First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Q2 2017 Earnings Presentation
43 slides from First Business Financial Services's earnings presentation, Aug 1, 2017
Slide 1: Investor Presentation Second Quarter 2017
wn" a eves INVESTOR PRESENTATION SECOND QUARTER 2017
Slide 2: Forward-Looking Statements
Forward-Looking Statements When used in vi 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,” “li
Slide 3: Table of Contents
Table of Contents Company Overview Quarterly Update Investment Rationale Commercial Banking Products & Services Strategic Plan Financial Performance Appendix iS IS O IN 10 [|B
Slide 4: Company Overview
wn" a eves COMPANY OVERVIEW
Slide 5: Company Profile
Company Profile FBIZ BANKING: FBIZ TRUST $1.8 Billion $1.3 Billion IN TOTAL ASSETS IN ASSETS UNDER MANAGEMENT & ADMINISTRATION Headquarters: Madison, WI Mission: Build long-term shareholder value as an entrepreneurial financial services provider to businesses, executives and high net worth individua
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 I 1990 ) 1995 )} 1998 ) 2000 >) 2001 | ‘ Madison Milwaukee Factoring I 2012 SBA Lending 2014 ] Kenosha &
Slide 7: Geographic Footprint
Geographic Footprint Seattle, WA ‘Appleton, WI ‘Minneapolis, MN Milwaukee, WI Kenosha, WI Madison, WI Detroit, MI Chicago,IL Cleveland, OH Denver, CO St.Louis, MO. Kansas City, KS, y Hockessin. DE © Banking Ofce en \sset-Based Lending Business Development Office Equipment Finance Business Developmen
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 FFICER Jodi A. Chandler Mark J. Meloy CHIEF HUMAN CEO OF FIRST RESOURCES BUSINESS BANK OFFICER David R. Seiler CHIEF OPERATING OFFICER Joan A. Burke PRESIDE
Slide 9: Quarterly Update
wn" a eves QUARTERLY UPDATE
Slide 10: Expanded Net Interest Margin and Improved Operating Efficiency
EXPANDED NET INTEREST MARGIN AND IMPROVED OPERATING EFFICIENCY TRUST & INVESTMENT SERVICES REPORTS RECORD ASSETS AND QUARTERLY FEE INCOME SBA PRODUCTION TRENDING IN THE RIGHT DIRECTION FOLLOWING SUBSTANTIAL REBUILD OF THE PLATFORM NON-PERFORMING ASSETS REMAIN AT HISTORICALLY ELEVATED LEVELS, CONTINU
Slide 11: Operating Efficiency
Operating Efficiency Diversified Revenue Streams Balance Sheet Growth Asset Quality Profitability 10% $ in millions (except per share amounts)|_Q22016 _Q12017_| Q22017 | __Change Top line revenue $21.564 $18.951 () . s ” 8 Total operating Spares Efficiency ratio Net interest income Gain on sale of S
Slide 12: Investment Rationale
wn" a eves INVESTMENT RATIONALE
Slide 13: A A A A
A A A A 7
Slide 14: Investment Rationale: P/E Multiple at a Discount to Peers
Investment Rationale P/E multiple at a discount to peer group a) P/E Trend (June 30, 2016 - June 30, 2017) Jun-16 Jul-l6.— Aug-16— Sep-16 Oct-16.» Nov-16 = Dec-16.—Jan-17_—s Feb-17.-— Mar-17_-— Apr-17._— May-17 —FBIZ-US §——Peer Group Average 10x Jun-17 8: Holdings, inc. (QCRH), jnia, Inc. (SONA), In
Slide 15: Investment Rationale: Dividend Yield Above Peer Average
Investment Rationale Dividend yield above peer group average (2) Dividend Yield Trend (June 30, 2016 - June 30, 2017) Jun-16 Jul-16— Aug-16— Sep-16. Oct-16. © Nov-16 = Dec-16—sJan-17_—sFeb-17_— Mar-17_—Apr-17 —FBIZ-US +—Peer Group Average May-17 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Jun-17 Ine.
Slide 16: Investment Rationale: Niche Business and Client-Centric Focus
Investment Rationale Competitive advantage driven by niche business and client-centric focus CLIENT & COMMUNITY EVENTS —— FIRST BUSINESS PRESENTS ——— First MANUFACTURING FIRST Business EXPO & CONFERENCE SEMINAR SERIES INDUSTRY PRACTICE GROUPS LEZ = & re Enterprising ° © NONPROFITS ight to FIRST BUSI
Slide 17: Investment Rationale: 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: Investment Rationale: Scalable Franchise Positioned for Growth
Investment Rationale Scalable franchise positioned for sustainable growth Organic growth remains the foundation for the future However, we believe our future success will create opportunities for acquisitions ==) Specialty finance, particularly within our existing products and services ==) Midwest-b
Slide 19: Commercial Banking Products & Services
wn" a eves 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
wn" a eves 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 23.50% ¢A more diversified income stream Fee Income Ratio > 25% eA higher net interest margin Efficiency Ratio 58% - 62% eA higher ROA and ROE In-Market
Slide 29: Financial Performance
wn" a eves FINANCIAL PERFORMANCE
Slide 30: Net Interest Margin
Net Interest Margin Annual Trend 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 MH Net Interest Margin = = Long-Term Goal Primarily reflects elevated fees collected from loan payoffs Quarterly Trend during 4Q16. 1Q14 2Q14 3Q14 4Q14 1015 2Q15 3Q15 4Qis 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Net I
Slide 31: Fee Income Ratio
Fee Income Ratio = Annual Trend = 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 lH Fee Income Ratio = = Long-Term Goal Quarterly Trend Temporarily slowed SBA loan production while 40% making investments in 35% e plat 30% 25% —_—<—= —se eee ee ee 20% sees eee ee ee 1Q14 2014 3Q14 4Q14 1
Slide 32: Efficiency Ratio
Efficiency Ratio Annual Trend 2005, 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Efficiency Ratio — — Long-Term Operating Range Temporarily slowed SBA Quarterly Trend 1Q14 2Q14 3Q14 4Q14 1015 2Q15 3Q15 4Qis 1016 2Q16 3Q16 4Q16 1Q17 2Q17 Efficiency Ratio — — Long-Term Operating Range
Slide 33: In-Market Deposits / Total Bank Funding
In-Market Deposits / Total Bank Funding =a Annual Trend Quarterly Trend = 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q172Q17 a @ sank in i in-Market Deposits Bank Wholesale Funding. — — Target O
Slide 34: Annualized Net Charge-Offs / Average Loans
Annualized Net Charge-Offs / Average Loans Annual Trend 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 m= FBIZ == U.S. Commercial Bank $1B-$3B Increase in 2Q17 Quarterly Trend sector exposure 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4qis 1Q16 2Q16 3Q16 4Q16 1Q17 2017 w= FBIZ m= U.S. Commer
Slide 35: Return on Average Assets
Return on Average Assets Annual Trend 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 HH ROAA = = Long-Term Goal Recent volatility pri reflects impact of previ disclosed credit issues and temporary slowdown in SBA production Quarterly Trend 1Q14 2Q14 3Q14 4Q14 1015 2Q15 3Q15 4Qis 1Q16 2Q
Slide 36: Return on Average Equity
Return on Average Equity = Annual Trend = 12% << eee eee ee 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 MM ROAE = = Long-Term Goal Quarterly Trend 1Q14 2014 3Q14 4Q14 1015 2Q15 3Q15 4Qis 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 M ROAE = = Long-Term Goal
Slide 37: Top Line Revenue Growth
Top Line Revenue Growth Annual Trend complet November 2014. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 === U.S. Commercial Banks $1B-$3B === FBIZ Quarterly Trend Temporarily slowed SBA 40% loan production while 30% making investments in the platform. 1Q14 2014 3Q14 4Q14 1Q15 2Q15 3Q15 4Q
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
Efficient Funding Strategy Mitigates Interest Rate Risk Continue to leverage commercial relationships to attract in-market transaction deposits Maintain bank wholesale funding’ within Board-monitored limits — Match-funding fixed-rate term loans with Bank wholesale funding locks in interest rate spre
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 losses or gains on foreclosed properties, other discrete items unrelated to our primary business activities and amortization of other intangible assets, if any
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 — Q2 2017 Earnings Presentation on 6ix