First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Q2 2018 Earnings Presentation
50 slides from First Business Financial Services's earnings presentation, Jul 31, 2018
Slide 1: Investor Presentation Second Quarter 2018
INVESTOR PRESENTATION SECOND QUARTER 2018
Slide 2: Forward-Looking Statements
Forward-Looking Statements When used in d nous oper ‘might,’ “believe,” “expect,” “‘plan,” “assume,” “intend,” “estimate,” “anticipate, “forward-looking statements" within the meaning of such term in the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncer
Slide 3: Table of Contents
Table of Contents CoOMpany: OVEViEW scssevscvsvescvesevsvevssvacvszeecestssrvesssieevererseries 4 Quarterly. Update wiser isesisensipesscesesspveccisvsccsaverssessvneveressaveess 10 Earnings Catalysts ssscvssssivenvercsesereroucsvescesasevsseorvenssimaarerssvees 14 Investment Rationale .... 20 Finan
Slide 4: Company Overview
COMPANY OVERVIEW
Slide 5: Company Profile
Company Profile FBIZ BANKING: FBIZ TRUST $1.9 Billion $1.6Billion [ADMINISTRATION Headquarters: Madison, WI Mission: Build long-term value as an pi ial financial services provider to businesses, executives and high net worth individuals * Experienced leadership * Entrepreneurial management style * I
Slide 6: Evolution of Success
Evolution of Success Aligned with the Financial Needs of Our Niche Client Base Asset-based Company Retirement Lending Plan Services Business Banking if Equipment if Private Wealth Finance Services 4 , if 4 | © ; O— O ; O 7 O 1990 ) 1995 ) 1998 ) 2000 ) 2001 Madison Milwaukee Receivable Financing J )
Slide 7: Evolution of Success
Evolution of Success Aligned with the Financial Needs of Our Niche Client Base BUSINESS iynmnarsee BANKI SPECIALTY FINANCE ‘Gnowine on LEADING AN BUILDING AND ENJovING MANAGING A ESTABLISHED MANAGING PERSONAL BUSINESS [BUSINESSES PERSONAL WEALT RETIREMENT
Slide 8: Geographic Footprint
Geographic Footprint % Medion witHa)*| . . . wivaukee.wi* | . . . -|. yo lanpieton, Wi* . . . ansasciyast | . . . kenosha, wt . . fom, rx . aus, . ; oo . ico. . . Commercial banking activities are in the Midwest with remote office locations located Jeers + nationwide for specialty finance business l
Slide 9: Leadership Team
Leadership Team Experienced team trained at large, complex institutions >< Corey A. Chambas Edward G. Sloane Jr David R, Seiler Michael J. Losenegger PRESIDENT AND Ci CHIEF FINANCIAL CHIEF OPERATING CCHIEF CREDIT OFFICER OFFICER OFFICER A 4 ew. Jodi A. Chandler Mark J. Meloy Joan A. Burke Daniel S.
Slide 10: Quarterly Update
QUARTERLY UPDATE
Slide 11: Quarterly Update
Quarterly Update Second Quarter 2018 RECORD NET INTEREST INCOME DRIVEN BY LOAN GROWTH AND STRONG NET INTEREST MARGIN e@ LOANS INCREASED 8% AN! TRUST & INVESTMENT SERVICES REPORTS RECORD ASSETS AND QUARTERLY FEE INCOME FOR THE 10TH CONSECUTIVE QUARTER NON-PERFORMING ASSETS INCREASED BY $11.1 MILLION
Slide 12: Quarterly Update
Quarterly Update Second Quarter 2018 Sin mi 19% PYQ% 22017 ai20is_| azz018| Change _ Change ns (except per share amounts)| Top line ‘Operating Efficiency Total operating expenses Efficiency ratio ss loans and leases receivabl Balance Sheet Grow! Total in-market deposits Net interest margin!” Total n
Slide 13: Quarterly Update: Net Interest Margin Analysis
Quarterly Update Second Quarter 2018 Net Interest Margin Analysis 5.00% _ 4.00% a 0.00% 4015 1016 2016 3016 4016 1017 2017 3017 4017 1018 2018 “—— Yield on interest-Earning Assets —= Cost of Funds — Net interest Margin Effective Federal Funds Rate Cumulative Beta Trends Since Ir 4.00% 3.00% 2.00% 1.
Slide 14: Earnings Catalysts
EARNINGS CATALYSTS
Slide 15: Earnings Catalysts
Earnings Catalysts A) 7 7 2
Slide 16: Organic Loan and Lease Growth
g FS Organic Loan and Lease Growth Differentiated approach to business banking and investment in talent drives current success and long-term organic loan and lease growth expectations Period End Loans and Leases ‘Commercial Lending BDO Growth a * 10 new hires since Q1 2017 throughout our Milwaukee,
Slide 17: Asset Quality Improvement
Asset Quality Improvement + NPL increase related to one fully-collateralized asset-based deal with full repayment expected = + Management's outlook on asset quality improvement in the coming quarters remains positive Asset Quality Trends 2017-3017, aQi7-s1a8_— 2018 | Non-Performing Loans _ Other Rea
Slide 18: SBA Lending Growth and Profitability
SBA Lending Growth and Profitability SBA lending primed for profitable growth following significant investments in platform and new producers ‘SBA Lending Core Competencies ‘SBA Lending BDO Growth YE 2016 1017 2017 3017 4017 1018 2018 [Existing BDOs New BDOs Experienced SBA functional experts hired
Slide 19: Scale Wealth Management Business
Scale Wealth Management Business Continue to expand high performing wealth management business throughout FBIZ footprint Product Profile ‘* Fiduciary and investment manager for individual and corporate clients, creating and executing asset allocation strategies tailored to each client’s unique situa
Slide 20: Investment Rationale
INVESTMENT RATIONALE
Slide 21: Investment Rationale
Investment Rationale A 7 SS 7 A 1
Slide 22: P/E Multiple at a Discount to Peer Group
P/E Multiple at a Discount to Peer Group” | P/E Trend (June 30, 2017 - June 30, 2018) 10x Jun-t7 Jud? Aug? Sep-17._— Oct-17 Nova? = Decl? Jan-d8Feb-18 © Mar-18 Apri8.May-18 Jun-18 —FBIUS_ —Peer Group Average Saneanaces ne. (0188, eR of (8, 7 2 8)
Slide 23: Dividend Yield Above Peer Group Average
Dividend Yield Above Peer Group Average" Dividend Yield Trend (June 30, 2017 - June 30, 2018) 3.00% I, AT int ha mee a ee BS Jun-t7 Jul-47—Aug-17_Sep-17_ Oct-17. Nov-17_Dec-17_Jan-18 Feb-18 © Mar-18Apr-18 May-18 Jun-18, —FBIZ-Us_ —Peer Group Average i (08 rr, Saneanaces ne. (0188, eR les Utah oncrp
Slide 24: Competitive Advantage Driven by Niche Business and Client-Centric Focus
Competitive Advantage Driven by Niche Business and Client-Centric Focus CLIENT & COMMUNITY EVENTS 1 ~~ FIRST BUSINESS PRESENTS ——— = | First & Enlerprising” MANUFACTURING FIRST \PROFITS Business’ ° © NONPROFITS EXPO & CONFERENCE FIRST BUSINESS SEMINAR SERIES INDUSTRY PRACTICE GROUPS sve PROEESSIONAL
Slide 25: Diversified Margin and Fee Revenue
Diversified Margin and Fee Revenue Margin and fee revenue diversification driven by suite of commercial products and services ‘Average Gross Loan and Lease Mix je commercial Lending - CRE NOO commerci Lending -Other* commer s Lending - C&l Lending CRE 00 Asset Based tending SBA Lending Equipment Fin
Slide 26: Scalable Franchise Positioned for Sustainable Growth
Scalable Franchise Positioned for Sustainable Growth Organic growth remains the foundation for the future Improving credit profile — While non-accrual loans increased in the second quarter of 2018, management's outlook on asset quality improvement in the coming quarters remains positive SBA client a
Slide 27: Financial Performance
FINANCIAL PERFORMANCE
Slide 28: Net Interest Margin
Net Interest Margin = | Annual Trend = Net interest Margin = = Long-Term Goal Quarterly Trend Net interest Margin = = Long-Term Goal Source SRP Glob Markt ligne, 28
Slide 29: Fee Income Ratio
Fee Income Ratio Annual Trend 15% | 10% | 5% p 0% 2013, 2014 2015 2016 2017 Fee income Ratio = = Long-Term Goat Quarterly Trend 25% we ee ee eee 20% {| 15% 10% 5% 0% 2017 3017 4017 1018 2018 | Fee Income Ratio = = Long-Term Goal 29
Slide 30: Efficiency Ratio
Efficiency Ratio 2017 efficiency impacted by Annual Trend 5 Investments in the platform. fe ee ee er ee eg ee ee SS — — oq Se | oe = 2013 2014 2015 2016 2017 Efficiency Ratio = = Long-Term Operating Range ‘Quarterly Trend -— ——= > ——— — 71 —_ — ——— —— —— —_— 2017 3017 4ai7 sans 2018 Efficiency Ratio
Slide 31: In-Market Deposits / Total Bank Funding
In-Market Deposits / Total Bank Funding = Annual Trend Quarterly Trend = son so ” son - o - i its im _ sts os i a” on x om i i ‘ . 1H Transaction Accounts © Non-Transaction Accounts 1 Transaction Accounts © Non-Transaction Accounts i "83 perentage of oa Bonk undn
Slide 32: Annualized Net Charge-Offs / Average Loans
Annualized Net Charge-Offs / Average Loans Annual Trend 25% 2.0% 1.5% 1.0% 0.5% 0.0% 2007 2008 2009 2010 2011 2012 2013, 2014 2015 2016 — re — US. Commercial Bank $18-$38 Quarterly Trend 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 2017 3017 aur 1018 — rez — US. Commercial Banks $18-$38 Source SP Glob Matt rl
Slide 33: Return on Average Assets
= Return on Average Assets = | Annual Trend = re aa ek om Quarterly Trend am a es ooo Sure: SP Global Maret tigen. 33
Slide 34: Return on Average Equity
Return on Average Equity Annual Trend 2 = & = 2 Quarterly Trend s = = & ai :
Slide 35: Top Line Revenue Growth
Top Line Revenue Growth Annual Trend 40% 30% 2013 2014 2015 — US. Commercial Banks $18-$38 — FBIZ Quarterly Trend 2016 2017 2017 3017 4017 — US. commercial Banks $18-$3B — FBIZ 101s 2018
Slide 36: Loan and Deposit Composition
Loan and Deposit Composition Total Gross Loans & Leases Total Deposits
Slide 37: Efficient Funding Strategy
Efficient Funding Strategy Mitigates Interest Rate Risk Bank Funding Sources * Leverage commercial ie latonshies to attract in-market transaction deposi Maintain bank wholesale nding within Board-monitored limits — Match-funding fixed-rate term loans with Bank wholesale funding locks in interest rat
Slide 38: Appendix: Supplemental Data & Non-GAAP Reconciliations
APPENDIX SUPPLEMENTAL DATA & NON- GAAP RECONCILIATIONS
Slide 39: Commercial Banking Products & Services
COMMERCIAL BANKING PRODUCTS & SERVICES
Slide 40: Commercial Lending
Commercial Lending Superior talent with business expertise building relationships in Midwest geographic footprint Product Profile ‘© Target small- to medium-sized companies in our Wisco ‘= Lines of credit and term loans focused on businesses with annual sales of up to $75.0 million Kansas and Missou
Slide 41: Treasury Management
Treasury Management Superior talent with business expertise building relationships in Midwest geographic footprint Product Profile Millions Target small- to medium-sized companies in our Wisconsin, Kansas and Missouri markets Comprehensive services for commercial clients to manage their cash and liq
Slide 42: Asset-Based Lending
Asset-Based Lending High-yielding, counter-cyclical product complements conventional commercial lending Product Profile ‘* Target medium-sized companies nationwide * Primarily provide revolving lines of credit and term loans for leveraged buyouts, capital expenditures, working capital, bank debt ref
Slide 43: Receivable Financing
Receivable Financing High-yielding, counter-cyclical product complements conventional commercial lending Product Profile * Target small- to medium-sized companies nationwide * Primarily provide funding to clients by purchasing accounts receivable on a full recourse basis * Positioned to provide comp
Slide 44: Equipment Financing
Equipment Financing Aligned with the equipment loan and lease needs of our niche client base Product Profile * Includes broad range of equipment finance products to address the financing needs of commercial clients in a variety of industries other commercial equipment * Financings generally range be
Slide 45: Trust / Private Wealth
Trust / Private Wealth Wealth It services for busi executives and high net worth individuals Product Profile ‘* Fiduciary and investment manager for individual and corporate clients, creating and executing asset allocation strategies tailored to each client’s unique situation * Full fiduciary powers
Slide 46: SBA Lending & Servicing
SBA Lending & Servicing Full client acquisition strategy for small businesses Product Profile * Primarily originate variable rate term loans through the 7(a) program which typically provides a guaranty of 75% of principal and interest * Product offering is designed to generate new business opportuni
Slide 47: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS
Slide 48: Efficiency Ratio
Efficiency Ratio Non-GAAP Reconciliation “Efficiency Ratio” is a non-GAAP measure representing non-interest expense excluding the effects of the SBA recourse provision, impairment of tax credit investments, losses or gains on foreclosed properties, amortization of other intangible assets and other d
Slide 49: Cost of Funds
Cost of Funds Non-GAAP Reconciliation “Cost of Funds” is defined as total interest expense on deposits and FHLB advances divided by the sum of total average deposits and total average FHLB advances. We believe that this measure is important to many investors in the marketplace our bank funding costs
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First Business Financial Services — Q2 2018 Earnings Presentation on 6ix