First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Q1 2016 Earnings Presentation
42 slides from First Business Financial Services's earnings presentation, May 9, 2016
Slide 1: Investor Presentation First Quarter 2016
INVESTOR PRESENTATION FIRST QUARTER 2016 First Business
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 Points of Focus Investment Rationale... Pillars of Success .. : » Record of Strong Execution « Unique Competitive Advantages « Focused Strategic Objectives Appendix
Slide 4: Company Overview
COMPANY OVERVIEW
Slide 5: Company Profile
Company Profile 1. Consists of all 2. Data as of March 16, 2016. Insider First Busi FBIZ BANKING: FBIZ TRUST $1.8 Billion $1.1 Billion IN TOTAL ASSETS IN ASSETS UNDER MANAGEMENT & ADMINISTRATION Experienced leadership Entrepreneurial management style Insider ownership of 8% Business-focused model Cl
Slide 6: Evolution of Success
Evolution of Success Aligned with Financial Needs of Our Niche Client Base First Business Bank - First Business Bank Northeast Region’ First Business Bank - Alterra Milwaukee Bank Kenosha Region 2002 - 2005 2007 - 2011 2012 | 2013 2015 Milwaukee ea jased Source: FBIZ management
Slide 7: Geographic Footprint
Geographic Footprint Seattle, WA Denver, CO San Anotnio, Tk © Banking Office © Asset-Based Lending Business Development Office © Equipment Business Development Office @ Factoring Office Source: FBIZ management ‘Minneapolis, MN Madison, WI Chicago,IL Appleton, WI Milwaukee, WL Kenosha, WI St.Louis, M
Slide 8: Proven Leadership Team
Proven Leadership Team Experienced leadership team trained at large, complex institutions and significant time with FBIZ Title “ke vn veas: large, one experience institutions Corey Chambas President & CEO - FBFS x x x x Ed Sloane CFO - FBFS x Dave Seiler COO - FBFS x x Michael Losenegger|Chief Credi
Slide 9: Points of Focus
POINTS OF FOCUS
Slide 10: Points of Focus
Points of Focus First Quarter 2016 r STRONG BALANCE SHEET GROWTH - LOAN GROWTH IN HISTORICALLY SOFT FIRST QUARTER SETS STAGE FOR 2016 @ OPERATING EXPENSE CONTROL RESULTS IN 62% EFFICIENCY RATIO @ EXPANDED AND DIVERSIFIED REVENUE STREAMS @ SOUND ASSET QUALITY HIGHLIGHTED BY SUSTAINED LOW LEVEL OF NET
Slide 11: Points of Focus
Points of Focus First Quarter 2016 LQ% PYQ % $in millions Qi 2015 Q42015 Q12016 Change Change Strong Balance Total loans and leases $1,295 $1,431 $1,449 1% 12% Sheet Growth Total arket deposits $1,055 $1,090 $1,106 1% Top line revenue $18.8 $19.8 Total operating expenses $11.7 $11.7 Efficiency ratio
Slide 12: SBA Platform Expands Across FBIZ Footprint
Points of Focus SBA Platform Expands Across FBIZ Footprint EARNINGS CATALYST $ * EARNING ASSET GROWTH « IN-MARKET DEPOSIT GROWTH «© FEE INCOME 4 EPS GROWTH Source: FBIZ management, 1 the sale of SBA the three months ended March 31, 2016 from SBA loans i i ("BDOs") located in WI and KS. % Revenue by
Slide 13: Credit Culture Helps Safeguard Shareholder Investment
Points of Focus Credit Culture Helps Safeguard Shareholder Investment Net Charge-Offs/Avg Loans 1.6% 4 Sustained low level of net charge-offs driven stent underwriting st 14% 4 1.2% | * Credit underwriting through a committee 0% process is a key to our operating philosophy. 0.8% 4 * Business develop
Slide 14: Investment Rationale
INVESTMENT RATIONALE
Slide 15: Investment Rationale
Investment Rationale J J) J) J A) aE 1 Inc. (AVNU}, Baylake Corp. (BYLK), (covz), Bi Inc. (OKSB), Inc. (SYBT), Ti (Ts, Ine. (OLBK), Ine. (OSBC), ‘QCR Holdings, inc. (QCRH), Inc. (SONA), Southwest it ings, ion, Inc. (WTBA).
Slide 16: Significant Deposit Growth Opportunity
Significant Deposit Growth Opportunity Dane 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%) IS Bank 8% Commerce Bank 13% FBIZ: 7% FBI: 2% FBIZ: 1% FBIZ: 0.5% $13.2 Billion $10.8 Billion $11.6
Slide 17: FBIZ Valuation - Price Appreciation
FBIZ Valuation - Price Appreciation % Price Increase Since 2012 Common Stock Offering (December 3, 2012 - March 31, 2016) -20% — Dec-12 Mar-13 Jun-13, Sep-13 Dec-13_ Mar-14 Jun-14 Sep-14 Dec-14— Mar-15 Jun-15, Sep-15 Dec-15 Mar-16
Slide 18: FBIZ Valuation - P/E Multiple
FBIZ Valuation - P/E Multiple P/E Trend Since 2012 Common Stock Offering (December 3, 2012 - March 31, 2016} Ox r r ; r ; r r r r r r r Dec-12_ 9 Mar-13_— Jun-13 Sep-13 Dec-13_ 9 Mar-14 —Jun-14 Sep-14 Dec-14. Mar-15—Jun-15 Sep-15 Dec-15 = Mar-16
Slide 19: FBIZ Valuation - Dividends per Share
FBIZ Valuation - Dividends per Share 26% $0.44 CAGR $0.14 2010 2015 @ Total Annual Dividends per Share $0.14 5 $0.12 | $0.10 $0.08 + $0.06 + $0.04 4 $0.02 } $0.00 ~ 4014 1Q15 2Q15 3Q15 4Q15 Dividends per Share === Dividend Yield 1Q16 r2.50% - 2.00% - 1.50% ; 1.00% + 0.50% ~ 0.00%
Slide 20: Pillars of Success
Pillars of Success Foundation for the Future SSS —— —— ———— RECORD OF UNIQUE FOCUSED STRONG COMPETITIVE STRATEGIC
Slide 21: Pillars of Success
Pillars of Success Foundation for the Future RECORD OF STRONG UNIQUE FOCUSED COMPETITIVE STRATEGIC
Slide 22: Record of Strong Execution
Record of Strong Execution Key Objectives DRIVE TOP LINE REVENUE GROWTH ACHIEVE e¢ +1% ROA e +12% ROE e ABOVE MARKET GROWTH STRENGTHEN IN-MARKET DEPOSIT MIX GENERATE CONSISTENT, STRONG PROFITABILITY DELIVER EPS GROWTH 22
Slide 23: Organic Growth Drives Top Line Revenue
. ‘ . 1 Organic Growth Drives Top Line Revenue Complemented by Niche Acquisitions $20.5 4 14% CAGR $76M $20.0 $19.5 4 Millions $39M $19.0 | $18.5 | $18.0 - 2010 2015 1Q15 2Q15 3Q15 4qis 1Q16 Source: SEC filings and FBIZ management. 1._ Top line revenue calculated as net interest income
Slide 24: Strengthen In-market Deposit Mix
Strengthen In-market Deposit Mix Focus on Transaction Accounts to Reduce Cost of Funds $1,800 5 1.00% 24% a $397M $1,500 | $1,200 { a S = $900 { = $600 | $300 j $0 - 0.00% 2010 2015 1Q15 2Q15 3Q15 4Qis 1Q16 (EEE Transaction Accounts" Wholesale Non: NIB 1BTr i HE posits? MEE transaction ME transactio
Slide 25: Generate Consistent, Strong Profitability
Generate Consistent, Strong Profitability Efficient Operating Model Drives Bottom Line Net Interest Margin 1.20% 18.00% 4.50% + 4.25% 4 1.00% | }15.00% 2) 4.00% | @ 0.80% 12.00% 3.75% 4 2 § 0.60% | 9.00% 3.50% + See eee eee ce 5 3.25% | 3 0.40% 6.00% [4 3.00% + 0.20% | + 3.00% 2.75% + peas 0.00% — :
Slide 26: Deliver EPS Growth
Deliver EPS Growth Drives Shareholder Value $0.60 5 1.90 $0.50 4 59% $ CAGR $0.40 + $0.30 + $0.20 + $0.185 $0.10 + 2010 2015 $0.00 ieee Gives 1Q14 2014 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 GB Diluted Eps M@MM__Dividends per Share
Slide 27: Pillars of Success
Pillars of Success Foundation for the Future RECORD OF UNIQUE STRONG COMPETITIVE STRATEGIC
Slide 28: Unique Competitive Advantages
Unique Competitive Advantages Key Themes If] Efficient Operating Model Efficient Funding Strategy iN SUCCESSFUL : NICHE H H H COMMUNITY Superior Credit Quality BLESS BANK Client - Centric Focus with High Touch Service Superior Talent with Business Expertise
Slide 29: Efficient Operating Model
Efficient Operating Model HIGH EFFICIENCY "BUSINESS BANK" OPERATING MODEL ¢ Limited branch network ¢ Invest in technology ¢ Products tailored to serve businesses and their owners 0% EFFICIENCY RATIO EFFICIENCY RATIO. Total Loans Outstanding per FTE Deposits Per Location $8,000 $700 $7,000 $600 6,000
Slide 30: Efficient Funding Strategy
Efficient Funding Strategy Mitigates Interest Rate Risk 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
Slide 31: Client-centric Focus with High Touch Service
Client-centric Focus with High Touch Service ©FBIZADVANTAGE FIRST BUSINESS SEMINARS & EVENTS EXPO & CONFERENCE —— FIRST BUSINESS PRESENTS —— O, Enter prising « ¢ MANUFACTURING FIRST A NONPROFITS Gy FAM ra ILY INDUSTRY PRACTICE GROUPS LN ~_ s MANUFACTURING EMERGING COMMERCIAL NOT FOR FOOD & PROFESSIO
Slide 32: Superior Talent with Business Expertise
Superior Talent with Business Expertise Engaged Employees = Happy Clients ENGAGED EMPLOYEES RIGOROUS HIRING PROCESS FORMAL MENTOR PROGRAM FUN EMPLOYEE OUTINGS 97% CLIENT SATISFACTION REGULAR SURVEYS AND FEEDBACK STRONG EMPLOYEE REFERRAL PROGRAM Source: Itsech, Ph.D. - Executive Trai ining & Consulti
Slide 33: Pillars of Success
Pillars of Success Foundation for the Future FOCUSED STRATEGIC
Slide 34: Focused Strategic Objectives
Focused Strategic Objectives If] Opportunistically Invest to Support Organic Growth LONG-TERM \f] Complement Organic Growth with Niche Acquisitions FUTURE SUCCESS \f] 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 industry leading CRM in 2015 Expand marketing/sales automation in 2016 Investments in Technology Data warehouse/BI implementation in 2015 Leverage BI suite in 2016 to enhance budget/forecast FOUNDATION process
Slide 36: Complement Organic Growth with Niche Acquisitions
Complement Organic Growth with Niche Acquisitions ¢ ORGANIC GROWTH REMAINS THE FOUNDATION FOR THE FUTURE e HOWEVER, OUR SUCCESS CREATES OPPORTUNITIES FOR ACQUISITIONS m= SPECIALTY FINANCE ==> REGISTERED INVESTMENT ADVISORY FIRMS ==> BUSINESS-FOCUSED COMMUNITY BANKS 36
Slide 37: Increase Percentage of Fee Income
Increase Percentage of Fee Income Additional Fee Income Generating Services $6.0 5 $5.0 4 $4.0 4 Millions Ww uw N w o o wn = o wn S rc) 1Q15 2Q15 3Q15 4Qis 1Q16 Gain on Gain on Sale of _ HE giecrscn MIE resientiat == other = L0*" WE eices os ay test Loans Deposits rigages Revenue weuees Historic % G
Slide 38: Appendix
APPENDIX SUPPLEMENTAL DATA & NON-GAAP RECONCILIATIONS
Slide 39: Efficiency Ratio
Efficiency Ratio Effici y 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 and amortization of other intangible assets, if any, divided
Slide 40: Deposit Cost
Deposit Cost Cost of Total Deposits ° “Cost of Total Deposits” is defined as total interest expense on deposits divided by total average deposits. "Cost of Total In-Market Deposits" is defined as total interest expense on in-market deposits divided by total average in-market deposits. In-market depo
Slide 41: Loan and Lease Composition
Loan and Lease Composition 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 All Other Loans Total Loans and Leases Deferred Loan Fees Total Gross Loans and L
Slide 42: First Business
First Business YOUR SUCCESS COMES FIRST.
First Business Financial Services — Q1 2016 Earnings Presentation on 6ix