First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Q4 2016 Earnings Presentation
40 slides from First Business Financial Services's earnings presentation, Feb 6, 2017
Slide 1: Investor Presentation Fourth Quarter 2016
INVESTOR PRESENTATION FOURTH QUARTER 2016 a» ° 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 Quarterly Update 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 FBIZ BANKING: FBIZ TRUST $1.8 Billion $1.2 Billion IN TOTAL ASSETS IN ASSETS UNDER MANAGEMENT & ADMINISTRATION Headquarters: Madison, WI Mission: Build long-term shareholder value as an entrepreneurial financial services provider to businesses, executives and high net worth individua
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 Appleton, WI Minneapolis, MIN Milwaukee, WL Kenosha, WI Madison, Wi Detroit, MI Chicago, Cleveland, OH Denver, co St.Louis, MO. Kansas City, KS, Y— Hockessin, DE Charlotte, NC. © Banking Office © Asset-Based Lending Business Development Office © Equipment Finance Bus
Slide 8: Proven Leadership Team
Proven Leadership Team Experienced leadership team trained at large, complex institutions and significant time with FBIZ ” | ieee | Sea experience institutions Corey Chambas President & CEO - FBFS x x x Ed Sloane CFO - FBFS x Dave Seiler COO - FBFS x x Michael Losenegger|Chief Credit Officer - FBFS
Slide 9: Quarterly Update
QUARTERLY UPDATE ue
Slide 10: Quarterly Update
Quarterly Update Fourth Quarter 2016 6 6 OY nnunnnemenn | @ Ss CO) QUARTERLY DIVIDEND INCREASED 8%, REPRESENTING A PAYOUT RATIO OF 28% BASED ON 4Q16 EARNINGS
Slide 11: Quarterly Update
Quarterly Update Fourth Quarter 2016 1Q% PYQ% $ in millions (except per share amounts)| Q4 2015 Q3 2016 | Q42016 § Change Change Top line revenue” $18.9 $20.7 Operating Efficiency Total operating expenses “) $12.0 Efficiency ratio” 63.63% Net interest income Gain on sale of SBA loans Diversified Rev
Slide 12: Investment Rationale
INVESTMENT RATIONALE
Slide 13: Investment Rationale
Investment Rationale SCALABLE FRANCHISE = WELL POSITIONED FOR SUSTAINABLE GROWTH CLIENT ACQUISITION SBA STRATEGY = EARNINGS CATALYST P/E MULTIPLE AT A DISCOUNT TO PROXY PEER GROUP* COMPETITIVE DIVIDEND YIELD (cow2), If] SIGNIFICANT OPPORTUNITY TO STRENGTHEN IN-MARKET DEPOSIT MIX f Inc. (SYBT), TriSt
Slide 14: Client Acquisition Strategy
Client Acquisition Strategy Purposeful & Temporary Slowdown in SBA Production, Long-Term Vision Remains Intact EARNINGS CATALYST $ FRANCHISE * EARNING ASSET GROWTH « IN-MARKET DEPOSIT GROWTH VALUE «© FEE INCOME 4 EPS GROWTH Source: FBIZ management, 1 the sale of SBA the year ended December 31, 2016
Slide 15: 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 16: Significant Opportunity to Strengthen In-Market Deposit Mix
Significant Opportunity to Strengthen = In-Market Deposit Mix = Dane County, WI Waukesha County, WI Fox Valley, WI" Alterra Bank Market” (Largest 3 banks 38%) (Largest 3 banks 33%) (Largest 3 banks 48%) (Largest 3 banks 42%) US Bank 12% Commerce Bank 13% FBIZ: 7% BIE 28 FBIZ: 1% FBIZ: 0.5% $13.9 Bil
Slide 17: FBIZ Valuation - Price/LTM EPS
FBIZ Valuation - Price/LTM EPS P/E Trend (January 4, 2016 - December 30, 2016) 12/30/2016, 22.56 | 12/30/2016, 13.87 10x Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 —FBIZ-US +—Proxy Peer Group Average
Slide 18: FBIZ Valuation - Dividends per Share
FBIZ Valuation - Dividends per Share 28% CAGR $0.48 $0.14 2011 2016 @ Total Annual Dividends per Share $0.16 5 $0.14 4 $0.12 4 $0.10 | $0.08 | $0.06 | $0.04 + $0.02 | $0.00 ~ /aeuauul 4qis 1Q16 2Q16 3Q16 4Q16 1Q17 Dividends per Share === Dividend Yield r2.50% - 2.00% ; 1.50% + 1.00% + 0.50% ~ 0.00%
Slide 19: Pillars of Success
Pillars of Success Foundation for the Future SSS —— —— ———— RECORD OF UNIQUE FOCUSED STRONG COMPETITIVE STRATEGIC
Slide 20: Pillars of Success
Pillars of Success Foundation for the Future RECORD OF STRONG UNIQUE FOCUSED COMPETITIVE STRATEGIC
Slide 21: 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 21,
Slide 22: Top Line Revenue Growth
Top Line Revenue Growth SBA Slowdown & Tepid Loan Production Lead to Lower Near Term Revenue Growth Expectations $25.0 14% $81M CAGR $20.0 wn Pp w i—} $43M Millions $10.0 $5.0 2011 2016 $0.0 4Q15 1016 2016 3Q16 4Q16 Top Line Revenue | NetInterest Income ™ Non-Interest Income : SEC fill management. C
Slide 23: Strengthen In-Market Deposit Mix
Strengthen In-Market Deposit Mix Focus on Transaction Accounts to Reduce Cost of Deposits $1,800 4 $1,500 + CAGR $1,200 4 $900 | Millions $600 | $300 | $o - 2011 2016 (Transaction Accounts’ = 1 2 3 4 “Cost of Total Deposits" and 1.00% ; 0.80% ; 0.60% + 0.40% ; 0.20% 0.00% 4Qis 1Q16 2Q16 3Q16 4Q16 No
Slide 24: Generate Consistent, Strong Profitability
Generate Consistent, Strong Profitability Efficient Operating Model Drives Bottom Line over the Long-Term Net Interest Margin 1.20% 4.50% 4 4.25% | 1.00% | 15.00% 2) A80%%. 1 @ 0.80% 12.00% 3.75% 2 § 0.60% 9.00% 3.50% | 2 5 al 5 0.40% 6.00% [4 3.00% 4 0.20% 3.00% 2.75% 4 2.50% : 0.00% — : : : —o.00%
Slide 25: Deliver EPS Growth
Deliver EPS Growth Drives Shareholder Value $1.62 2011 GE Diluted EPS $1.71 2016 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 GB Diluted Eps Dividends per Share
Slide 26: Pillars of Success
Pillars of Success Foundation for the Future RECORD OF UNIQUE STRONG COMPETITIVE STRATEGIC
Slide 27: Unique Competitive Advantages
Unique Competitive Advantages Key Themes If] Efficient Operating Model Efficient Funding Strategy iN SUCCESSFUL ; NICHE Strong Credit Quality COMMUNITY » BUSINESS BANK Client-Centric Focus with High Touch Service 7, Superior Talent with Business Expertise
Slide 28: Efficient Operating Model
Efficient Operating Model HIGH EFFICIENCY "BUSINESS BANK" OPERATING MODEL ¢ Limited branch network ¢ Investments in technology ¢ Products tailored to serve businesses and their owners 8% EFFICIENCY RATIO EFFICIENCY RATIO. Total Loans Outstanding per FTE Deposits Per Location $8,000 $700 $7,000 $600
Slide 29: Efficient Funding Strategy
Efficient Funding Strategy Mitigates Interest Rate Risk Continue to 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 spr
Slide 30: Strong Credit Quality
Strong Credit Quality Credit Culture Helps Safeguard Shareholder Investment over the Long-Term Net Charge-Offs/Avg Loans Susti d lower levels of net charge-offs through the credit cycle driven by consistent underwriting standard: 1.6% 4 1.4% 4 * Credit underwriting through a committee process is a k
Slide 31: Superior Talent with Business Expertise
Superior Talent with Business Expertise Engaged Employees = Happy Clients ENGAGED EMPLOYEES Source: Itsech, Ph.D. - Executive Training & Consulting. AJD Power customer satisfaction survey for retail banks in the Midwest has an average of 79% satisfaction in 2015 and the top performer is at 82%. RIGO
Slide 32: Pillars of Success
Pillars of Success Foundation for the Future FOCUSED STRATEGIC
Slide 33: 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] Expand and Diversify Revenue Streams
Slide 34: 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 34
Slide 35: Increase Percentage of Fee Income
Millions Increase Percentage of Fee Income Additional Fee Income Generating Services $6.0 7 r30% $5.0 4 $4.0 4 $3.0 $2.0 $1.0 $0.0 4qis 1Q16 2Q16 3Q16 4Q16 Loan Service situee BE otter me ces BI charges on EN cic Deposits a Historic % Target —— New % target set 10/30/2015 —__ %of Total Revenue Sourc
Slide 36: Appendix
APPENDIX SUPPLEMENTAL DATA & NON-GAAP RECONCILIATIONS
Slide 37: Efficiency Ratio
Efficiency Ratio Efficiency 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, divid
Slide 38: Deposit Cost
Deposit Cost Cost of Total Deposits is “Cost of Total Deposits” is defined as total interest expense on deposits divided by total average deposits. "Cost of Total In-Market Deposits" i defined as total interest expense on in-market deposits divided by total average in-market deposits. In-market depo
Slide 39: Loan and Lease Composition
Loan and Lease Composition December 3: f December 31, ($000) 2016 Total 2015 Commercial and Industrial $ 450,298 = 31% $ 472,193 Commercial Real Estate - Owner Occupied 176,459 12% 176,322 Commercial Real Estate - Non-Owner Occupied 473,158 33% 436,901 Construction 101,206 7% 100,625 Land developmen
Slide 40: First Business
First Business YOUR SUCCESS COMES FIRST.
First Business Financial Services — Q4 2016 Earnings Presentation on 6ix