SBFG - Earnings call transcript Q4 2024 | SB Financial Group, Inc.

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Operator

Good morning, and welcome to the SB Financial Fourth Quarter 2024 Conference Call and Webcast. I would like to inform you that this conference call is being recorded. [Operator Instructions] 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 Sarah Mekus with SB Financial. Please go ahead, Sarah.

Sarah Mekus

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

Chief are Mark Chief President Tony Steve Joining me Financial Klein, and today Officer; Officer. and Chairman, CEO; Cosentino, Lending Walz,

our forward-looking materials Cautionary release about website, for and undertakes Financial statements non-GAAP date risk included also forward-looking we to today's earnings our this the encourage participants measures presentation SB These financial a factors no as well refer to obligation Today's are statements. These information. speak them of and may of information only as to SEC as complete well available on update as materials contain discussion made, are of statements filings. as reconciliations in and them.

will Klein. to turn the I call over Mr. now

Mark Klein

everyone. and conference and Sarah, webcast. good you, Thank to morning, XXXX quarter our call fourth Welcome

definitely disciplined a of was commitment funding of our strength our we by one evolving challenging environment costs key revenue expansion, a our initiatives. delivered of and strategic rising underscoring diversified model market Despite business marked execution XXXX of the results, to economic and dynamics, resilience and year solid some our company.

our Let the the full me key year. some begin by quarter highlighting of for achievements and for

Bank past Marblehead business closing offer. State all this However, can provide the achieved acquisition we like I employees Financial Marblehead clients team very We to to lines successfully that and productive have would and with teams to before a was on on where begin, and of I congratulate look the our the that Marblehead XXXX, SB Bank forward The Friday.

which compared of include of quarter with down year. net to slightly the is million, EPS $X.X prior for Highlights income diluted the $X.XX,

the and rights shares However, up over in $X.XX would Visa servicing B we adjust for quarter sale prior or XXXX, the EPS the be when XX.X%.

increase. Net from annualized $XX, quarter the quarter, million, $XX.X fourth interest from share an X% of or the income XX.X% quarter XX% in increase linked $XX.XX per From a value book million at at pace. of totaled accelerated XXXX. ended up Tangible $X.X the revenue margin the

for quarter the loan was quarter sequential up growth. quarter consecutive full third growth $XX.X X.X%, and of marked this Loan the million,

as Our president, Deposits by of the million that the our to newer net and led Columbus Brussel, were our year. was and million delivered stable of Growth ability in growth. region, were a approach were with in Adam XX% XXX% regional levels to This our to growth, the of linked environment. rate our billion. clients deposit demonstrates of bulk base prior $X.XX the over growth ironically, $XX up quarter $XX reporting retain attract and deposit and compared consistent, competitive benefit to our higher offices highly relationship-driven our

delivered originated million. $XX million; increase over $XX million; $XXX area, our were quarter our growth, the northwest year, while XXXX XXXX the for XX% as million. million; XXXX second half originations market, million we well still our $XX the or million; $XXX XX% over $XX Ohio an Mortgage new volume. million was capacity, A by $XXX of Columbus, for market, And $X below Cincinnati arguably of total our and Indian

X.X% to points. of X.X% finally, $X.XX year improved of well, Levels quarter both the prior quarter billion, flat fourth X elevated were XXXX. the to expenses was basis quarter slightly and up Operating the which were quarter compared to X%. And linked portfolio servicing in from by by up the The linked charge-offs. and

metrics quality prior were quarter. remaining Our consistent with asset

more quality. growing and scope scale households, in diversifying path more mentioned asset those and certainly, Our for hinged households, quarters. remains strategic those more we activity more operational X efficiency, finally, on prior for in services key forward strategic initiatives revenue, That's

a delivering Most business linked relatively as from was quarter year on Looking closer prior volume, of million, ended XXXX, than I year. able mentioned as revenue substantially line. volume for diversity. higher than deliver tough high a the what The still up importantly, and $XX fairly the line mentioned, note, and I XXXX, mortgage XX% higher to were business we this

Strategically, XX $X.X milestones. our delivering way year our volume volume in well Indiana becoming just years was of newest in to second team in XXXX, Cincinnati in $XXX short nearly region we a highest million our very on several achieved in million And loans our region are or X able XXXX. just generate to months. With and few a

XXXX. market in We expect originators in and that substantial generate volume to add

prior was at process. year prior $XXX,XXX income We've title of And when was an revenues positive shares, deal commercial the internal our stress. increase or the Likewise, year. remain our year-over-year businesses brokerage allow XX.X%. from seen to quarter results internal we of up and our the wealth which brokerage in a to throughout linked volume plant relies as B increase residential to for volume flat the sale the year the million. of prior to title referral The great as improved client and compared $X.X XXXX, delivered have reduced been referrals, beneficiary XX% business, the residential revenue they've peak and reflected Noninterest on from slightly adjust tile Visa over

the as while new on deep key for to the base and XX. mentioned, This growing January their of completed A higher scale. I'm just our Marblehead the positioning August. agreement customer Ottawa a successful client acquisition tailored that area, of growth team Marblehead's palette in to serving our the strengthening new highlight commitment close driving value. milestone was clients. transaction the shareholder proud to we execution merger of long-term This our given diverse opportunities our reflects Ohio, more very solutions we able for acquisition, market to and of County, year quickly, into in existing a presence our were financial this as Bankcorp, and creating existing all-cash I deepen go Let's deliver expands relationships

were I over stable as linked by from the Again, deposits were substantially up year the million. prior indicated and earlier, $XX quarter from

Our Plus We meaningful quickly program Homebuyer solid pivot and state of and from year anticipate the our certainly XXXX both our of another results. growth markets ability well this past Ohio be to deposit Marblehead deposit our client was our relationships the in to new expand $XX-plus we to million via legacy growth as return markets. intentional as year as C&I-based more growth add to

have the X%, we in Since dramatically, Overall, of real loan estate portfolio an pre-COVID Also on instead June emphasis growth residential allow our consciously salable improved half an total but or million basis. of especially concentrating to have annualized our by and newer growing year less X.X% amortization levels $XX on Columbus for better XXXX loans the placed a loans, XXXX, traditional was below improved saw of second portfolio mature. higher note, approximately on market. to we strategy

In fact, million. for nearly the $XX year, the portfolio was residential down

to residential loan rising our result would to portfolio growth growth exclude an from million estate again, our over in real $XX million, rate. X.X% Normalizing $XX adjusted

balance capital the to our via growth buybacks capital continue of for share to dividends and return stockholders. and needs We

This quarter, with we buyback repurchased. were fairly being aggressive on shares over our XXX,XXX

shareholders $X.X XX% For dividend all income. million returned our or of via to and buyback XXXX, net of approximately our we nearly

deeper scope. of terms relationships, more In

our As expanded we have center contact and fully our quarters, operational. in prior is up discussed

awareness XXXX, client than we strategy and Long this brand had we loyalty. of term, both XXX,XXX greater interactions. will think more all brand For build

MLOs several advantage conversation regions the our to markets competitors we a Indianapolis part was and for in of also We key business in of us expansion of XXXX. Cincinnati. leaving in legacy line, of added growth X Organic the MLOs and added take our

organic the of offices addition even X greater year the that opportunities saleable expect originations. additional We and Marblehead of sheet mortgage will balance growth provide to deliver this

Operational excellence.

total business important and and the the model, secondary discussed, market. volume million volume this we mortgage XX% saw of market total, our the XX% purchase we XXXX XX% construction higher $XXX compared year XXXX. sold we As our from XXXX, of XX% like and and player down dominant -- volume slightly in was success was encompass equally again in as The to to purchase of the

our internal our X.X% just volume refinance addition, production. In was of XXXX

points, we're a quarter quite Finally, points X Charge-offs for in X just year the still low the basis basis overall. but asset spiked at quality. to bit

credits resolve third in levels We XXXX. that first of half also increased beginning that our will the the the X in commercial expect quarter themselves nonperforming loan

current Our to unwound minimal impact. be financial with credits for those are expectations

see million from to $X.X improvement down in million million the also or $X a continued significant criticized We our year to were which or and XX%. prior loans, of in $X.X classified reduction a

and us our annual performance. I'll little now our ask performance quarterly CFO, to Tony Tony? information Cosentino, more give a on

Anthony Cosentino

again, good morning, Mark, and everyone. Thanks,

Let me outline additional results. our full and year fourth highlights of quarter some

take a and let's interest income net statement the income. at First, look

balances same This and XX.X% quarter funding income was $XX.X million, growth costs fourth the $X.X asset higher reflects slightly. loan quarter, to interest even the compared yields million year. rose last the as In net improved or up

net year, a income interest X.X% $XX.X increase For totaled over million, full the XXXX.

to has extent, margin improvement. lesser stabilization The loan costs and of a growth driven funding that

the interest-bearing from up was quarter, X.XX%, prior And basis from points points. improved year basis deposit cost X of and down points For from funds basis XX just has linked quarter, XX linked the X.XX%, basis prior of was from the likewise up our XX quarter, down the however, the liabilities points cost to year.

million I in fourth for last year, from look down XX.X% quarter would occur XXXX. fourth not for gains results on quarter, from $X.X it but year million prior which the of we income, in up was of in the sale at did quarter. million, the the linked As quarter noninterest securities, included $X.X $X.X the the note,

the servicing Gains contributed and sequential fees reinforcing our improvement, of on stream. mortgage loan revenue to diversified wealth management rights the value

income despite fee-based the and by SBA total sectors. total for in the revenue. performance still and the was of business declined noninterest other full year, by X% to management accounted insurance wealth supported mortgage, For XX.X% but year, lines This challenges compared prior

the due the As the unfunded losses, credit credit our in we commitments. fourth $XX,XXX recorded actual quarter in at provision reduction of look an we for to

the increase watermark the OREO include indicated, is will X high the experience OAO. factors, model Mark quarter. the economic And of Our to no in continue levels for level improvement drove nonperforming And in allowance CECL our this we this believe our quarters. X as coming no to or level we which reflective is

ratio XX.X%, costs. to efficiency, from funding last due the efficiency the was for On rising the year slightly XX.X% quarter up

to balancing controlled remain 'XX year, expenses million reflects for growth slightly disciplined investments our expense This just well commitment operating than $XX.X higher with the However, management. levels. the totaling

we pricing. volume Mark billion. at months, to on will anticipate on the set portfolio And of As that improve the ended as the over XX% earning reprice the anticipated our mentioned, yield new loan to higher with assets loans, and loans total XX with turn balance next along our year $X.XX sheet, we

the managed XX%. year. to followed we with for as loan-to-deposit And transactional ratio level low-cost was this a higher growth result basis, and prior well cost overall as deposits a granular X.XX% that time of accounted Deposit On Even $X.XX growth deposits billion. to deposit of suit deposits our Deposits. cost grew to growth, XXX% nearly increase to maintained. of of growth, our our were

I fund the coming will liquidity the forward, from of our that majority of loan scaled acquisition amortization would growth. portfolio Going and expect XXXX the bond the Marblehead our

capital tangible book value. as XXX,XXX we during XX, indicated, price average Mark above On of the at repurchased management adjusted just quarter, slightly shares an the

over increased reflecting and For full per capital strategic X.X% our to repurchased book we with year-over-year, last share X of on over XXX,XXX capital shares, our par deployment. the done have strength up which position years. what was Tangible the we $XX, the year, value

risk basis nonperforming future loans, XX loans credit On underscoring The XXX% just of net nonperforming of taking X the of remained coverage total points points the low quarter. loans, for asset management quality look, robustness basis losses at and our for allowance at provided with framework. little of charge-offs a

XXXX short costs forward, look portion with year from net anticipate XX X.XX%, repricing we end the continuing moderate, expansion even in quarter anticipated Fed points the loans the interest curve. linked With funding improved fourth of a we to as at of And basis some gradual to margin quarter. the decreases margin the in up throughout substantial and rate

turn over to now back I'll call Mark. the

Mark Klein

we many to in in Tony. a been a our a value significant we've shareholders. client market our but base liquidity, balance regions, Thank of increased with number book made growth, bit as you, deferred acquisition very sheet organic and challenging expanded satisfying our ways, of our leading asset to the This and appreciation discussed has year,

to the equating dividend week yield. $X.XXX a this announced We approximate share, X.XX% past per of

balance want I dividend the Our or quite XXXX total shareholder to closing, staff of stockholders $X.XX community was to company. XX% in our and In We Marblehead welcome again remain earnings. our potential to and clients, pleased beyond. the into to our with sheet XXXX market. business and untapped organic leverage model intend grow region for growth We higher in a new performance largely Marblehead

up the Sarah? we'll questions. now for open investor And call

Sarah Mekus

Thank you.

questions. for ready now are We

Operator

Instructions] Martin Janney Montgomery. first with [Operator question comes from Brian The

Brian Martin

areas, Just level, on look the obviously both on just markets. on, just mortgage, a nice Cincinnati it like clarification in like talents dividends with sounds some new just higher investments of you some -- couple pretty to touch paid to get the the sound Indiana 'XX Tony, and new into Mark, the or and here as they

if we in rates, on these to originations kind you thinking And of talk can a mortgage 'XX? elsewhere, of with -- on get some even any potential you floor what of just for then kind terms kind in of performance. how about just what just But just we just you're change markets a can benefit this better don't about the in think But year? floor see if get in we bringing you terms add do production think is new of talents of

Mark Klein

Thanks, Brian. Yes.

know, $XXX indicated $XXX we million you with of the 'XX $XXX we're which looking in near out the somewhere, something I'm really, grounded million, trough is mark for as think As in at we've sure 'XX. conversation. we've the million, Certainly, again,

that build $XX X Cincinnati, So given shooting and individuals today saleable average, mark X what million as We kind we're have each we're X do say, those with which $XX on products to for. that of about million traditional additional. for in Cincinnati. is team kind to so is down there as the if portfolio I looking of would watermark X Brian, of MLOs to in products, well we now our And producers have XXX

but to phase, roll about portfolio compete. been potentially XX-year and competitive construction We know move all we those been on and are, and certainly deals. out like we've in to treasury and we salable We've sold is loans competitive that product. make putting move a know trying that our how more tight the where able to now those nicely and the and into sure are books, of deals but construction on we're to But that importantly, the rates

So place us but a nice number that to be XXXX, in would is the for for XXX XXXX. the be emphasis

Brian Martin

what to you're to Or other Mark, you where you. going adding you're folks And people the market, primarily going the in adding Got is staff? that's you're hire, markets said be that Cincinnati any is in? there

Mark Klein

Northwest in up some adding we're Well, Ohio.

of where And they pretty we a thing about that up year. the optimistic that for we're individuals expecting mentioned, that. X on from of team. very mentioned, so high ramped the is And going nucleus about or right pretty that, that Cincinnati, million X #X some as got have to familiar and I producers $XXX we're from and that Columbus they're so high are optimistic behind great out Inddy, Cincinnati. they're Here I X we're certainly X in X they've X with, plausible. the of as as Inddy market. to we're like cusp And in But producers at, And the we've kind this almost gone and

Brian Martin

Got you.

drives growth, in And growth. helpful. loan going you're bit about That's maybe the -- commercial though be just -- is terms likely to in of -- think sounds traditional -- little it terms then And if bit. to portfolio organic continues that a residential 'XX, growth a Okay. what still shift down the come as the commercial we continues of

growth about year. that to So seem today? in throughout little of picture you for right, just kind about and as kind just pipelines a reduction of 'XX, how bit and then And still nets big the are that elsewhere more we think out growth then thinking where mortgage organic does

Mark Klein

we something them. arena real survives, that and they do on exists there's probability that those, to knowingly refinanced when high happens The Yes. get may residential else a or PCG still estate

is We speak. rate are getting second of clearly, that half But current we the some what amortization in 'XX. Brian, I'm as portfolio about, and run optimistic trajectory, our

of numbers, came all And of all our If you nearly market. in as the done 'XX, Steve mentioned, but in net right really the virtually closed we of Columbus be talking been of look booked of yet which half but now, at we're I it give remains drawn, growth, second been would drawn, give amount just full half from can a what what's to a the books. fair probably half of us year and a -- has the XXXX. yet, which half us growth volume, already second we've And Columbus, on

And Steve has data probably additional got for us. some

Steven Walz

-- a bit certainly obviously, is $XX approved have are and in January on the we add we to loans Sure. point, to on Yes, saying year. have approved about first we'll tailwind we, Mark we in piggyback what see encouraged on That million closed yet that. To the to quarters of loans in with Ohio what Brian, half the we region. a some Central of that Mark's here see X include to to in that draw expect doesn't already there,

we very all -- to prospects participation So certainly, our Central bullish markets. there, we're and out of like broader our Ohio, we'd on see remained seeing

in seen participating have We a January. couple already

certainly are the to seeing start we momentum the So to this we're encouraged early year. by

Mark Klein

would Yes, like X%. to Brian, we're high single-digit, think, get to going I to that back

beyond. we've As always half in others got the absent pause currently us bag, or a which X% first happens. the rate But for in paying optimism run off, gives Steve of X% the 'XX certainly, and mentioned,

Brian Martin

Got in kind and Marblehead. on in I -- you. layering And of guess, Tony, of terms margin, just the

and that some margin I in how we're closed? about, into further to we here? remind and deals Maybe from at upward go of us maybe about it's mean, in of you Marblehead the kind the here or and I benefit And as just funding. talked combination stability here the then loan growth, 'XX think from this reduction think floor a

Anthony Cosentino

Right. Yes.

the was that here say I had fourth XX think And would was I our I more anticipated. think I margin quarter. X positive than in number

to pretty down when ability on little when I were funding moving than We Fed a clients anticipated. reduce moved. aggressive really costs rates Our lose better was bit we didn't the

thought that a was I So positive.

concur I you. with

I percentage go up bit here per quarter. up then baseline, certainly of through go think the to I points kind a suspect our probably not a X QX, more and and in basis it's it's double-digit going XX kind move few up little of to that. would is going

QX So time to we range finish in I XX a X we're 'XX, the would by probably XX at 'XX. anticipate of X

portfolio. to they're We've pricing bring on it, On in of their million, going portfolio, immediately move overnight today, high have $XXX on successfully the Their at deposit on Marblehead, pretty million of liquidating we average going our low $XXX their books probably on the than -- into strong executed loan what loans higher and $XX bond a of which call Xs, side, a is minimum. average million portfolio. that we're is, so at cost to funds, Xs

pipeline loan to $X.XX we Steve to to is as the confident close call the have XXX from And originally be a it, share it, put strong that earlier metrics We're call accretion anticipated. a to basis months we had transaction, XXX to the we $X.XX going were 'XX, we we're have think we EPS it, forward since that and than to in said, points. pretty strong going pretty able here extremely that especially drive, able model X in still

cleans I some kind data. So hope up that of

Brian Martin

that portfolio that mean I that much how bond the size of redeploy what today? is the Tony? of what's size And of liquidity, was kind you Yes.

Anthony Cosentino

Yes.

$XX for it, net-net, their $XX them, But So total base is, deposit million. assets million. call

got of liquidity clean with going books be we loans million doing liquidation those. come And movement comes the over. the $XX of over. that they on kind up don't anything that to of that's everything, We anticipate them, after no or to going really are So

million fresh it, So $XX $XX liquidity to $XX of we're million, have, million going to redeploy. call to

EPS we'll be -- of XX going our booked funds think have patient anticipate as I date, most just least And on just are XX at the X can. out current Fed recapture we to above short to X want these and given but to we that accelerate of the at we're going X on and end, as quickly fine because Steve here margin loan pipeline of to that a XX fund. said, be as being minimum our been

Brian Martin

you. Got Yes.

here credit Okay. guess comment the And I quality, heard of some I think in of the there's potential resolution then terms -- the I that credit.

it, on front, that we I call, pretty commentary and high with have down So the was next little maybe of see on this guess, kind a a the of was missed content? couple Is against to and the watermark I minimal that quarters. loss -- movement

Steven Walz

Yes, Brian.

I surprise nonperforming we've 'XX, referenced credits, increased the necessarily. in been These are as credits to weren't us number they earlier, think a that that monitoring.

not have internal so robust We a very particularly surprised. review process, loan

at one noted, We resolution certainly a frankly, didn't of at least precisely had of the court to year-end, those do least resolution play going dockets couple there -- been unforeseen midyear, think as but expect, prior we've along. again, hopeful, that by of said, we shocks, improvement We are. forward. good what's and handle where numbers in expect on we But absent those pretty a out of got

Anthony Cosentino

we've on, we is last is have going entire deterioration. said, watermark we don't years. high had as QX we're we add about. think X in charge-offs here to But X of strong, some We talked kind very we the or basis the for and further took the feel year our for to points as And any collateral X

further don't any credits. anticipate couple out of those we declination So of

Brian Martin

growth think got And year, Got expect point? cash funding deposit you. I not some the that portfolio. to then flow Tony, given much growth, you. this like fair the of to in guess, I sheet liquidity we about how balance the have bond on terms and guess, from loan I the the sounds Is this of, it potential

Anthony Cosentino

of $XX it, bond Marblehead liquidity. mean, net locked amortization we of funding I in million think the call the Yes. and between kind I have,

so Marblehead, we it, million $XX are. million basis, be loans, on million year-over-year a grow to $XX I'd this $XX where to million year call don't of think so $XX $XX or I we that million includes from disappointed call it if the

some a up deposit throughout home still raise eminently going we're on I come million cautious little think to a -- is year we here call is a $XX the doable. of it, kind have portion year out us, a now. of buyer pool, we're going by the which our matriculate will that its full means sit network, decline X that to time have of to from of with, way that And do $XX in a not we that but So million the

Mark Klein

to And tag to Obviously, to greater don't incentive We'll go all Brian, that. deposits do can plan, we that we accounts, current we across those above just margin. take get. generate can if those C&I on loans all want including But a emphasis board, the lower-cost generate need on we more to we the as have know. of now we transactional

it, gives like we're Marblehead opportunity speak. the markets. But But the offense not we're going going it. defensive If some deposits mode are don't in X.X% But we they've below a on it. the to pay for clearly, to to agree and with need certainly been Tony. certainly, we And going if other margin, we're I because greater as just find X% go there, go us

Brian Martin

you. Got

outlook. me, is the Okay. And last the one on then for just expense which

Marblehead, Just rate had in kind of how great. been just starting expense expenses just have then the about discipline guys kind And you of of XQ? can if we has that the you run layer in kind talk

that how of kind understand go XXXX. to trying as just may trend rate through you of kind run So

Anthony Cosentino

Yes.

we're fourth quarter, a run $XX accelerate So full for And we we of did on kind $XX rate. if million million the year.

of and on kinds fair things. we've think amount resources, a technology those spent I

We lot contemplating. do some projects a that of still in think rearview I is our mirror. we're have

going is it's bring an base, inexpensive. relatively expense but Marblehead Obviously, to on

going kinds we'll outside take our size the which amount For great their structure, of and they that's us all things, conversions those of. care cause have of of expenses don't to of a

going But have X.X% it I in behind over X.X% that got and the got of 'XX. growth reliance But part XXXX. back to of kind operating be we're on we about playing in faster I to have on sorry, X.X% We get the that X.Xx QX. of ball X.X% growth. talk were all to in the thing extremely kind made here of in given would our the past because our that kind teams the to revenue structure think X of first we first we is part Expenses think where equation revenue the revenue, we're of of to and positive than rose we growth should leverage rate to clearly is --

Mark Klein

looking number being Brian. equal. on little of which good things have should a is Thanks, yield now, all what forward of a to curve, not a positive than margins a the bit sloping really We're least XXXX wider fronts, more we drive which

So thanks for joining.

Operator

question-and-answer like session. over This concludes would Klein remarks. our the I turn for to conference back closing any Mr. to

Mark Klein

and reporting thanks goodbye. delivering to us. April. again, for results We and joining Thanks for with forward first Once again April you look forward joining, results quarter in to remains for certainly chatting XXXX. Optimism in high and looking

Operator

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

now may You disconnect.

SB Financial (SBFG) 24 Jan 252024 Q4 Earnings call transcript