First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Investor Presentation (July 2023)
45 slides from First Business Financial Services's investor presentation, Jul 28, 2023
Slide 1: Investor Presentation Second Quarter 2023
Investor Presentation Second 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 ................................. 11 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: Balanced and Steady Growth
6 M ill io ns Operating Trends - 3 Year CAGR of 14% $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 Inter
Slide 7: Profitability Exceeds Peers
7 Profitability Exceeds Peers Top Line Revenue Growth Drives Historically Strong Profitability Note: Peer Group defined as publicly-traded banks with total assets between $1.5 billion and $5.5 billion. Return on Average Common Equity FBIZ Peer Group Median 2012 2013 2014 2015 2016 2017 2018 2019 202
Slide 8: Tangible Book Value Growth
8 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(2) = 12% TBV/Share Div/Share Great Recession & Pandemic Recession '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '
Slide 9: Rate Cycle Consistency
9 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 10: Total Shareholder Return Above Peer Group Median
10 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 6/30/23. 2. Data as of 3/31/2023. Total Shareholder Return Above Peer Group Median Despite recent outperformance, Price/LTM EPS remains below pee
Slide 11: Drivers of Growth & Profitability
Drivers of Growth & Profitability
Slide 12: Second quarter highlights
12 • Robust Loan Growth. Loans grew $135.2 million, or 21.3% annualized, from the first quarter of 2023, reflecting broad-based expansion across the Company’s products and geographies in the second quarter. Similar expansion across the Company’s portfolios drove loan growth totaling $384.5 million,
Slide 13: Robust Profitability Metrics
13 Robust Profitability Metrics Strong Balance Sheet Growth and Stable Net Interest Margin Support Robust PTPP Adjusted ROAA Net Interest Margin 3.71% 4.01% 4.15% 3.86% 3.81% 3.44% 3.89% 3.93% 3.74% 3.63% 0.27% 0.12% 0.22% 0.12% 0.18% Adjusted net interest margin (1) Recurring, variable components (
Slide 14: Deposit-Centric Strategy Key to Growth
14 Deposit-Centric Strategy Key to Growth Double Digit In-Market Deposit Growth Supports Double Digit Loan Growth 1. Deposits defined as total deposits less wholesale deposits. Period end balances are presented. CAGR calculations represent growth from 2018-2022. M ill io ns In-Market Deposit Growth
Slide 15: Relationship Banking Key to Success
15 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 • Long-held top-quartile deposit
Slide 16: Core Deposit Strength
16 Core Deposit Strength FBIZ continues to grow core deposits as industry and peers decline Industry Core Deposit Growth(1) 01/01/20 03/11/20 05/20/20 07/29/20 10/07/20 12/16/20 02/24/21 05/05/21 07/14/21 09/22/21 12/01/21 02/09/22 04/20/22 06/29/22 09/07/22 11/16/22 01/25/23 04/05/23 06/14/23 $8.00
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: Net Interest Margin Components
18 Net Interest Margin Components Deposit mix change continues to 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 NIM Chang
Slide 19: Margin Expansion Through Majority of Rate Cycle
19 Margin Expansion Through Majority of 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
Slide 20: Positive Operating Leverage
20 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 $1.5 billion and $5.5 billi
Slide 21: Solid Asset Quality
21 Solid Asset Quality Non-Performing Assets/Total Assets Remain at Historically Low Levels M ill io ns Non-Performing Assets FBIZ NPA w/o ABL Loan ABL Loan (1) FBIZ NPA/TA Peer NPA/TA 2015 2016 2017 2018 2019 2020 2021 2022 1Q23 2Q23 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 —% 0.30% 0.60% 0.90% 1.20
Slide 22: Conservative Balance Sheet Philosophy
22 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 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
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 YTD 2023 Strategic Plan Return on average common equity 12.55% 8.64% 16.21% 16.79% 13.26% 13.50% Return on average assets 1.14% 0.70% 1.37% 1.46% 1.10% 1.15% Top line
Slide 26: Appendix: Supplemental Data & Non-GAAP Reconciliations
APPENDIX SUPPLEMENTAL DATA & NON-GAAP RECONCILIATIONS
Slide 27: Company Overview
COMPANY OVERVIEW
Slide 28: Offerings Designed Exclusively for Business and Wealth Management
28 Offerings Designed Exclusively for Business and Wealth Management Services that meet the evolving needs of our growing client base
Slide 29: Superior Client Satisfaction Rating
29 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 30: ESG Framework
30 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 31: Products & Services
APPENDIX Products & Services
Slide 32: Balanced Deposit Portfolio
32 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 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 Loan Portfolio
35 Midwest Locations - Office >$3mm Suburban Milwaukee, 13% Milwaukee, 12% Madison, 58% Kansas City, 10% Other, 7% Exceptional Credit Quality (2) - Office >$3mm 06/30/2023 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: C&I Lending
36 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 37: Treasury Management
37 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 38: Private Wealth Management
38 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 39: Non-GAAP Reconciliations
APPENDIX Non-GAAP Reconciliations
Slide 40: Tangible common equity to tangible assets
40 “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 41: Adjusted Net Interest Margin
41 “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 42: Pure Net Interest Income
42 "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 43: Net Operating Income
43 "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 44: Cost of Funds
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
é | First Business Bank FirstBusiness.Bank
First Business Financial Services — Investor Presentation (July 2023) on 6ix