SBFG - Earnings call transcript Q2 2020 | SB Financial Group, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the SB Financial Group's second quarter 2020 conference call and webcast. I would like to inform you that this conference call is being recorded, and that all participants are in a listen-only mode.

We will begin with remarks by management and then open the conference up to the investment community for questions and answers. I will now turn the conference over to [Sara Mykus] with SB Financial. Please go ahead.

Unidentified Company Representative

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

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

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

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

the will will measures Klein. to in addition the to financial non-GAAP earnings with is in non-GAAP accordance to over call reconciliation turn GAAP A I release. contain In measures. our also this of presented call now included results Mr. GAAP, financial

Mark Klein

past yesterday. second [Sara], certainly and today, us. Great this all pandemic. everyone. Thank Welcome for prior It a good quarters, company conference quarter with this webcast. as our release XXXX to you filed to has earnings have and you, Once we morning, again, comments as our quarter we've call with our our challenge navigated supplement been

income the just and non-GAAP net a year prior was was XXX up income that quarter. $X.X million when closing million all quarter, XX a $X.X return income acquisition nearly to points, in or local prior Included all a expense. prior or for By balance close assets loan $XX financial over XX% $X.X increase X% our merger-related staff average manner could XXX; $XX of offset year basis rights for impairment measures, responded over million our PPP for that income quarter, $X.X processing have interest our balances well. $X.X including reduction $X.X over pretax improving Edon year-over-year $XX the and customers PPP and of items, were million, in million in the safe XX%; that save $XXX their include: residential our years. Highlights quite needs a and as the X,XXX require loans the of million over million loans, net XX% or this Even interest say quarter up was $XX of members, Net adjusted of of and successfully million, reduction was to in were in must million great by mortgage of efficient $X.X of servicing interest just balances $XX dedication our over million grew able up mortgage in each year in the from Ensuring jobs, as Loan I in million. on growth while they've -- balances first adjusted to flat million, quarter we robust helped met costs million XX%.

million origination just or to mentioned. the mortgage Mortgage XXX% merger million levels. over Expenses volume PPP costs increased increased loan I $XXX prior million DDAs growth $XX quarter, Deposits were core and the $XX were funding items, $X.X million, up as year-over-year. million, traditional I in Edon up year-over-year, from business balances of to this beyond increased $X.X Edon mentioned, again, year-over-year down and have balances and Excluding higher $XXX these or due million. year the commissions million $XXX of XX% retention

remained assets set COVID-XX level reserves. of elevated provision to $X quality were aside our related million from in was the prior $X.X the of approximately Asset of year, million quarter, nonperforming basis which We although strong. metrics points in XX

assist with in needed, to clients, We continue payment our as deferrals the quarter.

made of we've quarters, for contractual our full asset remain do that organic in in diversifying over growing set X product and We payment number revenue Although scale, quality. of July. in growth principal and that in XXX excellence our requested the clients committed everything for scope, we lastly, diversity. stream, each forbearance communicated household to interest April, key a Revenue and had for deeper operational clients XX% initiatives a

volume million. impairment year on Noninterest have was million impairment. of $X.X This gains. income year year, $X.X for a Noninterest sale the servicing XXX% $X.X to loan from of to the gains prior quarter, up to the were improved prior despite that XX% up XX%, of mortgage increased on would and and prior sale noninterest total XXX%. or income revenue from $X.X quarter when and million mortgage increased volume Adjusting accounting loan income the from impact, XXX% for to million,

capacity, to another near process XXX pipeline over mortgage current be for in million. Our continues $XX loans

to are We biggest likely our deliver year team quarter, achieved Peak joined reflective company prior March of that results $XXX,XXX quarter. in exceed million record And volume we with and total June. $XXX $XXX,XXX prior to transactions delivered to in Title, new Abby the now revenue the and for were production compared 'XX, quarters, pace quarter the mark. as for on of for and increased this just our a mortgage ever, of revenue reported Waters volume. for in her

as to state of Peak our introduce we Columbus to the their continue clients bank expand metropolitan market. outside presence and lenders We

clearly our over for of our for $XX initiatives. PPP We the loans production owners business SBA all processed in XX% as to existing with our efforts than million to PPP small of X(a) in balances Our came XXX less in new at clients. markets commitments were focused on $XXX,XXX quarter

the commitment the and reflects our to on Our business small commitment. and was production that focus owner, detail

The median just million balance our of $XXX,XXX, $XXX,XXX, the $X only XX% and loans fact, were on exceeded mark. In average loans loans $XX,XXX. these level was of the the below XX with

retain commercial is with team loans certainly is expand our ready existing relationship the these the forgiveness, to with expected with serve to pending The now program. new of phase businesses next our clients. again small clients, each lending and of PPP to intention Our loan XXX

had potential have and showed LPO and in this the the that quarter, in quarter million to serve volume million market for with new staff and of months. closed leader first with the over now, $XX products. Indianapolis an focused year motivated we originated lending market X $XX just have through the market consumer a We a In a residential and and

the $XXX of management volume to coming our forward we with now million in goal line, PPP at with nearly months. deliver to under of level short-term pandemic under all are generating currently in annually. $XXX or $XX clients care at rebounded prior challenges end. quarter, million engaging assets overall our market wealth This assets total pace Wealth We improvement recovered of but quarter million has added in the the our look have residential on loan year-end management to our now this business in potential unique new the here solutions as

successful as liquidity I the and quarter Edon the scale, as elevated spending clients' regarding to well more levels in loan discretionary with the due initiative, scale key personal in asset of closing level levels transaction business mentioned our they importantly, just quarter. as the declining. surging efforts deposit and PPP ,was were on our Most focused Second

performance a improve growth the focused While to company we after certainly via entire last have organic been the to on misses near financial grow opportunity is decade, our nearly M&A few refreshing.

believe with is by in pipelines team markets. our we selling new potential here business to starting year, the potential standpoint from the we quarter partner. and June and very discussed. PPP near as operational integration is we expansion, was Edon feel as are We point our financially prior we improvement from Edon acquisition an business growth operational integrated engaged quarter. larger loan activity positioned in a our future. Our model for new likely We later a to improving the any this last and But inflated pursue well as to see is in growth and are the now scheduled conversion capital year some transaction the in Loan attractive

once with on introducing with focused of are of more to another will Edon full half but balances which agricultural our team our was As an predominantly ag our clients balances, such, lender, Naturally, Fritch. second not organically supplement the seasoned of and in also current only Edon remain we ag deposit optimistic year. as lending lender, we ability again this these slate Adrian new loan well. grow to products

encountered this XX% operating base need program expanded growth To to is $XX which by end, we to quarter XX%. estimate services $XXX for increased in Our have This and our clients. clients and delivery electronic accelerate, funding $XXX in remains us up our continues of deposit and fully. are environment client how deposits in million access everywhere their options our flexible of Included become and pandemic to participate the can engagement we've financial The PPP anytime. with accounts. or our this more more and becoming clients' engage million and that Edon in that provide the servicing, our aspect past million, are we have assets we preparing to

more Third per more is services scope, for our deeper relationships, strategy household.

continued client communications. phone This digital rechanneled quarter, calling outside calls and be to to

lending clients' when prepared our clients the and lending million for This $XXX forefront, and upon. called for to prepared in contact our capital lines proactive our needs clients PPP we next effort liquidity working lines Our likely commercial XXX% to with requirements revolving commercial over of this Notably, was participation in that quarter the for for of to us proactively commitment of XX% successful or clients' small each responsible liquidity our operations. directly of were was business $XX available them our remains million the provide calling at their phase in program programs. assure

continues for to dynamic focus a be company. our process referral Finally, our

This quarter, excellence theme. given pandemic. in XXX closed the accomplishment feel referrals, new market this are million core $XX from an our the quite we related and Operational from business over distraction in headwinds we that added

X:X of refinances. between and had have nearly traditionally We originations a mortgage originations split residential internal external

fairly seen as construction has of purchase we X/X in shift XXXX refinances, from refinances in and X/X X/X the year, internal and a originations business. this from volume have done our However, dramatic external

market. the is remains and internal to the local longer-term ongoing a While necessary, purchase the refinancing with relationship to line mortgages critical ingredient business realtors

be away Capacity capacity end back key in improve refinance in and activity of continues not of XXXX. our opportunities optimization seek amortization our second This has end, our purchase did of much gradual quarter, more quarter, and elevated to see impairment rates. servicing level our internal to to the late caused significant purchase business we is mortgage intend the processing driver but in shift from centers, to the a to pipeline to We front today. both only a and half refinance weighted

adjusted to now of We portfolio have $X.XX were just with the Households Expense loans XX% I levels million volume and over were from billion. prior the quarter. the commission prior up year. increased our from principal just But drops servicing up mentioned, balances XX% when over to quarter for year for the in balances X,XXX the growth additional mortgage up Edon cost merger expense X%. $XXX X%,

We expense put with we continue employee initiative we measures gatherings, our in the peak, offices and in quality. freeze, among quarter. the requests had quarter beginning million hiring final of containment XXX first with spending Client few. asset and Fifth deferral. our a forbearance Included limited at limit at staff net were reduced were And prevalent shore loans name travel on interest the in up to its margin. declining payment place to and a $XXX the to cost is

months, currently forbearance clients X smaller for of a As are a majority a period. number requesting we were the second our of X-month of request extensions evaluating for approvals

a clients However, here as we had full have earlier, payment number in July. I returning to stated status of

year, XX%, terms. returned for Specifically, $X.X XX% or expense quarter $X.X to and of or We and loans consumer for have XX%, XX now XX of provision all XXX full loans XX to have of million. loans mortgage contractual had XX of commercial million the XXX terms payment or the our returned contractual

is X points the increase basis above adjust we ratio And for Our year reserve up PPP prior would now reserve If X.XX%. the was to loan $XX balances, loss reserve the million. to from this X.X%.

We set few of tightened coverage XXX%, said, some loan to related is a now pandemic pay this median nonperforming and growth year, bit. that the portfolio we year, underwriting do level reserve aside levels led optimistic stands for median ,will in million. now half million loans loan we $X.X anticipate has COVID-XX losses. conservative remain second peer still dividends the on quarter, In stress That the Our our of $X of dissipates. our that group. as last activity at loan the the peer for past above our and business liquidity credit as And in years the

identify to the to from we expect coming earlier. PPP We the in offset additional this expect also with but mentioned provision loans quarters, fees expense I

will Tony Cosentino, on our quarterly our CFO, a provide more Now few performance. Tony? details

Tony Cosentino

Mark, and morning, good Thanks, everyone.

diluted the we of income had per or share. quarter, earnings $X.XX For GAAP $X.X net million per

impacted been up year, by $X.X OMSR impairment increase. adjust XX.X% the Highlights merger small $X.X $X.X from earnings margin noted loan costs; quarter as were but and net for indicated, prior is merger and by million, Absent business expense, $X.X and year up the Edon our $X.X XX% was the the mortgage impairment; $X.X gains Mark, for million up our million income from adjust operating of XX.X% mortgage, from million a the XX.X% As for on from flat. servicing sales the those operating a we and revenue, agriculture, prior year; in include: million up up up prior million, which when have when we delivered we would revenue, XX% rights, costs. Total items,

break interest X.X% up prior As with the quarter down but the quarter. starting the was linked from the second flat margin, income statement, we our year, to income

yield yield Clearly, the depressed Overall by expected. for were overall XX was asset prior decreased loan prior levels loans average our as points quarter basis Our the and points of XX year. yield loan balances of in PPP the the cash higher X.XX% down to the not basis earning year.

our clients' our to PPP levels pipelines. starting cash fundings in loan coming are quarters, As utilized in we and some decrease, the are will improvement see

expected, side, as interest-bearing prior On reduced our the year. the the cost liabilities funding we of from

margin. from X.XX% from the For down for points XX quarter were and year of basis quarter the prior from by the down Edon year prior the from XX% interest-bearing as down and the rate XX the by was the our interest the costs the linked impact expense on Total down basis quarter. our excess linked basis to points. points at X.XX%, by year margin XX quarter, from cash down prior liabilities interest PPP, and are XX% Net was headwinds

costs pipeline, XXX% we noninterest income million, to look from year, continue did expanding margin coming loan have declines $X.X in quarter. for noninterest $X.X prior and a $X.X the fees. in When up to year million million adjust higher up servicing or have We higher opportunities an further improve the $X.X origination would $X.X loan was SBA the originations quarters the or rights for reflecting prior volume million to were the that of Total mortgage funding with We from million The in year our of in impairment, the arena, prior income impairment origination volume. down the XXX%. in million been quarter. compared $X.X with

transactions and of record strong was the revenue agency number in quarter of double very delivering the a XXXX. $X.X million, quarter, which title second revenue had closing Our a of

and mortgage came yields second gains second that quarter refinance our volume. share quarter, pipeline The indicated, in volume pick company. $XXX sold mortgage in of current million. higher to did, anticipate our for million, all which of volume, XXXX purchase continued late Mark and and production Second -- on $X.X of records a third in Total up the our X.X% shift however, as strong. eclipsed the has was the quarter. in volume Purchase half remain projections the volume to quarter We at

market and $X.X value servicing as value and revenue down Our basis and rights million Not XX down this down At mortgage did year said, linked our XX quarter respectively, again our is of X from revenues of which were deliver million, linked total in declined points the second and quarter servicing to was quarter. the in for prior fair the from is XXXX of servicing XXXX. the calculated million pace in billion provided from surprisingly, on X% we June past rights mortgage XXXX, result, points quarters, our $XXX,XXX, as XX, XX% $X.X quarter and $X.X the the impairment. portfolio $X.XX basis of of

million. this compared on had up expenses Our now up year higher total balance for $X.X operating merger Edon. million, compensation $X.X XX% prior quarter we of million drove volume $X.X to costs sheet in Total the or which And million XX% mortgage impairment from mentioned the were the is and earlier, remaining $XX.X linked A quarter. is level as higher.

the is operating $X.X For year, expense million or up XX%.

$X.X our acquisition is from And goes for However, operating a the an leverage on X.X%. adjust mortgage OMSR basis. Edon if normalize the basis or merger growth for year-to-date operating GAAP the X.X and volume, if to we million merger a Peak leverage the and costs, impairment Title similar adjusted X.X year-to-date on costs, we

contracted Edon levels. of $XX.X have and $XX outstandings and are Now million, of levels the up at stood declined was due We by up year $XXX.X $XX $XXX the of liquidity. and year-over-year as our turn maintaining from from PPP of the growth prior and to million asset Adjusting $XXX or million growth growth of as from the million, million, $XX company. the we for Loan loan X loans had factors, XXXX, quarter. prior of assets year at million levels million, balance million $XXX our pandemic. year of XX% million total Deposit linked higher were $XX clients balances loan inflated these to prior are sheet. respectively, which the June loan XX% from loans the as the XX, pipelines

operating loans in acquisition have in PPP added been deposits million quarter. And percentage addition, In large our dispersed retained clients' Eden $XX.X the a the our accounts. of in

is share year quarter book and again, up the the position. in buy million able a basis, which our of shares and is XXXX, XX.X% or back this $X.X to authorization we million when tangible value balances. below ratio On share XX.X% quarter of equity-to-asset $XXX.X of shares. a number a XX, at up We Looking the second per $X.XX at from X.X% exclude finished recently or from buyback XXX,XXX at equity, our We've June XXXX. PPP we per been announced capital stands new book

the loans up basis year Regarding our $X.X million or from XX the asset million are $X quality, to total assets numbers up and $X.X quarter. our are nonperforming $X.X And million level accrued Included basis nonperforming in these of X points credits. be prior accrued in restructured linked our XX These credits, elevate restructured ratio nonperforming to by restructured would million reduced basis points. points. absent asset total

the monitor loan $X.X clients And remained expense to at-risk bay year. of and for continue up million, March portfolio. We XX this segments far, Provision our linked from prior at quarter. the quarter since those year thus the both the was have of

of allowance our loss loan and XXXX, increased of $XX to level X.XX%, from loans the up at million to currently. allowance is X.XX% XX, prior June absolute year Our XX.X%, total by has from percentage

year-to-date the summary, in net down basis a year. prior of $X.X million GAAP from $X.X or is XX% income So million on

over for costs, However, adjusted $X year-to-date GAAP net up adjusted income XX%. earnings up XX.X%. the $X I'll are call pretax comparison, or On And of earnings when year-to-date to pretax Mark. $X.X XX%. million OMSR $X.X million and is or turn or back million merger pre-provision these million now up a are

Mark Klein

our conclude my clients out past remarks clear a to that months. have all a I call employees Tony. to appreciation with endured fairly want of challenging and you, X today Thank of

all well the for and staff State for our the home conditions bank of as aid part, of certainly our efforts The I'll Sarah both were We the noticed the our back opened businesses offices but Sara? we under in markets. clients different small now currently, varied and in appreciated. to have, of all turn new questions. call to mentioned, quarter Edon over buyers, most at

Unidentified Company Representative

questions, Thank ir.yourstatebank.com. on call to waiting our accessible remind at you. you I be that And for website like while will we're today's would

our ready We for now question. are first

Operator

Janney [Operator Instructions] Montgomery. Martin of is from The first Brian question

Brian Martin

Yes. quarter. Nice

remarks So the you in the the color modifications. disclosure -- on I from Mark, added your -- appreciate prepared quarter the this

giving seen so And far, stand just kind deferrals kind with give maybe the in today, that you the Or little do is? curious the Just migration just where on where of couldn't numbers, can positive color back July? the details total you into were I if there. of, you've a

Mark Klein

a Yes. threw I of there, I know lot around numbers Brian.

number loans are a of that deferral. We in have

us commercial would Fannie, Jon all As mortgage. I I again, whether morning. return Fannie deep to with be P&I. the give like which, of positioning. he's mentioned, And or the if know particularly into following have Freddie of Jon I on commercial forbearance loans, generally But it's program this Freddie full consumer. world, on we're mentioned, the forbearance the here a Jon? nationwide the consumer, begun Freddie I'd been ask Mortgage little to and to might, Gathman I offered is as to through spirit Fannie. bit color us

Jon Gathman

to offered We're so Yes. entering I it the -- that. just would including in all add Freddie Fannie, just approach we forbearances, X our the took months.

we second round. that. months, X very to around. consistent their that a seeing, Freddie, we round, on currently what very expired but with for months numbers that at X moment. a of as half up a potential and at So and speak, which second this it's loans, are eligible been processing numbers July. here very is much at early the the go stages commercial early smaller time, can permission dozen some under program. it the stages, guidance in at offering in the but additional XX Fannie, just I we're But have The They're We're are Maybe We're small do. months

processing. currently consequently, We approach approach we the a and in the the took needs-based of which, again, more because go took analysis second around, also we're

a was around first The more proactive. go of

met thresholds forbearances. obtain you more and the needs criteria set, is This we certain certain you based. If

loan, us different on the depending basis. that and on a with we're are loan-by-loan of customers records financials supplying So type assessing

Mark Klein

work, answer that Does Brian?

Brian Martin

they than today? it this Okay. -- July, it Yes. as XX, what were at you've to Or is kind relative you're And of off? I guess, I that I different seen guess, just where point? the come at of, are working kind any is through still at guess, June where of deferrals Jon,

Jon Gathman

the in month no Well, in forbearances the first were round, July. of additional there

So round you Mark as of today. numbers those first that accurate were gave

The process have the as second speak. exact I again, midst don't but of. that in totally XX in we the XX, right round, And maybe we're are number,

Brian Martin

you. got I

that Okay. requesting to they if would ones any of is ones number, small not yet. -- It's of that as enough too or And I are requesting, are the guess, there just second deferrals be not detail pattern, really? the a

Jon Gathman

Yes, I think that's a accurate. some it's of estate in. see If there's very any pattern and second emerging, requests it's starting again, certainly numbers. commercial had the We very to just those in small We're and forbearance early the retail But real sector this come few week. sector.

Mark Klein

And follow Brian Brian. comment, -- just X up

As our generally you in and because, in in we've improved large we've add that balances dramatically, on when certainly those has decline speaking, in to PPP discretionary I seen a balances. and increase business forbearances spending the noticed part, mentioned, DDA addition liquidity the

Jon Gathman

sector, that I this point sorry, maybe again, would think is would hotels. about now out, Jon be other guess, just I'm I And I the it,

have you imagine, have of couple requested a that forbearance. a might As second those we

Brian Martin

Okay.

Tony Cosentino

$XX has that portfolio. We've that stayed additional level not downgrades disclosed of Brian, had any And any at or at QX. end we number, consistent of that million that

Brian Martin

Portfolio.

those your today? stand guys if of, that me pieces kind exposure what remind you is? in the Because the Yes. guess, as you where segregate kind do of Okay. are I more at-risk mind, today, at-risk

Jon Gathman

number, the which adjusted is manually a at-risk Yes, number.

in about industries We look from $XX.X and loans that then we kind those loans it our analyzed down loans. for XXX certain of at But look of at it's million, X.XX% there. So to portfolio. XXX the internally number pair we --

Brian Martin

-- it what, I biggest -- and sector are hotels components a it'd that, Jon, if whether the you And restaurants? Okay. standpoint, of is guess, or from

Jon Gathman

Yes.

it's Tony which mentioned, just million. $XX presently are hotels, As around right

Brian Martin

whatnot you'd And out? retail I out, be Okay. piece you it guess, the any or sectors, restaurants as in break there, whether call other them

Tony Cosentino

office that in as see We number. and have on space. We're commercial starting portfolio. stress, retail don't mentioned, I real don't even some We have Yes. our estate to

that in not hotels. number. really that's $XX inside anything that So But additional not million, to

SBA. primarily Our is restaurant concerning, portfolio while small and is by backed

exposure our minimal. So there is

just exposure, of net that pure that. biggest in and is number Our the X of pure because there hotel in sector volume

Brian Martin

Okay.

no just other big numbers So out. broken

On of in the and the $XX is nothing $XX call big other substantial there, million small other hotels that components you'd a lot portfolios million -- no out? total, other

Tony Cosentino

Yes, religious And another one, nursing list, I have there organizations, facilities $X.X in then don't million. through just think churches, $X.X the so. for Again, looking we million.

And as so we expect. performed have portfolios far, those

Brian Martin

Okay. Perfect. just In the appreciate It market. all I a the touching details. just maybe the was mortgage quarter. -- great on

year, step you of outlook I year? give second it half Just just guess, mix maybe the if back and helpful. be the obviously, a you X and on would of picked just the into as of of third bit, general, up But in on you're half kind into of any your kind quarter margin, the whatnot. just on Tony And kind the gain could the thoughts just mortgage, the how thinking sale that just quite for on about

Mark Klein

Yes. Sure.

of And do They'll XX, going Columbus know, As all for, a been on to just you business doing great percent that job. XX-plus volume. line XX jeez, now. we've the probably committed years is

end didn't to know pristine and been comes But quality and end are like volume value and the much volume. mortgages. we fixed time, comfortable add outstanding We the back quality when in Booms chain, At Matt on continue bullish the Tony piece, line. have business that rate we as we're on have out were broader we it very risk of pretty would then closures, with necessarily, for the no, -- pipeline, one an have to marginally, to to bullish be job which middle the about hedging it, because done of of portfolio. production $XX front because we that and in the on all Brian, hedging to allowed the deeper And million not And the want and course, and nicely. deeper. but the of staff the process balances with of the go go also risk, We processors be that has as we underwriters us and any

nicely. up set that got we've so And

books literally informed we're they've mortgages some outstanding of better process and business annual responsibilities our is on in is just all just responsibility to regardless and depth or Board, these managerial recently as production And done goal. $X adding on they're to to line, management and approve is Homoelle working taking billion ubiquitous job. little adding to the whether the of from and top. more our be exceptions. mortgages, defining from all it platform to and Encompass -- an going We on-site home have available a Our company all additional well of some Ernesto for producers, to our David on our as move done

a little to take line continue to envisioned and is. delivering markets. which run through originations. that went with like how the deeper is like originally. in. nice Indy relationships certainly the more mortgage in billion we of it sight a and yield business it So long no increases year getting on $X and little a intermediate business it have and we and the going end, next it, definition And level, steepens, shored in yield operations. develop $XX more a we're identification curve we But We're we're line, and and till Brian their it's it in to curve to million when in And we that now we contributing Indianapolis has all the our And up now flat

continue it. we're to we it, and we on bullish So expand intend and it, like to

to and... As can far Tony those gains, know I as speak

Tony Cosentino

getting into like sure of quarter that's there volume, was pandemic. looking the million as went anticipating happen and We weren't quarter were We to type to the quarter. of sure, the was kind terms what what it in Yes, Brian. $XXX with going we

curve et refinance. early the And the think of fine going and pricing move became really think in to purchase the it general of sure profitable as I the weren't future little kind down, And yield cetera. yield to market very I bifurcation maintaining happen defaults, with on pricing we was started because what between a on, accelerate. was extra

really So X to most the expand to sold. for the each that, part, the ability we on added spread

our yields which to we've for and portfolio, do hedging, think some nice to really place things and our really, nice things anything to I our in to did we we time. be relative take of spectacular seen there, were some pipeline care some allowed,

probably million led the $XXX that the combination we -- than we had. XXX% XXX So quarter and have traditionally of higher volume of yields to

Brian Martin

in say, near then of the thinking let's term or year into to guess, just trend expect I forward, 'XX? trend into more down year, do that you back and or that I picture? And big those Tony, guess just half But of hold I mean, lower Yes. anticipating, next going in the you're, in the yields little kind bit a that

Tony Cosentino

Yes.

it where yield picture to I I rest is for XXXX wood, think I think is, and the stay to on going the knock stay it pricing of probably is. think because curve where the yield is right going

going much we're volatility. to have So not as

as little to perform really who MLOs said to know going us is And that a our better. applaud have bit deliver hedge to close. to Our Mark clients we we before, has are great going

back able were end. we much hedge which percentage yields So higher improve a us on to at to and the enables

as end year. the good are. And we as million we very into we'll front probably from it's kind way end. for And continue volume, of million expect what worked we really, think $XXX to at they about in feel happens million play. $XXX see the look to QX things But comes if QX, would $XXX I seasonality So back

Jon Gathman

you it going we into on is forecast the XX%, what And good talked of get can an about and you a side. Brian, high the just about, have it comment. X we it's what when that and we know can MLOs when quality make hedging do is which XX% probability, We make Tony that And it's have the application, to end. just a take obviously to we all other pull-through, all that's on exactly

all but and and to only not So Tony the for that group on the volume, that out. accepting all improving Matt kudos margins way

So good. it's all

Brian Martin

Yes. just the No, minute, for to guys. over I it. appreciate about how a just stepping And margin

though -- bit. I drop it guess, liquidities levels, the Just as cash will the a little sounds

progress the If on as reducing you funding cost. bit a more well loan the as get sound growth, those positive little making

you this how PPP the margin, just the was And on you -- then I in are margin? QX? just how guess, much then, that So the And quarter about Tony, impact directionally it's impact thinking of with you things about I look couple that are thinking guys at going piece? just those kind and how the mentioned of you the ex-PPP call, of on just core forward, as or mentioned margin

Tony Cosentino

Sure.

into pretty extraordinarily quarter and on markets Brian, pattern with for provided we going kind acquisition think funding pipeline the robust the perfect a into we've to us cost went bond pipeline. in Edon which marketplace, the came stall low talked I that away. the pipeline, with went a as made it fund just about, because for everything us of Obviously,

think we a of and it. cash deploy are come to use really back. will didn't coming have So that loan pipelines We back ready

for I think it's the cash the I was which of some what in between see next the some starts our that Jon we we'll maneuver the a the under do fees. starting QX. head about we'll on unrealized on on side of to took PPP, that. amortization specifically, just and And for bit And us bit. move X, things. $XXX,XXX income a PPP, to $XXX,XXX nods QX of little here the a leaves as fee improve X portfolio bank interest shade And little out in on phase $X.X think so happens million months see $XXX,XXX, his

half book provision won't income is tangible and to levels going right need the of mortgage funds we to Going the in of now of for for utilization mind be year, the because for think on the the our kind forward, is provide able half talked us obviously, growth intention value PPP keeping of that, year, we levels to the rely for we've second necessarily. significant second about which higher

Brian Martin

Okay. helpful. No, that's

to -- expect anyhow, fees was million about what you the PPP? on to I the going is get in on Tony, total $X PPP, the from that So total the was

Tony Cosentino

million. Yes. $X.X Yes.

Brian Martin

right. a quarter, that? expecting, the Is fourth expectation forgiveness timing-wise? as size how you're is it low just fair the what Okay. are though you of would seem Perfect. you're thinking All and given pretty different be at where than guys that then it the that it event? is Or mean, I loans, today? Is of the just Is And I of guess, kind would forgiveness. high that -- level -- first quarter there of kind

Jon Gathman

$XXX,XXX encompass. expecting now, forgiveness would to of lot de talk, to event. you a There's quarter from as minimis be that about Right a fourth know, which $X we're million, levels Brian, anywhere

at of at think end of lower volume, in XX% I the the of numbers higher XX% loans. end our volume of terms our

expect SBA end in be the interest now So fourth yes, right will that we the payments, covering due the forgiveness, quarter. here that to the

out the way pipe in fourth with guidance will just -- furious or SBA They've introduced one their system. or the quarter. and I know some as other, speak. anticipate, we last out the come coming So that's fast we forgiveness week

Mark Klein

Portal.

Jon Gathman

yes, Portal, is thank Portal. different than which system, which regular the is you, Xa Online

we the to fully here of of this expect yes, that So quarter a year. in happen lot fourth

Brian Martin

That's just guess, the the impact can basis dollars -- Perfect. just Tony, And the building. -- so point PPP the back around helpful. of that impact the maybe Okay. I reserve you the gave I But in of just -- quarter. onto into

in consistent? anticipate half reserve the today second as the uncertainty the get year given expectation that, some revenue we the that mortgage building economy mentioned the and the you of with of that's is further You guess, I that PPP, should Tony, level into the

Tony Cosentino

Yes.

had basically with $X.X X I think no months of we've loan and set charge-offs we've million through aside $XXX,XXX growth.

I first or So that happens. for are we'll probably most kind year, million at seen, of about, I'm expectations line I in the $X.X to of a exposure number. lending half as everybody has talked think the credit are where as second our the half with that to set we've we get that's what don't aside levels COVID. big see Brian, year. we look we've provision would have And and consumer-type the -- of card we our really mean, of

COVID as sit haven't we to we related today. here charge-offs seen So impacts

naive we're going is. talked not and of are enough as that haven't seen to that we think Now where side, the has we really on it on see Jon and that, side, consumer some not it's the to but where we're about weakness about commercial

of we'll additional million to going income year, So of, second have deliver have of on to $X to income reserve $X but we're revenue that. net it, million to million, a call $X.X building in PPP be we $X.X where will solid the maybe fees we million the to side. And further half and fund think mortgage need the

Brian Martin

Got you.

it's And sounds that's loan slowly No, back Okay. Tony. like about growth, how up. picking it the just helpful,

today. are So pipelines I guess, from that standpoint, building the

what PPP? down expect you'd some goes with year, the net the... half growth in second the So That's excluding of of kind

Jon Gathman

starting and terms large as pressure Mark it's some to to in a say under I couple normalcy borrowers. -- we of alluded think return Tony of a to, going are building, have We're selling. pipelines we're clients see and come thing fair of to to

other or a we some some some believe, just here, they're do have the very to other. will look perhaps the a net-net their decided customers what the I they're to But necessarily and that have customers although side because don't of But competition, time those built on the nicely, I to we pipelines So forward provide in pressure going and we're COVID nice direction not have don't aren't third and is think to things out -- in price see there's the losing of operations, want to so, lot think one better customers. other yes, offsetting coming just to strong those couple sold. businesses quarter, do

Mark Klein

and and things. comment balance before, sit, Yes, sheets Brian, still it's quality fortunately, harder the that that X those clients going we're a from But testament, I where think have have, we we clients because great work liquidity of the have know generally the in of this have find found good are particularly that of doing to expanding we and to and I we deals environment. quality to to the many

at. this a a I'm X our we quarters. year nice couple mind fight that's a underwriting and of next area median years. that being pay growth we so level have it's our happy we're $XX with -- number, but function just lot a X X again, here We will million of was don't the to faster, that median a as And And participate I dividends or them. think could hopeful performer last grown we way our through

Brian Martin

pretty -- risk Yes. minimal outside the I credit, mean, of $XX maybe as guess standpoint, I And kind kind from guys guess, I level. guess the you talk we're and -- or in great $XX change like comparable? are now stress? where you concern outside of focused and some levels period, they have new million, And I because credits, that areas job. that, where times, pretty classified then any I the it's criticized of still second the of are these there's Mark, this some the been classified, there exposure I at ratings about And quarter, you today guess, that you are on? done guys has criticized given into of a the economic of mean, or million guys exposure kind that reviewed seeing just

Jon Gathman

to anything But and/or but a said, and contractual here government, forbearances Criticized met a you to economy did Many the see and that at under going But at be in obligations with look that forbearance. related as borrowers the situation have related in the be downgraded classified -- flooded Brian, kind fourth was money. these third as we through of of taking we payments much second continued know, increase, some specifically make harder forward, quarter, with so have non-COVID and to those of classifieds those. related we'll roll off not the our a We're large quarter, looking will borrower. that working we COVID. and

that So we're as intend those. working we of all we yes, through speak. But reassess to

think outside in dynamic again, a in remain to we don't se at our of softening we the X office space office, portfolio, COVID a commercial and we've moment exposure haven't manually and workforce per of at-risk related that potentially anything to. particular, specifically question, I have But how again, in adjusted? lot the will seen earlier, affect coronavirus. alluded But I industry also have any that to changes huge sections prices. anything Your that about nor affect which about or real estate downgraded that articles there that list retail, is two, concerned I put of together, we

Brian Martin

you. Got

mentioned the strong Okay. still. And Tony, being capital, very you obviously,

to opportunistic your that of kind on sense be your -- I appetite that do active or the front? on -- guess, Is continue to Just to you still anticipate shares. repurchase

Tony Cosentino

Yes.

are us. both think I words perfect those of for

the We little acquisitive, execution, that stock above opportunities continue we believe with. our use incredible an got feel be in are to capital. we're to going some and and value, that Obviously, presenting -- book we're trading terms a of that really, is mind tangible best discussions like of bit ourselves value keep in and in we at our we've to ourselves

of those both balancing out. we're say I'd So

Brian Martin

Okay. I mean, is there -- ahead, go Mark.

Mark Klein

terms discussed bottom somewhat probably I in Brian, length. conscious effort has of of just dividends. in to And form the we those But out to is line that the back and think for of pulled X attempt about at our a drive Tony. question Tony, I of general the have follow-up of Tony into some buybacks great and gone this X million. investors know I last we've I think, to X out have made programs. in And $XX that back years, half

Tony Cosentino

million dividends buybacks. About between $XX Yes. and

XX%, So that of about $XX XX% million.

scenario future capital for So that raised capital and weak that first Mark dramatically got what a fairly have tangible improved time. supplementing the we here, have we was and really equity I since when

Mark Klein

tangible increasing an So along the book value way.

So...

Brian Martin

own you until Or how I Yes. I today, just just it assess characterize M&A, seeing on guess, Mark, the of And to an you -- perspective opportunities your bit today? point, a or from are opportunities time Tony, portfolio? guess, M&A guess, for you're there hold would kind is or on I your of

Mark Klein

of a into organic overpay, the can grow opportunities opportunities arena. M&A do where because one of can that more at jump opportunities want the lot we way, But now organic if a growth. is bit market, Brian, out worked after X you this I if a we decentralized, identify do get we we've tangible talked have to growth and we X will, we our we to hard in lot that's and M&A the feel think more. we length. now X be which outside -- works the improve payback our X.X-year at we with there's to We've that that kind little a discussion. our fashion there, had there's more aggressive, accelerate the don't to we've client currency, we mentioned, have a be worked and out model of when to prudent some abound organic to growth. and there hard hard book provide old and those stronger and where do capital months worked inertia we and time be We can be, we've COVID-XX got we've or certainly Well, value But position up, a know we know as opportunistic on great But can

reach there, some So our and we're to by they're and more performance improve out scale. our pursue gathering to improve going opportunities continue to

Operator

back There session. Mark questions are Instructions] I the no like would at Klein other conference this concludes to the question-and-answer over remarks. [Operator This time. to turn closing for

Mark Klein

quarter joining again, well environment as safe We're next all Yes. as Thank take the October. earnings improve financial you. Once and third in performance, trying our and an to you we of we thanks, attempt markets GDP improved to as care to us. for communities pandemic remain of forward our we everyone, maybe look as report and quarter to and

you. Thank thanks us, for So again quarter. weekend, great a joining and have

Operator

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

disconnect. now may You

Mark Klein	Chairman, President and CEO
Tony Cosentino	Chief Financial Officer
Ernesto Gaytan	Chief Technology Innovation and Operations Officer
Jon Gathman	Senior Lending Officer
Brian Joseph Martin	Janney Montgomery

SB Financial (SBFG) 29 Jul 202020 Q2 Earnings call transcript