SBFG - Earnings call transcript Q4 2018 | SB Financial Group, Inc.

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Operator

Good morning, and welcome to the SB Financial Group Fourth Quarter and Full-Year 2018 Earnings 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 also note, this event is being recorded. I would now like to turn the conference call over to Melissa Martin. ahead. go Please

Melissa Martin

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

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

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

are identified the by SB call. Financial encouraged forward-looking We number update factors different undertakes statements no a obligation end within forward-looking required earnings at our of as to statement except the date this you to have 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 full you call good webcast. web year morning, quarter and Thank our you, Thank Jon XXXX for joining and and me for and Tony, fourth

liability, and our of a yesterday release one-time fourth In million, on addition for XX% year of for $X XXXX our effects purposes the just for tax the full comparative net excluding well. income improvement. annual comments performance, this reference our Highlights that to please quarterly as only, obviously, filed today quarter earnings we quarter include deferred and quarter

average or a XX over $XX.X XX% $X.X XX%. quarter, X.XX%, points representing up the year net assets year was the income million the or for For improvement. Return on basis prior million

X.XX%, were per quarter. return or year XX year earnings quarter in per For on points assets, share share, $X.XX line the prior the for with basis average XX%. Diluted up

shortly. or X.X%. of were essentially representing Loan revenue full nearly expanded quarter entire $XX fully million up nearly the basis, year. million talk for X.X% and million $XX grew prior year the [ph] $XX.X $X.X year or On year or $XXX,XXX operating that diluted $XX.X million, by were and EPS prior we'll volume an and over the the more million, quarter Operating for the or X.X%. X.X% linked over revenue year. or the over about a over increase increase $XX the linked increased an balances $XXX Mortgage $X.XX to $XX.X or Expenses million, X.X% million million of volume a this $X.XX origination were million XX% X.X% an up X.X%. growth expansion full bit up full Deposits or with and $X.X to For of or year. million, from was million year expansion for X.X% XX% increased over quarter year, at represents expansion $XX up and representing $XXX of flat

volume million in number for $X.X gains reported metrics remained quarters quality asset XX% quite before, we've As to nearly of delivered strong. loan SBA and of a expanded SBFG $XXX,XXX.

million for, mentioned that channels to look the in scope, communication better I five or our of The prior a continues that service Gains year levels the as expansion. set X% broader $XX.X rest line efforts $XXX,XXX were originations diversity over asset revenue for customized to slightly. quarters; focus were discussed strategic as year, year the For in earnings operational that excellence, product organic contracted premiums prior scale, our growth we've many initiatives higher for the sale with performance. briefly representing for ensure quality stability key and for we consistently for finally, and

bit lower from this quarter we slightly the our business prior and total the lines fee-based from or First, XX% from revenue, of a year. down delivered revenue diversity; million September $X.X quarter

mortgage balance several income. growth non-interest year have This of augment the greater diversify in number declined Over To lower our and our acquisition XX% net past this new and sheet to fee-based margin. will business grow because averaged approximately revenue our a announcing and delivered strategy net and management, that larger and existing volume, we we of be quarter. of care commercial-related under wealth years interest non-interest the first the our line assets income,

Our that as to leading of management, deposit SBA services lending, value-added well through to assets private more business continue as managing a deliver number services, pure non-interest goal a lines our key is quarters; client and we in our longer and to mortgage income term related clients. our wealth discussed under clients, care business group,

dedicated Our experienced SBA in all we Wayne, continue four designated to gains in are grow to regional and up lines. To loan In delivering Fort our beginning diversity these intimate sale production and development in SBA markets and XXXX, contribution. over continues Ohio. business $X.X XXXX Toledo, at over million our for corporate key a Westlake $XXX,XXX ensure line to order fee-based business gains old substantially loans professionals. $XXX,XXX greater deliver than for in bottom-line business through Columbus, company, originate now clients to our X-year XXXX provide officers have SBA more we process will this

and in a several credits. of million million weighted among Top X.X%. $XX books banks million focused $XX million average next in yield SBA and of service treasury we volume now on that business our to annual on in remain smaller deposits, Since sight, quarter oversight eight Additionally, $XX reassigned the also in small for lines With over operations on originate business and development have from small our over in United less of $XXX,XXX. have portfolio with XXX bankers XXXX achieving $XX an sold unsold years intimacy. inception services, we street a over XXXX bankers the in management the we third balance business now guaranteed status business generated These SBA credits SBA coming loans, been office have client than and as of for business States of strategy

mortgage $XX.X million. to Our million total approximately of of our continued $X.X deliver to XX% or the business non-interest non-interest or lending income line majority our income

drive As a a in represents contribution our Defiance region $XXX a revenue million and result, annuitizations growth an contribution $XX $XXX in income consistent of represents volatility million is on to nearly expanded in remained term the soon million [ph] $XXX markets solid XX at to of balances, contribution $XX now from Total our our years This points million, second XX this in was market our professionals over $X.X X quarter with This we The client debit prospects Wealth production year our on this vision the remain for production total markets or $XXX,XXX. three bottom-line to to business it assets our but corporation mortgage million to XX for deliver our up business bankers for and now services cards. interchange and of care level. intend ROA in million expansion services or Ohio. $XXX year and year. metrics representing by year. from fees net including million; of Wayne, $XXX Westlake, with lenders deposit dedicated of company. deposit and meaningful, lever each of million, much Columbus, a basis $XX well over a to care by of under basis of produce million, Findlay $X.X Toledo, Columbus at of points. footprint management our $X.X to focus and our XXXX ROA service We assets remain Diversity continues non-interest line ago. positioned our longer and our to and the Fort of million income due prior comes Findlay, higher We under small have accounted million balance constrained revenue

more elevate Our goal I services experience small bank larger these needs platform. fully environment mentioned a client delivering and to by is eight banks the meet and products business their that in community the with and bankers,

Our add improve growth has to balance scale us scale-up. Organic enabled sheet remains second key and initiative efficiency. to

arena well of expanded for and XX.X%. to an balance the improvement came redirected we from $XX strong with the the Loan of $X.X coupled drive organic we're about growth with fueled quarter, are and but business year-end just an SBA majority majority eight mortgages seven efficiency $XX key demand. million; $XX further assets all of collectively our This our year million in Loan growth total loan XX provided deposits balanced $XXX expectations. loans last lending the from maintain million our of year plans improve Commercial the for in leasing was our and nine to announced million XXXX date, sheet growth million commercial rate $XX have lines, of our our variable we emerging With over of program. done million additional Deposit and CNI initiative million $X.X by performance. and the growth bankers, To our lenders prospects from field over capacity One and growth. million and optimistic $XX markets we as for small our XX.X% expansion. those within or

This $XXX strategy the or deposit and XX% over million or year. traction. to quarter, for for The to $XX gain we million we've grew continues last gathering a quarter launched deposit X.XX% quarter the

county XX have including our with and management commercial footprint. loan We business our deposit complemented professionals development and retail small across staff eight those in-office XX our treasury officers lenders

around and our footprint now the growth. deposit Additionally, have this XXX we utilize gathering our of to juncture to enabled capture appetite, and lending our impatient in At that organic patient credit clients cycle, technology are for strategy we have initiatives. with drive clearly but us balance sheet also remote economic

another we're announcing of the to disadvantages. we quarter mitigate in fact, designated will initiative competitive other In deposit excited be new first XXXX about gathering

strategy deeper our Third, to is relationships. develop

means the we're new time in re-boarding be later contact to this a own with to we'll process To existing year. launching their to communicating a and continues the a efforts manner clients. center and ensure staff retail and choice, new Our our of onboarding clients clients

to provide is real-time goal in assistance need. to Our anytime clients

expansion with services new new over expansion or of for our over drive departments X.X% a direction Chief over recently year; levels the service the or announced products of growth Technology the loan and restructuring We've year. today X,XXX to that Officer, under Operations X.X% it entire X,XXX almost brings Innovation deposit household Gaytan. this the and prior expansion Ernesto servicing our us prior Our new enabled XX,XXX to and X.XX% have our growth

goal scarce client to to Our lines business process. intimacy. as between process and excellence in synergies evident resources our drive referral is is The allocate key to dynamic we these priorities our improve operational

with As we bankers new relationships existing both our we that and uncover expanding are ensure client clients. needs

number the of we servicing were $X.X remains nearly new sorts revenue. was fact, in a Clearly, that from annually lending excellence Operational into referrals our [ph], to loan five Our add strong fee an second added Working servicing in our able fourth X,XXX to $X.X generated quite With in years. coming households business income our results level billion in nearly increase our expanding referrals. but volume business over initiative. strategy of our and over as client clients we last line dividends. strength mortgage million amongst reach our XXXX, of $XX of X,XXX is now new from the highest close generates the primary driver loan serviced XX% representing mortgage XXXX of additional were key inter-dependently of our thing. Bank million stands nearly at X,XXX to pays portfolio over State to

$XXX deliver deploy to our and staff years. to annually markets is in million well-trained intent the continue producing Our in to vision coming of existing new

it's in Our residential December is Indiana of newest market produced online first now XXXX. and in Indianapolis, mortgage

Indianapolis us personalized desire Columbus, market and of where service a have for and fifth just Cleveland in Recently, service our residential Ohio confirmed staff lifted our to to communities the of appropriately. Bank mortgage our place formally and to XX replicate recognized Reserve experienced we success goal is market each in volume the of rank of the Our Federal similar needs years. have the seasoned and in capacity the of

organic strength have growth for but and in to merger arenas bench also our prepare our potentially only as we acquisition opportunities. deepen we additional and operations not As compliance begun managerial now such,

and have right the right above people, vision to confident right to model of beyond. term the the we and business $X grow our are longer We products, billion

our X.XX%, fifth pass-through assets more for initiative I quarter and the it the discuss key loans, above Non-performing year. $XXX,XXX loans of charge-offs reflect over non-accrual stress for will final are all shortly. excluding is These quality. a and Tony turn before the credits Our of SBA levels X.X%, net that asset we X.XX% couple to traditional well

cautious Tony insight. as a comments; with on pleased remains metrics to few I Overall, it a us certainly over but we're turn Our our our performance. grow are reserve to sheet. of we coverage Cosentino to little at metrics the non-performing Those our XXX%. now healthy give high-level remain portfolio Tony, balance

Tony Cosentino

morning Recapping net again, the $X.XX Mark good for earnings our per Thanks, everyone. quarter, $X of EPS. and diluted highlighted; as million Mark income

Our comparisons in our liability. to adjustment impacted one-time $X.X million XXXX year the prior due are significantly December by deferred of tax

and quarter, year we operating For X.X% down full contrasted impacted be by results sales small the fourth adjusted course, agriculture, delivering million or and XX% the $X.XX measure, in the from our X% capital net of volume this and by X.X% flat of mortgage a million as million up GAAP quarter for raise the year, And was income million $XX.X gains per share. year the $X.X the higher business would Loan $X.XX for of EPS the quarter. from count of mortgage, results $X.X $XX linked completed million. X% higher from is Diluted quarter by XXXX. in the first is up million of associated or prior the positive revenue XXXX. change $XX.X of from of the share of of with $X.X Highlight

with we with of year basis the prior further to for up for yield our loan Average statement full income XX.X% the the begin for XX points quarter by prior the prior XX we'd points at basis the XX.X%. yield and up asset by year. Net increased earning the was look income from interest As by X.XX% quarter, year from overall year margin.

deposit have In addition higher. increases and sheet the that impact four income balances, rating the interest balance higher loan this year of our rate driven to affected yields have

up point XX quarter. $X expense we increase and interest of to an $X.X coming prior have year, XX% side, $X.X points funding million of cost up continue experienced million Total the by the from risen interest our or linked of year, in year the basis or quarter from the prior the total full the quarter, for the expense costs from points in million $X.X million for basis up is liabilities in XX X.XX% XX%. and XXXX have at interest of the On bearing

for the fourth increased year X.XX%. segment. In the addition client the very full to the of linked Net interest year prior were our the year margin we flat. general and our the rise in quarter, on in from aggressive rates business pursuit competition, private From deposits throughout margin was stayed both the quarter essentially in quarter

XX has raise the years For the margin entire points XXXX in level, margin our our was loan approximately loan where was higher our in prior to higher capital levels sensitivity, significantly impact higher and improvement volume, XX basis by deposit in early asset been to that XXXX. than driven of

the expectations In XXXX. X.X%. slightly our will year is business linked prior sale sale in low the volume by lower and our margin This income quarters. of our offset SBA mortgage, internally X.XX% look that down be historic of income million will funded we down was that will the for current toward growth non-interest of to growth This margin Total the higher of positively our As was trend reflective forward, our and $X.X the revenue resulting spreads. DCM lower need favorable gains, more maintain loan I at in expect both back of in company. from to non-interest level rates XXXX early

up year the $X.X prior For million $XX.X or revenue the full million year. from total of was X.X%

needs years. discussed, variable million of rate curve as to $XXX.X in and or on lower changing Due higher the certainly higher and offset of to originated to has we've This compared impact have mortgage on were numbers. percentage As gain sales million client sale we XXXX however, rate balance the originations NIM our volume average of retained on helped driven sheets. prior $XX our lower a much

million volume increased on servicing calculated quarter volume indicated Mortgage $X.XX has level $X.X purchase XX%. at came $X.X up just up X% value or is remained $XX.X was million X year, was $XX basis At quarter. for Operating million portfolio slight In benefit result this mortgage expense the in rights on quarter's the X.X% prior or market $X.X The prior of which the and all to servicing million our compensation of in expenses from the year-end new highest $X.X $XXX,XXX $XX,XXX sale Total year. up million the from of servicing the X.X% with from The quarters XX% prior points, from were basis expense. points $XXX,XXX. just The mortgage billion fair did of X% value Total revenue from compared the XXXX. in temporary our expenses were in as quarter in sold prior from year the the million. increased provided were for servicing This [ph] in million the was of portfolio the linked and prior $XX.X revenue million linked quarter a impairment rights up all Mark which of a by quarter XXX from total year. growth is and year delivered part $X.X employee remaining or gains year, impairment. flat.

efforts, SBA company not risk to added mortgage XX also operations but positions sales have supplement resources We necessary only management. our our in and to and

operations reduction the technology company, operating or of $X.X reflecting year million the year XX.X%. $XX.X are up are full of the expenses various and sales in additional expenses and For compliance costs technology. million of for initiatives, Higher tax our staffing

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

million, prior growth On side, rate, we quarter and $XX.X up from from or X.X%. million linked year $XX the by XX% the deposit by a were up the

of growth that expectations. in As earlier, loan elevated to costs markets needs. but with than in We deposit competition in we've the forecast funding with half and Deposit XXXX. our higher experienced our of our rise slower will come higher rate discussed rate continue while is deposits private funding client growth a have has second rising at pricing our we all

the quarter million Looking finished up prior at we've $XXX.X the year. XX.X% capital, from at or $XX million,

the after pleased raised to of of We asset completion sponsorship in added liquidity continue up with ratio be and our also of to our prior capital XX.X% year. from the shares February. the Equity

in up quarter. as $X.X level restructured Mark assets and touched Including $X million assets restructured total to accruing alleviate of the non-performing level and X.X% X year points. up total quality total by on at in total credits from is the are is million million nearly now of million all prior stand maturity assets. our non-performing on, $X.X these XX% loans which extensions non-performing basis linked our $X.X just The total or assets, assets Asset of non-performing

non-performing linked the So the $X.X ratio would have credits for for the us quarter just provision zero, fourth to the on asset quarter led asset but equal absentees XXXX. be down to restructured, of quarter million year-end. total quality of points That XX basis at expense

X.X%, XX, allowance loan median losses has the to of quarter For loans is of with year XXX% We absolute up currently. million the prior. the we for or at to fourth have which now $XX.XX places now million, back the year growth under for XXXX. for up a increased our at the XXXX. our for this full level X.XX% move provision quarter is was to $X and set we've $X.X pretax billion at percentage we allowance our up group care XXXX still anticipate million which our year, X.XX% loan year to DTL December as peer added to allowance with But NPL million full income good of loss Mark. at $X.X adjusted With billion where in $X.X and forward have due net year landing year. we to declined coverage into turn And I'll and $X.X compared pre-provision assets XX% respectively. XX% And the have XXX% In prior the level call $X.X growth of income number X%. the the prior compared our over full from aside summary, of of million allowance at to total by loan us our

Mark Klein

Thank you, Tony.

in were the line expectations Our results this for our quarter with year.

our in our pleased quite are loans of deposits with to markets. and nearly grow We each ability

is best performance our a in net years As in reflex $XX.X in income [ph]. million our result XX

year. Tony tax the year As indicated the liability XX% facts of a deferred spoke up improvement last XXXX the over we excluding

sight Our our percentile performance peer well group percentile higher. this peer XX year performance that of or the goal our places at of of of the always group XX strategic XX-bank within and

that we've driven in those ample markets community that, With talked we've our our $X way the the now the Melissa, our number expertise aisle performing in high-growth wrap vision highest you, top within performance back of to desk billion reach, remain near it I'll and low-share opportunities up. to of for one With certainly turn now capital embraced banks quarters for to a about on to leverage America. were

Melissa Martin

for questions. Thanks, Operator, ready now we are Mark.

Operator

Instructions]. [Operator you. Thank

Melissa Martin

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

Operator

The first ahead. today Martin with Brian go Partners. FIG form question be Please will

Brian Martin

Tony kind Maybe it is about take thinking of had pay-offs just quarter, commercial lot kind being loan on the really you just more little you geographically bit pay-offs in whether of know, on You strong. a about pay-offs it these or of and given color how your and bit just can -- couple people starting less thoughts be give to play and up, growth, your on seem still just of into talking segment, was being seems how have and some of you growth Mark growth you of there some this can -- things; -- helpful. but But, just kind kind by just level XXXX? of about both, talked -- of that would in market a that a outlook maybe you, cautious just high angst but little kind the growth like you're been the

Mark Klein

a more have are and now clearly been lenders discussed that from we've X are with operations now of quarters treasury individuals of number built on potentially an As and services literally management roughly $X for don't XX we decoupled street right on before credit. SBA growth a the and million the delivering our very to pay-offs the we're I had at small the offence; few the $XX we clearly, fully right maybe But office year, at year. end of end -- million the of know,

love for built we growth we're our quality. mistake, make no, but asset So, no

are for at we've the the on less. the growth deposits or able clearly, We asset margin been And find to side. patient

much we We in we're did trends the the on XXXX lower Jon, additional for to then how on similar double-digit. bit. and we any we're comments and year? so And a excited higher But down looking opportunities single-digit about do were growth for better of that slowed or pace

Jon Gathman

opportunities large I there all the for some just take commercial just real clients some to them over couple and The different dollar prices last of were clients soaring execute maintain payoffs there those were our were we on that. or gains. will some in of years, there, estate to of Yes, but payoffs add with couple two three here relationships,

street those markets about regions, the as But for here I of XX have frankly. earlier. plus all our with on Mark Mark and a in will plans Certainly, metropolitan all clients across growth think balances lot offer have we as we XXXX people opportunity we beyond. feel said, mentioned we more but X the anticipate good and replacing So

Brian Martin

markets did kind year the or of geographically in 'XX? if which for I 'XX best outlook just it's And guess similar and by next for or a kind segment, of

Jon Gathman

Lima had well, growth, on certainly, of very something in Columbus, Well, market a our Defiance, regions SBA the year, and Wayne example, growth Findlay, year. of had terms Fort this don't growth. legacy unique; show [ph] all did nice But our that market up front contributed for necessarily a quite our in actual nice of Toledo terms

year of the weeks they last those So couple Toledo, some I heading the going this of nicely year. some the in, metropolitan again, opportunity. Fort I were our payoffs offer came said, mention, And as footprint particular, is trending the certainly are Columbus, more into didn't but but Wayne to in the focus of and markets, markets markets of think across the entire other literally Mark of Findlay

Brian Martin

And then just on the shifting on I CNI the is commercial CNI towards still more from guess away focus estate? and real side,

Jon Gathman

rather a we in general incentives to or like mix It pleased credit that approach that and 'XX efforts, place sometime we towards in with calling that achieve to and year results in estate the of XXXX, here commercial well, 'XX first very what Not is. emphasis that. 'XX. overall just And saw don't real continue growth I'm our to mix as we been but more similar we've targeting, want and we terms

Brian Martin

first I seems the right quarter? to pretty good The In usually some now pipeline; mean, pipeline's have heading the first seasonality to quarter it. into

Jon Gathman

But nice on Toledo a the I both market. the heading regional bit the into certainly think so. Columbus pipelines is depending moment. year. seasonal of at here the beginning it and bit have Again, it's a

quarter, I think we'll the we that as nice the pipeline see accelerate in well. but have here in second very first a

Brian Martin

don't anything, you puts it and to like but it on Tony, if If see on just how but I but or we and takes but I the if maybe -- should isn't And You the if get maybe with sounds what have rate get is pause you any we know, backed don't take don't of Fed But the we -- just lower, if there on you about we what's guess about then lower, assume I -- -- funding it? drift little pause it's what the or kind how perfect. I maintain, Tony little on -- pressure about maybe one it. increase, costs. it's to think help think one -- the talked a do it's going increases, are Okay, of margin? a margin, going for does higher don't how we maybe think know

Tony Cosentino

seeing. Yes, a forecast you of the We've our in expectation on market-based I couple expectations it. go-forward think that of would rate of hit kind our bit. coming impact got sensitivity more a Certainly, assets think down of floor in some margin increases. us that costs us I based the funding the rise tell our upon, off drifting those general we're little I'm would

significantly half say banks in we communities. our competition the first are among XXXX more seeing our We than and did of

we funded generally loan as the maintain did think move drift costs, as up. our pipeline that as on but still, I interest side, So 'XX, up our that's trying expense -- will to dramatic we get going to an maintain not to

Mark Klein

And to are funds Tony, to certainly the region, driving deposit eight probably higher, everyone's it betas competition of share. individuals GDP continue were but hopefully expand opportunities who we're which represents have is well quite our at Brian. the growth balance tied sheet, see and in And more pressure I continuing office, And now the in but marginal to intend to adding we cost poised certainly that's that business of street to certainly we opportunities our now why think, doing to deposit of side the make on X-plus to for continue take finding market and small mark the everyone, more arena. for

Brian Martin

pricing so pricing. going Are get -- to up, see drift increases, it's Fed I the I then keep if just we don't getting costs funding offset you up? going -- or can regardless guess better help if to is lower And guess, tougher that the rates that difficult -- funding the you're pressure to better pushing up pricing of yields push cost loan more up getting it now that I see

Tony Cosentino

say has anywhere pricing floors been Brian of think in. beta Jon, same been, established -- we've certainly if to again, Tony as rise I'd and I jump months our local will as a through we've communities. but in of kind in couple to pricing. new loan I'd like you'd It on seen not deposit has that. the is we've each gone add Jon general say, this

Jon Gathman

a new statement. floor sort all I a particularly we add, in readjusted Tony think sort as that I as Yes, that's the and competition long here, end, decrease curve would the level. to was said, set saw rate of of think December November, just fair on I

agree loan it's normalization the increase level rate Brian, same or said, to here, that deposit the 'XX will certainly able don't in I at help with we're the same pricing. that increase pricing forced that effort. happens of if know recurve That generally, we're Tony, while So I a that to at

Mark Klein

a just with have the much certainly Brian, side. banks put why with about a comment; on certainly our relationship XX%, that XX% broader And borrow our one most with follow-up and emphasis have we've an the deeper like potential deposit currently. discussion -- on more to money increased probably that deposit stance taken And that's clients conversation we ratio loan

Brian Martin

I you're you And going give thinking color I just of any wait here to something? a into or kind it guys initiative, you deposit, on can on mentioned in initiative -- what I of is the price or you thought your or guess until on deposit announce as just just deposit price guess you the I that far be and maybe that is putting kind you're baked what think as it's wait margin guess with do some initiative something -- place. that

Mark Klein

actually brick-and-mortar street our long of much of And deeply No, it's regional time. a that our great unlike every every one that's for disadvantage and when of about thought competitive we is don't competition. we we on a -- certainly question corner have

say, So take office see to our more about you'll safe going our we're to it, but safe clients. to to some generally say,

client's to as the out marketplace and all of become picking and that the And intimate with them sure deposits so to the waiting of client, part us can management that's in outside and actually of for come up to how services, we're we to treasury going versus and that's we're and of taking making more capture, a remote going to to client be waiting care about come heading opposed the place us. them to that business

disadvantage try we're to going So to a alleviate competitive there.

Brian Martin

I the So, lower, just just… level Tony, the Is be there guess, is impacted the other by mortgage -- margin. three there I And if thing I I today seasonality do you mean where other if you're remind And than me X.XX; more quarters? drift mean on it is margin? quarters your one guess, should to

Tony Cosentino

right absolutely that's Brian. Yes,

quarter's and of mid-year probably a seasonality-based. about As between given kind point XX the QX are volume of kind basis which we've talked QX differential mortgage is significantly

Brian Martin

I'll let one the you year. out jump give could jump and -- this think if else kind last and on your But So then of thing the someone XX% how in. mortgage, about just I just -- just mortgage were originations up

to a thoughts how well, take just you've added think that in, the we how and like of it help -- environment then the you this people kind XXXX on even Just think -- XXX, guess, just you things. sounds of can your production me we're think on environment gain -- you're longer-term I your -- volume -- remind or of 'XX how kind margins, do year, origination and about your as and given goal added; you do rate about difficult up producers maybe sale guys seeing you just you've the getting goal

Mark Klein

variables, continue market client the as role sizable number, for and private But couple Annapolis fully a Brian production began key we in to Columbus [ph] market there, first a whole fifth a the in he's have which beyond has producers and we our still and in we closing that variable familiar there, to the Annapolis amount, be I $XXX there individuals that in helped the some is Brian, we gone we [ph], here drive -- have we've -- vision now in First, pretty XXXX, the volume. said, board down not why in to the we're as now ago gentleman comments do do have a better production We for that that's players. mortgage play in of what assimilating larger just a in intend market. million But market, just sales sizable clearly across number well on had lending we area XX the a of mentioned, strategy. us going that to as with looking years a that which pretty certainly certainly and is arena the

time aspirations business including great and commercial have We in and potential that well. small market, there for as lending SBA

So our volume anyway. even which the in with marginally inventory over of even years know with precipitously, couple hopefully higher which we kind and of higher constrained last not expectations increase lower XXXX, will is rates

than other So the that, margin, Tony?

Tony Cosentino

said, in mortgage we line clouds our has don't in dark pricing see a looked kind Yes, but a the as business. business of inventory I strong It's think little and maintained been at of as we've lot I that very it. bit pricing of

[ph] great still good very our very a a we XXXX have it's for kind where individually us, and are. MLOs process, we think good of strong had very I feel about

Brian Martin

as So there margin is like XXX, level 'XX? least think Tony for about of at -- this it's seems type you a comfortable

Tony Cosentino

don't Absolutely, yes. there. that Yes, for I and been from down range see drifting some time we've in us

Brian Martin

'XX? the aren't me, thinking if the and people weren't -- in -- mortgage number, just new really today -- onboard And for in numbers you've production I like remind are got guess that recently not people I what 'XX, start about the look at you've I that added contributors 'XX that are the in people

Mark Klein

to from willing year. to with production. but on on accommodative first pretty and world. our that our producers, curve looking hoping is And down the the the I the remain in we generally least there -- rates Columbus continue we and we we're inventory variable year yield that get talent that for again, the of whatever happen. some certainly we're to stress of -- industry looking to this for is to and Well, higher better optimistic going again, some some we're do takes take the assistance. short number but the I'm were coming not number the know of numbers half mortgage additional this will it that's at year leader individuals have number, Again, we're several

Brian Martin

out that in like Mark. that it I to in hoping number XX today, that are I 'XX add producers yet. hire year going 'XX much ramping weren't people to mean, of yet, guess in you of different the kind is sit not right? if up there people but just today are you're late that the Is we And wasn't be

yet. hope that's you what done you Your do, but it haven't is,

Mark Klein

of that be intern as arena. will marginally a 'XX that and statement the onboard, No, give that come true two from maybe coming generally on us lift that's a in on in up individuals What clearly, we other speaking, to are there. in Annapolis in now one a kind individuals a or that market closed XXX the the brought person we we've have that couple need mortgage these might in thing But to an XXX. 'XX Columbus than

Brian Martin

let want and hop I've in. much hop got back and me me don't so take but can too else, there's if couple then out more out Let someone questions, I a time; hop to I

Mark Klein

Brian. thanks, All right,

Operator

from Please [Operator Instructions] comes with Butler ahead. Capital Tony The next [ph] question Management. go

Unidentified Analyst

quick two have questions. just I

I First, color pursue mentioned initiatives congratulations you'll in rating to strategic you some pursuing big know to In allows that more provide result? a this those on the upgrade as on undertaking. Could strategic a of you the opportunities. a your be you that's satisfactory, CRA that filing, number

Mark Klein

one begun and we've clearly, that's markets sheet in we some success of we lines we prospects with to continuing announcing that capital, some majority with lever now million markets. ready a potentially take we other move are on business speak had now key next now Columbus growth organically add years of to conversations to without our know like and we're $XX about need organic and of with that having of encouraged to build back all that are, new might loans in new some we're and attuned and We've feel $XXX needs definitively, great But augment five and I the value. Toledo, Findlay that with about the and M&A the into case in capital our communities. We're what ways last is think compliance do Wayne. our over from that full markets the on Fort to balance the in our that a we million and deposits thinking new-found shareholder level to to coming we've very what time fact, building anything prospects additional as about pocket certainly our potentially least key we or been And for at that and

about we're the now opportunities. So, excited

Unidentified Analyst

bit and And you do to SBA those? mentioned portfolio, Could the in think there was about agricultural I little of you more some -- has deterioration question commercial bit a a second with and credits. talk the troubled

Mark Klein

Absolutely. Jon?

Jon Gathman

guaranteed back them. and those not cherished it's all, Right and the took both now moment charge anticipate we quite, one all virtually we mentioned, charge-off all -- -- in working off to we this quarter two credits, really was but Yes, that conservative credit portion. non-SBA to of very virtually of of now approach confined recovering related fourth the all as a fully SBA relatively with a the both business Mark they had while, there the situation at loans, a took both one but for term in the changes we're they're cases balance and they with seasoned and forward, will the in they into both will they're isolated loans, weren't for where resolve plans we little think first to other think or we their working some around But quarter closely been had forced dynamics on new longer move that be resolution. them a I we're

Operator

SIG from Please is with next Partners. ahead. follow-up go a Martin Brian The question

Brian Martin

backup on about me and just last M&A deployment kind how of for guess how maybe this mean, at the kind point. thinking just on about looking with this capital I just at touching ones buybacks, guys you at I are the capital about also potential -- of Just mean talked and but call, a you couple deployment banks of I -- point?

Tony Cosentino

of I We some at. opportunities come with in present certainly raised February in pricing 'XX. hopeful think on couldn't to we we're on that to some resolution were looking transactions capital would the the ourselves

have fee-based to We're as that various utilize a capital. help our shortly going some shortly that that'll noninterest about that buybacks, supplement income discussions well. Mark going recall and announce to at we're alternatives here that of continuing we're have a we'll dividends, indicated, to line As will look bit business etcetera on

development a So I deployment. here 'XX think for have further capital we'll of lot opportunities in

Mark Klein

And that. our while first well pretty clear a and get us have it issues little that excited and certainly, just on one leveraging $XX you raise compliance intend on to million know, CRA quarter we now capital, comment, Brian, capital our as aligned; a all were we took of some

have those got markets. we our we a our think high-growth have that begun low-share on So great continue and expand which of some we we've to to opportunity while we markets in capital,

So ready we of to the done. and go have capital get we're to kind it

Brian Martin

guess, the the today, active? just In of as I and bank I the of -- the hope kind as M&A they little I'm discussions are to market -- kind would off bit mean they in far with maybe a Have side? fee-based tailed discussions I characterize conditions, get guess how on are side you 'XX than front something or done rather

Mark Klein

the a of current have but think not the we think we are, were accretion capital, why for good And be I from that when we we business us, of very Brian, that think 'XX. to juncture optimistic model, disappointed and we if end for we the be continue we have we at we it'd some we Again, our we raised footprint. that's would from by a And Clearly fringes be in book and indicated EPS good XXXX. pocket didn't on opportunities something our good perspective, of only have perspective. think

So we're strategic without that, continuing at look to divulging much beyond our options.

Brian Martin

for outlook you're government I And there about I the on or some SBA your with shutdown then 'XX, year thinking just mean? management; production last two -- here, I and of is just how mean wealth SBA full that impacting guess --

Jon Gathman

still just with short-term in us we create resolved for getting hanging in impacting of completed short-term, 'XX. and bridge. it that would it's in were sort some point terms delaying will sales a and/or delay ahead we It that kind as stays temporary At us we needs. not are temporary to as but having answer, get not [ph] believe just bridging is continue and of I before it's forge changing of this it's as clients implication we're pay production, long outlook authorization there and

Mark Klein

gains, XX, -- we're this we're XX, Well, currently or X, year now maybe just We're XX; one -- Mark. of thinking double-digit X instead comment.

potentially terms much at we've the breakeven books. sheet. closer, know across now the keep is as build at sheet the entire a there right We're have can them of or with we're looking to income loans we and that tactical the higher continuing worth able those would continue downside to organically strategically is that which yielding business been how look we're pretty to potentially, looking with yield line Organic we that optimistic reduction a take but our much market. it be organic develop guarantee, we the of we in so so breakeven balance about certainly and non-interest And XX% speak, in we're good to how shorter on a can pretty

Brian Martin

of SBA me, this what how your reminds were for It target; was thinking you guys about -- your kind budget year?

Mark Klein

The looking the mark. place we We if be know to results the know potential X entire we ones the have individuals kind plans our now we and doing marginal have wanted a mark, across to got in million to little have in the those going small But restructure in in we've 'XX. BDOs, we was so again, the the process. delivered will, just underwriting, going the become to that currently of have kick double we're then with nimble -- little we marketplace who footprint that a gain are BDO a rejuvenation agile, volume we're for -- coupled four improved $XX to $XX XXXX. have not We platform we with more you more million up and with a if to

Brian Martin

the was in you And production 'XX $XX million? said

Mark Klein

Yes.

Brian Martin

missed And then, I If there if you into not, you but what management, to need made something just I wealth maybe go changes to then you -- no did, was -- ask just any was? that going the had to that thought said it. on I was

Mark Klein

Wayne, upto the over -- now Fort years. leader to in million, in goal is $XXX expanded the million Indiana on same but No, some several land to bring to and line position kind we market thing, larger $XX that did better of $XXX the next management; a our put us couple the of million, not $XX to million team on a drive bottom certainly and continue profitability wealth accounts in on

Tony Cosentino

quarter had nice management. thought we'd those under in have fourth but results assets came to all and last pass quarter's our We a terms that we very of call in indicated of

Brian Martin

I you see the guess, them? some or point, XXXX? of on the then, fair controlled expect just thought it's And just guess guess kind expenses I in is that that this do Tony; in event on maintaining still say we're to to of the at the disciplined kind operating being I leverage expenses

Tony Cosentino

to that's 'XX think grown look revenue. right it. we've expenses, I certainly Yes, way the at the We've certainly roughly, about same done in as

were we has. looking in three three or our know, kind two growing two revenue growth of expense You times back of what years,

our here bit of that to we a that lot level achieved is we more BDO think were drive We looking at expectation the I about I we'll to higher which in growth get expect. think that than levels 'XX; net a on We referenced. 'XX those deployed will side, 'XX resources to positive a the pay-off level 'XX. Brian we've in as talked really front-end the leasing the strategy in Mark income for

Mark Klein

have we've the Brian, all mean put is a mean, and nutshell were a the bit people if lot a expectations. to deliver bets street of I on several years we our and optimism of In pessimism, prior I optimistic. all those of some about yet

process absent positive know and be that so have going made, maybe how that operating in more message majority to would that known that is a keen we're improve so XXXX we of I'd we're that to 'XX the the pessimism to balance can been for sure make the a back it. with be little pessimism a the leverage of get so eye of optimism on keeping some expenses been to conspicuously say just that in we've bit And of -- from has little bit bets just to we that we've on we

Brian Martin

year? point is You to potential where this you exactly area if maybe biggest is which is see most areas upside you business? execution to; mean the the upside your in I know, -- there And the most what the Mark wanted not about, or where hitting that

Mark Klein

know expectations our discussion $X high have the we greatest our asset on at [ph] a don't long we've nearing all-time or and forever. quality, got got strategic the markets, fronts, start going M&A we're and part I growth bad is enough other XX% around across we're great mentioned got the all patient very good in forward big asset diversity been of great we've we've that lenders, the clearly as for because market bull credit of billion, so to commercial great but side cycles I've Well, last

we with going think be So strong that's in, we because that four think the I we emphasis has opportunity know just changed line. all well. hands, think forward. going And but million grasp model surface as continue particularly changing area I of our changing within we to year there always, we're continual of change is to commercial us have, be our to management continues and of to the BDO and $XX lending, will wealth and wealth be it for is scratching certainly there, SBA, old continue a is business

intimacy street and to and we're we on coming have services the like the the contacts So treasury all to going us. and instead our out lines outside we business like going them people of and management and inside we the client our of because to brick-and-mortar the on client

Brian Martin

this how a provisioning? about -- growth where And or I guess as is sounds is -- I would you I it about based drifting -- your like -- outlook quality we lower at you little in reserve guess guess, for do last one allowance, in the think drifted bit again credit bit there it had I lower the think a that credit little think it year. it just I guess, and on about mean just is today on was

Mark Klein

to might be. non-performance you place of XXX% a As is expect, the good

to [ph] mentioned, median to average; a because don't coming allowed positive morning going speaking, in up have greater of so which got okay, know is certainly marginally want take is hedge SBA going of bit the get on up to but asset provision 'XX arena generally ability the profitability forward, reserve and here work the is more in improved arena we us allowance a we the the that not some it wanting end opportunity. with Tony an as to As hopefully, the be great will be was going environment is I to intend some towards because M&A which that's have we to we've the but year past grow. more has as to continue And to there opportunity in impact, be quality Cecil our a this risk and

more any it? So, on comments

Tony Cosentino

add. more out in we've I trend I last of would of kind provision 'XX. we bit expect level we assets in XX upto point of of -- the the assets. levels And level type be to would a basis high non-performing a more [indiscernible] return be to numbers, would 'XX, of as would kind just given at provision our those range, in stay as on levels normalized side would end I say say kind general the in of downward couple aggressive years. non-performing significant allowed had has look us in to a

Brian Martin

Thanks. the appreciate I helpful. that's right, colors. All all

Operator

this back gentlemen, closing concludes Mark I and Ladies to any like turn session. conference Klein for our would to question-and-answer over remarks. the

Mark Klein

our Once XXXX. for prospects XXXX again, looking quite on be We're the thank more as meeting again about internet. with even live pleased first We're for joining forward we'll to you over year April and quarter you XXXX excited annual broadcasting the us. of all the bringing in up-to-date our

again Thanks chatting first you for with in joining. forward regard to quarter we're all XXXX So of looking with to April.

Operator

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

disconnect. now may You

SB Financial (SBFG) 25 Jan 192018 Q4 Earnings call transcript