First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Q4 2015 Earnings Presentation
43 slides from First Business Financial Services's earnings presentation, Feb 9, 2016
Slide 1: Investor Presentation Fourth Quarter 2015
INVESTOR PRESENTATION Fourth Quarter 2015 YOUR SUCCESS COMES FIRST
Slide 2: Forward-Looking Statement
Forward-Looking Statement d "could," “should,” “hope,” “might,” “believe,” " a fig rs “may; ‘expect,” “plan,” “assume,” “intend,” “estimate,” “anticipate,” “project,” aii 0 oF arn "wit h term in m Act F199: ithe orin our i pr stomer and increase our expenses. (vi) f continued t our market areas, res
Slide 3: Table of Contents
Table of Contents Company Overview 4 Points of Focus 9 Investment Rationale... 14 Pillars of Success 20 = Record of Strong Execution 0.0.0.0... 21 = Unique Competitive Advantages .. 27 = Focused Strategic Objectives... 33 A di 38
Slide 4: Company Overview
COMPANY OVERVIEW YOUR SUCCESS COMES FIRST First _ Business
Slide 5: Company Profile
Company Profile FBIZ BANKING: Billion $1.8 Billic FBIZ TRUST $1.0 Billion Headquarters: * Experienced leadership Madison, WI * Entrepreneurial management style Mission: * — Insider ownership of 99%’ Business-focused model Client relationship focus with high touch service Niche acquisitions complemen
Slide 6: Evolution of Success
Evolution of Success Aligned with Financial Needs of Our Niche Client Base Source: FBZ management 4 Represents Appleton, Oshkosh and Green Bay, Wisconsin,
Slide 7: Geographic Footprint
Geographic Footprint Appleton, WI Minneapolis, Mt Milwaukee, WI Kenosha, WI Madison, WI Detroit, Ml Chicago,IL Denver, CO St.Louis, MO, Kansas City, Hockessin, DE Charlotte, NC Atlanta, GA San Antonio, TX © Banking Office @ Asset-Based Lending Business Development Office Equipment Finance Business D
Slide 8: Proven Leadership Team
Proven Leadership Team = Experienced leadership team trained at large, complex institutions and significant time with FBIZ | | Tite vrdgsteanet | reyearswineaz | erapen | peaenar institutions Joining FBIZ, Michael Losenegger | Chief Credit Officer - FBFS- x x Dave Vetta resident & CEC kee x x Source
Slide 9: Points of Focus
POINTS OF FOCUS YOUR SUCCESS COMES FIRST First Business
Slide 10: Points of Focus
Points of Focus Fourth Quarter and Full Year 2015 STRONG BALANCE SHEET GROWTH Overall balance sheet composition remained strong in 2015 driven by: andi uth of 12% and 8%, respectively. Period-end in-market deposit ratio remained strong at 69% as of December 31, 2015 - within the targeted operating r
Slide 11: Points of Focus
Points of Focus Fourth Quarter and Full Year 2015 1La% PY% $in millions 04 2014* Q3 2015 Q42015| Change ni FY 20147) FY 2015 | Change Strone Total loans and leases, net $1265 $1,362 $1,415 Balance Sheet Growth Total in-market deposits $1,011 $1,063 $1,090 Operating _ | TPline revenue $166 $18.7 $19.
Slide 12: SBA Platform Introduced Across FBIZ Footprint
Points of Focus SBA Platform Introduced Across FBIZ Footprint CLIENT ACQUISITION STRATEGY BUILD COMPLETE RELATIONSHIP mes + PRIVATE BANKING FOR OWNERS AND KEY EMPLOYEES EXPAND WITH CHANGING CLIENT NEEDS * ADDITIONAL SBA FINANCING + CONVENTIONAL TERM LOANS AND LINES OF CREDIT PRIVATE WEALTH MANAGEMEN
Slide 13: Credit Culture Helps Safeguard Shareholder Investment
Points of Focus Credit Culture Helps Safeguard Shareholder Investment Cumulative Net Charge-Offs as a % of 12/31/07 Loans and Leases” 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% t T 2008 2009 2010 2011 2012 2013 2014 2015 ome FBIZ — All BHCs Source: SNL Financial and SEC flings. 1. “Cu
Slide 14: Investment Rationale
INVESTMENT RATIONALE YOUR SUCCESS COMES FIRST First _ Business
Slide 15: Investment Rationale
Investment Rationale SCALABLE FRANCHISE, WELL POSITIONED FOR CONTINUED GROWTH EXPANDING CLIENT ACQUISITION SBA STRATEGY SIGNIFICANT IN-MARKET DEPOSIT GROWTH OPPORTUNITY P/E MULTIPLE AT A DISCOUNT TO HIGH PERFORMING PEER GROUP COMPETITIVE DIVIDEND YIELD
Slide 16: Market Deposits by County
Jane 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%) EBIZ: 2% FBIZ: 0.5% FBIZ: 7% FBIZ: 1% $13.2 Billion $10.8 Billi $11.6 Total Market Deposits Total Market Deposits Billi $48.4 Billion Total
Slide 17: FBIZ Valuation - Price Appreciation
FBIZ Valuation - Price Appreciation 2015) 120% snag vy My 1 on I Why let s Dec12 © Mar-13Jun-13._«‘Sep-13.Decl3. © Mar-ld— June Sep-ld-Dec-ld. MarelS—Jun-15 —FBIZUS- —SNL Micro Cap USS. Benk
Slide 18: FBIZ Valuation - P/E Multiple
FBIZ Valuation - P/E Multiple P/E ir i 3, 2012 - December 31, 2015) 1473 12.51 Dect2 Mar-3Jun-18—Sep-3.-Dec13_« Mar-id = dun-4Sep-14Dec-14. MaretS—Jun-tS— Sep-15.Dec-5 —FBIZ-US_- SNL Micro Cap U.S. Bank Source: SN Financial
Slide 19: FBIZ Valuation - Dividends per Share
FBIZ Valuation - Dividends per Share 26% CAGR $0.44 $0.14 2010 2015 [Total Annual Dividends per Share $0.14 $0.12 $0.10 $0.08 $0.06 $0.04 $0.02 $0.00 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 4Q14 1Q15 2Q15 3Q15 4Q15 1016" 2 Dividends per Share sm Dividend Yield’ Source: SEC flings and FB 2. OnJanuary 29,
Slide 20: Pillars of Success
Pillars of Success Foundation for the Future SHAREHOLDER VALUE RECORD OF UNIQUE FOCUSED STRONG COMPETITIVE STRATEGIC EXECUTION ADVANTAGES. OBJECTIVES
Slide 21: Pillars of Success
Pillars of Success Foundation for the Future SHAREHOLDER VALUE RECORD OF UNIQUE FOCUSED STRONG COMPETITIVE STRATEGIC EXECUTION ADVANTAGES, OBJECTIVES
Slide 22: Record of Strong Execution
Record of Strong Execution Key Objectives a DRIVE TOP LINE REVENUE GROWTH GB STRENGTHEN IN-MARKET DEPOSIT MIX GENERATE CONSISTENT, STRONG PROFITABILITY a DELIVER EPS GROWTH ACHIEVE ¢ +1% ROA ¢ +12% ROE ¢ ABOVE MARKET GROWTH
Slide 23: Organic Growth Drives Top Line Revenue
Organic Growth Drives Top Line Revenue’ Complemented by Niche Acquisitions $21.0 5 14% ACR $76M $20.0 | 2 $19.0 g H30M = $18.0 $17.0 $16.0 2010 2015 4Q14 1Q15° 2Q15 3Q15 4Qi5 Source: SEC lings and F812 management. 1
Slide 24: 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 $1,500 | r || +0.80% $1,200 + g ; 0.60% i} $397M = $00) = ; 0.40% $600 $133M $300 | oe $0 - ~ 0.00% 2010 2015 4Q14 1Q15 2Q15 3Q15 4Q15 HMI Transaction accounts? a! Transaction = sieisicio
Slide 25: Generate Consistent, Strong Profitability
Generate Consistent, Strong Profitability Efficient Operating Model Drives Bottom Line Net Interest Margin 1.20% 4.90% 1.00% 4.20% 2 2 3.50% | = SSS SSS B 0.80% 2 H z < a 2.80% 5 0.60% 5 e E 2.10% 5 2 3 0.40% 3 1.40% ase 0.20% 0.00% 0.00% 4014 1Q15 2015 3Q15 4Q15 4Q14 1015 2015 3Q15 4Q15 HMI Net int
Slide 26: Deliver EPS Growth
Deliver EPS Growth Drives Shareholder Value $0.185 2010 I Diuted eps 2015 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 4Q14. 1015 ME Diluted evs 2Q15 3Q15 [RIE Dividends per Share 4Q15
Slide 27: Pillars of Success
Pillars of Success Foundation for the Future SHAREHOLDER VALUE RECORD OF UNIQUE FOCUSED STRONG COMPETITIVE} STRATEGIC EXECUTION ADVANTAGES| OBJECTIVES
Slide 28: Unique Competitive Advantages
Unique Competitive Advantages Key Themes EFFICIENT OPERATING MODEL EFFICIENT FUNDING STRATEGY SUPERIOR CREDIT QUALITY CLIENT-CENTRIC FOCUS WITH HIGH TOUCH SERVICE SUPERIOR TALENT WITH BUSINESS EXPERTISE SUCCESSFUL NICHE COMMUNITY BUSINESS BANK
Slide 29: Efficient Operating Model
Efficient Operating Model HIGH EFFICIENCY "BUSINESS BANK" OPERATING MODEL All BHCs ¢ Limited branch network © Invest in technology 63% LY) * Products tailored to serve businesses and their owners EFFICIENCY RATIO | | EFFICIENCY RATIO Total Loans Outstanding per FTE Deposits Per Location Thousands s
Slide 30: Efficient Funding Strategy
Continue to leverage commercial relationships to attract in-market transaction deposits Maintain wholesale deposits within Board-monitored limits —Match-funding fixed-rate term loans with wholesale deposits locks in interest rate spread -WAOM' = 4.29 years — Long-term wholesale deposits more reasona
Slide 31: Client-centric Focus with High Touch Service
Client-centric Focus with High Touch Service ©FBIZADVANTAGE FIRST BUSINESS PRESENTS MANUFACTURING FIRST’ = “110° {() Family Business First EXPO & CONFERENCE '\C INITIATIVE of NORTHEAST WISCONSIN A Uy / bw
Slide 32: Superior Talent with Business Expertise
Superior Talent with Business Expertise Engaged Employees = Happy Clients RIGOROUS HIRING PROCESS FORMAL MENTOR PROGRAM SATISFACTION REGULAR SURVEYS AND FEEDBACK
Slide 33: Pillars of Success
Pillars of Success Foundation for the Future SHAREHOLDER VALUE RECORD OF UNIQUE FOCUSED STRONG COMPETITIVE STRATEGIC EXECUTION ADVANTAGES: OBJECTIVES
Slide 34: Focused Strategic Objectives
Focused Strategic Objectives OPPORTUNISTICALLY INVEST TO SUPPORT ORGANIC GROWTH COMPLEMENT ORGANIC GROWTH WITH ea URe NICHE ACQUISITIONS SUCCESS INCREASE FEE INCOME GENERATING SERVICES
Slide 35: Opportunistically Invest to Support Organic Growth
Opportunistically Invest to Support Organic Growth Investing for the Future CONVERSION TO SALESFORCE IN 2015 INVESTMENT IN TecHNOT OY) DATA WAREHOUSE/BUSINESS INTELLIGENCE IMPLEMENTATION IN 2015 FOUNDATION FOR SCALABLE OPPORTUNISTICALLY ADD NEW LOCAL BDOs FRANCHISE INVESTMENT IN AND EVALUATE ADDITIO
Slide 36: Complement Organic Growth with Niche Acquisitions
Complement Organic Growth with Niche Acquisitions © ORGANIC GROWTH REMAINS THE FOUNDATION FOR THE FUTURE © HOWEVER, OUR SUCCESS CREATES OPPORTUNITIES FOR ACQUISITIONS mm) SPECIALTY FINANCE mms) REGISTERED INVESTMENT ADVISORY FIRMS mm) BUSINESS-FOCUSED COMMUNITY BANKS
Slide 37: Increase Percentage of Fee Income
Increase Percentage of Fee Income Additional Fee Income Generating Services Millions 4014 1015 * 2Q15 3Q15 4q1s Gain on Gain on oan service rust HE Sole of = ME other 12" chargeson IS est, SBA Loans Residential Deposits Mortgages ==: Previous % Goal, ‘% of Total Source: SEC flings and F812 managemen
Slide 38: Appendix: Supplemental Data & Non-GAAP Reconciliations
APPENDIX SUPPLEMENTAL DATA & NON-GAAP RECONCILIATIONS YOUR SUCCESS COMES FIRST First Business
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 amortization of other intangible assets, if any, divided b
Slide 40: Deposit Cost
Deposit Cost Cost of Total Deposits “Cost of Total Deposits” is defined as total interest expense on deposits divided by average total deposits. "Cost of Total In-Market Deposits" is defined as total interest expense on in-market deposits divided by average total in-market deposits. In-market deposi
Slide 41: Cumulative Net Charge-off Percentage
Cumulative Net Charge-off Percentage mulative Net Charge-Offs to 12/31/07 Loans and Leases “Cumulative Net Charge-off Percentage” is defined as aggregate net charge-offs from 1/1/2008 through 12/31/15 divided by total loans and leases as of 12/31/07. We believe that this measure is important to many
Slide 42: Loan and Lease Composition
Loan and Lease Composition As of December 31, 2015 ‘Commercial and Industrial Commercial Real Estate - Non-Owner Occupied Commercial Real Estate - Owner Occupied Construction and Land Development Multi-family 1.4 Family Direct Financing Leases Total Gross Loans and Leases All Other Loans Direct Fina
Slide 43: Your Success Comes First
YOUR SUCCESS COMES FIRST | First Business
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