Banking Capital Markets News

First Business Bank Completes $32.5 Million Capital Raise and Announces $5.0 Million Buyback Program

First Business Bank Completes $32.5 Million Capital Raise and Announces $5.0 Million Buyback Program

First Business Financial Services, Inc. announced the successful private placement to institutional investors of $32.5 million in new capital consisting of $20.0 million of subordinated notes and $12.5 million of preferred stock (both more fully described below) and the redemption of $19.4 million of higher cost trust preferred securities and subordinated notes.

“We believe First Business Bank’s record of performance and proven ability to execute the Company’s growth strategy are key factors in successfully securing attractively priced capital”

The Company issued 7.00% Fixed-to-Floating Rate Series A Non-Cumulative Perpetual, Preferred Stock, par value $0.01 (the “Series A Preferred Stock”) with an aggregate offering price of $12.5 million. The Series A Preferred Stock will pay quarterly dividends, if declared, at an initial annual rate of 7.00% for five years. Thereafter, the annual dividend rate, if declared, will reset quarterly to a floating rate equal to the benchmark rate (expected to be the three-month Secured Overnight Financing Rate (SOFR)) plus 539 basis points. In addition, the Company 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 five years. Thereafter through maturity on March 15, 2032, the interest rate will reset quarterly to a floating rate equal to the benchmark rate (expected to be SOFR) plus 189 basis points.

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The Company intends to use a portion of the net proceeds from these offerings to redeem its $10.3 million 10.50% Fixed Rate Trust Preferred Securities maturing September 2038, and its $9.1 million Subordinated Notes bearing a Fixed-to-Floating interest rate of 6.00% and maturing April 2027.

Remaining net proceeds from the sale of the Series A Preferred Stock and the Subordinated Notes are expected to be used for general corporate purposes, including support of the Bank’s growth strategy.

“We believe First Business Bank’s record of performance and proven ability to execute the Company’s growth strategy are key factors in successfully securing attractively priced capital,” President and Chief Executive Officer Corey Chambas said. “With our strengthened capital position, we’re focused on enhancing shareholder returns through the redemption of higher cost trust preferred securities and subordinated notes, while continuing to support our strategy for achieving double-digit annual loan growth in 2022.”

The Series A Preferred Stock and the Subordinated Notes qualify as Tier I and Tier II capital, respectively, for regulatory risk-based capital purposes.

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Keefe, Bruyette & Woods, A Stifel Company, served as exclusive placement agent for the Series A Preferred Stock and the Subordinated Notes. Godfrey & Kahn, S.C. served as legal counsel to the Company. Squire Patton Boggs (US) LLP served as legal counsel to the placement agent.

New Repurchase Authorization & Shelf Registration

Effective March 4, 2022, the Company’s Board of Directors authorized the repurchase by the Company of shares of its common stock with a maximum aggregate purchase price of $5.0 million, in such quantities, at such prices and on such other terms and conditions as the Company’s Chief Executive Officer or Chief Financial Officer determine in their discretion to be in the best interests of the Company and its shareholders, any time from the effective date through March 4, 2023.

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