First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Q2 2016 Earnings Presentation
42 slides from First Business Financial Services's earnings presentation, Aug 1, 2016
Slide 1: Investor Presentation Second Quarter 2016
INVESTOR PRESENTATION SECOND QUARTER 2016 a» ° First Business
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... Pillars of Success .. : » Record of Strong Execution « Unique Competitive Advantages « Focused Strategic Objectives Appendix
Slide 4: Company Overview
COMPANY OVERVIEW
Slide 5: Company Profile
Company Profile 1. Consists of all 2. Data as of March 16, 2016. Insider First Busi FBIZ BANKING: FBIZ TRUST $1.8 Billion $1.1 Billion IN TOTAL ASSETS IN ASSETS UNDER MANAGEMENT & ADMINISTRATION Experienced leadership Entrepreneurial management style Insider ownership of 8% Business-focused model Cl
Slide 6: Evolution of Success
Evolution of Success Aligned with Financial Needs of Our Niche Client Base First Business Bank - First Business Bank Northeast Region’ First Business Bank - Alterra Milwaukee Bank Kenosha Region 2002 - 2005 2007 - 2011 2012 | 2013 2015 Milwaukee ea jased Source: FBIZ management
Slide 7: Geographic Footprint
Seattle, WA Geographic Footprint Appleton, Wi Minneapolis, MN Milwaukee, WI Kenosha, Wi Madison, WI Chicago,IL Denver, CO Detroit, MI (Cleveland, OH St.Louis, MO. Kansas City, KS, YY Hockessin, DE Charlotte, NC Atlanta, GA San Anotnio, TX © Banking Office © Asset-Based Lending Business Development O
Slide 8: Proven Leadership Team
Proven Leadership Team Experienced leadership team trained at large, complex institutions and significant time with FBIZ Title “ke vn veas: large, one experience institutions Corey Chambas President & CEO - FBFS x x x x Ed Sloane CFO - FBFS x Dave Seiler COO - FBFS x x x Michael Losenegger|Chief Cre
Slide 9: Quarterly Update
QUARTERLY UPDATE ue
Slide 10: Quarterly Update
Quarterly Update Second Quarter 2016 r ) EXPANDED AND DIVERSIFIED REVENUE STREAM PRODUCES RECORD TOP LINE REVENUE r POSITIVE OPERATING LEVERAGE DRIVES 61% EFFICIENCY RATIO r CONTINUING TO BUILD SCALABLE ORGANIZATION - 23% FTE INCREASE YEAR OVER YEAR e LOAN PREPAYMENTS REFLECTED IN MODERATE NET LOAN
Slide 11: Quarterly Update
Quarterly Update Second Quarter 2016 erating Leverage Drives Efficiency Expanded & Diversified Revenue Streams Produce Record Top Line Revenue Balance Sheet Growth Non-Systemic Credit Issues Temper Strong Quarter Source: SEC filings and FBIZ management. 1, LQ.% Change and PYQ % Ct LQ% PYQ% $in milli
Slide 12: Record Top Line Revenue
Quarterly Update Record Top Line Revenue 7 > $20.0 === 4 $15.0 2 = $10.0 $5.0 $0.0 2Q15 3Q15 4Q15 1Q16 2Q16 @ NetInterest Income & Non-Interest Income Sousee: SEC filings and FBIZ management. 1._Top line revenue calculated as net interest income + total non-interest inc:
Slide 13: Expanded and Diversified Revenue Streams
Quarterly Update Expanded and Diversified Revenue Streams $6.0 | $5.0 $4.0 —<<s = <= —<—<= = 2 S = $3.0 4 2 $2.0 | $1.0 $0.0 0% 2Q15 3Q15 4Q1s 1016 2016 Gain on Sale of Service G: = Residents! otter a WIM croceson MMMM sac SySaq Tost jortgages Deposits Loans sewers: Historic % Target % of Total "Rev
Slide 14: Investment Rationale
INVESTMENT RATIONALE
Slide 15: Investment Rationale
Investment Rationale J J) J) J A) aE (cow2), 1 (018k), Holdi f Inc. (SYBT), TriState Capital Inc. (OSBC), {CR Holdings, Inc. (QCRH), Inc. (SONA), Ine. (OKSB), Inc. (TSC), Washington i fon, Inc. (WTBA),
Slide 16: Client Acquisition Strategy
Client Acquisition Strategy SBA Platform Expands Across FBIZ Footprint % Gain on Sales of SBA Loans by BDO Location’ EARNINGS CATALYST 4 * EARNING ASSET GROWTH « IN-MARKET DEPOSIT GROWTH FEE INCOME 4 EPS GROWTH Source: FBIZ management, 1 "BDOs") located in WI and KS. 16
Slide 17: Client-centric Focus with High Touch Service
Client-centric Focus with High Touch Service ©FBIZADVANTAGE FIRST BUSINESS SEMINARS & EVENTS EXPO & CONFERENCE —— FIRST BUSINESS PRESENTS —— O, Enter prising « ¢ MANUFACTURING FIRST A NONPROFITS Gy FAM ra ILY INDUSTRY PRACTICE GROUPS LN ~_ s MANUFACTURING EMERGING COMMERCIAL NOT FOR FOOD & PROFESSIO
Slide 18: Significant Deposit Growth Opportunity
Significant Deposit Growth Opportunity Dane County, WI Waukesha County, WI Fox Valley, WI" Alterra Bank Market” (Largest 3 banks 39%) (Largest 3 banks 33%) (Largest 3 banks 50%) (Largest 3 banks 42%) IS Bank 8% Commerce Bank 13% FBIZ: 7% FBI: 2% FBIZ: 1% FBIZ: 0.5% $13.2 Billion $10.8 Billion $11.6
Slide 19: FBIZ Valuation - Price Appreciation
FBIZ Valuation - Price Appreciation % Price Increase Since 2012 Common Stock Offering (December 3, 2012 - June 30, 2016) -20% Dec-12 Mar-13_ Jun-13 Sep-13. Dec-13 Mar-14 Jun-14 Sep-14 Dec-14. Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
Slide 20: FBIZ Valuation - P/E Multiple
FBIZ Valuation - P/E Multiple Ox P/E Trend Since 2012 Common Stock Offering (December 3, 2012 - June 30, 2016) fo, 15.64 LN SRR —— Dec-12 Mar-13_ Jun-13_ Sep-13. Dec-13. Mar-14 Jun-14_ Sep-14_ Dec-14_ Mar-15 Jun-15 Sep-15. Dec-15— Mar-16—Jun-16
Slide 21: FBIZ Valuation - Dividends per Share
FBIZ Valuation - Dividends per Share 26% $0.44 CAGR $0.14 2010 2015 @ Total Annual Dividends per Share $0.14 5 $0.12 | $0.10 $0.08 + $0.06 + $0.04 4 $0.02 } $0.00 ~ 1Q15 r2.50% 2Q15 3Q15 4Qi5 1Q16 2Q16 Dividends per Share === Dividend Yield
Slide 22: Pillars of Success
Pillars of Success Foundation for the Future SSS —— —— ———— RECORD OF UNIQUE FOCUSED STRONG COMPETITIVE STRATEGIC
Slide 23: Pillars of Success
Pillars of Success Foundation for the Future RECORD OF STRONG UNIQUE FOCUSED COMPETITIVE STRATEGIC
Slide 24: Record of Strong Execution
Record of Strong Execution Key Objectives DRIVE TOP LINE REVENUE GROWTH ACHIEVE e¢ +1% ROA e +12% ROE e ABOVE MARKET GROWTH STRENGTHEN IN-MARKET DEPOSIT MIX GENERATE CONSISTENT, STRONG PROFITABILITY DELIVER EPS GROWTH 24
Slide 25: Strengthen In-market Deposit Mix
Strengthen In-market Deposit Mix Focus on Transaction Accounts to Reduce Cost of Funds $1,800 4 1.00% 24% CAGR 4 $397M $1,500 10.80% $1,200 4 2 + 0.60% = $900 | = + 0.40% $600 } $300 | p20" $0 - ~ 0.00% 2010 2015 2Q15 3Q15 4qQis 1Q16 2Q16 (Transaction Accounts? Wholesale Non- NIB ' || Deposits? || T
Slide 26: Generate Consistent, Strong Profitability
Generate Consistent, Strong Profitability Efficient Operating Model Drives Bottom Line Net Interest Margin 1.20% 4.50% 5 4.25% | 1.00% + 15.00% 2) 4.00% + @ 0.80% 12.00% g a) i-3 3.75% | < Ww i<j ¢ 6 0.60% +9.00% oO 3.50% 4 eee = e £ £ > s 3.25% 4 @ 0.40% 6.00% @ [4 a 3.00% + 0.20% 3.00% 2.75% 4 250
Slide 27: Deliver EPS Growth
Deliver EPS Growth Drives Shareholder Value $0.60 5 1.90 $0.50 4 59% $ CAGR $0.40 | $0.30 + $0.20 + $0.185 $0.10 + 2010 2015 $0.00 lm Diluted Eps 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 GB Diluted Eps M@MM__Dividends per Share
Slide 28: Pillars of Success
Pillars of Success Foundation for the Future RECORD OF UNIQUE STRONG COMPETITIVE STRATEGIC
Slide 29: Unique Competitive Advantages
Unique Competitive Advantages Key Themes If] Efficient Operating Model Efficient Funding Strategy iN SUCCESSFUL : NICHE H H H COMMUNITY Superior Credit Quality BLESS BANK Client - Centric Focus with High Touch Service Superior Talent with Business Expertise
Slide 30: Efficient Operating Model
Efficient Operating Model HIGH EFFICIENCY "BUSINESS BANK" OPERATING MODEL ¢ Limited branch network ¢ Invest in technology ¢ Products tailored to serve businesses and their owners 1% EFFICIENCY RATIO EFFICIENCY RATIO. Total Loans Outstanding per FTE Deposits Per Location $8,000 $700 $7,000 $600 6,000
Slide 31: Efficient Funding Strategy
Efficient Funding Strategy Mitigates Interest Rate Risk Continue to leverage commercial relationships to attract in-market transaction deposits Maintain wholesale funding within Board- monitored limits — Match-funding fixed-rate term loans with wholesale funding locks in interest rate spread —WAOM'
Slide 32: Superior Credit Quality
Superior Credit Quality Credit Culture Helps Safeguard Shareholder Investment Net Charge-Offs/Avg Loans 1.6% 4 14% 4 * Credit underwriting through a committee process is a key to our operating philosophy. 1.2% | 1.0% 4 * Business development officers have relatively low individual lending authority
Slide 33: Superior Talent with Business Expertise
Superior Talent with Business Expertise Engaged Employees = Happy Clients ENGAGED EMPLOYEES RIGOROUS HIRING PROCESS FORMAL MENTOR PROGRAM FUN EMPLOYEE OUTINGS 97% CLIENT SATISFACTION REGULAR SURVEYS AND FEEDBACK STRONG EMPLOYEE REFERRAL PROGRAM Source: Itsech, Ph.D. - Executive Trai ining & Consulti
Slide 34: Pillars of Success
Pillars of Success Foundation for the Future FOCUSED STRATEGIC
Slide 35: Focused Strategic Objectives
Focused Strategic Objectives If] Opportunistically Invest to Support Organic Growth LONG-TERM \f] Complement Organic Growth with Niche Acquisitions FUTURE SUCCESS \f] Increase Fee Income Generating Services
Slide 36: Opportunistically Invest to Support Organic Growth
Opportunistically Invest to Support Organic Growth Investing for the Future Conversion to industry leading CRM in 2015 Data warehouse/BI implementation in 2015 Investments in Technology Expand marketing/sales automation in 2016 Leverage BI suite in 2016 to enhance budget/forecast FOUNDATION process
Slide 37: Complement Organic Growth with Niche Acquisitions
Complement Organic Growth with Niche Acquisitions ¢ ORGANIC GROWTH REMAINS THE FOUNDATION FOR THE FUTURE e HOWEVER, OUR SUCCESS CREATES OPPORTUNITIES FOR ACQUISITIONS m= SPECIALTY FINANCE ==> REGISTERED INVESTMENT ADVISORY FIRMS ==> BUSINESS-FOCUSED COMMUNITY BANKS 37
Slide 38: Appendix: Supplemental Data & Non-GAAP Reconciliations
APPENDIX SUPPLEMENTAL DATA & NON-GAAP RECONCILIATIONS
Slide 39: Efficiency Ratio
Efficiency Ratio Efficiency Ratio “Efficiency ratio” is a non-GAAP measure representing non-interest expense excluding the effects of losses or gains on foreclosed properties, other discrete items unrelated to our primary business activities and amortization of other intangible assets, if any, divid
Slide 40: Deposit Cost
Deposit Cost Cost of Total Deposits is “Cost of Total Deposits” is defined as total interest expense on deposits divided by total average deposits. "Cost of Total In-Market Deposits" i defined as total interest expense on in-market deposits divided by total average in-market deposits. In-market depo
Slide 41: Loan and Lease Composition
Loan and Lease Composition f December 31, ($000) June 30,2016 Total 2015 Commercial and Industrial $ 456,297 31% $ 472,193 Commercial Real Estate - Non-Owner Occupied 502,378 35% 436,901 Commercial Real Estate - Owner Occupied 167,936 12% 176,322 Land development 60,599 4% 59,779 Construction 88,339
Slide 42: First Business
First Business YOUR SUCCESS COMES FIRST.
First Business Financial Services — Q2 2016 Earnings Presentation on 6ix