First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Q3 2022 Earnings Presentation
42 slides from First Business Financial Services's earnings presentation, Nov 10, 2022
Slide 1: Investor Presentation Third Quarter 2022
Investor Presentation Third Quarter 2022 Nasdaq: FBIZ
Slide 2: 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,” “likely,” or similar expre
Slide 3: Table of Contents
Table of Contents Company Overview ....................................................................... 4 Why FBIZ? ...................................................................................... 9 Financial Highlights .......................................................................
Slide 4: Company Overview
COMPANY OVERVIEW
Slide 5: Company Overview
• Serving unique needs of business executives, entrepreneurs, and high net worth individuals through Business Banking, Private Wealth, and Bank Consulting • Within Business Banking, our commercial banking offerings are focused on our attractive Midwest markets while Specialty Finance products and se
Slide 6: Offerings Designed Exclusively for Business and Wealth Management
6 Offerings Designed Exclusively for Business and Wealth Management Services that meet the evolving needs of our growing client base
Slide 7: ESG Framework
7 ESG Framework Environmental, social, and governance practices are integrated into our core business strategy • • • • Branch-lite model with only one location in each of the banking markets we serve • Support hybrid and remote work options to reduce carbon emissions related to commuting (even prior
Slide 8: Superior Client Satisfaction Rating
Superior Client Satisfaction Rating Excellent Employee Satisfaction Drives Superior Client Satisfaction 8 *NPS benchmarks reported in “The State of B2B Account Experience: B2B NPS & CX Benchmarking Report,” CustomerGauge, 2021 NPS benchmarks reported in “The State of B2B Account Experience: B2B NPS
Slide 9: Why FBIZ?
WHY FBIZ?
Slide 10: Total Shareholder Return Above Peer Group Median
Note: Peer Group defined as publicly-traded banks with total assets between $1 billion and $5 billion. TSR time period is 1/3/2022 - 11/7/2022. 1. Data as of 10/31/2022. Total Shareholder Return Above Peer Group Median Despite recent outperformance, Price/LTM EPS remains below peers 10 1 Year Total
Slide 11: Tangible Book Value Growth
Tangible Book Value Growth History of Steady, Consistent TBV and Dividend Growth Through Economic Cycles TBV 3YR CAGR = 11% Div/Share 3YR CAGR = 9% 2021 TBV Growth = 15% 11 TBV/Share Div/Share Great Recession & Pandemic Recession '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 'YTD 2
Slide 12: ROATCE Above Peer Group Median
ROATCE Above Peer Group Median Top Line Revenue Growth and Superior Asset Quality Drives Historically Strong Profitability 12Note: Peer Group defined as publicly-traded banks with total assets between $1 billion and $5 billion 1. Data is for the nine months ended September 30, 2022. ROATCE FBIZ Peer
Slide 13: Price to Tangible Book Value
Price to Tangible Book Value Historically traded at a premium to peer group Note: Peer Group defined as publicly-traded banks with total assets between $1 billion and $5 billion. 13
Slide 14: Financial Highlights
FINANCIAL HIGHLIGHTS
Slide 15: Third Quarter Highlights
• Strong Profitability Metrics - Excluding the impact of PPP loans, pre-tax, pre-provision adjusted ("PTPP") return on average assets increased to 2.05% in the third quarter, compared to 1.24% in the prior year quarter as pre-tax pre-provision earnings grew to a record $14.1 million. • Record Top Li
Slide 16: Robust Profitability Metrics
Robust Profitability Metrics Net Interest Margin Expansion and Loan Growth Lead to Robust PTPP Adjusted ROAA Net Interest Margin 3.45% 3.71% 4.01% 3.22% 3.45% 3.89% 0.23% 0.26% 0.12% Adjusted net interest margin (1) Recurring, variable components (2) Q3 2021 Q2 2022 Q3 2022 16 1. "Adjusted Net Inter
Slide 17: Margin Expands on Positive Beta Differential
Margin Expands on Positive Beta Differential and Match-Funded Balance Sheet Cumulative Earning Asset Beta Exceeds Funding Beta 17 NIM, Yields, and Costs 5.55% 3.95% 4.51% 3.73% 3.14% 3.69% 2.40% 1.99% 1.76% 1.42% 0.54% 0.45% Average Loan Yield Net Interest Margin Securities Yield Cost of Funds (5) Q
Slide 18: Positive Operating Leverage
18 Positive Operating Leverage Ability to grow revenues faster than expenses outpaces peer group Loan vs. Deposit Growth FBIZ Loan Growth(1) FBIZ Deposit Growth(2) '19 '20 '21 0% 5% 10% 15% 20% 25% Note: Peer group defined as publicly-traded bank with total assets between $1 billion and $5 billion.
Slide 19: Key Operating Trends
M ill io ns $28.1 $32.5 $39.1 $41.1 FYE 2018 FYE 2019 FYE 2020 FYE 2021 $0.0 $15.0 $30.0 $45.0 $60.0 $75.0 $90.0 $105.0 $120.0 Key Operating Trends Operating Fundamentals Demonstrate Earnings Power 19 Note: Net interest income is the sum of "Pure Net Interest Income" and "Fees in Lieu of Interest".
Slide 20: Deposit-Centric Strategy
20 Deposit-Centric Strategy Ability to Generate Double-Digit Loan Growth Supported by History of Strong Deposit Growth 1. Deposits defined as total deposits less wholesale deposits. Period end balances are presented. M ill io ns Deposit Growth History (1) DDA IB DDA MMA CD '18 '19 '20 '21 $0 $500 $1
Slide 21: Diversified Lending Growth
Diversified Lending Growth Continuing to grow conventional commercial lending while expanding specialized lending mix 21 Th ou sa nd s Net Loan Growth Q4 2021 $82,268 $1,739 $20,236 $18,844 $11,304 $10,884 $6,167 $1,819 Commercial Lending Private Wealth Asset- Based Lending Accounts Receivable Finan
Slide 22: Drivers of Growth and Profitability
Drivers of Growth and Profitability Continued growth in higher yielding specialized lending Note: Additional financial information on business lines can be found in the appendix. 1. Excluding PPP loans. 22 Business Life Cycles Early Stage Adolescent Mature Very High Growth & Low Profitability High G
Slide 23: Continued Asset Quality Improvement
Continued Asset Quality Improvement Non-Performing Assets/Total Assets Decline to Lowest Levels In 20 Years 23 M ill io ns NPA FBIZ NPA/TA Peer NPA/TA 3Q21 4Q21 1Q22 2Q22 3Q22 $0.0 $1.2 $2.4 $3.6 $4.8 $6.0 $7.2 $8.4 0.10% 0.15% 0.20% 0.25% 0.30% 0.35% 0.40% 0.45% Note: Peer group defined as publicly
Slide 24: Appendix: Supplemental Data & Non-GAAP Reconciliations
APPENDIX SUPPLEMENTAL DATA & NON-GAAP RECONCILIATIONS
Slide 25: Appendix: Strategic Plan
APPENDIX Strategic Plan
Slide 26: FBIZ Strategic Plan 2019-2023 Strategies
FBIZ Strategic Plan 2019-2023 4 Strategies Designed to Navigate the Company over a 5-Year Time Horizon 26
Slide 27: FBIZ Strategic Plan 2019-2023 Goals
FBIZ Strategic Plan 2019-2023 Goals Set to Deliver Above Average Shareholder Return 27 Goal Actual 2019 Actual 2020 Actual 2021 Actual YTD 2022 Goal 2023 Return on average common equity 1 12.55% 8.64% 16.21% 16.59% 13.50% Return on average assets 1 1.14% 0.70% 1.37% 1.49% 1.15% Top line revenue grow
Slide 28: Appendix: Commercial Banking Products & Services
APPENDIX Commercial Banking Products & Services
Slide 29: Commercial Lending
Product Profile • Target small to medium-sized companies in our Wisconsin, Kansas, and Missouri markets • Lines of credit and term loans focused on businesses with annual sales of up to $75.0 million Technology Initiatives • Deploying client portal that enables easy and secure communications and doc
Slide 30: Treasury Management
Product Profile • Target small to medium-sized companies in our Wisconsin, Kansas, and Missouri markets • Comprehensive services for commercial clients to manage their cash and liquidity, including lockbox, accounts receivable collection services, electronic payment solutions, fraud protection, info
Slide 31: Trust / Private Wealth
Product Profile • Fiduciary and investment manager for individual and corporate clients, creating, and executing asset allocation strategies tailored to each client’s unique situation • Holds full fiduciary powers and offers trust, estate, financial planning, and investment services, acting in a tru
Slide 32: Asset-Based 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 refinancing, debt restructuring, corporate turnaround strategies and debtor-in-possession financing in the c
Slide 33: Accounts Receivable Financing
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 competitive rates to clients starting up, seeking growth, and needing cash flow support, or who are experienci
Slide 34: SBA Lending
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 opportunities by meeting the needs of clients whose borrowing needs cannot be met with
Slide 35: Equipment Finance
Product Profile • Includes broad range of equipment finance products to address the financing needs of commercial clients in a variety of industries • Focus includes manufacturing equipment, industrial assets, construction, and transportation equipment, and a wide variety of other commercial equipme
Slide 36: Floorplan Financing
Product Profile • Offers floorplan financing for independent car dealerships nationwide • Allows car dealers the flexibility to finance their acquisition of used cars, preserving cash flow, and allowing dealers to purchase inventory • Offer floorplan programs from $500,000 to $10 million for larger,
Slide 37: Bank Consulting
Product Profile • Expertise to assist institutions with balance sheet management • Services offered include investment portfolio management and administration, asset liability management, and asset liability process validation services Technology Initiative • Currently focusing on improved use of da
Slide 38: Appendix: Non-GAAP Reconciliations
APPENDIX Non-GAAP Reconciliations
Slide 39: Adjusted Net Interest Margin Reconciliation
“Adjusted Net Interest Margin” is a non-GAAP measure representing net interest income excluding the fees in lieu of interest and other recurring, but volatile, components of net interest margin divided by average interest-earning assets less average net PPP loans, if any, and other recurring, but vo
Slide 40: Pure Net Interest Income Reconciliation
"Pure Net Interest Income" is defined as net interest income less fees in lieu of interest. "Fees in Lieu of Interest" is defined as prepayment fees, asset-based loan fees, non-accrual interest, and loan fee amortization. We believe that this measure is important to many investors in the marketplace
Slide 41: Net Operating Income Reconciliation
"Net Operating Income" is a non-GAAP financial measure. We believe net operating income allows investors to better assess the Company’s operating expenses in relation to its top line revenue by removing the volatility that is associated with certain one-time and other discrete items. In compliance w
Slide 42: First Business Bank
First Business Bank.
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