Slides
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FirstBusiness.Bank Investor Presentation Fourth Quarter 2024
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FirstBusiness.Bank 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 express ions are intended to identify “forward‐looking statements” within the meaning of such term in the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties, including among other things: (i) Adverse changes in th e economy or business conditions, either nationally or in our markets, inc luding, without limitation, inflation, economic downturn, labor shortages, wage pressures, and the adverse effects of public health events on the global, national ,a n dl o c a l economy, which may affect the Corporation’s credit quality, revenue, and bus iness operations; (ii) Competitive pressures among depository and oth er financial institutions nationally and in our markets; (iii) Increases in defaults by borrowers and other delinquencies; (iv) Our ability to manage growth effe ctively, including the successful expansion of our client support, administrative infrastruct ure, and internal management systems; (v) Fluctuations in interest rat es and market prices; (vi) Changes in legislative or regulatory requirements applicable to us and our subsidiaries; (vii) Changes in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations; (viii) Fraud, including client and system failure or breaches of our network security, including o ur internet banking activities; (ix) Failure to comply with the applicable SBA regulations in order to maintain the eligibility of the guaranteed portions of SBA loans. (x) Ongoing volatility in the banking sector may result in new legislation, regulations or policy changes that could subject the Corporation and the Bank to incre ased government regulation and supervision, (xi) the proportion of the Corporation’s deposit account balances that exceed FDIC insurance limits may expose the Bank to enhanced liquidity risk, and (xii) The Corporation may be subject to increases in FDIC insurance assessments. These risks could cause actual results to differ materially from what FBIZ has anticipated or projected. These risks could cause actual results to differ materially from what we have anticipated or projected. These risk factors and uncertainties should be carefully considered by our shareholders and potential investors. For further information about the factors that could aff ect the Corporation’s future results, please see the Corporation’s annual report on Form 10 ‐K for the year ended December 31, 2023 and other filings with the Securities and Exchange Commission. Investors should not place undue reliance on any such forward ‐looking statement, which speaks only as of the date on which it was made. The factors described within the filings could affect our financial performance and could cause actual results for future periods to differ materially f rom any opinions or statements expressed with respect to future periods. Where any such forward ‐looking statement includes a statement of the assumptions or bases underlying such forward ‐looking statement, FBIZ cautions that, while its management believe s such assumptions or bases are reasonable and are made in good faith, assumed facts or bases can vary from actual results, and the differences bet ween assumed facts or bases and actual results can be material, depending o nt h e circumstances. Where, in any forward‐looking statement, an expectation or belief is expressed as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance t hat the statement of expectation or belief will be achieved or accomplishe d. FBIZ does not intend to, and specifically disclaims any obligation to, update any forward ‐looking statements. Forward‐Looking Statements
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FirstBusiness.Bank Table of Contents 4Q4 2024 Results 5Company Snapshot 6Strategic Plan 10Why FBIZ? 18Drivers of Growth & Profitability 27Appendix
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FirstBusiness.Bank 4 EPS $1.71 Private Wealth $3.4 B in AUM&A Loans +8% NIM 3.77% TBV per Share +23% Fourth Quarter 2024 Highlights Record operating revenue, strong net interest margin, and positive operating leverage drive record pre‐tax, pre‐provision earnings Note: Percentages represent growth over the prior quarter. PTPP Income +15% Strong earnings generation produced a 23.0% annualized increase in tangible book value per share compared to the linked quarter and 15.0% compared to the prior year quarter Robust Private Wealth Management assets under management grew to a record $3.419 billion •P W M fee income totaled $3.4 million for Q4 2024, up 16.8% over Q4 2023 Record performance reflects continued balance sheet growth coupled with operational efficiency •P T P P income totaled $17.7 million for Q4 2024, up 16.1% from Q4 2023 Consistent loan growth throughout the Company •L o a n s grew 8.3% annualized from the prior quarter and 9.3% from the Q4 2023 Match funding strategy and pricing discipline produced a strong net interest margin of 3.77% • Fees in lieu of interest grew $1.4 million for Q4 2024, up 139% from the prior quarter Reported earnings elevated by tax benefit and SBA recourse reserve • Excluding these benefits the fourth quarter EPS was $1.43
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FirstBusiness.Bank 5 •S e r v i n g unique needs of business executives, entrepreneurs, and high net worth individuals through Business Banking, Private Wealth, and Bank Consulting •W i t h i n Business Banking, our commercial banking offerings are focused on our stable and attractive Midwest markets while Specialty Finance products and services have national reach • Efficient and highly scalable model with very limited branch network and exceptional digital capabilities Headquarters: Madison, WI Mission: Build long‐term shareholder value as an entrepreneurial banking partner that drives success for businesses, investors, and our communities FBIZ Business Banking 2 $3.8 Billion 3 FBIZ Private Wealth $3.4 Billion 3 IN ASSETS UNDER MANAGEMENT & ADMINISTRATION 1. Market capitalization as of 1/29/2025. 2. Consists of all on-balance sheet assets for First Business Financial Services, Inc. on a consolidated basis. 3. Data as of 12/31/2024. 5 IN TOTAL ASSETS First Business Bank NASDAQ: FBIZ — $405 million Market Cap 1
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FirstBusiness.Bank Five Year Strategic Plan
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FirstBusiness.Bank 2024‐2028 Strategies OBJECTIVE First Business Bank's unique model and culture will foster innovative and engaged team members who develop deep client relationships and deliver exceptional results for all stakeholders.
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FirstBusiness.Bank 8 2024‐2028 Goals & Progress Plan aims to deliver above average total shareholder return compared to peer median 1. ROATCE and TBV Growth includes the impact of a $1.7 million benefit from a partial release of a state deferred tax valuation allowance recognized in Q4 2024. 2. Revenue growth muted in 2024 due to exceptional SBIC and swap fee income recognized in 2023. 3. Represents data from the 2024 employee engagement survey. 4. Net promoter score assesses likelihood to recommend on an 11‐point scale, where detractors (scores 0‐6) are subtracted from promoters (scores 9‐10), while passives (scores 7‐8) are not considered. See appendix for additional information on the source of the net promoter score. Represents data from the 2024 survey. 20242024‐2028Goals 15.4%≥15% by 2028ROATCE1 15.0%≥10% per yearTBV Growth1 6.6%≥10% per yearRevenue Growth2 60.61%<60% by 2028Efficiency Ratio 71%≥75%Core Deposits to Total Funding 86%≥85%Employee Engagement & Participation3 70≥70Net Promoter Score4
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FirstBusiness.Bank 9 Note: Peer Group defined as publicly traded banks with total assets between $1.75 billion and $7.0 billion. 1. 1 ‐Year, 3‐Year, and 5‐Year TSR is through 12/31/2024. 2. Data as of 9/30/2024. Total Shareholder Return Above Peer Group Median Despite recent outperformance, Price/LTM EPS remains below peers 0% 20% 40% 60% 80% 100% 120% 1‐Year TSR 3 ‐Year TSR 5 ‐Year TSR Total Shareholder Return1 FBIZ Peer Group Median S&P 500 Bank Russell 2000 6.0 7.0 8.0 9.0 10.0 11.0 12.0 P/LTM EPS Price / LTM EPS2 FBIZ Peer Group Median
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FirstBusiness.Bank WHY FBIZ?
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FirstBusiness.Bank 11 Growing Profitability FBIZ’s Historic and Ongoing Growth Supports Earnings Power Differentiated Loan Growth Capabilities History of consistent double‐digit growth Growth is C&I focused and diversified Solid credit quality due to deep client relationships, strong underwriting, and niche business expertise Strong & Stable Deposit Franchise Track record of double‐digit growth driven by deep client relationships Creates relatively stable and strong NIM in a challenging environment Deposit‐centric culture led by treasury management sales also drives meaningful service charge income Growing Profitability Profile Significant fee revenue contribution from Private Wealth business History of long‐term positive operating leverage Consistent double‐digit TBV growth History of double‐digit top line revenue growth 13% 5‐year Loan CAGR 2019‐2024 12% 5‐year Core Deposit CAGR 2019‐2024 12% 5‐year TBV/Share CAGR 2019‐2024
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FirstBusiness.Bank 12 Balanced and Steady Growth Operating Fundamentals Drive Earnings Power Note: Net interest income is the sum of "Adjusted Net Interest Income", “Other Interest Income”, and "Fees in Lieu of Interest". Non-interest income is the sum of "Private Wealth Management Service Fees", "Other Fee Income", "Service Charges", "SBA Gains", and "Swap Fees". 1. "Adjusted Net Interest Inco me" and "Net Operating Income" are non-GAAP measurements. See appendix for non-GAAP reconciliation schedules. 2. "Net Tax Credits" represent management's estimate of the after-tax contribution related to the investment in tax credits as o f the reporting period disclosed. 3. "Fees in Lieu of Interest" is defined as prepayment fees, asset-based loan fees, non-accrual interest, and loan fee amortizat ion. •S t e a d y revenue expansion supported by: ◦ Double‐digit loan and deposit growth ◦ Strong and stable net interest margin ◦ Diverse sources of non‐ interest income, including service fees from our Private Wealth Management business which comprises 43% of total non‐interest income •S t r a t e g i c investments drive growth while maintaining positive long‐ term operating leverage •S t r o n g earnings power reflected in 2024 ROAA of 1.20%. Operating Income Highlights $32.5 $39.1 $41.2 $48.1 $57.4 $62.1 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 $180.0 2019 2020 2021 2022 2023 2024 Millions Net Tax Credits ² Swap Fees Gain on Sale of SBA Loans Fees in Lieu of Interest ³ Svc Charges on Deposits Other Fee Income Private Wealth Mgmt Svc Fees Other Interest Income Adjusted Net Interest Income ¹ Operating Expense Net Operating Income ¹
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FirstBusiness.Bank 13 Margin Strength Through Rate Cycles Match‐Funding Strategy Better Positions Balance Sheet for Rate Changes 1. Peer Group defined as publicly‐traded banks with total assets between $1.75 billion and $7.0 billion. 2.5% 2.7% 2.9% 3.1% 3.3% 3.5% 3.7% 3.9% 2018 2019 2020 2021 2022 2023 9/30/24 YTD Net Interest Margin FBIZ Net Interest Margin Peer Median Net Interest Margin(1) Linear (FBIZ Net Interest Margin) Linear (Peer Median Net Interest Margin(1))
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FirstBusiness.Bank 14 Disciplined Interest Rate Risk Management Match‐Funding Strategy Insulates Balance Sheet throughout Various Rate Cycles Methodical Approach • Individually match‐fund loans with maturities over 5 years and amounts greater than $5MM • Portfolio match‐funding in various terms against the fixed‐rate loan portfolio with maturities under 5 years and amounts less than $5MM • ~$10‐$25 million of monthly wholesale funding maturities to effectively manage the liquidity requirements of the match‐funding strategy Floating Rate Portfolio • Floating portfolio is predominantly indexed to SOFR, which aligns with the Bank’s SOFR‐indexed and managed rate non‐maturity deposit portfolio • 54% as of 12/31/24 • Balances as of 12/31/24: Fixed Rate Portfolio • Wholesale funding used to match maturities and cash flows on long‐ term fixed rate loans. This locks in interest rate spread and maintains greater stability in net interest margin • 46% as of 12/31/24 DepositsLoans SOFR = $678 MMSOFR = $1.268 B Managed rate, non‐maturity = $1.011 BPrime = $400.0 MM
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FirstBusiness.Bank 15 Operating Leverage Outperforms Peers History of Growing Revenues Faster than Expenses Note: Peer group defined as publicly traded bank with total assets between $1.75 billion and $7 billion. 3Q24 represent data for the trailing 12 months. Peer data not yet available for full year 2024. 1. Operating leverage is defined as the percent growth in operating revenue less the percent growth in operating expenses. 2. FBIZ and peer average data is average of 2019‐TTM 9/30/24 •W e aim to achieve 10% revenue growth on an annual basis, with positive operating leverage ◦ Despite headwinds related to outsized NIM in 2023, we achieved positive operating leverage in 2024 for the sixth consecutive year •S t r a t e g i c initiatives directed toward revenue growth and operating efficiency through use of technology have generated positive operating leverage on an annual basis • Operating revenue 5‐year CAGR of 10.4% outpaces operating expense 5‐year CAGR of 8.4% •I n i t i a t i v e s include: ◦ Expanding higher‐yielding C&I lending business lines ◦ Strong focus on treasury management and growing core deposits ◦ Increasing our commercial banking market share outside of Madison ◦ Scaling our Private Wealth Management business in our less mature commercial banking markets ◦ Robotic process automation implementation ◦ AI usage discovery and roll out ‐12.0% ‐10.0% ‐8.0% ‐6.0% ‐4.0% ‐2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 2019 2020 2021 2022 2023 LTM 9/30/24 2024 Operating Leverage FBIZ Peer Group Median 1 FBIZ Avg2 = 3.3% Peer Avg2 = ‐1.8%
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FirstBusiness.Bank 16 Growth and Profitability Exceeds Peers Top Line Revenue Growth and Efficient Capital Management Drives Strong Profitability Note: Peer group defined as publicly traded bank with total assets between $1.75 billion and $7 billion. Peer data not yet available for full year 2024. ‐4% ‐2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 2021 2022 2023 9/30/24 LTM 2024 Top Line Revenue Growth FBIZ Peer Group Median 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 2021 2022 2023 9/30/24 LTM 2024 Return on Average Tangible Common Equity FBIZ Peer Group Median
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FirstBusiness.Bank 17 Shareholder Value Creation History of Steady, Consistent TBV and Dividend Growth Through Economic and Interest Rate Cycles TBV 5YR CAGR = 12% Div/Share 5YR CAGR = 11% $0 $5 $10 $15 $20 $25 $30 $35 $40 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 TBV/Share Div/Share Great Recession & Pandemic Recession
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FirstBusiness.Bank Drivers of Growth & Profitability
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FirstBusiness.Bank 19 $5,400 $5,600 $5,800 $6,000 $6,200 $6,400 $6,600 2023 2024 thousands Gross Treasury Management Service Charges $1,950 $2,000 $2,050 $2,100 $2,150 $2,200 $2,250 $2,300 $2,350 $2,400 2023 2024 millions Average Core Deposits Relationship Banking Key to Success Solid Core Deposit Growth Despite Banking Industry Trends •L o n g‐term client relationships drive core deposit growth, aided by clients’ comfort with utilizing the Bank’s longstanding extended deposit insurance products • Successful execution of client deposit initiatives has attracted new relationships and increased gross treasury management service charges •L o n g‐held top‐quartile deposit pricing strategy promotes retention •N e t Promoter Score1 of 70 is well above industry benchmark score of 24. 1. Net promoter score assesses likelihood to recommend on an 11‐point scale, where detractors (scores 0‐6) are subtracted from promoters (scores 9‐10), while passives (scores 7‐8) are not considered. See appendix for additional information on the source of the net promoter score. Growth over prior year = 13% Growth over prior year = 11%
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FirstBusiness.Bank 20 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. Peer banks defined as publicly traded bank with total assets between $1.75 billion and $7 billion. 8.1 % 1.6 % 2.3 % 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% FBIZ All Publicly Traded Banks Median Peer Banks Core Deposit Growth Q3 2023 Through Q3 2024
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FirstBusiness.Bank 21 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 '19 '20 '21 '22 '23 '24 millions Core Deposit Growth History1 DDA IB DDA MMA CD Deposit‐Centric Strategy Key to Growth Double Digit Core Deposit Growth Supports Double Digit Loan Growth 1. Core deposits defined as total deposits less wholesale deposits. Period end balances are presented. •D e p o s i t growth remains one of our major strategic priorities under our new 5‐year plan •D e p o s i t‐centric sales strategy led by treasury management sales located in all bank markets with direct production and outside calling goals • Bankers trained to fund their loan production with deposit growth goals •D e p o s i t‐focused individual banker incentive compensation and bank level bonus plans DDA 5‐Year CAGR = 8% Total Core Deposits 5‐Year CAGR = 12%
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FirstBusiness.Bank 22 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 '19 '20 '21 '22 '23 '24 millions Loan Growth History1 CRE C&I All Other Diversified Lending Growth Continuing to Grow Higher Yielding C&I Lending Mix 1. Period end balances excluding PPP loans are presented. On January 1, 2023, the Bank adopted ASU 2016‐03 Financial Instruments ‐ Credit losses (“ASC 326”). The Bank adopted ASC 326 using the modified retrospective method which does not require restatement of prior periods. The balances as of December 31, 2023 reflect a reclassification of $43 million to commercial and industrial from commercial real estate, and $7 million from consumer and other to commercial real estate. 2. Average balances excluding PPP loans are presented. 3. Excluding the impact of PPP loan fees and interest income 5 Year CAGR = 13% Exceeds strategic plan goal of 10% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 30% 31% 32% 33% 34% 35% 36% 37% 38% 39% 40% Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Yield Loan Mix % Growth in Higher‐Yielding C&I Lending2 C&I Loan Mix C&I Lending Yield(3) CRE and Other Yield
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FirstBusiness.Bank 23 Robust Profitability Metrics Strong Balance Sheet Growth and Resilient Net Interest Margin Support Robust ROAA Note: Peer group defined as publicly‐traded bank with total assets between $1.75 billion and $7 billion. Peer data not yet available for 4Q24. 1. "Adjusted Net Interest Margin" is a non‐GAAP measurement. See appendix for non‐GAAP reconciliation schedules. 2. "Recurring, variable components" is defined as fees in lieu of interest, FRB interest income, and FHLB dividend income. 3. $1.7 million benefit from a partial release of a state deferred tax valuation allowance recognized in Q4 2024 3.19% 3.09% 3.14% 3.19% 3.50% 3.43% 3.46% 3.50% 3.48% 0.19% 0.15% 0.19% 0.14% 0.29% 0.00% 3.69% 3.58% 3.65% 3.64% 3.77% 2.0% 2.2% 2.4% 2.6% 2.8% 3.0% 3.2% 3.4% 3.6% 3.8% 4.0% Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Net Interest Margin Peer Median Net Interest Margin Adjusted Net Interest Margin ¹ Recurring, Variable Components ² 0.00% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 ROAA FBIZ Peer Median 3
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FirstBusiness.Bank 24 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 FHLB advances. 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 4Q23 1Q24 2Q24 3Q24 4Q24 NIM, Yield, and Costs Yield on Loans Yield on Securities NIM Cost of Funds (2) 0.02% 0.00% 0.15% ‐0.31% 0.28% ‐0.03% 0.01% 3.64% 3.77% 3.40% 3.45% 3.50% 3.55% 3.60% 3.65% 3.70% 3.75% 3.80% 3.85% NIM Components Increase Decrease Total
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FirstBusiness.Bank 25 Solid Asset Quality Non‐Performing Assets/Total Assets Remain Well Managed Note: Peer group defined as publicly‐traded bank with total assets between $1.75 billion and $7.0 billion. Peer data not yet available for 4Q24. 1. Represents a fully collateralized ABL credit, for which the Company expects full repayment. Excluding this credit, non‐performing assets totaled $22.2 million, or 0.58% of total assets as of 12/31/24. 2. For more detailed definitions on credit quality categories see the Bank's 10‐K filed with the SEC on February 28, 2024. •A s of 12/31/2024, 95% of the loan portfolio was classified in category I(2) and 99% of loans were current. •I n the ABL pool, we continue to expect full repayment related to the second quarter 2023 $10.9 million default, now paid down to $6.2 million. Excluding this credit, non‐performing assets totaled $22.2 million, or 0.58% of total assets as of 12/31/24. •I s o l a t e d weakness in the $41 million transportation segment of the Equipment Finance portfolio. 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 2021 2022 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 Millions Non‐Performing Assets FBIZ NPA w/o ABL Loan ABL Loan (1) FBIZ NPA/TA Peer NPA/TA $0 $1,000 $2,000 $3,000 Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 Q4 2021 Q3 2021 Credit Quality Indicators Category I Category II Category III Category IV
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FirstBusiness.Bank 26 13% 18% 16% 7%6%4% 4% 5% 2% 2% 23% 12/31/2024 Truck Transportation Construction of Buildings Specialty Trade Contractors Support Activities for Transp. Crop Farming Ambulatory Health Care Svcs Rental and Leasing Svcs Admin. and Support Svcs Prof., Scientific, and Technical Svcs Merch. Wholesalers, Durable Goods All Others Maturing Over Time $0.0 MM $10.0 MM $20.0 MM $30.0 MM $40.0 MM $50.0 MM $60.0 MM $70.0 MM $80.0 MM $90.0 MM 2025 2026 2027 2028 2029 2030 2031 2032 Equip. Finance Excl Transp. Transportation Equipment Finance Portfolio by Industry 1. For more detailed definitions on credit quality categories see the Bank's 10‐Q filed with the SEC on July 26, 2024. Category IV represents non‐performing loans. Equipment Finance Portfolio Analysis Strong and diversified portfolio; Transportation sub‐category showing sector‐specific weakness Asset Quality Breakdown1 • Equipment Finance (EF) loans diversified across industries ◦ EF comprised 28% of C&I loans and 10% of Total Loans at 12/31/2024 ◦ Transportation sector comprised 13% of EF , 3.6% of C&I, and 1.3% of Total Loans •S t a b l e asset quality in EF portfolio excluding Transportation sector, which is experiencing isolated industry weakness Equipment Finance excl. Transportation 12/31/202412/31/202312/31/2022 $284.3 MM$226.4 MM$147.0 MMTotal Portfolio 98%96%96%Category I 0%1%2%Category II 0%1%1%Category III 2%2%1%Category IV Transportation 12/31/202412/31/202312/31/2022 $41.2 MM$60.9 MM$50.8 MMTotal Portfolio 87%90%98%Category I 0%1%1%Category II 0%2%0%Category III 13%7%1%Category IV
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FirstBusiness.Bank APPENDIX SUPPLEMENTAL DATA & NON‐GAAP RECONCILIATIONS
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FirstBusiness.Bank 28 Offerings Designed Exclusively for Business and Wealth Management Services that meet the evolving needs of our growing client base
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FirstBusiness.Bank 29 Superior Client Satisfaction Rating Excellent Employee Satisfaction Drives Superior Client Satisfaction Note: Net promoter score assesses likelihood to recommend on an 11‐point scale, where detractors (scores 0‐6) are subtracted from promoters (scores 9‐10), while passives (scores 7‐8) are not considered. The score ranges from ‐100 to +100.
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FirstBusiness.Bank 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 COVID) • Reduced paper usage via implementation of Docusign • Minimal technology eco‐footprint by continued use of state‐of‐the art technology to minimize power consumption • Annually recycle company‐generated and employee‐owned e‐waste • Employee e‐waste recycling is now offered year‐round • Named to the national list of Top Workplaces USA for the third straight year • Awarded nine culture of excellence awards by Top Workplaces Increased advisory board diversity (to over 40%) to enhance our business development efforts with a diverse client base in all markets • Provide all employees with 8 hours of paid time to support volunteer efforts and give back to their communities in a meaningful way of their choosing • Corporate Governance and Nominating Committee monitors key governance structure risks, effectiveness of the Board DEI policy practices and strategies, and oversight of the overall ESG program • To ensure alignment with the Company's ESG principles, responsibility for Board delegated ESG risks and opportunities are defined in all committee charters • Board diversity – 29% female and 14% ethnic or racial directors and 50% of standing committees chaired by female directors • 86% director independence, and 100% committee membership independence
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FirstBusiness.Bank 31 $2,119,998 $6,864 $980,278 $3,107,140 Deposit Breakdown Robust Liquidity and Capital Base Stable Core Deposit Base Substantial Liquidity Strong Capital Ratios (%) 12/31/2024Source $128,207Short‐term Investments 444,453Collateral value of unencumbered pledged loans 310,125Market value of unencumbered securities 882,785Readily accessible liquidity 45,000Fed fund lines 981,463Excess brokered CD capacity (1) 1,909,248Total Liquidity Uninsured Deposits Collateralized Public Funds FDIC Insured Approximately 68% of deposits are insured or collateralized 8.78% 9.10% 9.45% 12.08% 4.00% 4.50% 6.00% 8.00% Tier 1 Leverage Capital Common Equity Tier 1T i e r 1 Capital Total Capital As of 12/31/24 Well Capitalized 1. Bank internal policy limits brokered CDs to 50% of total bank funding when combined with FHLB advances.
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FirstBusiness.Bank 32 Capital Strength 12/31/233/31/246/30/249/30/2412/31/24 $375,440$384,083$392,359$407,421$421,639Total Regulatory Capital $3,356,247$3,381,059$3,425,925$3,477,734$3,491,626Total Risk‐Weighted Assets 8.43%8.45%8.51%8.68%8.78%Leverage Ratio 8.38%8.51%8.64%8.76%9.10%Common Equity Tier 1 Capital Ratio 8.74%8.86%8.99%9.11%9.45%Tier 1 Ratio 11.19%11.36%11.45%11.72%12.08%Total Capital Ratio $289,588$297,788$305,170$311,982$328,589Total Shareholders' Equity $265,573$273,846$281,337$288,156$304,685Tangible Common Shareholders' Equity 8,314,7788,306,5738,294,5898,295,0178,293,928Total Shares Outstanding $33.4$34.4$35.4$36.2$38.2Book Value Per Share $31.9$33.0$33.9$34.7$36.7Tangible Book Value Per Share $0.2275$0.25$0.25$0.25$0.25Cash Dividends Per Share • Regulatory capital ratios remain solid including a Total Capital Ratio of 12.08% and a Tier 1 Ratio of 9.45%. • Tangible book value per share increased 23% annualized from the prior quarter and 15% from the prior year quarter . •Q u a r t e r l y cash dividend of $0.25 per share. HIGHLIGHTS
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FirstBusiness.Bank 33 Balanced Deposit Portfolio Diversified Product Base with Long‐Tenured, Deep Client Relationships • Longstanding deposit insurance options available through IntraFi and Reich & Tang to provide further security for our large clients • Funding is augmented by non‐callable wholesale deposits rather than non‐relationship sourced funds •O u r deposit relationships span multiple industry segments •D i v e r s e deposit base has an average deposit relationship tenure of over 10 years •H i s t o r y of offering competitive deposit rates supported by growth in higher‐yielding commercial & industrial lending •N e a r l y 50% of the top 50 deposit relationships also have a commercial loan relationship Food Services, 2% Agriculture, 4% Construction, 4% Education, 7% Finance & Insurance, 9% Health Care, 6% Information, 5% Maunfacturing, 2% Other Services, 11% Private Wealth, 7% Professional, 2% Public Admin, 6% Real Estate, 21% Retail Trade, 2% Transportation, 5% Utilities, 5% Wholesale Trade, 2% Top 50 Deposit Relationships by Industry As of(Unaudited) December 31, 2023 March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024(in thousands) $ 445,376 $ 400,267 $ 406,804 $ 428,012 $ 436,111 Non‐interest‐bearing transaction accounts 895,319 818,080 841,146 930,252 965,637 Interest‐bearing transaction accounts 711,245 813,467 837,569 817,129 809,695 Money market accounts 287,131 266,029 224,116 207,337 184,986 Certificates of deposit 457,708 457,563 575,548 587,217 710,711 Wholesale deposits $ 2,796,779 $ 2,755,406 $ 2,885,183 $ 2,969,947 $ 3,107,140 Total deposits $ 994,687 $ 995,428 $ 1,011,977 $ 1,088,496 $ 980,278 Uninsured deposits 17,051 16,622 34,810 10,755 6,864 Less: uninsured deposits collateralized by pledged assets 977,636 978,806 977,167 1,077,741 973,414 Total uninsured, net of collateralized deposits 35.0%35.5%33.9%36.3%31.3%% of total deposits
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FirstBusiness.Bank 34 Diversified Lending Products Double digit loan growth driven by stellar performance across all areas of the bank Note: Period end balances as of 12/31/2024 presented. 62% 37% 1% Total Loan Breakdown CRE C&I Other 14% 44%12% 28% 2% Commercial Real Estate Breakdown CRE‐OO CRE‐NOO Construction Multi‐family 1‐4 family 38% 28% 6% 12% 12% 4% C&I Breakdown by Product All other C&I lending Equipment Finance Accounts Receivable Financing Asset‐Based Lending Floorplan Finance SBA Lending
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FirstBusiness.Bank 35 Product Profile •T a r g e t small to medium‐sized companies •L i n e s of credit and term loans focused on businesses with annual sales of up to $75.0 million Technology Initiatives •D e p l o y i n g client portal that enables easy and secure communications and document exchanges Note: Loan balances represent quarterly average data. Commercial Real Estate Lending Superior Talent with Business Expertise Building Relationships in Midwest Geographic Footprint 3.00% 4.00% 5.00% 6.00% 7.00% $1,550 $1,600 $1,650 $1,700 $1,750 $1,800 $1,850 $1,900 4Q23 1Q24 2Q24 3Q24 4Q24 Millions Portfolio Analysis CRE Avg Balances Average Yield $20 $30 $40 4Q23 1Q24 2Q24 3Q24 4Q24 Millions Gross Revenue Interest Income Fee Income
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FirstBusiness.Bank 36 • Office loans focused in our bank markets and concentrated in Wisconsin •E x c e p t i o n a l asset quality with no non‐performing office loans in the portfolio • 89% of all office loans have recourse • Office loans consist of 69% Class A space • Office represents 9% of total loans as of 12/31/24 • Majority of office loan maturity terms are 2031 and beyond •A l l office loans with 2031+ maturities are conventional fixed rate or fixed to the client via an interest rate swap Note: The office specific loan data presented in charts on this slide represents office loans greater than $3 million, which represents 76% of total office loans. 1. Source: Q4 2024 CoStar market reports. 2. For more detailed definitions on credit quality categories see the Bank's 10‐K filed with the SEC on February 21, 2024. CRE Office Portfolio Analysis Exceptional credit quality on office loans throughout the Midwest Multi‐Family 35% Office 13%Owner‐occupied 14% Industrial 12% Healthcare 8% Retail 5% Hospitality 6% Land Development 3% 1‐4 Family 3% Misc. 1% Commercial Real Estate Breakdown Suburban Milwaukee, 13% Milwaukee, 11% Madison, 65% Kansas City, 6% Other, 5% Midwest Locations ‐ Office >$3mm Vacancy Rates: Madison = 6.0% Milwaukee = 11.3% Kansas City = 11.6% $‐ $20,000 $40,000 $60,000 $80,000 $100,000 2025 2026 2027 2028 2029 2030 2031+ Thousands Maturing Over Time Office >$3mm Loan Balances $‐ $50,000 $100,000 $150,000 $200,000 Category I Category II Category III Category IV Thousands Exceptional Credit Quality (2) ‐ Office >$3mm 9/30/2024
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FirstBusiness.Bank 37 •L o a n s focused in our bank markets and concentrated in Wisconsin •E x c e p t i o n a l asset quality with no non‐performing loans in the portfolio •R e p r e s e n t s 17% of total loans • 90% of all multi‐family loans have recourse •A l l multi‐family loans with 2031+ maturities are conventional fixed rate or fixed to the client via an interest rate swap 1. Source: Q4 2024 CoStar market reports. 2. For more detailed definitions on credit quality categories see the Bank's 10‐K filed with the SEC on February 21, 2024. Multi‐Family Portfolio Analysis Exceptional credit quality on Multi‐Family loans throughout the Midwest Market Rent 72% Rent Restricted 20% Senior Housing 1% Student Housing 7% Multi‐Family Breakdown $‐ $25,000 $50,000 $75,000 $100,000 $125,000 $150,000 2025 2026 2027 2028 2029 2030 2031+ Thousands Maturing Over Time $‐ $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 Category I Category II Category III Category IV Thousands Exceptional Credit Quality (2) 12/31/2024 Suburban Milwaukee, 17% Milwaukee, 16% Madison, 26% Kansas City, 3% Other WI Markets, 30% All Other 8% Midwest Locations Vacancy Rates: Madison =5 . 6 % Milwaukee = 5.6% Kansas City = 8.0% National = 8.0%
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FirstBusiness.Bank 38 Product Profile •T a r g e t small and medium companies in a variety of industries •F i n a n c i n g s range from $250,000 to $10 million Technology Initiatives •D e p l o y i n g client portal that enables easy and secure communications and document exchanges Note: Loan balances represent quarterly average data. C&I Lending Diversified commercial product offerings target companies nationwide 4.00% 6.00% 8.00% 10.00% $‐ $200 $400 $600 $800 $1,000 $1,200 $1,400 4Q23 1Q24 2Q24 3Q24 4Q24 Millions Portfolio Analysis All Other C&I Lending Asset‐Based Lending Equipment Finance Accounts Receivable Financing Floorplan Financing SBA Lending Average Yield $20 $21 $22 $23 $24 $25 $26 $27 4Q23 1Q24 2Q24 3Q24 4Q24 Millions Gross Revenue Interest Income Fee Income
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FirstBusiness.Bank 39 Product Profile •T a r g e t 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, information reporting, reconciliation, and data integration solutions Technology Initiative • Implemented a solution that auto‐archives treasury management documentation which has immediately generated labor savings Note: Funding mix represents quarterly average balance data. Transaction Accounts include interest-bearing DDA, non-interest-be aring DDA and NOW accounts. Bank Wholesale Funding includes brokered deposits, deposits gathered through internet listing services and FHLB advances. Non-Transaction Accounts includes core CDs and money market accounts. "Cost of Funds" is a non-GAAP measure. See appendix for non-GAAP reconciliation schedules. Treasury Management Superior Talent with Business Expertise Building Relationships in Midwest Geographic Footprint 0.00% 1.00% 2.00% 3.00% 4.00% $‐ $1,200 $2,400 $3,600 4Q23 1Q24 2Q24 3Q24 4Q24 Millions Funding Mix Non‐Transaction Accounts Transaction Accounts Bank Wholesale Funding Cost of Funds $0.50 $0.75 $1.00 $1.25 $1.50 $1.75 4Q23 1Q24 2Q24 3Q24 4Q24 Millions Fee Revenue and Analyzed Charges TM fees Analyzed Charges
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FirstBusiness.Bank 40 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 trustee or agent capacity as well as Employee Benefit/Retirement Plan services • Also includes brokerage and custody‐only services, for which we administer and safeguard assets but do not provide investment advice Technology Initiative • Implementing client portal for new client onboarding Note: Total Assets Under Management & Administration represent period‐end balances. Private Wealth Management Wealth Management Services for Businesses, Executives, and High Net Worth Individuals $1,500 $2,000 $2,500 $3,000 $3,500 4Q23 1Q24 2Q24 3Q24 4Q24 Millions Assets Under Management & Administration Private Wealth Employee Benefits Other $2 $3 $4 4Q23 1Q24 2Q24 3Q24 4Q24 Millions Fee Revenue
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FirstBusiness.Bank 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 average interest‐earning assets. Fees in lieu of interest are defined as prepayment fees, asset‐based loan fees, non‐accrual interest, and loan fee amortization. In the judgment of the Company’s management, the adjustments made to net interest income allow investors and analysts to better assess the Company’s net interest income in relation to its core client‐facing loan and deposit rate changes by removing the volatility that is associated with these recurring but volatile components. The information provided below reconciles the net interest margin to its most comparable GAAP measure. Adjusted Net Interest Margin Non‐GAAP Reconciliation For the Three Months Ended December 31, 2024September 30, 2024June 30, 2024March 31, 2024December 31, 2023(Dollars in Thousands) $60,110$59,327$57,910$55,783$54,762Interest income 26,96228,32027,37026,27225,222Interest expense 33,14831,00730,54029,51129,540Net interest income 2,3591,0021,3068491,121Less fees in lieu of interest 1,0628419591,4361,466Less FRB interest income and FHLB dividend income $29,727$29,164$28,275$27,226$26,953Adjusted net interest income $3,516,390$3,405,534$3,347,027$3,294,717$3,199,485Average interest‐earning assets 76,57652,60361,08297,03699,118Less Average FRB cash and FHLB stock 19,07718,95419,80720,54018,602Less Average non‐accrual loans and leases $3,420,737$3,333,977$3,266,138$3,177,141$3,081,765Adjusted average interest‐earning assets 3.77%3.64%3.65%3.58%3.69%Net interest margin 3.48%3.50%3.46%3.43%3.50%Adjusted net interest margin
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FirstBusiness.Bank 42 "Adjusted Net Interest Income" is defined as net interest income less fees in lieu of interest and other recurring, but volatile components of net interest income . "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 marketplace who are interested in the trends in our net interest margin. In compliance with applicable rules of the SEC, this non‐GAAP measure is reconciled to net interest income, which is the most directly comparable GAAP financial measure. Adjusted Net Interest Income Non‐GAAP Reconciliation For the Year Ended December 31,2024December 31,2023December 31,2022December 31,2021December 31,2020December 31, 2019(Dollars in Thousands) $124,206$112,588$98,422$84,662$77,071$69,855Net Interest income 5,5163,4525,28311,1609,3006,479Less fees in lieu of interest 4,2984,0551,525741789934Less FRB and FHLB income $114,392$105,081$91,440$72,665$66,850$62,371Adjusted net interest income (non‐GAAP)
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FirstBusiness.Bank 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 compliance with applicable rules of the SEC, this non‐GAAP measure is reconciled to net income, which is the most directly comparable GAAP financial measure. Net Operating Income Non‐GAAP Reconciliation For the Year Ended December 31, 2024December 31, 2023December 31, 2022December 31, 2021December 31, 2020December 31, 2019(Dollars in Thousands) $44,245$37,027$40,858$35,755$16,978$23,324Net income (6,905)(10,112)(11,386)(11,275)(1,327)(1,175)Less income tax expense (8,827)(8,182)3,8685,803(16,808)(2,085)Less provision for credit losses 59,97755,32148,37641,22735,11326,584Income before taxes and provision for credit losses (non‐ GAAP) Less non‐operating income ‐‐‐‐275‐Net gain on sale of state tax credits ‐‐809‐‐‐BOLI death benefit (8)(45)‐29(4)(46)Net (loss) gain on sale of securities (8)(45)80929271(46)Total non‐operating income (non‐GAAP) Less non‐operating expense 168124915383224Net loss on repossessed assets ‐‐‐253540Amortization of other intangible assets ‐‐809‐‐‐Contribution to First Business Charitable Foundation (104)775(188)(76)(278)188SBA recourse (benefit) provision 400‐351‐2,3954,094Tax credit investment impairment (recovery) ‐‐‐‐744‐Loss on early extinguishment of debt 464787319(36)3,2794,546Total non‐operating expense (non‐GAAP) 1,6301,206338‐9691,352Add net tax credit benefit (non‐GAAP) $62,078$57,359$48,224$41,162$39,090$32,528Net operating income
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FirstBusiness.Bank 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. The information provided below reconciles the cost of funds to its most comparable GAAP measure. Cost of Funds Non‐GAAP Reconciliation For the Three Months Ended December 31, 2024September 30, 2024June 30, 2024March 31, 2024December 31, 2023(Dollars in Thousands) $24,120$25,290$24,676$23,837$22,644Interest expense on total interest‐bearing deposits 1,9692,0591,9741,7171,851Interest expense on FHLB advances $26,089$27,349$26,650$25,554$24,495Total interest expense on deposits and FHLB advances $2,566,814$2,466,313$2,414,282$2,360,573$2,249,701Average interest‐bearing deposits 444,683440,161436,968443,416448,818Average non‐interest‐bearing deposits 270,476278,103294,043287,307301,773Average FHLB advances $3,281,969$3,184,577$3,145,293$3,091,296$3,000,292Total average deposits and total average FHLB advances 3.18%3.44%3.39%3.31%3.27%Cost of funds
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FirstBusiness.Bank