First Business Financial Services, Inc. · NASDAQ:FBIZ
First Business Financial Services — Q1 2017 Earnings Presentation
43 slides from First Business Financial Services's earnings presentation, May 9, 2017
Slide 1: Investor Presentation First Quarter 2017
wT on =} ig) INVESTOR PRESENTATION FIRST QUARTER 2017
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 Commercial Banking Products & Services Strategic Plan Financial Performance Appendix le IS COIN |O |B
Slide 4: Company Overview
sles ee =] 9} COMPANY OVERVIEW
Slide 5: Company Profile
Company Profile a —o 1. Consists of all FBIZ BANKING: FBIZ TRUST $1. 8 Billion $1. 3 Billion IN TOTAL ASSETS ASSETS UNDER MANAGEMENT & AGRaniSEATCn Headquarters: Madison, WI Mission: Build long-term shareholder value as an entrepreneurial financial services provider to businesses, executives and hig
Slide 6: Aligned with the Financial Needs of Our Niche Client Base
Aligned with the Financial Needs of Our Niche Client Base + Business Banking Equipment Finance and Leasing Private Wealth Business Banking Madison Wisconsin Wisconsin Kenosh: PRODUCTS oO RESOURCES Asset-based Lending Business Banking Business Banking Milwaukes js 4 Business Banking and SBA Northeast
Slide 7: Geographic Footprint
Geographic Footprint Seattle, WA Appleton, WI Minneapolis, MIN Milwaukee, WI Kenosha, Wi Madison, WI Detroit, Mi Chicago, IL (Cleveland, OH Denver, CO St.Louis, MO. Kansas City, KS, _ Hockessin, DE Charlotte, NC @ Banking Office @ Asset-Based Lending Business Development Office © Equipment Finance B
Slide 8: Leadership Team
Leadership Team Experienced team trained at large, complex institutions Corey A. Chambas PRESIDENT AND CEO Edward G. Sloane Jr. CHIEF FINANCIAL David R. Seiler CHIEF OPERATING FFICER OFFICER Jodi A. Chandler Mark J. Meloy Joan A. Burke CHIEF HUMAN CEO OF FIRST PRESIDENT OF RESOURCES BUSINESS BANK FI
Slide 9: Quarterly Update
eles = i=) 9} QUARTERLY UPDATE
Slide 10: Quarter highlights
NO LOSSES DIRECTLY RELATED TO THE INCREASE IN NON- PERFORMING ASSETS AS A RESULT OF PRUDENT UNDERWRITING QUARTER IS SECOND HIGHEST Q1 LOAN GROWTH IN FBIZ HISTORY SBA INFRASTRUCTURE REBUILD NEARLY COMPLETE WITH RECENT HIRING OF DIRECTOR OF SBA CREDIT TRUST & INVESTMENT SERVICES REPORTS RECORD ASSETS
Slide 11: Operating Efficiency
Operating Efficiency Diversified Revenue Streams Balance Sheet Growth Asset Quality Profitability 10% $ in millions (except per share amounts)|_Q12016 _Q42016_| Qi2017|) Change PYQ% Change Top line revenue . $20.684 Total operating expenses Efficiency ratio Net interest income Gain on sale of SBA lo
Slide 12: Investment Rationale
eles = i=) 9} INVESTMENT RATIONALE
Slide 13: Scalable Franchise Positioned for Sustainable Growth
A A A SCALABLE FRANCHISE POSITIONED FOR SUSTAINABLE GROWTH
Slide 14: Investment Rationale: P/E Multiple at a Discount to Peers
e Investment Rationale = : ‘ 1 = P/E multiple at a discount to peer group (1) => P/E Trend (March 31, 2016 - March 31, 2017) 24x 22x 20x 18x 16x 14x 12x 10x Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 —FBIZ-US —Peer Group Average ne . een, ine (008K, CR
Slide 15: Investment Rationale: Dividend Yield Above Peers
Investment Rationale Dividend yield above peer group average a) Mar-16 Apr-16 May-16 Dividend Yield Trend (March 31, 2016 - March 31, 2017) Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 —FBIZ-US +—Peer Group Average Dec-16 Jan-17 Feb-17 3.00% 1.50% 0.50% 0.00% Mar-17 Ine. (OLBK), CR {svBT), {ACBI), Firs
Slide 16: Investment Rationale: Competitive Advantage from Niche Focus
Investment Rationale Competitive advantage driven by niche business and client-centric focus CLIENT & COMMUNITY EVENTS 4 —— FIRST BUSINESS PRESENTS ——— E ee) = : nterprising = plirst MANUFACTURING FIRST NONPROFTS -—— Business EXPO & CONFERENCE ——— Brought to you by SEMINAR SERIES FIRST BUSINESS INDU
Slide 17: Investment Rationale: Margin and Fee Revenue Diversification
Investment Rationale Margin and fee revenue diversification driven by suite of commercial products and services Average Gross Loan and Lease Mix Fee Revenue Sources jm commercial Lending - CRENOO my Trust / Private Commercial Wealth? [Lending - Other my Treasury Management jm commercial Lending - C&
Slide 18: Investment Rationale: Scalable Franchise for Sustainable Growth
Investment Rationale Scalable franchise positioned for sustainable growth e Organic growth remains the foundation for the future However, we believe our future success will create opportunities for acquisitions ==) Specialty finance, particularly within our existing products and services ==) Midwest
Slide 19: Commercial Banking Products & Services
eles = i=) 9} COMMERCIAL BANKING PRODUCTS & SERVICES
Slide 20: Commercial Lending
Commercial Lending Superior talent with business expertise building relationships in Midwest geographic footprint Product Profile e Target small- to medium-sized companies in our Wisconsin, Kansas and Missouri markets © Geographic footprint includes Madison, Milwaukee and Northeast Wisconsin, and th
Slide 21: Treasury Management
Treasury Management Superior talent with business expertise building relationships in Midwest geographic footprint Product Profile © Target small- to medium-sized companies in our Wisconsin, Kansas and Missouri markets © Geographic footprint includes Madison, Milwaukee and Northeast Wisconsin, and t
Slide 22: Asset-Based Lending
Asset-Based Lending High-yielding, counter-cyclical product complements conventional commercial lending Product Profile ° Target medi ized ¢ Primarily provide revolving lines of credit and term loans for leveraged buyouts, capital expenditures, working capital, bank debt refinancing, debt restructur
Slide 23: Factoring
Factoring High-yielding, counter-cyclical product complements conventional commercial lending Product Profile e Target small- to medi ized ¢ Primarily provide funding to clients by purchasing accounts receivable on a full recourse basis © Positioned to provide competitive rates to clients starting u
Slide 24: Equipment Financing
Equipment Financing Aligned with the equipment loan and lease needs of our niche client base Product Profile e Includes broad range of equipment finance products to address the financing needs of commercial clients in a variety of industries e Focus includes manufacturing equipment, industrial asset
Slide 25: Trust / Private Wealth
Trust / Private Wealth Wealth management services for businesses, executives and high net worth individuals Product Profile e Fiduciary and investment manager for individual and corporate clients, creating and executing asset allocation strategies tailored to each client’s unique situation ¢ Full fi
Slide 26: SBA Lending & Servicing
SBA Lending & Servicing Full client acquisition strategy for small businesses Product Profile ¢ Primarily originate variable rate term loans through the 7(a) program which typically provides a guaranty of 75% of principal and interest © Product offering is designed to generate new business opportuni
Slide 27: Strategic Plan: Indicators of Success
eles = i=) 9} STRATEGIC PLAN INDICATORS OF SUCCESS
Slide 28: Strategic Plan: Indicators of Success
Strategic Plan Indicators of Success Client-centric plan that we believe Key Performance Indicator will drive: Long-Term Target Net Interest Margin 2 3.50% eA more diversified income stream Fee Income Ratio > 25% eA higher net interest margin Efficiency Ratio Peers eA higher ROA and ROE In-Market De
Slide 29: Financial Performance
eles = i=) 9} FINANCIAL PERFORMANCE
Slide 30: Net Interest Margin
Net Interest Margin Annual Trend 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 | Net Interest Margin = = Long-Term Goal Primarily reflects Quarterly Trend during 4Q16. 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Qis 1Q16 2Q16 3Q16 4Q16 1Q17 Net Interest Margin == Long-Term Gi
Slide 31: Fee Income Ratio
Fee Income Ratio Annual Trend 35% 30% 25% a 20% ee eee eee ee ee ee ae 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 lH Fee Income Ratio = = Long-Term Goal Quarterly Trend Temporarily slowed SBA Joan production while making investments in stform. 20% ——eeee eee ee 1014 2Q14 3Q14 4Q14 1
Slide 32: Efficiency Ratio
Efficiency Ratio Annual Trend 2011 2012 2013 2014 2015 2016 2005, 2006 2007 2008 2009 2010 Efficiency Ratio — — Long-Term Operating Range loan pre Quarterly Trend 4Q14 1Q15 2Q15 3Q15 4Qis 1Q16 2016 3Q16 4Q16 1Q17 1Q14 2Q14 3Q14 Efficiency Ratio — — Long-Term Operating Range Temporarily slowed SBA ro
Slide 33: In-Market Deposits / Total Bank Funding
In-Market Deposits / Total Bank Funding = Annual Trend Quarterly Trend = 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1016 2Q16 3Q16 4Q16 1Q17 a @ sank in i
Slide 34: Annualized Net Charge-Offs / Average Loans
Annualized Net Charge-Offs / Average Loans Annual Trend Increase in 2016 Alterra Bank 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 m= FBIZ == U.S. Commercial Bank $1B-$3B Quarterly Trend 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Qis 1Q16 2Q16 3Q16 4Q16 1017 w= FBIZ === U.S. Commercial Banks
Slide 35: Return on Average Assets
Return on Average Assets Annual Trend 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 lm ROAA = = Long-Term Goal Recent volatility primarily Quarterly Trend SBA production. 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Qis 1Q16 2Q16 3Q16 4Q16 1Q17 BH ROAA = _ == Long-Term Go:
Slide 36: Return on Average Equity
Return on Average Equity Annual Trend 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 ROAE = = Long-Term Goal Recent volatility primarily Quarterly Trend 1014 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Qis 1Q16 2Q16 3Q16 4Q16 1Q17 ROAE == == Long-Term Goal
Slide 37: Top Line Revenue Growth
Alterra Bank acquisition was completed November 2014 Top Line Revenue Growth Annual Trend 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 === U.S. Commercial Banks $1B-$3B === FBIZ Quarterly Trend Temporarily slowed SBA the platform. 1014 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Qis 1016 2Q16 3Q16 4Q16
Slide 38: Loan and Deposit Composition
Loan and Deposit Composition Total Gross Loans & Leases Total Deposits CRE Noo ca CREO. Multi-Family a Construction . Land Development a 1-4 Family Direct Finance Leases Consumer & Other Money Market ‘Wholesale Deposits NIB Transaction 1B Transaction In-Market COs
Slide 39: 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 spre
Slide 40: Appendix: Supplemental Data & Non-GAAP Reconciliations
wn" a eves APPENDIX SUPPLEMENTAL DATA & NON- GAAP RECONCILIATIONS
Slide 41: Efficiency Ratio Non-GAAP Reconciliation
Efficiency Ratio Non-GAAP Reconciliation “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
Slide 42: Cost of Funds Non-GAAP Reconciliation
Cost of Funds Non-GAAP Reconciliation “Cost of Funds” is defined as total interest expense on deposits and FHLB advances divided by the sum of total average deposits and total average FHLB advances. We believe that this measure is important to many investors in the marketplace who are interested in
Slide 43: First Business: We Are Banking. Focused.
First Business" WE ARE BANKING. FOCUSED.
First Business Financial Services — Q1 2017 Earnings Presentation on 6ix