First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Q3 2024 Earnings Presentation
46 slides from First Business Financial Services's earnings presentation, Oct 25, 2024
Slide 1: Investor Presentation Third Quarter 2024
Investor Presentation Third Quarter 2024 FirstBusiness.Bank
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 Q3 2024 Results 4 Company Snapshot 5 Strategic Plan 6 Why FBIZ? 10 Drivers of Growth & Profitability 18 Appendix 27 FirstBusiness.Bank
Slide 4: Third Quarter 2024 Highlights
Third Quarter 2024 Highlights Stable net interest margin, continued balance sheet growth, and positive operating leverage support tangible book value expansion Net Income Strong bottom line profitability reflects success of efforts to grow loans and deposits, produce positive $10.3 MM operating leve
Slide 5: Company Snapshot
First Business Bank NASDAQ: FBIZ — $368 million Market Cap1 FBIZ Business Banking 2 FBIZ Private Wealth $3.7 Billion $3.4 Billion IN TOTAL ASSETS 3 3 IN ASSETS UNDER MANAGEMENT & ADMINISTRATION Headquarters: Madison, WI Mission: Build long‐term shareholder value as an entrepreneurial banking partner
Slide 6: Five Year Strategic Plan
Five Year Strategic Plan FirstBusiness.Bank
Slide 7: 2024-2028 Strategies
2024‐2028 Strategies OBJECTIVE First Business Bank's unique model and culture will foster innovative and engaged team members who develop deep client relationships and deliver exceptional results for all stakeholders. FirstBusiness.Bank
Slide 8: 2024-2028 Goals & Progress
2024‐2028 Goals & Progress Plan aims to deliver above average total shareholder return compared to peer median Goals 2024‐2028 September 2024 YTD ROATCE ≥15% by 2028 13.4% TBV Growth ≥10% per year 11.1% Revenue Growth ≥10% per year 4.7% Efficiency Ratio <60% by 2028 62.04% Core Deposits to Total ≥75
Slide 9: Total Shareholder Return Above Peer Group Median
Total Shareholder Return Above Peer Group Median Despite recent outperformance, Price/LTM EPS remains below peers Total Shareholder Return1 Price / LTM EPS2 140% 12.0 120% 10.0 100% 8.0 80% 6.0 60% 4.0 40% 20% 2.0 0% 0.0 1‐Year TSR 3‐Year TSR 5‐Year TSR P/LTM EPS FBIZ Peer Group Median S&P 500 Bank
Slide 10: Why FBIZ?
WHY FBIZ? FirstBusiness.Bank
Slide 11: Growing Profitability
Growing Profitability FBIZ’s Historic and Ongoing Growth Supports Earnings Power Differentiated Loan Growth Strong & Stable Deposit Growing Profitability Profile Capabilities Franchise History of consistent double‐digit Track record of double‐digit growth Significant fee revenue contribution growth
Slide 12: Balanced and Steady Growth
Balanced and Steady Growth Operating Fundamentals Drive Earnings Power $160.0 Operating Income Highlights $140.0 Net Tax Credits ² • Steady revenue expansion supported by: Swap Fees ◦ Double‐digit loan and deposit $120.0 growth Gain on Sale of SBA Loans ◦ Strong and stable net interest Fees in Lieu
Slide 13: Margin Strength Through Rate Cycles
Margin Strength Through Rate Cycles Match‐Funding Strategy Better Positions Balance Sheet for Rate Changes 3.9% 3.7% 3.5% Net Interest Margin 3.3% 3.1% 2.9% 2.7% 2.5% 2018 2019 2020 2021 2022 2023 YTD 2024 FBIZ Net Interest Margin Peer Median Net Interest Margin(1) Linear (FBIZ Net Interest Margin)
Slide 14: Disciplined Interest Rate Risk Management
Disciplined Interest Rate Risk Management Match‐Funding Strategy Insulates Balance Sheet throughout Various Rate Cycles Methodical Approach • Individually match‐fund loans with maturities over 5 years and amounts greater than $5MM • Portfolio match‐funding in various terms against the fixed‐rate loa
Slide 15: Operating Leverage Outperforms Peers
Operating Leverage Outperforms Peers History of Growing Revenues Faster than Expenses • We aim to achieve 10% revenue growth on an annual basis, with positive operating leverage1 Operating Leverage ◦ Atypically high net interest margin ("NIM") in 2023 creates 12.0% temporary positive operating lever
Slide 16: Growth and Profitability Exceeds Peers
Growth and Profitability Exceeds Peers Top Line Revenue Growth and Efficient Capital Management Drives Strong Profitability 1 Top Line Revenue Growth Return on Average Common Equity 15% 18% 16% 10% 14% 12% 5% 10% 8% 0% 6% ‐5% 4% 2% ‐10% 0% 2021 2022 2023 1Q24 2Q24 3Q24 2021 2022 2023 1Q24 2Q24 3Q24
Slide 17: Shareholder Value Creation
Shareholder Value Creation History of Steady, Consistent TBV and Dividend Growth Through Economic and Interest Rate Cycles $40 TBV 5YR CAGR = 11% $35 Div/Share 5YR CAGR = 11% $30 $25 $20 $15 $10 $5 $0 TBV/Share Div/Share Great Recession & Pandemic Recession 1. Q3 2024 dividends per share calculation
Slide 18: Drivers of Growth & Profitability
Drivers of Growth & Profitability FirstBusiness.Bank
Slide 19: Relationship Banking Key to Success
Relationship Banking Key to Success Solid Core Deposit Growth Despite Banking Industry Trends Average Core Deposits Gross Treasury Management Service Charges • Long‐term client relationships drive core deposit growth, aided by $2,450 $1,650 clients’ comfort with utilizing the $2,400 Growth over Grow
Slide 20: Core Deposit Strength
Core Deposit Strength FBIZ Continues to Grow Core Deposits as Industry and Peers Decline Core Deposit Growth Q2 2023 Through Q2 2024 16% 14% 13.4 % 12% 10% 8% 6% 4% 2% 1.2 % 0.8 % 0% FBIZ All Publicly Traded Banks Median Peer Banks Source: S&P Capital IQ. Core Deposits defined as deposits in U.S. of
Slide 21: Deposit-Centric Strategy Key to Growth
Deposit‐Centric Strategy Key to Growth Double Digit Core Deposit Growth Supports Double Digit Loan Growth Core Deposit Growth History1 $3,000 • Deposit growth remains one of DDA 5‐Year CAGR = 10% our major strategic priorities Total Core Deposits 5‐Year CAGR = 15% under our new 5‐year plan $2,500 •
Slide 22: Diversified Lending Growth
Diversified Lending Growth Continuing to Grow Higher Yielding C&I Lending Mix Loan Growth History1 Growth in Higher‐Yielding C&I Lending2 $3,500 40% 9.0% 39% $3,000 5 Year CAGR = 12% 8.0% 38% Exceeds strategic $2,500 plan goal of 10% 37% 7.0% Loan Mix % 36% $2,000 millions Yield 35% 6.0% $1,500 34%
Slide 23: Robust Profitability Metrics
Robust Profitability Metrics Strong Balance Sheet Growth and Resilient Net Interest Margin Support Robust PTPP Adjusted ROAA Net Interest Margin PTPP ROAA3 4.0% 2.00% 3.76% 3.8% 3.69% 3.65% 3.64% 0.10% 3.58% 3.6% 0.19% 0.13% 1.75% 0.18% 0.15% 3.4% 3.2% 1.50% 3.23% 3.19% 3.0% 3.09% 3.14% 2.8% 3.66% 1
Slide 24: Net Interest Margin Components
Net Interest Margin Components NIM Components NIM, Yield, and Costs 3.85% 8.0% 3.80% 7.0% 3.75% 0.04% 0.12% 6.0% 3.70% 3.65% ‐0.07% 3.64% 3.65% 5.0% ‐0.02% ‐0.03% 3.60% ‐0.02% ‐0.04% 4.0% 3.55% 3.50% 3.0% 3.45% 2.0% 3.40% 1.0% OI gs ns 24 24 nt s es ) ts g( 1 o si w in F IL Lo a 2Q 3Q me u ri d in 3
Slide 25: Solid Asset Quality
Solid Asset Quality Non‐Performing Assets/Total Assets Remain Well Managed Non‐Performing Assets Credit Quality Indicators $25.0 1.00% Q3 2021 Q4 2021 Q1 2022 $20.0 0.80% Q2 2022 Q3 2022 Q4 2022 $15.0 0.60% Q1 2023 Millions Q2 2023 Q3 2023 $10.0 0.40% Q4 2023 Q1 2024 Q2 2024 $5.0 0.20% Q3 2024 ‐$800
Slide 26: Equipment Finance Portfolio Analysis
Equipment Finance Portfolio Analysis Strong and diversified portfolio; Transportation sub‐category showing sector‐specific weakness Equipment Finance Portfolio by Industry Maturing Over Time 9/30/2024 • Equipment Finance (EF) loans Truck Transportation $80.0 MM diversified across industries Construc
Slide 27: Appendix: Supplemental Data & Non-GAAP Reconciliations
APPENDIX SUPPLEMENTAL DATA & NON‐GAAP RECONCILIATIONS FirstBusiness.Bank
Slide 28: Offerings Designed Exclusively for Business and Wealth Management
Offerings Designed Exclusively for Business and Wealth Management Services that meet the evolving needs of our growing client base FirstBusiness.Bank 28
Slide 29: Superior Client Satisfaction Rating
Superior Client Satisfaction Rating Excellent Employee Satisfaction Drives Superior Client Satisfaction Employee Performance Engagement Enablement Manager Belonging Effectiveness 1. Moses & Associates, 2023, 2. J.D. Power, 2022, 3. Qualtrics XM Institute, 2022, 4. Statista, 2023 Note: Net promoter s
Slide 30: ESG Framework
ESG Framework Environmental, social, and governance practices are integrated into our core business strategy • Named to the national list of Top • Branch‐lite model with only one location in • Corporate Governance and Nominating Workplaces USA for the third straight year each of the banking markets
Slide 31: Robust Liquidity and Capital Base
Robust Liquidity and Capital Base Stable Core Deposit Base Substantial Liquidity Source 9/30/2024 Short‐term Investments $86,670 $2,969,947 Collateral value of unencumbered pledged loans 397,852 Uninsured Market value of unencumbered securities 279,191 Deposits Readily accessible liquidity 763,713 $
Slide 32: Capital Strength
Capital Strength 9/30/24 6/30/24 3/31/24 12/31/23 9/30/23 HIGHLIGHTS Total Regulatory Capital $407,421 $392,359 $384,083 $375,440 $365,058 • Regulatory capital ratios remain solid including a Total Capital Ratio Total Risk‐Weighted Assets $3,477,734 $3,425,925 $3,381,059 $3,356,247 $3,259,956 of 11.
Slide 33: Balanced Deposit Portfolio
Balanced Deposit Portfolio Diversified Product Base with Long‐Tenured, Deep Client Relationships • Longstanding deposit insurance options available through IntraFi and Reich & Tang to provide further security for our large clients • Funding is augmented by non‐callable wholesale deposits rather than
Slide 34: Diversified Lending Products
Diversified Lending Products Double digit loan growth driven by stellar performance across all areas of the bank Total Loan Breakdown Commercial Real Estate Breakdown C&I Breakdown by Product 2% 2% 3% 14% 10% 27% 38% 38% 15% 60% 7% 42% 15% 27% All other C&I lending Equipment Finance CRE C&I Other CR
Slide 35: Commercial Real Estate Lending
Commercial Real Estate Lending Superior Talent with Business Expertise Building Relationships in Midwest Geographic Footprint Product Profile • Target small to medium‐sized companies • Lines of credit and term loans focused on businesses with annual sales of up to $75.0 million Technology Initiative
Slide 36: CRE Office Portfolio Analysis
CRE Office Portfolio Analysis Exceptional credit quality on office loans throughout the Midwest Commercial Real Estate Breakdown Midwest Locations ‐ Office >$3mm Land Development 1‐4 Family Other, 6% • Office loans focused in our bank 3% Misc. Kansas City, 7% Suburban Milwaukee, 13% 3% 1% markets an
Slide 37: Multi-Family Portfolio Analysis
Multi‐Family Portfolio Analysis Exceptional credit quality on Multi‐Family loans throughout the Midwest Multi‐Family Breakdown Midwest Locations Student All Other Senior Housing Housing 8% Suburban Milwaukee, 17% 1% 8% Rent Restricted • Loans focused in our bank markets 20% and concentrated in Wisco
Slide 38: C&I Lending
C&I Lending Diversified commercial product offerings target companies nationwide Product Profile • Target small and medium companies in a variety of industries • Financings range from $250,000 to $10 million Technology Initiatives • Deploying client portal that enables easy and secure communications
Slide 39: 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 • Comprehensive services for commercial clients to manage their cash and liquidit
Slide 40: Private Wealth Management
Private Wealth Management Wealth Management Services for Businesses, 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 • Hol
Slide 41: Core Net Interest Margin
Core Net Interest Margin Non‐GAAP Reconciliation “Core 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 excluding other re
Slide 42: Pure Net Interest Income
Pure Net Interest Income Non‐GAAP 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
Slide 43: Net Operating Income
Net Operating Income Non‐GAAP 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‐t
Slide 44: Adjusted PTPP ROAA
Adjusted PTPP ROAA Non‐GAAP Reconciliation “Pre‐tax, pre‐provision adjusted return on average assets” is defined as operating revenue less operating expense divided by average total assets. In the judgment of the Company’s management, the adjustments made to non‐interest expense and non‐interest inc
Slide 45: 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 average FHLB advances. We believe that this measure is important to many investors in the marketplace who are interested in the
Slide 46: FirstBusiness.Bank
. First Business Bank FirstBusiness.Bank
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