SBFG - Earnings call transcript Q3 2018 | SB Financial Group, Inc.

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Operator

Good morning everyone and welcome to the SB Financial Groups Third Quarter 2018 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please also note today's event is being recorded. At this time, I would like to turn the conference call over to Ms. Relations. Investor Martin, Melissa ahead. go please Ma'am,

Melissa Martin

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

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

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

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

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

Mark Klein

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

quarter the raise or quarter prior are additional basis Trailing $X.X implications EPS Loan balances prior or of over or from stand X.XX% were Expenses year XX% year from decrease staffing primarily quarter. and the quarter were Highlights the a filed compliance expanded X.X% at million by or certainly or million XX% the from a months briefly up June XX.X% down million $X.XX. $X.XX the representing X the and diluted or year today a from expanded capital decrease share income quarter over the or quarter from quarter year over $X.XX Mortgage X.XX% quarter linked for million, nearly year over the was X.X% $X.X linked $X.XX or as year per linked quarter. over prior assets and XX% from on net from and XX quarter common our of earnings we and million XX.X%. X.X% the and prior XQ ago improvement up now needs of or year-to-date X.X% $XX million for point slightly X.X% a average due $XX the X.X% of release Deposits per reflecting comments $X $XX $X.XX, Our XX.X% now million and supplemented ago or improvement the areas. $XX shares. to X.X origination $XX representing volume share quarter. the year include revenue Operating and up of yesterday. over million million on nearly ago from the regulatory EPS million $XX return and increase,

Asset quality ours. the or strength slowed a to constraints volume and timing down $XXX,XXX metrics as with a year of be XX% due quarter. SBA prior some bit quarters to ago from was to significantly continue loan

prior year the $XX.X the For of from million down or $XX.X originations million totaled $XXX,XXX year, X%.

excellence customized our balance, for continued performance and we that scale broader to organic of prior asset that growth household, with revenue speak more that level course levels to quality improve quarters set service our initiatives for through diversity of reflect product frequently. results strategic we key seek each commitment in As for five of of operational

First, revenue diversity.

gains. in quarter SBA slightly sales from delivered to fee sale our and bit loan XX% we the lower lines from ago year of XX% lower business mortgage a lower June quarter and from quarter based of over due This the revenue down volume

balance sheet down variable quarter flowed sale This gain. rate products that including to constrained mortgage was as million $X in slightly residential our volume loan mentioned I and

million volume $XXX this now strong our originated SBA year-to-date have for we as but with bit lending quarter a $XXX compared slower mentioned, prior year, million remains originations. was I to the year. $XX.X also the For in million

intend products. We Development variable the We XX% quarters our Westlake, pursue over and in originating are to Toledo. Fort client sales Finley in production products year-to-date Columbus than and consistent increases our Historically, that and total in competitive originations, mortgage to year we million Wayne originations. the of increased to mortgage sold rates, approximately with or lending have this been rate now we've loan continue our Officers million Slight ever include $XX Columbus, BDOS, part volume million. positioned X% due had some goal additional Business we professionals. market our that for with has better has and with in as million XX% year declined $XX.X but $XX offer construction $XXX Mortgage of $XXX prior to private production Defiance purchase million, levels approximately

a In regional fourth September, fact, team. production to hired pleased announce a in we mortgage organized executive seasoned Indianapolis, in

year producers Ohio, million of producers from expansion. We projected in another this certainly is Michigan, X Indiana near our across and our X loan XXXX expect mortgage and the producing annually sights. Central XX within to producers this $XXX of But Indiana total add goal term

this the business production nature that SBA Our to of continues loan line. sale reflect lumpy gains accompany

loan we $XXX,XXX quarter sold only This sale $XXX,XXX gains. with

diversity to $XX available $X.X very on at committed process In close status a back each XXXX, and quarter. in are top achieving markets by to and fourth the success $XX more They U.S. strong line, XXXX. leadership is that top in Reorganized million a well conscious for improves million year XXX and capital sales growing. and total as sales, in nearly approach stability to improve this in market. pipeline our bottom-line $XX clearly with with business in we gains. to our the originations This the as over producer another the growing, million as to volume $X.X sale and deliveries we this are as line that and business in million our workflow our However, doubled expect loan are competitiveness growing process effective approximately in million businesses nearly and and to room cost

performance. meaningful make to to continues our overall line business contributions management wealth Our

quarter revenue just our stands seasoned Westlake. line challenging over quarter This year-to-date Wayne, markets at been us, in growth year-to-date $XXX,XXX Finely our $XXX,XXX this prospects talent over in has $X.X line certainly now but number. and strong business our additional for with prior million Growing higher of Fort linked newer or with and remain was

under will give we management us enter increase a we in in fact, the momentum that great In fourth from XXXX. will announcing quarter as assets the market Cleveland be large a

growth initiative key strong. and scale remains improve balance second add to Our sheet efficiency, organic remained

by $XX XX.X% representing our year-over-year improved million total expansion. $X from to Toledo $XXX million, Lima Loan Columbus million $XX our the came growth expand we of X.X% $XX quarter and assets Finley $X Defiance million, each and million, markets, a This growth million.

working it quarter duration by demand, our enterprise nearly the decentralized launched proper levels. markets from small lenders this Not four of funding, our $XX.X Our we in up and businesses To million have commercial gathering strategy. year on linked job for an are for done to the to quarter expanded unique deposit deliver fund managers when model prior commercial with with our But wide the cost have generate continue dedicated liquidity by only as from well required liquidity and rich combing lenders, each staff or deposit street as levels well to loan the also includes identifying million eight business seasoned $XX.X target appropriate to be our operations markets. executive operation the the comes X% as. XX%. higher they is on ensure as again calling hitting we or treasury driven where clients also Audits

Third is develop to our deeper strategy relationships.

existing goal client the is the channel communicate here staff process onboarding the The with at new Our to efforts most clients. clients time retail most using desired owns the the and by appropriate to the to client. reboarding

results. delivering are efforts Our

an XXX the year households end and increased number relationships deepening over total an to year us increase increase for XX,XXX both expand Expanding households products of over enable by in and to over a of of to to existing new or X.X%. our this the clients our quarter this XXXX households number X.XX%. of XX,XXX or Our

over services XXXXX clients growth probability of expanding products the over expanded of drive the our expansion. addition, expanding By We to the the number to balance life. by servicing in year this households, of and number sheet X.XX% number of we services a In our sticky excellence XXXX them or improved also products. organic remains for Operational theme. to households those fourth has our

household, new of quarters, of continue State total not production we from trend portfolio growth servicing those a I business, our also million loans but Even only Over for reflect in over as the solid new XXXX Bank. building mentioned year. representing $XXX mortgage mortgage recent a production has XX% loans mortgage slowed The

the nearly year result, of a mortgages X.X%. an service increase over ago As or quarter X,XXX we now XXX

in larger Officer as a nearly I sheet our initiative the annual Ernesto a allow stands $XXX our continued processes operational build the and of quarter. Department. growth and mark. entire worthy IT now Our Innovation a nearly to team servicing new of coupon larger $X stands staff million deeper M&A risen of drive members month, our that revenue. opportunities. our billion The modestly align will X.XX% the our residential some pursuing Under and from balance billion clients servicing and portfolio mark million Gaytan, both that Gaytan across Technology restructuring billion year journey enterprise at better continue ago and Last the well Rates trust in servicing to average our portfolio with to announced on new sheet ensures organic $X.XX Chief intend year, bench confidence. and we of to resources of deliver Operations portfolio our direction leadership weighted here today the as $X Mr. $X to but this stability have up the to balance priorities excellence was to A

This products for the We services exceed work a and quarters. number only as the XXX by every consulting requires right best right one continue centered of of discussed do have our and needs. the offering meet staff for that we the clients' client things interdependently to client members to

diligently XXX% and the As judiciously. we $XX a and to do To The client say representing solutions provide nothing million result, client differently, needs needs products. household they XXX what this client client have recommend not. to and solutions over everything prospect of of want additional led in needs

asset that Our consistent stand our X.XX% the and X.XX% non-performing reserve loans fifth and initiative to and testing for credits past continued our XXXX stress for We're on as loans now applies just metrics loan and to accommodative of an the to of charge-offs increased our focused and year, slightly XXX,XXX. our assets Overall, $XX,XXX environment. is in to net scope approval credit as favorable loan peer company. to of robust stable excess any the strength XXX%. portfolio at standards be and quality, well due review final continue Non-performing quarter operating maintaining

implementation a on for the credit will put our Finally, to a now two we look we corner that a now. to detection better little years system quarterly to us that data prepare the driven ask little early anticipate and give us ago the in over I'd Tony around more like Tony of place next performance. cycle enable Cosentino detail

Tony Cosentino

year, federal Good down in raise Thanks first the the million impact the EPS up XXXX XXXX as XX.X% the Recapping million in rate to currently. was Also highlighted. $X.X shares. prior Net reduction our earnings capital tax to $X.X morning which XX.X% due reflected our per income cuts but share. Mark. new tax added $X.XX of Net and in everyone. Mark common income of our from are quarter our from

from XX was X.X% the small agriculture. we third And revenue prior quarter. sales from the Loan of basis $X.X of XXXX. NPA the was lastly, gains quarter for $XX.X ratio mortgage, X% the volume September non-performing operating steady up up continue quarter to business year linked year assets flat end points. highlights million million Mortgage a of and XX.X%. Loan of our higher Some last of $XX.X from from million growth or with from delivered quarter, hold at by

basis X.XX% the of period income break up the was our from income up margin. for XX we million loan up the asset our statement, to balances interest third earning points was will linked from and of average quarter. yield we Net yield our further Overall, the X.X% points by down year by our begin As of quarter $XX.X quarter with End XX% prior prior prior the XX year. loan to prior basis year. the increased year from

of and increasing balance have In higher had variable our addition interest we pace four on at the With loans increases nature same loan have impact, but to this average, the will funding driven year yields higher. sheet not affected costs seeing of income necessarily that we XX% to yields our rise. that rate we've are see continue a

cost income side, to up XX% year, quarter. volume private $XX basis by margin risen basis XX a product $X.X XX key $XX funding up income by clearly and costs, for our points were interest linked we the influenced the quarter at to from origination. the variances million softer XX XX% prior from million year from from which from increase banking loan experience the the an has the Net activity with a by basis but the balance year linked interest June fees this quarter new and continue increased clients. margin loan and prior total a $XX in of in liabilities, On at prior variance with X.XX% growth loan million with reduced the quarter basis course of was points. mortgage loan the quarter. driven up driver higher interest the and came which combination prior of points of costs in deposit down our of bearing Loan strategy all expense X% due from interest Total the is from points XX year booting have million These

lower DCM million SBA credits level We were documentation quarter SBA was predicted. income to not gains with prior expect of of a We rate last the And to fourth But to revenue the up be Because and quarters. strong of SBA line down production on 'XX the have loan in QX was business. reporting and third the expect year continued the of the percentage down QX Total we reflecting of our as due Technology and a in SBA sale XX%. non-interest two and this from had was pipeline income mortgage a number of from production growth $X.X significantly lower that production. quarter of as delayed a our in fee total pressure quarter our origination issues.

mortgage by the new the X.X% months, For for up year were X.X%. originations million of the originated from million XX originations. in prior or we $XX.X last $XXX quarter, have And

quarter historical of sheet chosen to averages. This activity we quarter's new more purchase on Again our clients balance than volume as had XX%. remained product our high this arm have residential more our at do

of ease We Total the books million. million, at volume $X.X on $XX which to in from are and was move looking came to at some product sale portfolio our gains alternatives of off our in product levels. fourth our percentage liquidity X.X% sold on quarter increase sold mortgage to

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

basis were up up for but our points the XX, year, fair impairment. and of calculated up from XX% was third XXXX, million 'XX basis Our quarter September points $XX,XXX $XX.X in X% of X did XXX quarter. prior the result 'XX from June servicing mortgage At rights the value

expense quarter million prior just expenses Our $XXX,XXX. linked is expense. quarter, to or impairment and X.X% benefit temporary were from operating year compensation from The In is expenses $X.X and compared growth million. remaining million slightly $X.X employee all of were the increased $X.X total the up

reflecting SBA company have and and added our -- have grown, to has risk we mortgage as management. And resources also to supplement efforts. added our and added We operations necessary professionals sales our company XX QX up well our were business as sale the of XX.X% expenses that activity operating the operating basis, in first tax year-to-date initiatives the quarter. and in as a we've DCM also On distributed

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

added we and the interest aggressively side, is million million a an up our effort money private quarter XX.X% which services prior by growth XX.X We that embarked base. deposit market client was deposits percent and to by were product from the $XX.X our customer the in linked growth during rate on On expense expand with in up our $XX priced quarter. the Included X.X%. year from deposit or our

for their level at expect the going level growth and expense forward. product stabilize that We to current

last sheet loan mid teens have been discussed to we percentage fund growth. balance we quarter, our fully As utilizing our

our high from last to XX% deposit is While loan quarter. to a for pulled back this historically. quarter the bit XXX% is It level ratio very still us

pricing competition continue third with deposit slower of at in a our addition, that will rate to In but costs quarter has We than elevated. rise deposit and forecast our certainly rising XXXX. markets all of experienced

capital Looking million million $XXX at We up at position. or $XX finished from the XX.X% prior quarter the our year.

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

was maturity all prior X.X assets our million assets. non-performing The we As quarter. accruing now of absent non-performing points. XXXX. non-performing the look to from which losses ratio have third year XXX,XXX million expense quarter elevate compared asset XX credit. our restructured Provision total restructured up linked quarter but the level X.X asset non-performing X.X had loan X.XX% set at our be of total in would XXXX. equal is These was down just to stand the Year-to-date, in we in million of quarter in at are non-performing points basis asset level total million the level or year-to-date in assets just quality, to basis total the the X.X total extensions just XXXX. XXX,XXX provision nearly aside zero by from and We these Included of loans XX

at call we due growth million million stands it X.X%. loans loan to total absolute coverage loan compared with prior quarter our XXX% at income the $X.X look still pretax When from we been up prior of allowance and of our by strong landing to places up year allowance, million the still allowance all up turn level will As at We I or has declined number our X.X% from our is Primarily XXX% of to the from with of $X.X over In prevision at care to loss percentage prior allowance has NPL forward. where September move we billion. assets year-to-date summary, as a currently. X% to at anticipate which performance the now median income have of year now we our X.X% prior with peer net look year-to-date level the at group year. This our our to XX%. and back under we X.X $X.X Mark. increasing the good are

Mark Klein

you, Thank Tony.

continued X.X% in growth we $XX residential quarter of as net driven expansion Tony and level million reflecting million and our in loan This were year-over-year ROA production. high quarter proud $XX revealed. mentioned the $XX deposit our performance, again, that a Highlighting of income was we've perform growth by at loan million to of double-digit

well strong a us Our finish the year. quite the quarter to has positioned third for through performance

Our $XX over million. commercial pipeline stands at

market the great the transitioned reveals with Our final lending estate real SBA strength and quarter residential momentum. purchase clearly has to for pipeline

given Our the side drive loan the to mentioned. our growth Tony our the expansion deposit sheet be as to fund at ratio of XX% will loan to liability of margin challenges balance

for remain and And performance. with turn intent to clearly local strong efficiency answers. and the to and improved our drive regional and Melissa call in leading to Our economies greater scale concert high I'll back questions

Melissa Martin

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

Operator

from comes Please go Partners. first Our Sean today question from ahead your FIG [Operator with Tobin Instructions] question.

Sean Tobin

morning. Good you. Thank

Mark Klein

you to Nice with have Good us. morning, Sean.

Sean Tobin

with Starting loan growth.

little down quarter more you at there forward? any from double-digit Can your was is last talk quarter? a the going it for growth is low about very like the pipeline, to up And change or loan loan healthy outlook Third XX% growth annualized.

Mark Klein

Jon?

Jon Gathman

it's pipeline our for No, would Sean. I from fourth -- is last the level pretty quarter. say quarter

at here approved some have We see that have draw of number next a quarter we'll the through fourth we'll number the of forward large to and good. selling into commercial a of market we well. that first fourth for because the will notes only turnover But so presumably stable quarter as relatively the draw the good real properties from The we've here so our continue investors on is pipeline because market we number have gains year is they'll real and I a I quarter. do third facilities beginning some estate the and of and new done. we're of estate estate next real construction see loan fully quarter redeploy anticipate them be again to going the into projects challenge commercial out

Mark Klein

follow-up comment, low for lenders 'XX high the a just with Sean, growth 'XX, we a to our our for clearly built just continue expansion number we're SBA expect double-digit a quarters ascent definitely of including lenders, levels. as single-digit, we've that commercial in and And not claimed

Sean Tobin

you a growth. I the case? loan of Is more touched do segments know you Thank portfolio. what awesome. diversifying loan the know I portfolio of you segment you. to still on C&I CRE little to And the specifically drive spoke Awesome, expect that

Jon Gathman

Jon. Sean, no is absolutely. This

that be we've new side deals that we're about all and quarters. things talked particular eight in labor well. initiatives small particularly C&I manufacturing and a efforts, again include loans like business of restructured amplify incentive changes small our number we that where bankers We've in finding in to in previous here in to put segment And calling business here as they're some begun In targeted. focused going we businesses plan, XXXX. to in to are obviously retail 'XX as tend fruits also on of changes personnel changes were see fact, C&I in that We've which in

be our 'XX to for of continues focus XXXX. here the that and remainder So

Sean Tobin

right. All

Okay.

some last quarter? mentioned is quarter? You quarter Did And in fourth you there this occur expected fund that still that expected projects the to up. more

Jon Gathman

delayed Yes. earlier is Sean C&I doing matter They was well. I utilized we a $XX own I delayed start ideal anticipate probably when three little three yes, their particular. bit between because in of very projects first X speak they'll those as was fact we which somewhere totaled quarter mentioned delayed that so $XX projects X cash to quarter large and are so to XXXX. large growing. around million as have growing -- million customer that But the a that, now One for nice fourth of the of

Sean Tobin

are Okay, Can Sorry, it which as geography? Defiance, Toledo? Columbus and today about weaker great. your weaker and operating you defines today? ones and stronger Which stronger talk markets specifically are more ones

Jon Gathman

loan terms of In Sean? growth

Sean Tobin

sorry. Yes,

Jon Gathman

interestingly we've has had in in nice so a our historically In fair pipeline from or Columbus loan growth Columbus looking the four here growth are from is think three, the the as quarter Defiance. Finley, years seen will of I strongest markets last been two year our growth Certainly, far fourth at -- growth amount different some this loan be the well. two we've and category mean that markets. region. leading I Toledo

the of will a about drawn growth, talked some think and outs in I Lima be markets. we'll see lot Wayne earlier those we Fort of

a diversity from terms in growth where of So amount XXXX. here fair coming into

Sean Tobin

talk know that strength? beginning mentioned what's deposit about you of in the that quarter linked deposits the to gaining the Is increased touched you you quarter Last traction? side, driving Okay. Can implementing XX% switch new then, about call. fronts strategies, annualized. I And

Mark Klein

the lost deposit private portfolio up needed knew C&I make to by group the Well, portfolio. can that we've period for have percentile the private known to to need increased as loan Sean, We've time we mentioned portfolio we we increase plus increasing we that a drive for we of we but with scale and account, rates, And transactional those that before deposit. getting client a certainly if determined to XX rates obviously, that and grow of the and to up our margin. client deposit also

conscious moved So including But really eight and well focused them literally removed arena approach we've liquidity high find had on from businesses propensity more I and treasury the from the the four the with C&I. operating the to all street street. as mentioned individuals as on seeking deposits commercial our individuals with as time the on management that a we retail office

certainly loan expect to growth drive approved in existing pipeline Jon the notes draw yet. has imminent to funding continue our embedded in mentioned well So to we be for that is as what's the our that as

Sean Tobin

All right.

then, type the of you and terms offering depends on money but of, terms it And Okay. terms retail obviously, of in new in in deposits guys new on any rates funding?

Mark Klein

is well in liquidity But the client on very XXX X% money need rate. mark. at a attention kind -- and Well, to do private launched that we we competitive it but cost market to to to paid margin, we marginal mark certainly in into had to CDs keeping addition account and to XXX% love which find what we was okay. the We've do our the now recent again of are giving fact the a close we're that

certainly we above our well deposits beta the the continue to mark demand we much for one that the our on cost not seen. just So look competition. to room grow deposits to we've given Certainly don't because loan relative again have

can find exiting of that deposits markets. we some recent we large are that would regional our of were some those banks be optimistic and So note

growth way gain continue because in have and of lower they're albeit had traction markets primarily number that of we opportunities launched some we've have we deposits the because markets lending share [indiscernible] of a of several a on years. to comprised can much higher in think that's what So some those that couple for we they don't

Sean Tobin

growth? Definitely. outlook of little more for give on And in forward? you then, a Can your color terms going XXXX that deposit

Mark Klein

Yes.

greater expanding with doing high certainly good the Just a being commercial rates we beta again economy think a yield as will nicely by mix if said that level our that real poised and bit and than we're market. steepens have competition. as driven a We've unfortunately economy softening always at a will is a -- curve we with for rising met be estate and well rise we've seen, little be rate

to be that there cost. looking we are we can loans. people that now we 'XX in the great we our street find out for a think some some on We've got lenders find looking optimistic albeit continue But can out think deposits and we we excess it not marginal So that's strategies and have of it's there number great and for the loans. the well specifically

the the gearing for of liability balance matter growth side sheet. up the staff a it's Now of

Sean Tobin

That's quarter. guess were fees? helpful. margin, or very yields related Was Awesome. mortgage to flat slightly gears, linked I this down Switching to loan the

Jon Gathman

It has was impact loan on fee level our on fees. yields. mortgage I'm an loan obviously sorry a our

we've in the we'll to really slight but the is really see continue on side, a increases side. loan stabilized on little pricing some our think stickier loan yield I of markets

this So to range to try I relative that. we're drive they'll for continuing on think stay But sometime.

Sean Tobin

has my Okay. topic it versus new looks of And seeing existing And that are is today on then type yields? pricing intensified. on like guess you of rates it loan production what

Mark Klein

markets non -- a don't enough think is particularly in -- know generally competition been, that banks banks, been this I certainly the has regional various loan strong the issue, yes. but that -- community there our significant are I pricing growth have

Sean Tobin

strong of the quarters continued last several Okay. think the lot over for about and And few margin volatility over outlook the funding pressure? should we margin your quarters. then given cost loan How there's a growth next been in

Jon Gathman

would we're this costs to are rise going think rise will basis. I XXs, I the the to deposit percentage term. impact they've they're our for loans I absolutely raise but range continue as ratio near going call, stay expect deposit. risen same to a to think the XXX% capital in case. quarter in over above loan of to last said given in I loan deposit think I going I mean for not as to the a sized that's on And I the was X.XX margin to XXX to for suspect stay the range getting sticky would level X.XX I in the be two the in quarter quarters same on high to said, last the

Mark Klein

we verbal and how this, Sean we appreciate allude that Now notional certainly steepening Jon rates benefits additional that is just a raising that taking a realize spirit on have and on make writing of we've and kept it swap basis on points and of to risk. products also make didn't but to sure more yield spirit the take margin some of our a curve, duration several basis and ago a we the that yield offering put to fixed those we yield one because risk books much had actually curve the Jon the and but comment on began on table leaving continue years can a wider the

Jon Gathman

customers environment and as is Mark, upside in yield mean now right because in benefits pointed we five go it's cost XX approximately versus get if hardware out different I even and flat the is he rate so curve $XX think that years the minimal raising versus situation. I million just that the to the there, two or out XX of XX

So continue increases yes, seen increases up. to LIBOR very we've some prime as recently we those have rate here nice move and with

Mark Klein

and happy with mentioned have curve verbal products positioning and us increasing as we've for client. as I increases there and So our been yield those our good one we're the clients the again are got

Sean Tobin

LIBOR? Okay. variable your How prime much it is to is or of rate, portfolio tied

Tony Cosentino

It's high variable. about is mid in XX% XXs to the

Mark Klein

portfolio. current our That's

of We loans undrawn million] that are have primarily another CNI -- lines equity credit. in combining that and [$XX same [ph] and home of again lines that's

Sean Tobin

given an you mortgage provide update rate current on environment? outlook the Can Okay, good. raising

Mark Klein

has variable all definitely new the what do obviously be number, and that that going variable been which in, we of we the is four which markets. away there, not market team refinancing and some regional been Well, our But to our why every XX% the we're would us, have knowingly purchase in X% about all clearly, make Indianapolis with refinancings now will going producers pretty again, market into teams robust internally number is that of our has -- have. down

that to the volume as year. but and but to only clearly remain that thought because to per try Our X in to that and still not expectations XXX back only us be and XXX forward. sale on retail we to million quite into billion in our were is 'XX softened to we obviously number one $XXX as up the get XX of certainly a of because with $X Again have But we it's a no service for to on mentioned inventory. our million on. delivering going do XX% that we I not think states to 'XX to things to household XX we is bullish but get going like on that work the a do mark. gains, staff And with remain have in markets billion XXX But the more in in hard currently the to million in of steadfast there and long we're number get to total getting certainly years bit the have taking going are individuals I love the it's work X.X and don't more currently not in going portfolio loan we growing producers. more take our going the And to three XX% X.X fairly volume, job And excess get to we X done, we household. servicing the

Sean Tobin

mortgage of Okay. origination, And that about [indiscernible]? should or the in we then XXXX rest specifically of quarter then, in and how think fourth for the terms

Tony Cosentino

Yes. Sure, Sean. Tony. This is

level with of type market to X% call were where QX of on up originators. we QX what of basis origination X% similar the kind put be down other mid teens of which to in we're seeing contrast 'XX. expectation that kind year-over-year it would That going a us for is a initial level it's probably Our to on in

similar that capture we've have market adding the some of We've by fringe market. those been capture think to share to players more able we've I left market more able been seen level today. as digits high double-digit type to on think for the is I single sit we is expectation here street. growth a type that like low 'XX our And people and share

Mark Klein

in, also of a loans loans We've that loans spec ever anymore aware or aggressive Sean What's Mark, the certainly been there are no the kept on of development I'm anymore loan sure and fact -- front heard anymore. and one lot doing and there's one's it. construction development in given you're of us no certainly

on a trying to we those the some market attack found in And take some So construction decided we traction to individually. of opportunities position great all be them there.

probably projects. million we think have or so in I $XX construction

having spec So product or anymore. which development loan we've of mitigated nobody's not the doing kind kind downside of of a

nicely eventually and this whole to the work those find for So those will us way portfolio.

So that and good ago or a we year strategy, two. was launched a about a half

Sean Tobin

quarter. Okay. from And this then, quarter forward? That's very expect moderate going to to helpful. XX% mortgage picked that Do XX% last you up sales

Mark Klein

historically this some XXs been in We year had the from year. been mid We've kind kind this what down of saw range. of improvement a year

of that on I a acknowledge growth has more confident added more been think function. customer sheet to balance taking in landed market, in on balance very to less have arm has the sheet. product bit client a more us the our year we this successful which the private a has bit we've sales become which And

liquidity see pipeline balances potentially us. ongoing balance for sheet some at off continue our will and but we can of that'll those purposes those think I strategy opportunities to monetize some and/or of for be to we an if move look of

Sean Tobin

Right.

from, quarter compliance update us need through you wrapped on Okay. to XXXX get indicated about could so, forward? M&A And the thoughts on up? then, exam, outlook talk provide regarding And going if your outlook your you you that M&A can on an has Last M&A? you your

Mark Klein

they the which September do for Sean didn't really or the the at compliance end admit exam that wrapped to of doesn't Sure. us timeline was be meet the per regulator much commitment they readily up hurdle.

to up here in And this October. finish so now they've recommitted

be the it side they that continue done on We have self consumer in have we thoroughly. we fact, it any that. and reporting resolution that all timely; and is complied. worthy about they've issues We've And we've compliance acknowledged notate of certainly the XXX% optimistic done to that

in in to that to us identified be month expanding would expecting footprint banks this here up So the that we're and of be and that are interest with area to the have in continuing impetus both we've markets. conversations would adjacent strategically that marketing our that high certainly wrapped pending

grown nicely prudent which last time as work get on bit it's at guess of company long-term conversations clearly we've five mark with million, certainly to albeit on the going take and M&A. two our expect we to the opportunities So is organically doesn't not years think But to a here. that. that to do acquisitions way grow to three soon, any Again or eliminate play those we speak. those And to the XXX most billion while continue we constrained the regulatory $X we

Sean Tobin

outlook then, I And forward quarter. on this lastly that? us the guess Can provision, on you. was you Thank zero just provision any give going

Tony Cosentino

Absolutely.

somewhere with level. I level, loan felt be would I forward up And our of look a it basis. close the that was finish in as XX% to think think we a I something that the that range looked XX% relative of we've in try in the think to loan year our I total around to not on charge absolute keep level offs, the full growth $X going of we're somewhere into at that the of somewhere improvement range million. prudent like allowances XX% going XX% the million range, growth probably to call guess $XXX,XXX year-over-year we level but And of to the to like our loan to level close $X provision, expense portfolio, when to felt grow as in pace we provision growth, we we're still levels. 'XX,

Sean Tobin

all for questions. Thanks my quarter Great right. taking guys. All Awesome. Okay.

Mark Klein

it. us Thanks Appreciate for joining on Sean.

Operator

ahead from with next [indiscernible]. go Our comes Instructions] question your Please [Operator question.

Unidentified Analyst

Actually Tony. the system mentioned driven I of loan a early data question Mark. detection Hi, regarding have performance. you Hi,

Mark Klein

gather I'm well. question sorry. your Can you seem sorry to we speak little? can't up I'm

Unidentified Analyst

Hi.

Sorry.

speak detection little on more early driven data Could a mentioned a you You for loan bit system that? performance.

Tony Cosentino

Jon?

Jon Gathman

Baker Sure, have is they our a a ago portfolio years This module Tony. Hill Jon. of through that quarterly that number We on rescores basis. a purchased

align changes checking really from does that. it's you with of of the for credit looking -- other to every same overdraft fact forewarn that the that like We're line you base and/or quarter is, loans. for data they But changed that larger baseline the our the in the a indication give business credit. same could it it's those And small we've an accounts, well overdrafts look also review then and core you in loan as into our it system to it things use potentially of idea and analyzes is that has what is, process. changes So develops instance at it business loans. said data applies line usage, something for things And their early integrated

those intend divulges officer track trend further to -- over focus also perhaps process we is that and keeping score that weaknesses. of our loan on that focus system a review Our credits use that review to time loan potential

Unidentified Analyst

How Okay. has yet? the all provision provision influenced That's at great. that the has influenced or it

Jon Gathman

this detected Well, say I really anything because significant. at point only hasn't it would hasn't it

with that looking data terms Our is perhaps cycle some good. [Cecil] anticipate, asset provision perhaps they we levels. very, very going our so different to I some economic would little use would corner around particular of the quality to [ph] in forward a that in speak drive

Unidentified Analyst

side. then, deposit Okay, to changing the great. And

talk that bit you're the indicators deposit costs stabilize? will little a about mentioned seeing You will costs you stabilize. deposit that that Can

Tony Cosentino

the What in referencing rate expect quarter. to added in call increase in type that or that that is balances we a a product. XX wouldn't XX million obviously level at to in I of rates dramatically our it high million private was product the client product I fairly

it's of perspective that -- costs expense a more a in impact kind I on quarter. I that than of step is seen but outside from stair been increase. kind So deposit stabilization. we've the step the think had some specifically mean an bit a gradual our Clearly, moving interest market

prior stable still the I think in certainly two. been more has quarter, than be fourth it'll So it

Mark Klein

to us gathering certainly And have a will have little do publicly And and position to fourth that that quarter Tony to comment. in strategies of competitive that think. of the in and do more our but out a markets. arenas deposit the here I yet, be want some extra just strategies an put in we going some we're innovative we more some We all rolling don't be about speak

Unidentified Analyst

Okay. all That's much. to That's I hear. have. very Thank great you

Mark Klein

you. Thank

Tony Cosentino

Thank you.

Operator

session. reach back this of to today's end we turn at to And time closing Mark the for Klein question-and-answer I'd any over call conference ladies like remarks. and gentlemen, the

Mark Klein

and a certainly you pleasure was entire will with Again, forward talking us. soon. our for results year for It our result. you in XXXX here third thank to quarter thanks for we with chatting I look joining you talk reporting and us Again January all joining and

Operator

you thank that conclude gentlemen conference attending. Again, does for and Ladies call. today's

You may now disconnect your lines.

SB Financial (SBFG) 19 Oct 182018 Q3 Earnings call transcript