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 24, 2024
Slide 1: Investor Presentation Third Quarter 2024
Investor Presentation Third Quarter 2024
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 Q3 2024 Results 4 Company Snapshot 5 Strategic Plan 6 Why FBIZ? 10 Drivers of Growth & Profitability 18 Appendix 27
Slide 4: Q3 2024 Results
Strong bottom line profitability reflects success of efforts to grow loans and deposits, produce positive operating leverage, sustain a strong and stable margin, and maintain solid asset quality Prudent balance sheet management supported a stable NIM of 3.64%, within the Bank’s target range Net inte
Slide 5: Company Snapshot
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 stable and attractive Midwest markets while Specialty Finance products
Slide 6: Five Year Strategic Plan
Five Year Strategic Plan
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.
Slide 8: 2024-2028 Goals & Progress
2024-2028 Goals & Progress Plan aims to deliver above average total shareholder return compared to peer median Represents data from the 2023 employee engagement survey. Net promoter score assesses likelihood to recommend on an 11-point scale, where detractors (scores 0-6) are subtracted from promote
Slide 9: Total Shareholder Return Above Peer Group Median
Note: Peer Group defined as publicly traded banks with total assets between $1.75 billion and $7.0 billion. Peer data not yet available for 3Q24. 1-Year, 3-Year, and 5-Year TSR is through 9/30/2024. Data as of 6/30/2024. Total Shareholder Return Above Peer Group Median Despite recent outperformance,
Slide 10: Why FBIZ?
WHY FBIZ?
Slide 11: Growing Profitability and Differentiated Loan Growth
Growing Profitability FBIZ’s Historic and Ongoing Growth Supports Earnings Power Differentiated Loan Growth Capabilities History of consistent double-digit growth Growth is C&I focused and diversified Solid credit quality due to deep client relationships, strong underwriting, and niche business expe
Slide 12: Balanced and Steady Growth
Balanced and Steady Growth Operating Fundamentals Drive Earnings Power Note: Net interest income is the sum of "Pure Net Interest Income" and "Fees in Lieu of Interest". Non-interest income is the sum of "Private Wealth Management Service Fees", "Other Fee Income", "Service Charges", "SBA Gains", an
Slide 13: Margin Strength Through Rate Cycles
Margin Strength Through Rate Cycles Match-Funding Strategy Better Positions Balance Sheet for Rate Changes Peer Group defined as publicly-traded banks with total assets between $1.75 billion and $7.0 billion.
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 loan po
Slide 15: Operating Leverage Outperforms Peers
Operating Leverage Outperforms Peers History of Growing Revenues Faster than Expenses Note: Peer group defined as publicly traded bank with total assets between $1.75 billion and $7 billion. 1Q24, 2Q24, and 3Q24 represent data for the trailing 12 months. Peer data not yet available for 3Q24. Operati
Slide 16: Growth and Profitability Exceeds Peers
Growth and Profitability Exceeds Peers Top Line Revenue Growth and Efficient Capital Management Drives Strong Profitability Note: Peer group defined as publicly traded bank with total assets between $1.75 billion and $7 billion. Peer data not yet available for 3Q24. 1. 1Q24, 2Q24, and 3Q24 represent
Slide 17: Shareholder Value Creation
Shareholder Value Creation History of Steady, Consistent TBV and Dividend Growth Through Economic and Interest Rate Cycles TBV 5YR CAGR = 11% Div/Share 5YR CAGR = 11% Q3 2024 dividends per share calculation is annualized. CAGR = 11%
Slide 18: Drivers of Growth & Profitability
Drivers of Growth & Profitability
Slide 19: Relationship Banking Key to Success
Relationship Banking Key to Success Solid Core Deposit Growth Despite Banking Industry Trends Long-term client relationships drive core deposit growth, aided by clients’ comfort with utilizing the Bank’s longstanding extended deposit insurance products Successful execution of client deposit initiati
Slide 20: Core Deposit Strength
Core Deposit Strength FBIZ Continues to Grow Core Deposits as Industry and Peers Decline Source: S&P Capital IQ. Core Deposits defined as deposits in U.S. offices excluding time deposits over $250,000 and brokered deposits of $250,000 or less. Peer banks defined as publicly traded bank with total as
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 deposits defined as total deposits less wholesale deposits. Period end balances are presented. Deposit growth remains one of our major strategic priorities under our new 5-year plan Deposit
Slide 22: Diversified Lending Growth
Diversified Lending Growth Continuing to Grow Higher Yielding C&I Lending Mix Period end balances excluding PPP loans are presented. On January 1, 2023, the Bank adopted ASU 2016-03 Financial Instruments - Credit losses (“ASC 326”). The Bank adopted ASC 326 using the modified retrospective method wh
Slide 23: Robust Profitability Metrics
Robust Profitability Metrics Strong Balance Sheet Growth and Resilient Net Interest Margin Support Robust PTPP Adjusted ROAA Note: Peer group defined as publicly-traded bank with total assets between $1.75 billion and $7 billion. Peer data not yet available for 3Q24. "Core Net Interest Margin" is a
Slide 24: Net Interest Margin Components
Net Interest Margin Components Wholesale funding defined as brokered CDs and non-reciprocal interest-bearing transaction accounts plus FHLB advances. 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 advanc
Slide 25: Solid Asset Quality
Solid Asset Quality Non-Performing Assets/Total Assets Remain Well Managed Note: Peer group defined as publicly-traded bank with total assets between $1.75 billion and $7.0 billion. Peer data not yet available for 3Q24. Represents a fully collateralized ABL credit, for which the Company expects full
Slide 26: Equipment Finance Portfolio by Industry
Maturing Over Time Equipment Finance Portfolio by Industry For more detailed definitions on credit quality categories see the Bank's 10-Q filed with the SEC on July 26, 2024. Category IV represents non-performing loans. Equipment Finance Portfolio Analysis Strong and diversified portfolio; Transport
Slide 27: Appendix: Supplemental Data & Non-GAAP Reconciliations
APPENDIX SUPPLEMENTAL DATA & NON-GAAP RECONCILIATIONS
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
Slide 29: Superior Client Satisfaction Rating
Superior Client Satisfaction Rating Excellent Employee Satisfaction Drives Superior Client Satisfaction 1. Moses & Associates, 2023, 2. J.D. Power, 2022, 3. Qualtrics XM Institute, 2022, 4. Statista, 2023 Note: Net promoter score assesses likelihood to recommend on an 11-point scale, where detractor
Slide 30: ESG Framework
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 to COVID) R
Slide 31: Robust Liquidity and Capital Base
Robust Liquidity and Capital Base Stable Core Deposit Base Substantial Liquidity Strong Capital Ratios (%) Source 9/30/2024 Short-term Investments $86,670 Collateral value of unencumbered pledged loans 397,852 Market value of unencumbered securities 279,191 Readily accessible liquidity 763,713 Fed f
Slide 32: Capital Strength
Capital Strength 9/30/24 6/30/24 3/31/24 12/31/23 9/30/23 Total Regulatory Capital $407,421 $392,359 $384,083 $375,440 $365,058 Total Risk-Weighted Assets $3,477,734 $3,425,925 $3,381,059 $3,356,247 $3,259,956 Leverage Ratio 8.68% 8.51% 8.45% 8.43% 8.65% Common Equity Tier 1 Capital Ratio 8.76% 8.64
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 non
Slide 34: Diversified Lending Products
Diversified Lending Products Double digit loan growth driven by stellar performance across all areas of the bank Note: Period end balances as of 9/30/2024 presented.
Slide 35: Commercial Real Estate Lending Product Profile
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 Initiatives Deploying client portal that enables easy and secure communications and document exchanges Note: Loan balances represent quarter
Slide 36: CRE Office Portfolio Analysis
Office loans focused in our bank markets and concentrated in Wisconsin Exceptional asset quality with no non-performing office loans in the portfolio 92% of all office loans have recourse Office loans consist of 66% Class A space Office represents 9% of total loans as of 9/30/24 Majority of office l
Slide 37: Multi-Family Portfolio Analysis
Loans focused in our bank markets and concentrated in Wisconsin Exceptional asset quality with no non-performing loans in the portfolio Represents 16% of total loans 90% of all multi-family loans have recourse All multi-family loans with 2031+ maturities are conventional fixed rate or fixed to the c
Slide 38: C&I Lending Product Profile
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 and document exchanges Note: Loan balances represent quarterly average data. C&I Lendi
Slide 39: Treasury Management Product Profile
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, informat
Slide 40: Private Wealth Management Product Profile
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 trustee
Slide 41: Core Net Interest Margin 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 recurring, but volatile, components of average inte
Slide 42: 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 43: 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 44: Adjusted PTPP ROAA 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 income allow investors and analysts to better
Slide 45: Cost of Funds 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 trends in our bank funding costs. The
Slide 46: First Business Bank
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First Business Financial Services — Q3 2024 Earnings Presentation on 6ix