Commercial Lending
We strive to meet the specific commercial lending needs of small to medium
sized companies in our target markets of Wisconsin, Kansas and Missouri, primarily
through lines of credit and term loans to businesses with annual sales between
$2.0 million and $75.0 million. Through FBB, we have a significant presence
in Madison and its surrounding areas. In 2000, we opened FBB-Milwaukee to take
advantage of the strong commercial base located in Milwaukee and the surrounding
communities. In 2006, FBB opened a loan production office in Appleton to take
advantage of the commercial environment in Northeast Wisconsin. Subsequently,
FBB opened additional loan production offices in Oshkosh, Green Bay and Manitowoc.
In 2014, FBB-Milwaukee opened a loan production office in Kenosha, further expanding
within the southeastern area of Wisconsin. Also in 2014, we acquired Aslin Group,
Inc. and its bank subsidiary Alterra to add an established business focused
team serving similar sized businesses in the Kansas City metropolitan area.
Our commercial loans are typically secured by various types of business assets,
including inventory, receivables and equipment. We also originate loans secured
by commercial real estate, including owner-occupied commercial facilities, multi-family
housing, office buildings, retail centers, and, to a lesser extent, commercial
real estate construction loans. In very limited cases, we may originate loans
on an unsecured basis.
Asset-Based Financing
First Business Capital Corp. (“FBCC”), a wholly-owned subsidiary
of FBB, provides asset-based lending to small to medium sized companies. With
its sales offices located in several states, FBCC serves clients nationwide.
FBCC primarily provides revolving lines of credit and term loans for financial
and strategic acquisitions (e.g., leveraged or management buyouts), capital
expenditures, working capital to support rapid growth, bank debt refinancing,
debt restructuring, corporate turnaround strategies and debtor-in-possession
financing in the course of bankruptcy proceedings or the exit therefrom. As
a bank-owned, asset-based lender with strong underwriting standards, FBCC is
positioned to provide cost-effective financing solutions to companies with annual
sales between $2.0 million and $75.0 million who do not have the established
stable cash flows necessary to qualify for traditional commercial lending products.
Asset-based lending typically generates higher yields than traditional commercial
lending. This line of business complements our traditional commercial loan portfolio
and provides us with more diverse income opportunities. As of December 31, 2015,
our asset-based lending business line represented 11.3% of our total gross loans
and leases receivable.
First Business Factors (“FBF”), a division of FBCC, provides funding
to clients by purchasing accounts receivable on a full recourse basis. FBF provides
competitive rates to clients starting up, seeking growth and needing cash flow
support, or who are experiencing financial issues. Similar to asset-based lending,
factoring typically generates higher yields than traditional commercial lending
and complements our traditional commercial portfolio. We believe we will continue
to grow this business line in the future. FBF is headquartered in Chicago, Illinois
and with its sales offices located in several states is able to serve clients
nationwide. As of December 31, 2015, our factored receivable financing business
line represented approximately 1% of our total gross loans and leases receivable.
Equipment Financing
First Business Equipment Finance, LLC (“FBEF”), a wholly-owned subsidiary
of FBB, delivers a broad range of equipment finance products, including leases
and loans, to address the financing needs of commercial clients in a variety
of industries. FBEF’s focus includes manufacturing equipment, industrial
assets, construction and transportation equipment, and a wide variety of other
commercial equipment. These financings generally range between $500,000 and
$7.5 million with terms of 36 to 84 months. We believe we will continue to grow
this business line primarily through our existing offices in Wisconsin. As of
December 31, 2015, our equipment financing business line represented approximately
3.3% of our total gross loans and leases receivable.
Small Business Administration (“SBA”) Lending
The SBA guarantees loans originated by lenders to small business borrowers who
meet its program eligibility and underwriting guidelines. Specific program guidelines
vary based on the SBA loan program; however, all loans must be underwritten,
originated, monitored and serviced according to the SBA’s Standard Operating
Procedures. Generally, the SBA provides a guaranty to the lender ranging from
50% to 90% of principal and interest as an inducement to the lender to originate
the loan.
The majority of our SBA loans are originated using the 7(a) term loan program.
This program typically provides a guaranty of 75% of principal and interest.
In the event of default on the loan, the bank may request that the SBA purchase
the guaranteed portion of the loan for an amount equal to outstanding principal
plus accrued interest. In addition, the SBA will share on a pro-rata basis in
the costs of collection as well as the proceeds of liquidation.
Alterra is an active participant in the SBA’s Preferred Lender Program
(“PLP”). The PLP is part of the SBA's effort to streamline the procedures
necessary to provide financial assistance to the small business community. Under
this program, the SBA delegates the final credit decision and most servicing
and liquidation authority and responsibility to carefully selected PLP lenders.
We leverage this expertise and capacity centralized at Alterra to package, underwrite,
process, service, and liquidate, if necessary, all SBA loans throughout the
Corporation’s other locations. We believe our ability to reduce the processing
time to originate a loan with the SBA creates a competitive advantage in the
markets we serve. Since 2012, Alterra has ranked first among all SBA lenders
in the Kansas City SBA district measured by loan volume according to data published
by the SBA.
SBA lending is designed to generate new business opportunities for the Banks
by meeting the needs of clients whose borrowing needs cannot be met with conventional
loans. We earn income from the note rate of interest, generally a variable rate,
and by gathering deposits from and providing other services to these clients.
In addition, our SBA strategy generates significant non-interest income from
two primary sources. First, we typically sell the guaranteed portion of the
SBA loans to aggregators who securitize the assets for sale in the secondary
market and receive a premium on each loan sold, resulting in the recognition
of a gain in the period of sale. Second, we receive servicing income from the
holder of the securitized asset. Whereas past practice has been to sell the
guaranteed portion of every SBA loan, our future practice will be to evaluate
a variety of factors before making the decision to sell or retain the guaranteed
portion of each SBA loan we originate.
Treasury Management Services
The Banks provide comprehensive services for commercial clients to manage their
cash and liquidity, including lockbox, accounts receivable collection services,
electronic payment solutions, cash vault services, fraud protection, information
reporting, reconciliation and data integration solutions. For our clients involved
in international trade, the Banks offer international payment services, foreign
exchange and trade letters of credit. The Banks also offer a variety of deposit
accounts and balance optimization solutions. As we continue to seek to diversify
our income and increase our non-interest income, we have focused on increasing
sales of these services and have emphasized these offerings with new and existing
business clients.
Trust and Investment Services
FBB, through its First Business Trust & Investments (“FBTI”)
division, acts as fiduciary and investment manager for individual and corporate
clients, creating and executing asset allocation strategies tailored to each
client’s unique situation. FBTI has full fiduciary powers and offers trust,
estate, financial planning and investment services, acting in a trustee or agent
capacity as well as Employee Benefit/Retirement Plan services. FBTI also provides
brokerage and custody-only services, for which it administers and safeguards
assets, but does not provide investment advice.