First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Investor Presentation (January 2024)
45 slides from First Business Financial Services's investor presentation, Jan 26, 2024
Slide 1: Investor Presentation Fourth Quarter 2023
Investor Presentation Fourth Quarter 2023
Slide 2: Forward-Looking Statements
2 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 exp
Slide 3: Table of Contents
Table of Contents Company Snapshot ...................................................... 4 Why FBIZ? ..................................................................... 5 Drivers of Growth & Profitability ................................. 12 Strategic Plan ........................................
Slide 4: Company Snapshot
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 Finance products and
Slide 5: Why FBIZ?
WHY FBIZ?
Slide 6: Operating Trends - Net Operating Revenue CAGR of 15%
6 M ill io ns Operating Trends - 5 Year Net Operating Revenue CAGR of 15% $32.5 $39.1 $41.2 $48.1 $57.4 FYE 2019 FYE 2020 FYE 2021 FYE 2022 FYE 2023 $0.0 $15.0 $30.0 $45.0 $60.0 $75.0 $90.0 $105.0 $120.0 $135.0 $150.0 Balanced and Steady Growth Operating Fundamentals Drive Earnings Power Note: Net i
Slide 7: Positive Operating Leverage
7 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 $1.5 billion and $5.5 billion. 1. Operating leverage is defined as the percent growth in operating revenue less the percent growt
Slide 8: Profitability Exceeds Peers
8 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 $1.5 billion and $5.5 billion. Source S&P Global. 1. Represents growth rate for the nine months ended Septemb
Slide 9: Tangible Book Value Growth
9 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% 2023 TBV Growth = 13% TBV/Share Div/Share Great Recession & Pandemic Recession '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
Slide 10: Rate Cycle Consistency
10 Rate Cycle Consistency TBV/share above peers in current rate cycle Note: Peer Group defined as publicly-traded banks with total assets between $1.5 billion and $5.5 billion. Cumulative TBV % Change During Current Rate Cycle FBIZ Peer Group Median 12/31/21 03/31/22 06/30/22 09/30/22 12/31/22 03/31
Slide 11: Total Shareholder Return Above Peer Group Median
11 Note: Peer Group defined as publicly traded banks with total assets between $1.5 billion and $5.5 billion. 1. 1-Year, 3-Year, and 5-Year TSR is through 12/31/23. 2. Data as of 9/30/2023. Total Shareholder Return Above Peer Group Median Despite recent outperformance, Price/LTM EPS remains below pe
Slide 12: Drivers of Growth & Profitability
Drivers of Growth & Profitability
Slide 13: Fourth Quarter 2023 Highlights
13 Net Income $9.6 MM In-Market Deposits +27% Loans + 13% NIM 3.69% PTPP ROA 1.77% TBV per Share +14% 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 v
Slide 14: Relationship Banking Key to Success
14 Relationship Banking Key to Success Solid In-Market Deposit Growth Despite Banking Industry Trends • Long-term client relationships drive in-market deposit growth, aided by clients’ comfort with utilizing the Bank’s longstanding extended deposit insurance products • Successful execution of client
Slide 15: Core Deposit Strength
15 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. Core Deposit2 Growth: 2Q22 through 1Q23 FBIZ 3.8% Pro
Slide 16: Deposit-Centric Strategy Key to Growth
16 Deposit-Centric Strategy Key to Growth Double Digit In-Market Deposit Growth Supports Double Digit Loan Growth 1. In-market deposits defined as total deposits less wholesale deposits. Period end balances are presented. M ill io ns In-Market Deposit Growth History (1) DDA IB DDA MMA CD '18 '19 '20
Slide 17: Diversified Lending Growth
17 Diversified Lending Growth Continuing to grow higher yielding C&I lending mix Th ou sa nd s Net Loan Growth Q4 2021 $82,268 $1,739 $20,236 $18,844 $11,304 $10,884 $6,167 $1,819 Commercial Lending Private Wealth Asset- Based Lending Accounts Receivable Financing SBA Lending Equipment Finance Floor
Slide 18: Margin Strength Through Rate Cycle
18 Margin Strength Through Rate Cycle Match-Funding Strategy Positions Balance Sheet Well for Rate Changes NIM, Yields, and Costs 5.55% 3.95% 4.51% 3.73% 3.14% 3.69% 2.40% 1.99% 1.76% 1.42% 0.54% 0.45% Average Loan Yield Net Interest Margin Securities Yield Cost of Funds (5) Q4 2019 Q3 2020 Q4 2020
Slide 19: Robust Profitability Metrics
19 Robust Profitability Metrics Strong Balance Sheet Growth and Resilient Net Interest Margin Support Robust PTPP Adjusted ROAA Net Interest Margin 4.15% 3.86% 3.81% 3.76% 3.69%3.66% 3.36% 3.21% 3.11%3.93% 3.74% 3.63% 3.66% 3.50% 0.22% 0.12% 0.18% 0.10% 0.19% Adjusted net interest margin (1) Recurri
Slide 20: Net Interest Margin Components
20 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 deposits and average FH
Slide 21: Solid Asset Quality
21 Solid Asset Quality Non-Performing Assets/Total Assets Remain Well Managed M ill io ns Non-Performing Assets FBIZ NPA w/o ABL Loan ABL Loan (1) FBIZ NPA/TA Peer NPA/TA 2021 2022 1Q23 2Q23 3Q23 4Q23 $0.0 $4.0 $8.0 $12.0 $16.0 $20.0 $24.0 —% 0.20% 0.40% 0.60% 0.80% 1.00% Note: Peer group defined as
Slide 22: Equipment Finance Portfolio by Industry
22 Equipment Finance Portfolio by Industry 1. For more detailed definitions on credit quality categories see the Bank's 10-K filed with the SEC on February 22, 2023. Category IV represents non-performing loans. Equipment Finance Portfolio Analysis Strong and diversified portfolio; Transportation sub
Slide 23: Strategic Plan
Strategic Plan
Slide 24: FBIZ Strategic Plan 2019-2023
24 FBIZ Strategic Plan 2019-2023 4 Strategies Designed to Navigate the Company over a 5-Year Time Horizon Planning process is nearing completion for next 5-year plan beginning in 2024
Slide 25: Proven execution of strategic objectives
25 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% 1.15% Top line rev
Slide 26: Appendix: Supplemental Data & Non-GAAP Reconciliations
APPENDIX SUPPLEMENTAL DATA & NON-GAAP RECONCILIATIONS
Slide 27: Offerings Designed Exclusively for Business and Wealth Management
27 Offerings Designed Exclusively for Business and Wealth Management Services that meet the evolving needs of our growing client base
Slide 28: Superior Client Satisfaction Rating
28 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 detrac
Slide 29: ESG Framework
29 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 C
Slide 30: Robust Liquidity and Capital Base
30 Robust Liquidity and Capital Base Stable In-Market Deposit Base Substantial Liquidity Conservative Securities Portfolio Strong Capital Ratios (%) Source 12/31/2023 Short-term Investments $107,162 Collateral value of unencumbered pledged loans 367,471 Market value of unencumbered securities 259,79
Slide 31: Capital Strength
31 Capital Strength 12/31/23 9/30/23 6/30/23 3/31/23 12/31/22 Total Regulatory Capital $375,440 $365,058 $340,045 $331,220 $323,893 Total Risk-Weighted Assets $3,356,247 $3,259,956 $3,178,855 $3,000,105 $2,877,245 Leverage Ratio 8.43% 8.65% 8.80% 9.00% 9.17% Common Equity Tier 1 Capital Ratio 8.38%
Slide 32: Balanced Deposit Portfolio
32 Balanced Deposit Portfolio Diversified Product Base with Long-Tenured, Deep Client Relationships Top 50 Deposit Relationships by Industry Food Services, 2% Agriculture, 2% Arts & Entertainment, 2% Construction, 4% Education, 8% Finance & Insurance, 5% Health Care, 10% Information, 2% Maunfacturin
Slide 33: Diversified Lending Products
33 Diversified Lending Products Double digit loan growth driven by stellar performance across all areas of the bank Th ou sa nd s Net Loan Growth Q4 2021 $82,268 $1,739 $20,236 $18,844 $11,304 $10,884 $6,167 $1,819 Commercial Lending Private Wealth Asset- Based Lending Accounts Receivable Financing
Slide 34: Commercial Real Estate Lending
34 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 M ill io ns Portfolio Analys
Slide 35: Office Loans: Midwest Locations
35 Midwest Locations - Office >$3mm Suburban Milwaukee, 13% Milwaukee, 11% Madison, 60% Kansas City, 11% Other, 6% Exceptional Credit Quality (2) - Office >$3mm 12/31/2023 Category I Category II Category III Category IV $— $50,000 $100,000 $150,000 $200,000 $250,000 Maturing Over Time Office >$3mm L
Slide 36: Multi-Family Loans: Midwest Locations
36 Midwest Locations Suburban Milwaukee, 14% Milwaukee, 18% Madison, 23%Kansas City, 3% Other WI Markets, 41% Exceptional Credit Quality (2) 12/31/2023 Category I Category II Category III Category IV $— $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000 Maturing
Slide 37: C&I Lending
37 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 M ill io ns Portfolio Analysis All Other C&I Lending A
Slide 38: Treasury Management Product Profile
38 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, i
Slide 39: Private Wealth Product Profile
39 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 t
Slide 40: Adjusted Net Interest Margin Reconciliation
40 “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, components of avera
Slide 41: Pure Net Interest Income Reconciliation
41 "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 marketpl
Slide 42: Net Operating Income Reconciliation
42 "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 complianc
Slide 43: Adjusted PTPP ROAA Reconciliation
43 “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 bett
Slide 44: Cost of Funds Reconciliation
44 ‘‘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.
Slide 45: First Business Bank
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