First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Investor Presentation (April 2023)
46 slides from First Business Financial Services's investor presentation, Apr 28, 2023
Slide 1: Investor Presentation First Quarter 2023
Investor Presentation First 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 Strong Liquidity & Capital ............................................ 11 Drivers of Growth & Profitability .................
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: Tangible Book Value Growth
6 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% 2022 TBV Growth = 9% TBV/Share Div/Share Great Recession & Pandemic Recession '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '
Slide 7: Rate Cycle Consistency
7 Rate Cycle Consistency TBV/share above peers in current rate cycle Note: Peer Group defined as publicly-traded banks with total assets between $1 billion and $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 03/31/23 (
Slide 8: Balanced and Steady Growth
8 M ill io ns $32.5 $39.1 $41.2 $48.2 FYE 2019 FYE 2020 FYE 2021 FYE 2022 $0.0 $15.0 $30.0 $45.0 $60.0 $75.0 $90.0 $105.0 $120.0 $135.0 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 Inter
Slide 9: Profitability Exceeds Peers
9 Profitability Exceeds Peers Top Line Revenue Growth and Superior Asset Quality Drives Historically Strong Profitability Note: Peer Group defined as publicly-traded banks with total assets between $1 billion and $5 billion. Return on Average Common Equity FBIZ Peer Group Median 2012 2013 2014 2015
Slide 10: Total Shareholder Return Above Peer Group Median
10 Note: Peer Group defined as publicly-traded banks with total assets between $1 billion and $5 billion. 1. Peer group median 5-Year TSR is 0.01%. 2. Data as of 3/31/2023. Total Shareholder Return Above Peer Group Median Despite recent outperformance, Price/LTM EPS remains below peers Total Shareho
Slide 11: Strong Liquidity and Capital Position
Strong Liquidity and Capital Position
Slide 12: Relationship Banking Key to Success
12 Relationship Banking Key to Success In-Market Deposits Up Post Bank Failures • We acted swiftly, calling each of our business clients with greater than $1 million in deposits • From March 8 to March 31, we added new clients and in-market deposit balances increased $45 million • Long-term client r
Slide 13: Balanced Deposit Portfolio
13 Balanced Deposit Portfolio Diversified Product Base with Long-Tenured, Deep Client Relationships • FBIZ depositors are [diversified] small- and medium-sized businesses [and municipalities/NFPs? PWM?] • Can we disclose a breakdown of clients by deposit balance size buckets? • Average balance per c
Slide 14: Strong and Stable Sources of Liquidity
14 Strong and Stable Sources of Liquidity Primary & Secondary Sources Provide Ample Liquidity During Uncertain Environments 1. Brokered CD capacity capped at 50% of total bank funding when combined with FHLB advances per internal policy. Primary Sources: • Short-Term Investments (Primarily excess ca
Slide 15: Conservative Balance Sheet Philosophy
15 Conservative Balance Sheet Philosophy Prudent Interest Rate Risk Management Supports Stable Capital Position • A key strength of our balance sheet management strategy is closely matching the duration of our assets with the duration of our liabilities to mitigate interest rate and market value ris
Slide 16: Drivers of Growth & Profitability
Drivers of Growth & Profitability
Slide 17: First quarter highlights
17 • Strong Deposit Growth. Total deposits grew to $2.477 billion, increasing 56.9% annualized from the linked quarter and 22.4% from the first quarter of 2022. Growth included an increase in wholesale deposits of $219.9 million and $409.8 million compared to the linked and prior year quarters, resp
Slide 18: Robust Profitability Metrics
18 Robust Profitability Metrics Strong Net Interest Margin and Balance Sheet Growth Support Robust PTPP Adjusted ROAA Net Interest Margin 3.39% 3.71% 4.01% 4.15% 3.86% 3.22% 3.44% 3.89% 3.93% 3.74% 0.17% 0.27% 0.12% 0.22% 0.12% Adjusted net interest margin (1) Recurring, variable components (2) Q1 2
Slide 19: Net Interest Margin Components
19 Net Interest Margin Components Deposit mix change and liquidity build impact net interest margin 1. Wholesale funding defined as brokered CDs plus FHLB advances. • NIM range in forecast • Rate assumptions in forecast • Beta outlook • Impact under differing scenarios 5YR CAGR = 11.4% Drivers of NI
Slide 20: Margin Expansion Through Rate Cycle
20 Margin Expansion Through Rate Cycle Due to Positive Beta Differential and Match-Funded Balance Sheet Cumulative Earning Asset Beta Exceeds Funding Beta 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
Slide 21: Deposit-Centric Strategy Key to Growth
21 Deposit-Centric Strategy Key to Growth Double digit deposit growth exceeds loan growth 1. Deposits defined as total deposits less wholesale deposits. Period end balances are presented. M ill io ns Deposit Growth History (1) DDA IB DDA MMA CD '18 '19 '20 '21 '22 Q1 23 $0 $500 $1,000 $1,500 $2,000
Slide 22: Diversified Lending Growth
22 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 23: Exceptional Asset Quality
23 Exceptional Asset Quality Non-Performing Assets/Total Assets at Lowest Levels In 20 Years M ill io ns Non-Performing Assets FBIZ NPA FBIZ NPA/TA Peer NPA/TA 1Q22 2Q22 3Q22 4Q22 1Q23 $0.0 $1.2 $2.4 $3.6 $4.8 $6.0 $7.2 —% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% Note: Peer group defined as publicly-trad
Slide 24: Positive Operating Leverage
24 Positive Operating Leverage Ability to grow revenues faster than expenses outpaces peer group Loan vs. Deposit Growth FBIZ Loan Growth(1) FBIZ Deposit Growth(2) '19 '20 '21 0% 5% 10% 15% 20% 25% Note: Peer group defined as publicly-traded bank with total assets between $1 billion and $5 billion.
Slide 25: Strategic Plan
Strategic Plan
Slide 26: FBIZ Strategic Plan 2019-2023
26 FBIZ Strategic Plan 2019-2023 4 Strategies Designed to Navigate the Company over a 5-Year Time Horizon
Slide 27: Proven execution of strategic objectives
27 FBIZ Strategic Plan 2019-2023 Proven execution of strategic objectives Goal Actual 2019 Actual 2020 Actual 2021 Actual 2022 Actual Q1 2023 Strategic Plan Return on average common equity 12.55% 8.64% 16.21% 16.79% 13.96% 13.50% Return on average assets 1.14% 0.70% 1.37% 1.46% 1.17% 1.15% Top line
Slide 28: Appendix: Supplemental Data & Non-GAAP Reconciliations
APPENDIX SUPPLEMENTAL DATA & NON-GAAP RECONCILIATIONS
Slide 29: Company Overview
COMPANY OVERVIEW
Slide 30: Offerings Designed Exclusively for Business and Wealth Management
30 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
31 Superior Client Satisfaction Rating Excellent Employee Satisfaction Drives Superior Client Satisfaction *NPS benchmarks reported in “The State of B2B Account Experience: B2B NPS & CX Benchmarking Report,” CustomerGauge, 2021. **First Business Bank Annual Client Survey conducted by Dr. Moses Altse
Slide 32: ESG Framework
32 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 33: Products & Services
APPENDIX Products & Services
Slide 34: Diversified Lending Products
34 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 35: Commercial Real Estate Lending
35 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 36: Office loan portfolio
36 Midwest Locations - Office >$3mm Suburban Milwaukee, 13% Milwaukee, 6% Madison, 57% Kansas City, 9% Other, 14% Exceptional Credit Quality (2) - Office >$3mm 03/31/2023 Category I Category II Category III Category IV $— $100,000 $200,000 $300,000 Maturing Over Time Office >$3mm Loan Balances 2023
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
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 Management
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: Non-GAAP Reconciliations
APPENDIX Non-GAAP Reconciliations
Slide 41: Tangible common equity to tangible assets
41 “Tangible common equity to tangible assets” is defined as the ratio of common stockholders’ equity reduced by intangible assets, if any, divided by total assets reduced by intangible assets, if any. The Company’s management believes that this measure is important to many investors in the marketpl
Slide 42: Adjusted Net Interest Margin
42 “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 43: Pure Net Interest Income
43 "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 44: Net Operating Income
44 "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 45: Cost of Funds
45 ‘‘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 46: First Business Bank
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