposits. First Business Bank has total customer deposits outstanding of $1,906 million. The bank’s deposit base has increased over the past year, growing 4.6%. The average bank in the country has a loan to deposit ratio of approximately 82%. In comparison, First Business Bank has a loan to deposit ratio of 110% which is above the average. A lower ratio is generally better as it indicates that the lending activities of a bank are more comfortably covered by its deposit base. Deposits, as noted earlier, are usually a cost effective source of financing. Effectively all of the bank’s deposit base is funded by domestic sources.

Bank Performance and Capital Metrics

first business bank-performance-metrics-sept-21

Moving on to the performance and capital metrics for the bank, in the above we have a chart that shows key performance metrics for First Business Bank compared with the average U.S. bank. As a starting point, looking at the bank’s return on assets, over the past year it has improved. Importantly, on this metric we can also see that the bank is above the average bank. Return on assets tells us how productive a bank is being with its asset base. Next, looking at the bank’s return on equity, which tells us how much of a return the bank has generated for its owners, over the past year it has improved. In addition, we can also see that the bank is above the average bank on this metric. Another metric that is helpful in contextualizing a bank’s return on equity is its leverage ratio. A lower ratio means that the bank has a higher reliance on borrowing to deliver its return on equity. In this case, the total leverage ratio is currently below the average U.S. bank, and has improved over the past year. Last but certainly not least is the tier 1 capital ratio. This is an important measure of the financial strength of a bank and its balance sheet. First Business Bank’s tier 1 capital ratio has been relatively stable over the past year, and is below the average U.S. bank.

Final Thoughts: First Business Bank

In conclusion, when we look at all the various factors and data we give First Business Bank a 3.1 out of 5.0 rating, which we consider to be above average. While for example, the bank shines when it comes to its cost of funds, which is above the national average, its tier 1 capital is a downward force on its rating. On this metric, the bank is below the national average. As a reminder, our rating is based on our proprietary scoring system which uses data from an in-depth nationwide bank study we performed. None of the work presented is intended to be investment advice or advice of any sort and is presented purely for informational purposes.