First Business Financial Services, Inc.

Good afternoon. Welcome to the First Business Financial Services Third Quarter 2020 presentation. It will be an opportunity to request this event to be recorded. I'd like to thank the CEO, Corey Chambers. Please go ahead.

Good afternoon, everyone, and thank you for joining us. We appreciate your time and your interest in First Business Bank. Joining me today is our President and Chief Operating Officer, Dave Seiler, and our CFO, Brian Spielman. Today, we'll discuss our financial performance, followed by a Q&A session. I'd like to direct you to our third quarter earnings release and supplemental earnings call slides, which are available through our website at ir.firstbusiness.bank. We encourage you to review these along with our other investor materials. Before we begin, please note this call may include forward-looking statements, and the company's actual results may differ materially from those indicated in any forward-looking statements. Important factors that could cause actual results to differ materially from those indicated in the forward-looking statements are listed in the earnings release and the company's most recent annual report, Form 10-K. and as may be supplemented from time to time in the company's other filings with SEC, all of which are expressly incorporated herein by reference. There, you can also find information related to any non-GAAP financial measures we discuss on today's call, including reconciliations of such measures. First Business delivered another outstanding quarter. Our team again produced high-quality loan and deposit growth sourced from core client relationships. We maintained a strong net interest margin and produced positive operating leverage, driving improved efficiency. Private wealth assets continued to expand, delivering significant annuity-like fee income. And operating revenue reached record levels, reiterating the value of our revenue diversification. These highlights contributed to robust profitability metrics. Year-to-date ROA grew 15 basis points to 1.23% compared to the same period of 2024. Year-to-date return on average tangible common equity grew to over 15%, up from just under 14% in 2024. And most importantly for shareholders, we grew tangible book value per share an impressive 16% from a year ago. We are very pleased with the quality of this quarter's results, which Dave will expand upon more now.

Dave? Thank you, Corey. Third quarter performance was very strong across the board and reflects our consistent growth and profitability. Our model is designed to drive 10% long-term growth, and we view quarterly results as a tool for tracking our success toward this. Our pre-tax, pre-provision earnings are a good indicator of the success of our model. We saw 18% growth from the second quarter and 20% growth compared to the first nine months of 2024. Credit costs can impact results meaningfully, and the provision for credit losses this quarter was better than expectations, leading to earnings per share growth of 26% from the second quarter and 25% year to date. A primary driver of these exceptional results was the record level of non-interest income generated during the quarter. That included elevated swap fees and income from SBIC funds, as well as two non-recurring items which totaled about $770,000 that Brian will cover. Swap income grew nearly six times from the linked quarter, and income from SBIC funds grew over four times from the linked quarter. While both items are variable quarter to quarter, third quarter levels exceeded our expectations and were outside our historical range. This quarter's fee income performance showcases our successful revenue diversification efforts that we believe provide significant long-term benefits and differentiate us from our peers. Fee income comprised 19% of our operating revenue for year-to-date 2025 and 2024, compared to about 15% for peers. I'll highlight, as a business-only bank, we've achieved this outperformance without the heavy fee revenue stream of a residential mortgage or consumer business. This reflects the success of our investments for growth and efficiency and high quality, high producing talent we attract. It's also one of the drivers of our strong ratio of operating revenue per average FTE, which has been 30 to 40% above our peers over the past five years. Looking ahead, we'd expect annual fee income growth to approximate 10%. However, we would expect Q4 operating fee income to be more in line with our recent four quarter average. Net interest income growth was also substantial and reflects continued and robust balance sheet expansion. You can see the highlights on slide three of the earnings call slides and our quarterly loan and deposit growth trends on slide four. Loan balances grew about 85 million or 10% annualized during the quarter, and 286 million or 9% over the same period last year. We had strong growth across our geography with our Kansas City and Northeast Wisconsin markets leading the way. We continue to see solid demand for our conventional and niche CNI products and pipelines look strong for the fourth quarter. Activity levels in our asset based lending group continue to exceed what we've seen in the last two years, and we are positioned to capture growth opportunities in this space. Our accounts receivable financing business is similarly poised for growth. We've been investing in these businesses, which also perform well during economic downturns through business development, officer hires, technology, and process improvements. We know how to lend to these clients and our solid underwriting process has historically driven better than average loss rates across cycles. We value the strong risk-adjusted returns our niche CNI businesses provide. We also continue to see strong growth in core deposits of 9% from both the linked and prior year quarters. Our South Central Wisconsin market led the way in our deposit growth by landing several large new relationships. We track service charges on deposits as a proxy for new relationship deposit growth, and these fees grew 25% from last year's third quarter. onto asset quality, which was pretty stable, with non-performing assets decreasing slightly during the quarter. Net charge-offs totaled $1.3 million and were primarily from previously reserved equipment finance loans. In total, NPAs decreased by $5.2 million to 0.58% of total assets compared to 0.72% last quarter. Our overall portfolio continues to perform as expected and we have no areas of particular concern. The transportation loans in our small ticket equipment finance portfolio continue to shrink and our CRE markets remain strong. Additionally, we don't have direct consumer exposure, so we wouldn't be impacted by things like credit card and auto loan delinquencies. This is a positive differentiator for our business focus model. Before passing it to Brian, I'll make one quick note on the government shutdown. We do not currently anticipate any negative credit exposure related to the federal government shutdown. We do, however, depend on federal government processing to complete SBA loan closings. This may affect the already variable timing of SBA loan sale premiums. Our SBA loan pipeline is strong, and while pricing continues to be extremely competitive, we continue to win deals. Now I'll hand it off to Brian.