First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Investor Presentation (November 2018)
51 slides from First Business Financial Services's investor presentation, Nov 29, 2018
Slide 1: Investor Presentation Third Quarter 2018
INVESTOR PRESENTATION THIRD QUARTER 2018
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 Company Overview Quarterly Update ... Earnings Catalysts .. Investment Rationale ........0.00.0.00.0000 Financial Performance .............0..0000065 Appendix..........0.0...
Slide 4: Company Overview
COMPANY OVERVIEW
Slide 5: Company Profile
Company Profile FBIZ BANKING” FBIZ TRUST $1.9 Billion $1.7 Billion ADMINISTRATION Headquarters: Madison, WI Mission: Build long-term shareholder value as an entrepreneurial financial services provider to businesses, executives and high net worth individuals + Experienced leadership + Entrepreneurial
Slide 6: Evolution of Success
Evolution of Success Aligned with the Financial Needs of Our Niche Client Base Asset-based Company Retirement Lending Plan Services Business Banking Equipment Private Wealth Services Finance Services 4 O- t 1990 ) 1995 )19 ° I Madison Milwaukee 98 ) 2000 ) 2001 ) 2006 I Northeast Wisconsin SBA Lendi
Slide 7: Evolution of Success
Evolution of Success Aligned with the Financial Needs of Our Niche Client Base GROWING OR MANAGING LEADING AN. BUILDING AND ‘A BUSINESS ESTABLISHED BUSINESS MANAGING WEALTH ENJOYING RETIREMENT
Slide 8: Geographic Footprint
Geographic Footprint § recone iano a Pei = fees : reas pene: : ° ° evo . seatte, wa * 5 Lou, WO . chariot, NC . o San Antoni, TE . ouster, = ' - Mir, FL . Commercial banking activities are concentrated in Memphis, TW = the Midwest with remote office locations located esau o nationwide for specialty
Slide 9: Leadership Team
Leadership Team Experienced team trained at large, complex institutions Corey A. Chambas Edward G. Sloane Jr. David R. Seiler Michael J. Losenegger Barbara McCarty Conley PRESIDENT AND CEO CHIEF FINANCIAL OPERATING CHIEF CREDIT OFFICER GENERAL COUNSEL OFFICER R \% Cm \ Ss Jodi A. Chandler ‘Mark J. M
Slide 10: Quarterly Update
QUARTERLY UPDATE
Slide 11: Quarterly Update
Quarterly Update Third Quarter 2018 RECORD NET INTEREST INCOME DRIVEN BY PRICING DISCIPLINE AND INCREASED FEES COLLECTED IN LIEU OF INTEREST LOAN GROWTH MODERATED TO A 1% ANNUALIZED INCREASE DURING Q3 2018 DUE TO ABOVE AVERAGE PAYOFFS TO RECORD TOP LINE REVENUE SIGNIFICANT LOAN RECOVERY MORE THAN OF
Slide 12: Quarterly Update
Quarterly Update Third Quarter 2018 $n millions (except per share amounts)| 32017 __q22018_| 932018 19% change Top line revenue $21.965 Operating Efficiency Total operating expenses 315.277 Diversified Revenue Streams y ratio 69.55: Net interest inco Gain on sale of SBA loans $0.606 Trust and invest
Slide 13: Quarterly Update: Net Interest Margin Analysis
Quarterly Update Third Quarter 2018 Net Interest Margin Analysis 1.00% 0.00% 1016 2a16 3016 4016 1017 2Q17 3017 4017 1a18 2018 3018 “= Vield on interest-Earning Assets == Cost of Funds — Net interest Margin Effective Federal Funds Rate Cumulative Beta Trends Since Initial 2015 Rate Hike 100% 5.00% 8
Slide 14: Quarterly Update: Vendor Financing Program
Quarterly Update Third Quarter 2018 Vendor Financing Program Mission: To market our products and services to vendors who operate within distinct vertical market segments so that First Business becomes the point of sale financing partner of choice that the vendor uses to support the sale of their equ
Slide 15: Earnings Catalysts
EARNINGS CATALYSTS
Slide 16: Earnings Catalysts
Earnings Catalysts A A 7 7 16
Slide 17: Organic Loan and Lease Growth
Millions Organic Loan and Lease Growth Differentiated approach to business banking and investment in talent drives current success and long-term organic loan and lease growth expectations $1,620 $1,600 $1,580 $1,560 $1,540 $1,520 $1,500 $1,480 $1,460 $1,440 Period End Loans and Leases YOY Growth = 9
Slide 18: Asset Quality Improvement
Asset Quality Improvement * Q2 2018 NPL increase related to one fully-collateralized asset-based deal with full repayment expected = | * Management's outlook on asset quality improvement in the coming quarters remains positive Asset Quality Trends ‘Aggregate Through the Cycle Net Charge-Offs $50 2.5
Slide 19: SBA Lending Growth and Profitability
SBA Lending Growth and Profitability SBA lending primed for profitable growth following significant investments in platform and new producers SBA Lending Core Competencies ‘SBA Lending BDO Growth + Experienced SBA functional experts hired 8 late 2016, early 2017 to. lead SBA credit, operations and 6
Slide 20: Scale Wealth Management Business
Scale Wealth Management Business Continue to expand high performing wealth management business throughout FBIZ footprint = | Product Profile © Fiduciary and investment manager for inc tailored to each client’s unique situation * Full fiduciary powers and offers trust, estate, financial planning and
Slide 21: Investment Rationale
INVESTMENT RATIONALE
Slide 22: Investment Rationale
Investment Rationale 7 7 SS 7 A 7 22
Slide 23: P/E Multiple at a Discount to Peer Group
P/E Multiple at a Discount to Peer Group” P/E Trend 1x 10x Sep-l7 Oct-17 Nov-17 —Dec-17_—Jan-18Feb-18Mar-18 Apr18 May-18 Jun-18_Jul-t8— Aug-8 —Sep-18 —FBIZ-Us_ —Peer Group Average 23
Slide 24: Dividend Yield Above Peer Group Average
Dividend Yield Above Peer Group Average” Dividend Yield Trend 3.00% 0.50% 0.00% Sep-17 Oct-17 Nov? Dec-17_Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul Aug-18Sep-18 —FBIZ-US —Peer Group Average 24
Slide 25: Competitive Advantage Driven by Niche Business and Client-Centric Focus
Competitive Advantage Driven by Niche Business and Client-Centric Focus CLIENT & COMMUNITY EVENTS = " ——— FIRST BUSINESS PRESENTS ——— O, e = [fist MANUFACTURING FIRST ieee = J Business EXPO & CONFERENCE O40 NONPROFITS SEMINAR SERIES FIRST BUSINESS INDUSTRY PRACTICE GROUPS, 2EéO0s5 REAL ESTATE BEVERA
Slide 26: Diversified Margin and Fee Revenue
Diversified Margin and Fee Revenue 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 tending -C&t Commercial Lending CREO ‘asset Based tending SBA Lending E
Slide 27: Scalable Franchise Positioned for Sustainable Growth
Scalable Franchise Positioned for Sustainable Growth Organic growth remains the foundation for the future Improving credit profile — While non-accrual loans increased in the second quarter of 2018, a large recovery was recognized in the third quarter and management's outlook on asset quality improve
Slide 28: Financial Performance
FINANCIAL PERFORMANCE
Slide 29: Net Interest Margin
Net Interest Margin ‘Annual Trend 3.50% eee eeee eeee ae 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2013 2014 2016 2017 Net Interest Margin = = Long-Term Goal Quarterly Trend 4.00% 3.50% ee — — a 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 3017 417 rare 2018 3018 Net interest Margin = = Long-Term Goal
Slide 30: Fee Income Ratio
Fee Income Ratio = Annual Trend = * (20% eee a ad oe a i seo cone nosso rome Quarterly Trend sox ~ om 2a? an nae was sala Fee Income Ratio = = Long-Term Goal Source: Su? Got Markt tigen ee Income Rat fied stot non nee ncome aed by total top ne revenue 30
Slide 31: Efficiency Ratio
Efficiency Ratio 70% 70% 66% 62% 58% 54% 50% 74% 70% 66% 62% 58% 54% 50% 2017 effitency impacted by 3016 decision to slow SBA Annual Trend production while making Investments inthe platform. a I a —~] oe — a — 2013 2014 2015 2016 2017 Efficiency Ratio = = Long-Term Operating Range Quarterly Trend cs
Slide 32: In-Market Deposits / Total Bank Funding
In-Market Deposits / Total Bank Funding = Annual Trend Quarterly Trend = wos ws on os - ss 60% | 60% ! o - wo wx os ™ “at - 7 a percentage fat bane fining,
Slide 33: Annualized Net Charge-Offs / Average Loans
Annualized Net Charge-Offs / Average Loans Annual Trend 25% 2.0% 15% 1.0% 0.5% 0.0% 2007 2008 2008 2010 2011 2012 2013 2014 2015 2016 2017 — rez = US. Commercial Bank $18-$38 Quarterly Trend 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 0.2% + 3017 4qi7 1018 2a18 3018 — rez US. Commercial Banks $18-$38 33
Slide 34: Return on Average Assets
Return on Average Assets 1.20% ‘Annual Trend 1.00% eeeee eee ee ee ee eee 0.80% 0.60% 0.40% 0.20% 0.00% 2013 2014 2016 2017 lm ROAA = = Long-Term Goal Quarterly Trend 1.40% 1.20% 1.00% woe eer eee eee woe eee eree 0.80% 0.60% 0.40% 0.20% 0.00% 1018 3018 Source: SAP Gotl marker netigene = = Long-Term
Slide 35: Return on Average Equity
Return on Average Equity ‘Annual Trend 16% 10% 12% eeeee ween enw ee ee ee ee ee eee 10% 8% 6% a% 2% 0% 2013 2014 2015 2016 2017 TE ROAE = = Long-Term Goal Quarterly Trend 16% 14% 12% -- weee- weee- = — 2 = = 10% 3% 6% a% 2% 0% 3017 4017 1018 2018 3018 Mm ROAE = = Long-Term Goal Source St Got Maret
Slide 36: Top Line Revenue Growth
Top Line Revenue Growth 40% 30% 20% 10% ox 10% 20% ‘Annual Trend 2013 2014 2015 2016 2017 —— US. Commercial Banks $18-$38 — FBIZ Quarterly Trend 4017 1018 2018 3018 US, Commercial Banks $18-$38 —= FBIZ Source: St? Got Markt tigen. Quarry Ter represents yer over ye op ine revenue growth. Top Une Reve
Slide 37: Loan and Deposit Composition
Loan and Deposit Composition Total Gross Loans & Leases Total Deposits 37
Slide 38: Efficient Funding Strategy
Efficient Funding Strategy Mitigates Interest Rate Risk + 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 spread —WAO
Slide 39: Appendix: Supplemental Data & Non-GAAP Reconciliations
APPENDIX SUPPLEMENTAL DATA & NON- GAAP RECONCILIATIONS
Slide 40: Commercial Banking Products & Services
COMMERCIAL BANKING PRODUCTS & SERVICES
Slide 41: Commercial Lending
Commercial Lending 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 * Lines of credit and term loans focused on businesses with annual sales of up to
Slide 42: 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 liquidity,
Slide 43: Asset-Based Lending
Asset-Based Lending High-yielding, counter-cyclical product complements conventional commercial lending Product Profile * Target medium-sized companies nationwide ‘* Primarily provide revolving lines of credit and term loans for leveraged buyouts, capital expenditures, working capital, bank debt ref
Slide 44: Receivable Financing
Receivable Financing High-yielding, counter-cyclical product complements conventional commercial lending Product Profile * Target small- to me im-sized companies nationwide ‘+ Primarily provide funding to clients by purchasing accounts receivable on a full recourse basis ‘© Positioned to provide com
Slide 45: Equipment Financing
Equipment Financing Aligned with the equipment loan and lease needs of our niche client base = | Product Profile ‘* Includes broad range of equipment finance products to address the financing needs of commercial clients in a variety of industries ‘* Focus includes manufacturing equipment, industrial
Slide 46: Trust / Private Wealth
Trust / Private Wealth 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 * Full f
Slide 47: 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 opportun
Slide 48: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS
Slide 49: Efficiency Ratio
Efficiency Ratio Non-GAAP Reconciliation “Efficiency Ratio” is a non-GAAP measure representing non-interest expense excluding the effects of the SBA recourse provision, impairment of tax credit investments, losses or gains on foreclosed properties, amortization of other intangible assets and other d
Slide 50: 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 total average FHLB advances. We believe that this measure is important to many investors in the marketplace who are interested in
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