SBFG - Earnings call transcript Q2 2018 | SB Financial Group, Inc.

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Operator

Good day and welcome to the SB Financial Second Quarter 2018 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Melissa Martin. ahead. go Please

Melissa Martin

at I conference everyone. Internet to you our remind will Relations. Good is would being this website on available call archived the under broadcast that Investor be morning, and like www.yoursbfinancial.com live and over

Klein, are plans, Gathman, Cosentino, regarding Jon President and Lending SB forward-looking operational statements Officer. objectives. This Financial's Joining Chief Mark CEO; Officer; anticipated Financial results me and Chairman, today contain performance, and Senior Tony call may

subject from based to uncertainties our are management's or on risks actual and are implied number statements and a Forward-looking that results expectations of to those on cause could today. differ call materially expressed

to of to by at have of this which law statement our any a number the encouraged Group call. of within release, forward-looking required the SB no undertakes different review. We update except Financial obligation end after statements forward-looking as earnings date identified are the factors you

financial certain addition measures. results contain also presented the with now call Mr. will accordance in turn Klein. over the non-GAAP In to to call GAAP, financial will I this

Mark Klein

Nice Thank us. have good and morning to you, webcast. to everyone. XXXX our you Welcome all second Melissa quarter with

or over over a prior $X.X Trailing expanded the Loan EPS for that morning increase. X.XX% $X.XX, quarter. improvement quarter the but quarter the a the $X.XX. year year this average comments the improvement and year XX% earnings million the linked X.X% XX.X% yesterday. we or stands quarter, quarter XX% $X.X over release supplemented quarter. nearly for of XX%. quarter year. from by a Briefly, over was highlights $XXX.X Our or Diluted year from Operating ago quarter, quarter filed quarter. income $XX representing the XX.X% the prior-year quarter. from expanded but X% from Deposits share, year $X.XX months prior the net an up a volume X.X% prior down from include the are million, return assets and Expenses EPS improvement per a $XX Mortgage million million XX of representing $XX revenue nearly now XX% were linked the ago over million the from origination to linked grew from ago linked XX% support and likewise up the $XXX nearly or or slightly from million or up million million or just balances a $XX at X.X%

strong in to competitive Asset each quality, volume reflect a growth finally continues common still SBA quarter, nearly higher $X originated first million our our markets. we strengths. with theme be of our slowed strength loan company our but from of in bit one activity a our

deliver new existing the first color of quality and operational And asset now quarter. bit of households, but on We ones that revenue course excellence on our every mentioned top five them set and to broader steady revenue our product continue diversity, It's the scale to organic discussed strategic growth as about a initiatives after we've world-class expansion all efficiency, diversity. not each; in quarter. a only quarter of well, deliver key course we've tier

quarter This historical our down lower line level. from our XX% from we slightly XX% business revenue linked bit from and over of fee-based delivered a quarter and the was

discussed ago were from up X January quarter. the DCM, X% be would this XX% fee on Our the quarter of linked to and year flat also ago from results of quarter. earlier, which completed year the down and we Adjusting sale income the for year

as relationship. We as inventory remain the volume household million. line with million net using key total level Finley adjacent solid. million MLO's market as $XX and XX six of months mortgage the Ohio in higher XXXX. coupled several Northeast quarters a Columbus a We're the is housing goal that $XX mortgage the lender retail $XX albeit both now deploying pipeline mentioned. as constraint now, produced $X.X in a volume discussed to results a million $X.XX the marked deeper generated volume in for markets, the in additional prior an of with our Central our developing I nearly nearly added more we to million Indiana our now by I set on another the million SBA past $XX our of slower billion, addition expand bulk our This longer-term quarter. of much $XXX our was line West and to year year-to-date per portfolio Northwest across the bit rates, nearly MLO's mortgage growth footprint portfolio I we in of We've all this Indiana We new we million. through our near-term quarter mortgage improvement production XX in although over as in saw with with a Defiance Northeast in in and expectations mentioned to of in market banking and and marginally variable-rate year our of in the was recently clearly million. our bit servicing representing of $XX we've for the sale business have revenue quarter product. SBA production keep Columbus $XXX two gateway vision quarter, Despite a our staff a hired then begin to Ohio sights Ohio generate managed market. lending year in of quarter first ago This mentioned, this limited quarter

continues strategy an SBA to expanding economy. Our in traction gain

Columbus, XXX,XXX be now soon Greater have loan Fort $X over of development in Westlake been officers quarter and for nearly sold sale our we Toledo in in gains. announced production BDO and Wayne, Cleveland additional million We Indiana. an This to

plan. in banks million on SBA in top With thus US model driven us level do and meaningful to ranking year, the our nearly million production we're clearly XXXX to volume closer far strategic $XX XXX production among $XX volume goal incentive-based move loan lending. our and Our continues this of making by in a progress who executing

XXX XXXX, closed our June out the SBA ranking the to banks in improved of that X,XXX percentile. an XX we As the loan have or U.S. of

continue become top to plan the our will XXXX. to XXX in refine serve that U.S. the by producer We we in markets

As of management platform. on June XX, brokerage traditional XXXX, we our now million million. XXX wealth assets division XXX XX had total our the in care of assets and under

a As seasoned advisor as investment we Helma we our has our over with strengthened developed presence more million. newer includes opportunities Fort new management presence Cameron markets, a $XX our and [ph]. expand in existing Mr. now market have This wealth Wayne progress pipeline to into

to and remains initiative second improve Our add scale efficiency.

we accompany. quarter, and the expanded operating This revenue organic that balance growth sheet

professionals share and in by past inertia. In regional quarter up provides each Toledo and management our X.X%. million of increases the newer by Wayne the quarter, quarter the fact low growth treasury from $X.X our $XX or $X.X all small company now business linked the our loan was expanded by leaders million. Fort growth each million the also and setting models from in $X.X deposits. We business have with net Deposits this lenders region year nine to commercial working this attract pace $XX.X for Decentralized delivered market our million prior million nearly that market-specific million added Columbus markets delivered strong defiance $XX.X of

now on from number a business deposit and commercial our of retail our focused staff we every business addition, into have small In and clients. lending redeployed small market, gathering

Third greater is our deliver to strategy scope.

a XX,XXX of As provide now staff as from year. retail we've over the number lift in X.X% not quarters, onboarding the continue slightly households, efforts increasing and only in products linked our services Households reboarding and from discussed prior quarter and by our but prior well.

over our We X.X% from the and the prior grew services XX,XXX from quarter X.X% now linked also products increasing and to year.

improve bank by digital revitalization quarter supplement to which platform, and continue was this website. We our the of our highlighted

users increase a continues. we of in Additionally, at trend that number our fourth X,XXX the a banking key servicing we billion representing mortgage saw households. a of quarter $X.XX portfolio theme; mobile year-over-year excellence end, Operational XX% reported improvement

of leadership serve we Six expert, deliver his the many touch. that but the part business interdependently As our a under clients annually Capital. we experience $X.X Sigma along presence our household, his Chief In Under at realign does majority Working a and add enable as culture. referral to metrics and relationships. It's and value have the had We to begun to Ernesto who Gaitan, identify have now to expertise career November his improve spent the hired revenue key in us processes unique of our delivers of we at GE only in also we to leadership opportunities, to million Officer year, discussed for a our line operational ensure seamless client every provide leverage entryway fully reoccurring Innovation our not last this intend way. Technology this to quarters, space.

a residential business million. line. client this led XXX those XX.X over identified and another X.X another needs XX.X loans resulted These we closed, our Of nearly equity to quarter XXX mortgage million we solutions XXX referrals result, resulted million. to for As XXX referrals home in loans staff for XXX refer that for referrals in

fifth what We and just or do The past for to and basis declined $XX,XXX X.XX%. by nothing at key not. X.XX% XXX% initiative point. Total quality, are net due making needs of now asset $XXX,XXX loans every attempt assets they just nonperforming the provide client to charge-off one

now nonperforming to robust XXX%. stands a reserve Our at

for and on earnings this Tony comments and tangible Tony us capital. just in shares to performance I'd Tier additional the of organic Clearly, Before I I'd added liquidity And now we stock robust increased The I Costantino the February, price. quarter. fund with capital this stock million over has X a foundation our X.X to the evident past provided to sheet sponsorship of $XX is to balance solid to and which the color, common support, on provide, additional strong that some comment like details in completed million turn in more our call ask Tony along equity like mentioned. equity capital growth raise and both

Anthony Cosentino

everyone. Thanks Mark, and good morning,

That had $X.XX of was or $X.XX X% the up the $X.X million XX% year has or previously diluted Mark $X.XX highlighted, of quarter. prior and from net $X.XX As the income per from for EPS up or we linked quarter. EPS

Of XXXX course, million from rate, from impacted as XX.X% February common of shares to XX.X% in tax a addition in any reduction down X.XX the as coming is new currently. comparative our federal the well by

XX.X%. quarter, and and for some gains revenue from June business prior XX.X% or million agriculture. up for year from small Loan XXXX mortgage, of $XXX.X up from growth up delivered So was million the linked X.X% quarter. the sales highlights $X.X Loan the operating

Our quarter which ratio, nonperforming point. lastly is higher than second indicated, of $XXX.X basis volume mortgage Mark down of reduce was now the XXXX as XX our to and we in million XX.X% continue to

margin the and of was a our break the loan the we the linked the net curve, with headwinds X.X% yield quarter second prior interest an despite and of up increase prior period up income balances XX% End by from quarter. income As were down further $XXX year up million, XX.X%. from beginning statement from flattening of year

from yield points Our earning Overall, X.XX% basis increased for average up the of in the yield basis year. prior by was XX year. loan points the XX quarter asset prior our

the necessarily which that the In addition seeing With funding our at higher. certainly to higher XX origination. million slightly that cost loan key increase points an the have by the XX% loan pace basis impact, costs continue the by the almost has to margin points. activity X.XX% and Loan balance was of liabilities, same all to year a at that sheet are of quarter, from Total variances tied we On the Net XX XX up balance is year yields XX% were growth, half linked experience year rates in side, costs. basis rate three nature, average, $XXX which nine basis on points increase loans total XX% due continue quarter. increased prior not funding driven yields These volume nearly in up up expense interest points of XX and year income higher up our as the increased costs, our to to but loan with the from combination we points deposit the in was of clearly higher interest from basis will exclusively prior for from basis variable from the the the and variance with quarter. and driver. $X increases and somewhat margin second linked see million interest have interest-bearing we loan of prior the to mortgage prior significant risen of a up for fees income came of from an influenced at quarter

unlikely lower million somewhat the the of the We quarter this occurred will at we total loan of is repeat pipeline, $X.X forward. DCM income reflects sale a going we million percentage $XX have noninterest nearly strong prior realized year. which this certainly of in of SBA the that business Total first our was growth, year, from a revenue it that down XX%. as gains Fee healthy still of quarter and income but

originations quarter. quarter, million up indicated the mortgage $XX.X XX% were of $XX million and the prior as we from or $XXX.X For from year million XX.X% were linked the by up or

in $XX on $X.X purchase X.X% sold at sheet our and by variable-rate on at outstanding. clients into gains measurable shift our XX% come which quarter, which in balance of residential new remained sale million. we high quarter's volume was saw higher This million, volume Total drove did mortgages, on the a

portfolio and is portfolio remain in of XXXX. quarter. million servicing the pace by level deliver at has $X.XX value year. total The servicing the rights increased million revenue Our provided to X.X% market in XXX,XXX of past billion from this quarter mortgage prior That our $XX on $X.X of for revenue servicing or

value were quarter basis XX points servicing the slight Our $XX.X of in from XX% X% XX, the points rights mortgage up up from XXX result XXXX was impairment. of million, did quarter. prior June year calculated up second those fair from $XX,XXX basis a and the linked At and very

expenses X.X% remaining the and the up million basis, the $XX,XXX. reflecting quarter of distributed the initiatives operating prior down this of linked discussed quarter, but is total for first $X.X in were XXXX. year, or Our DCM up temporary On tax million to Operating $X.X were expenses were we the compared a impairment $XX,XXX. and year-to-date quarter sale XX%, of expenses

year-to-date However, the and are quarter operating leverage for positive. both

prior year million linked We the and XXXX, June million, Now were assets of the sheet, XX, prior at of the residential total book by $XX.X real from year, XX.X% from $XXX.X the million turn commercial had million as category with at stood balance to estate $XX.X of was we company. our loan total to real the every $XXX which $XX.X growth outstandings the in loan followed million. estate up Compared by led quarter. grew of

non-interest for XXXX, Adding impact moving to points, costs our up these We've deposit liquidity XX our we year. loan a slightly growth offset this or X.X% and XXX% cost up X% prior up the the million requirements. is past the but rate to linked also is it or $XX.X of deposit up by higher growth continue the match the are we quarter XX%. as ratio of basis to bearing On XX, side, cost rate but from and up quarter. prior $X.X Deposit funding basis dropped by year liabilities profitability XX% rise on The from point total million, June of and critical demand by from points their continue X.X%. interest-bearing with growth XX that basis XX loan-to-deposit

million, position, our the quarter XX.X% from or at finished we $XX.X $XXX.X of up capital XXXX. XX at million June Looking

after be our sponsorship We equity-to-asset to of and of February. prior significantly capital the added ratio completion with continue of the pleased XX.X% raise the year. was liquidity from in up also our The shares

points. XX $XXX,XXX those was have points restructured and non-performing ratio elevate would $X.X from total accruing non-performing total from non-performing of flat is quarter. restructured by restructured and $XXX,XXX maturity linked nonperforming of just level stand linked quarter. Regarding $X.X assets the quarter all down to prior for our asset $XX,XXX. basis the for expense in assets. loans, The total in These nearly basis credits, XXXX at total the quarter of the asset total asset assets quality, did million in credits. $XXX,XXX extensions our down the level just $XXX,XXX Included quarter the or absent Provision second losses million loan X.XX% now be to is compared nonperforming XX of We our year and

still loan X.XX% loans allowance the that Our $X.X currently. million growth, of by which declined absolute or year top X.X% allowance our group, million XX, is great year-to-date total we allowance loss XX% quarter, performance at have at number. look to In quarter NPA over XX%. Due up NPL we from ratio. turn of from X.X%. a now still prior And now loans our to to allowance basis, coverage net loan June a $XXX,XXX to on our year-to-date. level the income pretax us has percentage a year places of above level income certainly of because pre-provision I'll prior of our are we back in at quartile peer at peer prior This number $X.X and XXX%, up strong been non-performing bodes our year-to-date well has this the call when XXXX strong median up the given the And our with well Mark. reduction summary, with from

Mark Klein

results you it year-over we year-over-year, diversify the at of reflect our company. normalized on $XXX of the and line real Thank I'd driven had our then commitment quality. and certainly of quarter revenue our improve deliver A residential great $XXX million to quarter scale balance top market-leading for and mentioned, double-digit grow course estate Clearly sheet our growth by a revenue mentioned XX% many million production one asset improvement add as to more nearly strong our together level and the was for efficiency. company Tony, profit as representing the expansion organic fronts, Tony

of That said come pressure our the most the added nearly side into be half to we Tony half ratio, optimistic we momentum it the funding. seen earnings cost have will of margin. the of as continue. will selective second the we With that on XXX% move without not remain we on opportunities surely effect revenue that certainly balance sheet, liability the As lending will loan-to-deposit year, indicated overall first in optimize and will the

Finally, we remain steadfast.

stakeholders, markets insightful Our that time. And call of investment any back deliver geographically diverse that focus community. line high-performing economy to for expansions one serving remains to a turn questions Melissa. regional company entering our all to longest fairly albeit I'll Melissa business our leadership, leaders, with of an the continue from and one is strong resilient, the

Melissa Martin

Thank you, first now our question. Mark. Operator, are for we ready

Operator

Instructions] [Operator the We session. will now begin question-and-answer

Melissa Martin

I accessible website While we assemble, our www.yoursbfinancial.com will Relations. questions today’s are on Investor you at under be to waiting call for that remind like would to

Operator

The question Please go FIG first Brian we -- Martin comes Partners. from have with ahead.

Brian Martin

good Hey, morning guys.

Mark Klein

Good morning.

Brian Martin

to how profitability, part I to commentary wanted on on about margins if Tony to margin a just like could outlook it. trying or the kind it you're understand margin, second to then trying rise, of just just but from to thinking start Maybe comments think guess, with funding to just as I about your maybe that given seems expecting costs gap you prospectively. but you quarter in maximize just I your if fees just maybe the prospectively how guess first context and the some you of continue were just maybe certainly outlined reconcile just of of about kind quarter. Tony, in Mark's margin about and it, are Mark, Tony up mortgage It kind and them to of reconciling how of

Anthony Cosentino

we balance level, to certainly increases the that think we've be mid I we will I quarterly the the was to factors oversized next million, bit certainly funding to I realized And two sized quarters traditionally is XXX% evident we've of This which levels, that it loan level their a X quarter deposit also unique XXs. I these loan times would to. growth. yet to fact been $XX margin had loan normal for of to happy allow of Thanks say a Brian a when X.X sheet not the that kind would get move think level an of question. the of all growth, Sure, Tony. low to kind say of

a mortgage oversized margin that certainly $XX up fees, that bit we somewhat from margin impact the on going and think I million loan QX significant on in to a loan certainly impact has discount QX. impact originations Had a our on can't level.

I our to of cost three factors the are So, as back maybe to forward, level got us because latter we begin those margin I higher to see look four markets. type come normalized would we the in say above a think more for throughout level funding that the and half that quarter, would certainly QX we the XXX those evident

Mark Klein

this Mark. is Brian,

funding as the and we we your cognizant that comment, one price Just been certainly X.X we've demand. marginal as is of so loan have X into well to seen cost

to expanding, but going line, leakage we're funding prudent clearly net moving the the larger bottom albeit be keep on net that a forefront we're clearly a income as So, with the very to income bit up as a interest it's but in loan on to well ROE, deposit. and with ROA, improvement side maybe loan of on XXX%

So line of we're right in sight.

Brian Martin

Right.

growth loan what with this accommodate just on specifically what going a that maybe in call, the things you how are given couple side the to the and doing ratio match growth? kind found of critical I strategy to kind guess a and deposit guess far of you of loan-to-deposit nature the and funding as there forward. the guess but Okay mentioned you I I as deposit, loan are

Mark Klein

loans and deposit when on more requiring our certainly it comes deposit the question conversations certainly is those with great clearly beginning. accounts is robust to the side Right, funding funding loan

mentioned overseeing would been network, I to eight generally retail now those the our next would entire have street, the as that put clients, in We also retail clients, with management individuals ones. of offices, business been which allowed existing as every restructured individuals another eight relegated those have retail us small well or as place day that have literally which has commercial layer prospective existing talking offices, to on those managing

continue and to improve on and might changed the the move clearly shoe balance to scale. expand and and we've clearly we We've balance the sheet needle think So other to efficiency foot put able the sheet be the game. the the we relative

some that's our private out advising their currently and key albeit with relationship doing are and larger the portion now our that again of it, that deposit into base how right XXX us. that products products bringing level So with we're about to new client are at reaching them a of

also we're some So but to ones. not relationships, new it establish using only expand current

Brian Martin

you. Got

but maybe growth, That's little you it of or one to I saw a And a but just you growth missed and least maybe bit this you if color quarter, the and of just next kind from, then have geographically bit and just little of helpful. about like. bit you however could just you're can Okay. about of what the to talk it loan we book longer the it gave balance think a think on the you looks how you how just guys, cognizant where going came little profitability of what frame loan I maximize based the term, pipeline know I at quarters, couple guess in

Mark Klein

individuals structurally times Brian. markets. as our for here, we're Jon with growth a very but brand some can Okay. of comments diverse high-level Again XX, -- mentioned Thanks with number geographic built in I've our make

done think we're We deposit loan machine at where funding, XX% we've we're we're I but and literally what and I those feeling slowdown. are pretty expect feel now, should But, requests, good going. rest you about the have where Jon to know going that we've committee, of all to the alternative from look and come growth and

Jon Gathman

a to weightings Tony some do. and bit the growth remainder The different the projects model, and 'XX board year on pipeline the our and We C&I with of we're in strong. CRE a in incentives remains of year. changed the not as pivot went we've some that here not things, but C&I pipeline still growing for nice I come more through began call, in the of here very and seen

drawing in have are of projects and here number second quarter. We a the third up that

looking pivoting growth at that loan So strategically. it's again a all about more little and

strategic benefit we know being capital to our deposits more deploy for concentrated our to deposit have We funding those credits as are you and the little get Mark going bit said and come structured that world. where to C&I those growth, in the more tend about of

Mark Klein

higher-yielding well in we've SBA as know Freddie years specific or garner Mac on a developed You is some and strategy variable follow-up rate million sheet. has to done certainly that loans XX%, SBA $XX that, comment and what sold three off focused know and you our the additional Brian, ago so, one given like much balance our ability balances relationships marginally us we

So, that's set addition delivery relevant channels been that of to to great in intend product space. all and throughout market we a significantly and remain our our

Brian Martin

side, I at out talking the Means I mortgage clearly of does continue? loan what component the that, are of about about to strategically on to to book expect growth to which of guess. how got would the you guess others, probably which If trend on. the least And going forward change and or cap opposed as loan how you. retained guess that think variable that of it's you focused kind the kept guys want it's side grow. that, that kind the to a residential some you being just lead my quarter, is loans, were rate the I sold that Is relative

Mark Klein

net to clearly, the flatness more I of about end talking in earlier interest And margin and the going, that with on the mortgage them given the talked Brian, have loans Thanks comes like book, well we putting machine that this relative we variable. those that variable albeit XXX% those of the through yield our much loan-to-deposit curve. the those have ratio. this, we curve booking we about has of of given how will be driven the some Tony

Those low some markets. and of on robust group million $X.X is client $X our loans million that private our high-growth So, end. to mortgage Metropolitan very share

I the relationship selectively want. pulling that we consciously field result to to more need Tony, we as to We private and a determine able you but continue we've it's that as we what might like and of been make going we we it, so fund relationship, far. is comment. sure have mentioned. we've into we're get gather additional get client how So so did far, But by it price that enjoyed to inertia to

Anthony Cosentino

kind QX, Yeah, given add that, really say we a origination percentage of been client don't product, curve a quarter oriented, and the of into bit much this in our very certainly slope dramatic little the high-profile the we've mortgage I to sale on to would of mind rate type was that had yield of on just our And having mid-XXs to portfolio. historically that a relative our private high-XXs of shift variable the the of this seen we more and we client quarter professionals, clientele product product. client we medical in and have that and real of of like profile

real a residential percentage. mid-XXs now still only is Our in right of still estate terms

So, overly but bank. estate residential want be to XXX% we we're don't real certainly concerned, not

Brian Martin

Right, okay.

comfortable higher. you're there but it's higher it you and maybe is still go least take point, some now at cap So, there that bit at a having it at room to somewhere

Anthony Cosentino

bit particular certainly certainly Yes internally -- we've and conscious about Brian as some a certainly pay on think I to conversation channel. so liked but continue far, I more delivery dividends it that of the us that it approach to mentioned would and agenda to discuss give

Brian Martin

of we about anything just give -- what I are selling from then think it think versus if Okay. any of get maybe we if that shifted on that, you down that's kind with are and just you if gain lower how kind Perfect on are production secondary just thought can about a of range. the we changed think comments guys what touch what about outlook. and mortgage a the and the quarter, you quarter just certainly about -- that is to the business little is the that forward. into first market, as and that, just differently going if sale thinking look margin we to How does second like we or then forward was kind go your

Mark Klein

get midst just something to I've mortgage right like. XX obviously Brian, the as comment. We really for that Yeah, we it banking of regulatory one is years, have mentioned reform. in

that we but times. with not but household. love certainly non-interest So at to clearly to continue like ongoing something per the X,XXX an X.X only we angst can that And to deal best banks service give to households that the that on opportunity of income, that, have basis, X.X have we gather some know

markets We have services. in our expand to all four continue a of that household with two, our great reach opportunity via three, to one,

I a that perspective, through going scale. great the network more to retail my So line where lever it's gather from business to sit, we're

As far on great widen done as the think loan. of gains, our evident a in with Tony organizations Tony to and professionals other that and has I and hedge take each a margin job that's mortgage couple

Anthony Cosentino

business, it that's end the on I think QX the think and really Brian market. we taking really mortgage forward a just look right of I and was I was think anomaly, the in an and some and breather as 'XX Yeah, inventory-driven people

client we strong had extremely that both strong QX, of we've is arena. well be as and as of as the strong in would origination here level portfolio in I be a of seeing sales sit in private today. in we're QX terms result pipeline of that Our type roughly expect clientele We're that that similar level volume. very very getting, product the of

Brian Martin

Tony, it thinking understand that Okay, about level you guess you're to of back -- XX% or at think at so so it? that, you the kind type of a tend how sale quarter you toward gravitate origination lower think it about keep I the talked post range, just historic what this up I you would XX%, least

Anthony Cosentino

we the surprised Yeah, I'm couple of back level the that next pipeline XX% in get in based quarters seeing. the I'd certainly upon be

Mark Klein

short to Well, what of know, other balance yield side the on going the in Tony challenges to all we we the is and the want we you sure that Brian people have and make as get sheet. consciously continue of light end, the but curve the and price we're if driving

Brian Martin

Yeah.

Okay.

good. guess level give like you It's today any it we was Tony, linked realistic, range, going of at Is take least is are pretty -- feel it's No of on that's gain there there. to at a what year I the fluctuation holding in down broad in margin, kind just just hold ago. guess and of So of similar you quarter, It's this just kind this to or it's kind kind more sale little that but… kind decreased. of then

Anthony Cosentino

level. in from to we it of that No have I X.X where a be range mid that change significant would would type are kind not X.XX will say

Brian Martin

in said are I downtick some guys I does we're I any you And any in how just of guess taking guess enough. have market change traditional guarantee just or heard one competition your that the can little other and Fair quarter, opposed Are standpoint just market how you look that bit seeing seeing SBA on more to Okay. offer a an or this customers how look in from you a the that. on guess does commentary do and like least I that thinking, at pipeline you pipeline that -- bank as this.

Jon Gathman

pipeline our Jon. strong. No, very, this very is remains No

quarter a outstanding of we think second more first had. function the I to comparison quarter first is quarter the

quarter second but very bit, a there very, was was down pipeline The the strong.

large We SBA. a couple have of

category. We that that USDA there one in have into falls loan same

quarter about optimistic moving I'm So, and forward. the pipeline third the

We have not changed our strategy.

targeted see those your pressure answer We've don't We targeted market and be -- development, professional it to to continue, was. that tends in question, the business doctors, we've it that any remains loans as to change we specific and necessarily acquisition, SBA market portfolio. to

business key officers. have development We

in we in soon XXXX to new higher to remainder earlier, Fort said fact, Mark of continue and and level towards Toledo that in Wayne In here will think we as XXXX be really that drive deploy

Mark Klein

such our where not probably but guarantee. SBA given Brian, certainly are walked calls that needed some just an XXX XX-plus we would've from making one individuals we have again, comment. month, might make help, being all calls new credit a we that all a things where a the with approach, constant, away

opportunity we've that great us, supplement client marginally. business make as line that to increase have that rates income is some always with that expand said keep relationship the as we fee-based going to Now mortgage and

SBA both think ends SBA that We model of is particularly our markets expanding GDP think a got and got our we've do We we've our space, three-plus who the feel right? the we we in So, have really BDO's deployed with supportive like lending. of covered nothing, curve the prospects opportunities. we but and that we certainly are

Brian Martin

-- did miss that? you looking someone did you and did also miss that I you you're Right or someone -- it at I I guys this quarter. or say added did guess guys

Mark Klein

yet somebody added in Toledo quarter in in the joined the we're somebody Fort adding second tentatively accepted, us We Wayne. and quarter third but here hasn't in that's

Brian Martin

That's of the rate is Wayne, today book margin. good. is component Fort with All right amount okay. increases. All loan and right. back This the variable of to portfolio a what re-pricing and then loan just the what, one question rate

the with increases. close pretty thereafter are You to rate

Anthony Cosentino

say I'd of XX/XX things yeah the about there. of in a entire fix Well, We're couple variable to terms portfolio.

on Now as That necessarily million re-price people of wider a a points mean roughly now. rise again every XX that basis rate on about get because floors to that's to doesn't we that further away that every certainly quarter gets going Fed XXX,XXX time. away We're you get from. do right have

we're would any an probably I kind whether portfolio rise, LIBOR immediate to reaction is So, of say our be prime probably or rate based. of XX% that based

Brian Martin

Yeah.

clean this me that clean Okay. looked last away, thought okay. keep pretty a right so how making guys that Anything all unusual was, like a characterize pretty outside franchise that Are two outlook Would rate that on expense the in just one that of quarter. bit. moves investments the of quarter I just and with trickle mortgage to were in the to expenses, XX%, up expense the but thinking just kind kind things volatility unit, there. line, run said on I heard. the you goes you That's it Maybe about not what know the tending I of the you're or for expense -- still rate side. you

Anthony Cosentino

increases incentives, room additional some may, we to this we our but would that additional we've a some expenses new of certainly from it initiatives our clearly staff continued Be as run. last our market. That everyone The contain from of quarter the on quarter tax the employment realize. our with some of -- we begged reported operating has has positive that some expenses to was we again a incentive components and to eye first up, Well, newfound keep still keen lot continued tighten. and the found as year leverage market have as are that that have clearly borne

income. you As for in I XX mentioned Brain, continued our number people quarter look clearly we staff, real certainly more lot a would again million of net a And in poised commercial expand. the we to to sell XX but portfolios those those portfolio at like we're our rise person and have we our with we average as our those when off got of when on million We've efficiency last on improvement SBA, balance are run gains build that time interest room that sheet.

they're those to initial but contend trades to made provide So five-plus last higher all in that good take have we continuing that level. they're years up, us business us and through been a have trades going those and we the fee-based inertia initial that's lines, profitability to

Brian Martin

Yeah.

thinking you seems it now, color any about on just just helpful about how they've, And in the I discussions there the like just and how there trending other as guess and That's of talked opportunities market, like that as capital kind update guess guess just far any go currency. benefit if maybe you're goes M&A is I on better some it there? is Okay. forward, wondering or as and seems got the are just I things capital your there you you just that. Are

Mark Klein

as our need certainly said, Well opportunities certainly -- those examination. in strengthening seen currency, our us is That to have XXXX close we've compliance giving discussions. which to we

have not but only that to sheet continue would perspective opportunities those that expect platter eminent, We the anything rank had said, our resolution fit we would on certainly fit have balance geographically loan us, help but to. is conversations we with issues that we're a certainly we we discussing deposit. our some nicely from a don't that currently timely have for and But to that that regulators XXX%

entities deposit-rich company. they're challenges, own other nicely side grown the balance with they the because sheet, deposit their So haven't our that obviously those have would because of fit rich

out our there certainly conversations are those to on eye M&A Organic So, we continue wise growth the our on -- keen for have side. continue that we the but opportunities think very we to stakeholders, we a capital keep all judiciously. is use of

Brian Martin

Yeah.

tax sustainable. was I Okay. think about higher of kind XX.X%, the least trend that as rate let's it that trend I a kind you no forward, call of year than you quarter, looks it levels was change it at I the level of kind thinking, around to been rate of for does is just or higher is expect from pretty going it XX% bit current current this kind this a from And guess it's the level, lower bit to of blended that think a kind

Anthony Cosentino

Brian. some be that hi the compensation higher tax were rate bit some high a a to comfortable of the had investments This items couple Yeah, Yeah, quarter. more I as tend would this as we tax-free stock with well is type again. Tony forward XXs level. going

Brian Martin

it. you High XXs, if think appreciate back and who I I'll has else okay. right one. All there's all questions taking that's step I and someone the

Mark Klein

Brian. Thanks to Nice chat with you.

Anthony Cosentino

you, See Brian.

Operator

Please to over [Operator Klein Instructions] go closing would like for I the to session. This Mr. question-and-answer conference back remarks. concludes our turn ahead. any

Mark Klein

we for you quarter certainly to to with proud thank of Financial SB have you look joining. at for great We third here Thanks chatting of what attempting and We're we're your in October again, all for the XXXX. result for joining results forward the Once we accomplish thank again you in confidence a delivered. and day.

Anthony Cosentino

you. Thank

Operator

for attending today's you now Thank The conference concluded. presentation. has

You may now disconnect.

SB Financial (SBFG) 20 Jul 182018 Q2 Earnings call transcript