First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Q4 2017 Earnings Presentation
43 slides from First Business Financial Services's earnings presentation, Jan 31, 2018
Slide 1: Investor Presentation Fourth Quarter 2017
wT on =} ig) INVESTOR PRESENTATION FOURTH QUARTER 2017
Slide 2: Forward-Looking Statements
Forward-Looking Statements When used in this presentation, and in any other oral statements made with the approval of an authorized executive officer, the words or phrases “may,” “could,” “should,” “hope,” “might,” “believe,” “expect,” “plan,” “assume,” “intend,” “estimate,” “anticipate,” “project,”
Slide 3: Table of Contents
Table of Contents Company Overview Quarterly Update Investment Rationale Commercial Banking Products & Services Strategic Plan Financial Performance Appendix
Slide 4: Company Overview
sles ee =] 9} COMPANY OVERVIEW
Slide 5: Company Profile
Company Profile a —o 1. Consists of all Fi FBIZ BANKING: FBIZ TRUST $1. 8 Billion $1. 5 Billion IN TOTAL ASSETS ASSETS UNDER MANAGEMENT & AGRaniSEATCn Headquarters: Madison, WI Mission: Build long-term shareholder value as an entrepreneurial financial services provider to businesses, executives and
Slide 6: Aligned with the Financial Needs of Our Niche Client Base
Aligned with the Financial Needs of Our Niche Client Base Asset-based Company Retirement Lending Plan Services Business Banking if Equipment if Private Wealth Services Finance Services J I J 1990 ) 1995 )} 1998 ) 2000 >) 2001 l . Madison Milwaukee . SBA Factoring Lending I I 2012 ) 2014 I Kenosha &
Slide 7: Geographic Footprint
Geographic Footprint Seattle, WA g Appleton, WI Minneapolis, MN Milwaukee, Wi ‘enosha, WI Madison, WI Detroit, Mi ‘Gicago,IL- Denver, CO YC Hockessin, DE @ Banking Off ce @ Asset Based Lending Business Development Office Equipment Finance — _ -
Slide 8: Leadership Team
Leadership Team Experienced team trained at large, complex institutions Corey A. Chambas PRESIDENT AND CEO Edward G. Sloane Jr. CHIEF FINANCIAL David R. Seiler CHIEF OPERATING FFICER OFFICER Jodi A. Chandler Mark J. Meloy Joan A. Burke CHIEF HUMAN CEO OF FIRST PRESIDENT OF RESOURCES BUSINESS BANK FI
Slide 9: Quarterly Update
eles = i=) 9} QUARTERLY UPDATE
Slide 10: Decreasing for the Third Consecutive Quarter
DECREASING FOR THE THIRD CONSECUTIVE QUARTER C) LOAN LOSS PROVISION DECLINED TO THE LOWEST LEVEL IN NINE QUARTERS © LOANS INCREASE 10% ANNUALIZED DURING Q4 2017 TO A RECORD $1.5 BILLION TRUST & INVESTMENT SERVICES REPORTS RECORD ASSETS AND QUARTERLY FEE INCOME FOR THE EIGHTH CONSECUTIVE QUARTER STRO
Slide 11: Quarterly Financial Summary
1Q% PYQ % $ in millions (except per share amounts)|_Q42016 _Q32017_ | Q42017 | __Change Change Top line revenue 220.684 bi k [ -8)% (8.7)% Operating Efficiency Total operating expenses Efficiency ratio Net interest income Gain on sale of SBA loans Trust and investment services fee income Service cha
Slide 12: Investment Rationale
eles = i=) 9} INVESTMENT RATIONALE
Slide 13: Investment Rationale Highlights
A P/E MULTIPLE AT A DISCOUNT TO PEER GROUP DIVIDEND YIELD SIGNIFICANTLY HIGHER THAN PEER GROUP AVERAGE A] COMPETITIVE ADVANTAGE DRIVEN BY NICHE FOCUS A] DIVERSIFIED MARGIN AND FEE REVENUE SCALABLE FRANCHISE POSITIONED FOR SUSTAINABLE GROWTH
Slide 14: P/E Multiple at a Discount to Peer Group
e Investment Rationale =a : ‘ 1 = P/E multiple at a discount to peer group (1) => P/E Trend (December 31, 2016 - December 31, 2017) 26x 24x 22x 20x 18x 16x 14x 12x 10x Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 ——FBIZ-US ——Peer Group Average ie L een,
Slide 15: Dividend Yield Above Peer Group Average
e Investment Rationale = Dividend yield above peer group average a) => Dividend Yield Trend ( ber 31, 2016 - D ber 31, 2017) 3.00% 2.50% 2.00% 1.50% aS EOS OTe eee 1.00% 0.50% 0.00% Dec-16 Jan-17 Feb-17 Mar-17_— Apr-17 May-17 Jun-17 Jul-17 Aug-17.— Sep-17 Oct-17 Nov-17 Dec-17 —FBIZ-US —Peer Group Av
Slide 16: Competitive Advantage Driven by Niche Business Focus
Investment Rationale Competitive advantage driven by niche business and client-centric focus CLIENT & COMMUNITY EVENTS 4 —— FIRST BUSINESS PRESENTS ——— E ee) = : nterprising = plirst MANUFACTURING FIRST NONPROFTS -—— Business EXPO & CONFERENCE ——— Brought to you by SEMINAR SERIES FIRST BUSINESS INDU
Slide 17: Margin and Fee Revenue Diversification
Investment Rationale Margin and fee revenue diversification driven by suite of commercial products and services Average Gross Loan and Lease Mix Commercial Lending - CRE NOO Commercial Lending - Other! Commercial Lending - C&d Commercial Lending - CREOO Asset-Based Lending SBA Lending Equipment Fina
Slide 18: Scalable Franchise Positioned for Sustainable Growth
Investment Rationale Scalable franchise positioned for sustainable growth e e Organic growth remains the foundation for the future mam) Successful 2017 recruiting improves the ratio of producers to support staff in our Kansas City, Northeast Wisconsin and Milwaukee regions mam) 12 replacement produc
Slide 19: Commercial Banking Products & Services
eles = i=) 9} COMMERCIAL BANKING PRODUCTS & SERVICES
Slide 20: Commercial Lending
Commercial Lending Superior talent with business expertise building relationships in Midwest geographic footprint Product Profile e Target small- to medium-sized companies in our Wisconsin, Kansas and Missouri markets © Geographic footprint includes Madison, Milwaukee and Northeast Wisconsin, and th
Slide 21: Treasury Management
Treasury Management Superior talent with business expertise building relationships in Midwest geographic footprint Product Profile © Target small- to medium-sized companies in our Wisconsin, Kansas and Missouri markets © Geographic footprint includes Madison, Milwaukee and Northeast Wisconsin, and t
Slide 22: Asset-Based Lending
Asset-Based Lending High-yielding, counter-cyclical product complements conventional commercial lending Product Profile ° Target medi ized ¢ Primarily provide revolving lines of credit and term loans for leveraged buyouts, capital expenditures, working capital, bank debt refinancing, debt restructur
Slide 23: Factoring
Factoring High-yielding, counter-cyclical product complements conventional commercial lending Product Profile e Target small- to medi ized ¢ Primarily provide funding to clients by purchasing accounts receivable on a full recourse basis © Positioned to provide competitive rates to clients starting u
Slide 24: Equipment Financing
Equipment Financing Aligned with the equipment loan and lease needs of our niche client base Product Profile e Includes broad range of equipment finance products to address the financing needs of commercial clients in a variety of industries e Focus includes manufacturing equipment, industrial asset
Slide 25: Trust / Private Wealth
Trust / Private Wealth Wealth management services for businesses, executives and high net worth individuals Product Profile e Fiduciary and investment manager for individual and corporate clients, creating and executing asset allocation strategies tailored to each client’s unique situation ¢ Full fi
Slide 26: 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 27: Strategic Plan: Indicators of Success
eles = i=) 9} STRATEGIC PLAN INDICATORS OF SUCCESS
Slide 28: Strategic Plan: Indicators of Success
Strategic Plan Indicators of Success Client-centric plan that we believe Key Performance Indicator will drive: Long-Term Target Net Interest Margin 2 3.50% eA more diversified income stream Fee Income Ratio > 25% eA higher net interest margin Efficiency Ratio Peers eA higher ROA and ROE In-Market De
Slide 29: Financial Performance
eles = i=) 9} FINANCIAL PERFORMANCE
Slide 30: Net Interest Margin
Net Interest Margin Annual Trend 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Net Interest Margin = = Long-Term Goal Primarily reflects elevated fees collected a Quarterly Trend during 4016. 4Q14 1Q15 2Q15 3Q15 4Qis 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 Net Interest Margin == = Long
Slide 31: Fee Income Ratio
Fee Income Ratio Annual Trend 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 lH Fee Income Ratio = = Long-Term Goal Quarterly Trend Slowed SBA loan Q4 2017 non-interest production while making investments in the sale of securities. 4Q14 1Q15 2Q15 3Q15 4Qis 1016 2Q16 3Q16 4Q16 1Q17 2Q17
Slide 32: Efficiency Ratio
Efficiency Ratio 2017 efficiency impacted by Annual Trend production while making investments in the platform. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Efficiency Ratio — — Long-Term Operating Range Quarterly Trend Primarily reflects elevated fees collected from loan payoffs durin
Slide 33: In-Market Deposits / Total Bank Funding
In-Market Deposits / Total Bank Funding 100% Annual Trend 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 100% Quarterly Trend 4Q14 1015 2Q15 3Q15 4Q15 1016 2016 3Q16 4Q16 1017 2017 3Q17 4Q17 as a percentage of total bank funding.
Slide 34: Annualized Net Charge-Offs / Average Loans
Annualized Net Charge-Offs / Average Loans Annual Trend 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 m= FBIZ == U.S. Commercial Bank $1B-$3B Increase in 2017 due to previously disclosed energy Quarterly Trend sector loan and Wisconsin based C& loan. 4Q14 1Q15 2Q15 3Q15 4Qis 1Q16 2Q16
Slide 35: Return on Average Assets
Return on Average Assets Annual Trend 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 lm ROAA = = Long-Term Goal Quarterly Trend 4Q14 1Q15 2Q15 3Q15 4Qis 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 Mm ROAA = = Long-Term Goal
Slide 36: Return on Average Equity
Return on Average Equity Annual Trend 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 M ROAE = = Long-Term Goal Recent volatility primarily reflects impact of previously disclosed credit issues and temporary slowdown in SBA productio! Quarterly Trend 4Q14 1Q15 2Q15 3Q15 4Qis 1016 2Q16 3Q
Slide 37: Top Line Revenue Growth
Top Line Revenue Growth Acquisition mpleted November 2014. Annual Trend 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 === U.S. Commercial Banks $1B-$3B === FBIZ Quarterly Trend Temporarily slowed SBA loan production while making investments in the platform. —— 4Q14 1Q15 2Q15 3Q15 4Qis 1016
Slide 38: Loan and Deposit Composition
Loan and Deposit Composition Total Gross Loans & Leases Total Deposits CRE Noo ca CREO. Multi-Family a Construction . Land Development a 1-4 Family Direct Finance Leases Consumer & Other Money Market ‘Wholesale Deposits NIB Transaction 1B Transaction In-Market COs
Slide 39: Efficient Funding Strategy
Note: Represents quarterly average data. 1: 2 3. Efficient Funding Strategy Mitigates Interest Rate Risk Strategically shifting from brokered CDs to FHLB Bank Funding Sources advances as the all-in cost for FHLB advances, 100% including the FDIC insurance premium associated 90% | with brokered CDs,
Slide 40: Appendix: Supplemental Data & Non-GAAP Reconciliations
wn" a eves APPENDIX SUPPLEMENTAL DATA & NON- GAAP RECONCILIATIONS
Slide 41: 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 42: Non-GAAP Reconciliation
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 who are interested in the trends in
Slide 43: First Business: We Are Banking. Focused.
First Business" WE ARE BANKING. FOCUSED.
First Business Financial Services — Q4 2017 Earnings Presentation on 6ix