First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Q1 2024 Earnings Presentation
48 slides from First Business Financial Services's earnings presentation, Apr 26, 2024
Slide 1: Investor Presentation First Quarter 2024
FirstBusiness.Bank Investor Presentation First Quarter 2024
Slide 2: Forward-Looking Statements
FirstBusiness.Bank2 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,” “likel
Slide 3: Table of Contents
FirstBusiness.Bank Table of Contents Company Snapshot 4 Why FBIZ? 5 Strategic Plan 13 Drivers of Growth & Profitability 18 Appendix 29
Slide 4: Company Snapshot
FirstBusiness.Bank 4 • 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 Fi
Slide 5: Why FBIZ?
FirstBusiness.Bank WHY FBIZ?
Slide 6: Growing Profitability and Differentiated Loan Growth
FirstBusiness.Bank6 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 Strong & Stable Deposit Franchise Track record of double-digit growth driven b
Slide 7: Balanced and Steady Growth
FirstBusiness.Bank7 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 "Trust Fee Income", "Other Fee Income", "Service Charges", "SBA Gains", and
Slide 8: Positive Operating Leverage
FirstBusiness.Bank8 Positive Operating Leverage Ability to grow revenues faster than expenses outpaces peer group Note: Peer group defined as publicly traded bank with total assets between $1.75 billion and $7 billion. Peer data not yet available for 1Q24. 1. Operating leverage is defined as the per
Slide 9: Profitability Exceeds Peers
FirstBusiness.Bank9 Profitability Exceeds Peers Top Line Revenue Growth and Efficient Capital Management Drives Strong Profitability Note: Peer Group defined as publicly-traded banks with total assets between $1.75 billion and $7.0 billion. Source S&P Global Peer data not yet available for 1Q24. . -
Slide 10: Tangible Book Value Growth
FirstBusiness.Bank10 $0 $5 $10 $15 $20 $25 $30 $35 $40 TBV/Share Div/Share Great Recession & Pandemic Recession Tangible Book Value Growth History of Steady, Consistent TBV and Dividend Growth Through Economic and Interest Rate Cycles TBV 3YR CAGR = 10% Div/Share 3YR CAGR = 10% 1. Q1 2024 dividends
Slide 11: Rate Cycle Consistency
FirstBusiness.Bank11 Rate Cycle Consistency TBV/share above peers in current rate cycle Note: Peer Group defined as publicly-traded banks with total assets between $1.75 billion and $7 billion. Peer data not yet available for 1Q24. Differentiated Approach Aids TBV Preservation • FBIZ holds a small s
Slide 12: Total Shareholder Return Above Peer Group Median
FirstBusiness.Bank12 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 1Q24. 1. 1-Year, 3-Year, and 5-Year TSR is through 3/31/2024. 2. Data as of 12/31/2023. Total Shareholder Return Above Peer Group Median De
Slide 13: Strategic Plan
FirstBusiness.Bank Strategic Plan
Slide 14: FBIZ Strategic Plan 2019-2023
FirstBusiness.Bank14 FBIZ Strategic Plan 2019-2023 Proven execution of strategic objectives Goal Actual 2019 Actual 2020 Actual 2021 Actual 2022 Actual 2023 Strategic Plan Return on average common equity 12.55% 8.64% 16.21% 16.79% 13.79% 13.50% Return on average assets 1.14% 0.70% 1.37% 1.46% 1.13%
Slide 15: 2024-2028 Strategies
FirstBusiness.Bank 2024-2028 Strategies
Slide 16: Strategic Year Plan Overview
FirstBusiness.Bank Strategic 5 Year Plan Overview 5 Year Goals Strategies • ROATCE • TBV Growth • Top Line Revenue Growth • Efficiency Ratio • Core Deposits to Total Funding • Employee Engagement & Participation • Net Promoter Score Culture • Protect and strengthen our unique culture with a growing
Slide 17: FBIZ Strategic Plan 2024-2028 Newly Approved Targets
FirstBusiness.Bank17 FBIZ Strategic Plan 2024-2028 Newly approved targets 1. Net promoter score assesses likelihood to recommend on an 11-point scale, where detractors (scores 0-6) are subtracted from promoters (scores 9-10), while passives (scores 7-8) are not considered. See appendix for additiona
Slide 18: Drivers of Growth & Profitability
FirstBusiness.Bank Drivers of Growth & Profitability
Slide 19: Solid bottom line profitability reflects deposit and loan growth
FirstBusiness.Bank19 Solid bottom line profitability reflects success of efforts to grow deposits and loans at a double-digit pace, bolstering revenue growth and bringing relative stability to net interest margin in a volatile environment Robust Expansion Across Loan Products and Geographies • Loans
Slide 20: Relationship Banking Key to Success
FirstBusiness.Bank20 $1,300 $1,350 $1,400 $1,450 $1,500 $1,550 1Q23 1Q24 th ou sa nd s Gross Treasury Management Service Charges $1,800 $1,900 $2,000 $2,100 $2,200 $2,300 $2,400 1Q23 1Q24 m ill io ns Average Core Deposits Relationship Banking Key to Success Solid Core Deposit Growth Despite Banking
Slide 21: Core Deposit Strength
FirstBusiness.Bank21 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. 10.3 % (2.4)% (2.9)% (2.0)% -4% -2%
Slide 22: Deposit-Centric Strategy Key to Growth
FirstBusiness.Bank22 $0 $500 $1,000 $1,500 $2,000 $2,500 '19 '20 '21 '22 '23 1Q24 m ill io ns Core Deposit Growth History1 DDA IB DDA MMA CD * Deposit-Centric Strategy Key to Growth Double Digit Core Deposit Growth Supports Double Digit Loan Growth 1. Core deposits defined as total deposits less who
Slide 23: Diversified Lending Growth
FirstBusiness.Bank23 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 '19 '20 '21 '22 '23 1Q24 m ill io ns Loan Growth History1 CRE C&I All Other Diversified Lending Growth Continuing to grow higher yielding C&I lending mix 1. Period end balances excluding PPP loans are presented. On January 1, 202
Slide 24: Margin Strength Through Rate Cycle
FirstBusiness.Bank24 Margin Strength Through Rate Cycle Match-Funding Strategy Positions Balance Sheet Well for Rate Changes 1. Peer Group defined as publicly-traded banks with total assets between $1.75 billion and $7.0 billion. 2. Board of Governors of the Federal Reserve System (US), Effective Fe
Slide 25: Robust Profitability Metrics
FirstBusiness.Bank25 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 1Q24. 1. "Adjuste
Slide 26: Net Interest Margin Components
FirstBusiness.Bank26 Net Interest Margin Components 1. Wholesale funding defined as brokered CDs and non-reciprocal interest-bearing transaction accounts plus FHLB advances. 2. Cost of funds is defined as total interest expense on deposits and FHLB advances, divided by the sum of total average depos
Slide 27: Solid Asset Quality
FirstBusiness.Bank27 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 1Q24. 1. Represents a fully collateralized ABL credit, for which
Slide 28: Equipment Finance Portfolio Analysis
FirstBusiness.Bank28 19% 15% 14% 9% 6% 4% 4% 4% 3% 2% 20% 3/31/2024 Truck Transportation Construction of Buildings Specialty Trade Contractors Support Activities for Transp. Crop Farming Ambulatory Health Care Svcs Rental and Leasing Svcs Admin. and Support Svcs Prof., Scientific, and Technical Svcs
Slide 29: Appendix: Supplemental Data & Non-GAAP Reconciliations
FirstBusiness.Bank APPENDIX SUPPLEMENTAL DATA & NON-GAAP RECONCILIATIONS
Slide 30: Offerings Designed Exclusively for Business and Wealth Management
FirstBusiness.Bank30 Offerings Designed Exclusively for Business and Wealth Management Services that meet the evolving needs of our growing client base
Slide 31: Superior Client Satisfaction Rating
FirstBusiness.Bank31 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 s
Slide 32: ESG Framework
FirstBusiness.Bank32 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 commutin
Slide 33: Robust Liquidity and Capital Base
FirstBusiness.Bank33 $1,776,600 $16,622 $995,428 $2,755,406 Deposit Breakdown Robust Liquidity and Capital Base Stable Core Deposit Base Substantial Liquidity Strong Capital Ratios (%) Source 3/31/2024 Short-term Investments $46,984 Collateral value of unencumbered pledged loans 340,639 Market value
Slide 34: Capital Strength
FirstBusiness.Bank34 Capital Strength 3/31/24 12/31/23 9/30/23 6/30/23 3/31/23 Total Regulatory Capital $384,083 $375,440 $365,058 $340,045 $331,220 Total Risk-Weighted Assets $3,381,059 $3,356,247 $3,259,956 $3,178,855 $3,000,105 Leverage Ratio 8.45% 8.43% 8.65% 8.80% 9.00% Common Equity Tier 1 Cap
Slide 35: Balanced Deposit Portfolio
FirstBusiness.Bank35 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
Slide 36: Diversified Lending Products
FirstBusiness.Bank36 Diversified Lending Products Double digit loan growth driven by stellar performance across all areas of the bank Note: Period end balances as of 3/31/2024 presented.
Slide 37: Commercial Real Estate Lending
FirstBusiness.Bank37 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
Slide 38: CRE Office Portfolio Analysis
FirstBusiness.Bank38 • Office loans focused in our bank markets and concentrated in Wisconsin • Exceptional asset quality with no non-performing office loans in the portfolio • Almost 90% of all office loans have recourse • Office loans consist of 66% Class A space • Office represents 10% of total l
Slide 39: Multi-Family Portfolio Analysis
FirstBusiness.Bank39 Vacancy Rates1: • Madison = 3.6% • Milwaukee = 5.2% • Kansas City = 9.1% • National = 7.8% • 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 • 96% of all mul
Slide 40: C&I Lending
FirstBusiness.Bank40 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 quarte
Slide 41: Treasury Management and Funding
FirstBusiness.Bank41 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, f
Slide 42: Private Wealth Management
FirstBusiness.Bank42 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 servi
Slide 43: Adjusted Net Interest Margin Non-GAAP Reconciliation
FirstBusiness.Bank43 “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 excluding other recurring, but volatile, c
Slide 44: Pure Net Interest Income Non-GAAP Reconciliation
FirstBusiness.Bank44 "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 investo
Slide 45: Net Operating Income Non-GAAP Reconciliation
FirstBusiness.Bank45 "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 i
Slide 46: Adjusted PTPP ROAA Non-GAAP Reconciliation
FirstBusiness.Bank46 “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 an
Slide 47: Cost of Funds Non-GAAP Reconciliation
FirstBusiness.Bank47 ‘‘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 ba
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First Business Financial Services — Q1 2024 Earnings Presentation on 6ix