0000767405
false
0000767405
2023-07-28
2023-07-28
iso4217:USD
xbrli:shares
iso4217:USD
xbrli:shares
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
August 4, 2023 (July 28, 2023)
SB FINANCIAL GROUP, INC
(Exact name of registrant as specified in its charter)
Ohio |
|
0-13507 |
|
34-1395608 |
(State or other jurisdiction
of incorporation) |
|
(Commission File Number) |
|
(IRS Employer
Identification No.) |
401 Clinton Street, Defiance, OH |
|
43512 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including
area code (419) 783-8950
Not Applicable
(Former name or former address, if changed since
last report.)
Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 1 4a- 12 under the Exchange Act (17 CFR 240.1 4a- 12) |
☐ |
Pre-commencement communications pursuant to Rule 1 4d-2(b) under the Exchange Act (17 CFR 240.1 4d-2(b)) |
☐ |
Pre-commencement communications pursuant to Rule 1 3e-4(c) under the Exchange Act (17 CFR 240.1 3e-4(c)) |
Indicate by check mark whether
the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule
12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant
to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name
of each exchange on which registered |
Common Shares, No Par Value
6,851,040 Outstanding at August 4, 2023 |
|
SBFG |
|
The NASDAQ Stock Market, LLC (NASDAQ Capital
Market) |
Item 2.02. Results of Operations and Financial Condition.
On July 28, 2023, SB Financial
Group, Inc. (the “Company”) hosted a conference call and webcast to discuss its financial results for the second quarter ending
June 30, 2023. A copy of the transcript for the conference call and webcast is furnished as Exhibit 99.1 and is incorporated herein by
reference.
The information in this Item
2.02, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed to be “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that Section,
nor shall such information be deemed to be incorporated by reference in any registration statement or other document filed under the Securities
Act of 1933 or the Exchange Act, except as otherwise stated in such filing.
Item 9.01. Financial Statements and Exhibits.
(a) Not Applicable
(b) Not Applicable
(c) Not Applicable
(d) Exhibits
SIGNATURE
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
SB FINANCIAL GROUP, INC. |
|
|
Dated: August 4, 2023 |
By: |
/s/ Anthony V. Cosentino |
|
|
Anthony V. Cosentino |
|
|
Chief Financial Officer |
INDEX TO EXHIBITS
Current Report on Form
8-K
Dated August 4, 2023
SB Financial Group,
Inc.
-3-
Exhibit 99.1
SB
Financial Group, Inc.
Second
Quarter 2023 Financial Results Conference Call Script
July
28, 2023
Sarah
/ Speakers call-in #: 888-338-9469
Operator:
Good
morning and welcome to the SB Financial “Second Quarter 2023 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 & answers. I will now turn the conference
over to Sarah Mekus with SB Financial. Please go ahead, Sarah.
Sarah:
Good
morning, everyone. I would like to remind you that this conference call is being broadcast live over the Internet and will be archived
and available on our web site at ir.yourstatebank.com. Joining me today are Mark Klein, Chairman, President and CEO and Tony Cosentino,
Chief Financial Officer.
Today’s
presentation may contain forward-looking information. Cautionary statements about this information, as well as reconciliations of non-GAAP
financial measures, are included in today’s earnings release materials as well as our SEC filings and other investor materials.
These materials are available on our website, and we encourage participants to refer to them for a complete discussion of risk factors
and forward-looking statements. These statements speak only as of the date made, and SB Financial undertakes no obligation to update
them.
I
will now turn the call over to Mr. Klein.
Mark:
Thank
you, Sarah, and good morning, everyone.
Highlights
of this quarter’s results include:
| ● | Net
income of $3.1 million, up $241 thousand or 8.5 percent from the prior year quarter but would
be up $443 thousand or 16.7 percent, excluding the effects of the OMSR recapture in both
years. Year to date adjusted net income is up $738 thousand or 15.5 percent; |
| | |
| ● | Return
on average assets of 91 basis points, with return on tangible common equity of 12.4 percent; |
| | |
| ● | Net
interest income of $9.8 million was up $200 thousand or 2.5 percent from the prior year as
loan growth and better asset-mix have offset higher funding costs. However, compared to the
linked quarter, margin income was down 4.8 percent as the betas on funding costs have begun
to exceed those on the asset side; |
| | |
| ● | Loan
balances were higher from the linked quarter by $8.5 million, and have now risen over $89
million or 10 percent over the prior year quarter; |
| | |
| ● | Deposits
were down from both the linked and prior year quarters as challenges to identify funding
at or below the margin, continued; |
| | |
| ● | Expenses
were down from the linked quarter by $434 thousand or 4 percent and down $463 thousand or
4.3 percent from the prior year; |
| | |
| ● | Mortgage
origination volume strengthened in the quarter, up 32 percent from the linked quarter, however
we are still down from the prior year; |
| | |
| ● | And,
asset quality metrics continued the trend of positive momentum on NPAs and coverage of NPLs; |
We
continue to concentrate on our five key initiatives.
| ● | Revenue
Diversity-net-interest income with fee-based revenue from business-line “complements” |
| | |
| ● | More
scale with Organic growth |
| | |
| ● | Deeper
relationships within each household via cross-sales and referrals |
| | |
First,
revenue diversity.
| ● | For
the quarter, our mortgage business line originated $65 million in volume, higher by $16 million
or 32 percent from the linked quarter. We also increased our percentage sold in the quarter
to 73 percent, which is in line with traditional levels and is a critical metric as we continue
to manage both the size and make-up of the funding side of our balance sheet. The quest to
seek out and find quality MLOs in our high growth markets continues and we expect that production
in the coming quarter will show positive growth from both the linked quarter and the prior
year. |
| ● | Overall,
non-interest income was $4.4 million, which was up from the linked quarter and down just
slightly compared to the prior year; primarily due to declining residential real estate lending
volume. However, the gain on sale nearly doubled from the linked quarter and is reflective
of more competitive pricing in the Freddie/Fannie arena as well as our initiative to constrain
portfolio volume. That said, the Residential business line fee income was down by over $1.9
million for the first six months of this year versus the same period, last year. This decline
represents 79 percent of our year-over-year, fee-income variance. |
| ● | Our
commitment to the Title insurance business remains strong despite the headwinds in the Residential
lending space. As we discussed in prior web-casts, we intended to bolster our volume and
revenue with a more conscious commitment to escalate title policy revenue Peak receives from
State Bank. As a result of our initiative, State Bank has generated transaction volume for
the first six months of 2023 of $36.2 million and revenue for Peak of $183 thousand. As such,
over 34 percent of Peak’s transactions representing 21 percent of their revenue was
due to State Bank activity. Our goal is to not only diversify our sources of revenue from
our 20+ clients but to also escalate State Bank’s title work revenue to Peak Title
to at least the 50 percent level of potential activity, all else being equal. The current
environment of “purchase transactions” presents a greater challenge as the seller
typically directs the title work. Year-to-date, our title policy revenue is off 36 percent
over the prior-year-period whereas our residential lending volume is off 40 percent. . |
| ● | Wealth
Management continues to be a competitive advantage and a compliment to our more traditional
commercial bank services; not only does it potentially provide a broader range of products
and services to our 36,000 households but also a unique source of non-interest income and
greater revenue diversity to which we aspire. With over 50 years of providing Wealth services
in our markets, we have a unique ability to manage much more of our clients’ financial
needs than most Peer banks. We recently added new executive leadership who has a long history
of advising wealth clients in the region; we believe she will not only be a complement to
our other six business lines but additive to our sales initiatives to expand our current
level of assets under management. Additionally, the business line is on track to provide
$3.8 million in revenue for 2023. |
Our
second key initiative…more scale.
| ● | In
the current rate environment, loan growth must be accompanied by substantially higher rates
in order to ensure margins remain stable. To our benefit, we have witnessed a number of our
competitors pulling back on lending in our markets, which we clearly have not done. We continue
to reach out to identify opportunities with new and existing clients, but we have also become
much more selective in providing financing to higher-risk-loan-sectors and structures that
we will provide to our customers. Until funding at the margin retreats from the current 5-plus
percent mark, loan growth will be intentional and conscious, but selective. |
| ● | Loan
growth in the quarter slowed as we were up just $8.5 million from the linked quarter but
up over $89 million or 10.0 percent from the prior year quarter. Unfortunately, our commercial
lending activity has been impacted by paydowns in the agricultural sector and limited growth
in the level of business activity of our current book. We continue to call aggressively in
all of our markets. For the first two quarters of this year our commercial lenders have made
over 1900 client and prospect calls and have enabled us to log a current pipeline of $61
million. As an organization, we have re-committed on our quest to garner a deeper deposit
relationship with all borrowing clients; absent which pricing adjusts. |
| ● | Liquidity
was fairly stable during the quarter, with deposits declining slightly, which required us
to replace funding with slightly more costly wholesale borrowings; overall, the size of the
Company remained flat. However, we forecast a slightly larger balance sheet for the remainder
of 2023 in light of the paydowns in the investment portfolio and limited borrowings to fund
loan growth. |
Third
is our strategy to develop deeper relationships—more scope.
| ● | SBA
lending as a Preferred Lender, continues to be another great compliment to our core business
model. We began to drive a more intentional model in 2015. Since inception we have closed
$64 million that we would have missed, absent this strategy. As we discussed last quarter,
timing of our SBA loan closings delayed our gain-on-sale to be recognized in this quarter.
As such, we have now closed $7.5 million in the first half of the year and have sold $2.5
million for a GOS of $242 thousand while retaining $5.0 million on our books driving both
non-interest income as well as net interest income, higher. We continue to be bullish on
two of our growth markets, Columbus Ohio and Indianapolis, Indiana. Our lower-cost funding
continues to be provided by our legacy markets while loan demand is projected to provide
greater asset lift. The overarching goal here is to gain market share and to expand relationships
with clients that can provide not only lending opportunities but also the expansion of our
deposit gathering initiatives through Treasury Management. |
| ● | Our
new corporate sales champion is singularly focused on improving (reducing) our percentage
of single service households. As we discussed in prior quarters, his focus remains on organic
growth initiatives to drive scale on both sides of the balance sheet. Given our expansion
in the mortgage business line over the last decade in a number of markets where we are under-branched,
a number of these clients have a limited relationship beyond the initial mortgage product.
With our expanded ability to service these clients digitally, we intend to continue to drive
more scope by adding additional products and services to each household. To date, we have
logged a service-per-household of 2.90. Our goal is to add one more service-per-household
in our 36,000 households to drive the depth of our relationship nearer to 4 times, all else
being equal. |
Operational
excellence remains our fourth key theme.
| ● | The
need for us to provide a seamless digital experience for our clients remains a key objective.
We have begun the process of testing a more robust on-line account opening process and we
continue to make strides to improve our internal CRM usage and utilize the nCino platform
to drive efficiency in our lending processes. Clearly, there remains more work to be done
to fully realize the potential of our technology gains. |
| ● | Operating
expenses have been on a general downward trend over the last 18 months due to not only our
lower, volume-driven-commission-levels that have led to a pull-back in revenue, but also
our targeted reductions in resources in those business lines. Our total headcount is down
over 5 percent compared to the prior year, even with the additions we identified for our
client contact-center we launched this year and the 5 new MLOs. |
| ● | As
a result of our focus on cost-containment, we have delivered positive operating leverage
for both Q1 and Q2. We expect to continue this positive trend as the balance sheet expands,
asset mix normalizes, and expenses moderate. |
| ● | Our
client contact center we introduced in Q1, is now assisting with client care. In fact, this
group is now fielding approximately 12,000 calls each month. More success on referrals and
cross-sells is in the queue as we begin to more effectively embrace the capabilities of our
Salesforce platform. |
Our
fifth and final key initiative is asset quality
| ● | Our
asset quality continues to reflect strong credit underwriting. Charge-offs were down from
the linked quarter to just $22 thousand and for the year, our annualized charge-off rate
is just two basis points. Thus far, the resilience of our clients has been as anticipated
as they appear to have managed their exposure to higher interest rates quite well. Tony will
discuss the favorable position that we continue to see with our allowance level that includes
coverage of our non-performing loans above 500 percent. This industry-leading metric is a
direct reflection of our commitment to not only prudent lending practices but also the measures
we took during the pandemic to build our reserve in order to provide greater earnings stability,
post-COVID; |
| ● | Delinquencies
ended the quarter at $2.4 million or 24 basis points with our less-than-90-day delinquencies
ending the quarter at just 10 basis points. With client credit bureau scores higher and household
debt as a percentage of disposable income, lower, all signs point toward continued positive
trends in our portfolio. |
Tony
will now provide greater detail on the quarter.
TONY:
Thanks
Mark, and good morning, everyone. Again, for the quarter, we had GAAP net income of $3.1 million with EPS of $0.44 per share, up 10 percent.
Excluding the servicing recapture from the prior year, core diluted EPS are up 22 percent as compared to the similar core earnings achieved
in the 2nd quarter of 2022:
| ● | Total
operating revenue was up from the linked quarter but down slightly as compared to the prior
year quarter. When we exclude the servicing rights recapture from both years, operating revenue
would be up 3.3 percent; |
| | |
| ● | Margin
revenue was up 2.5 percent compared to the prior year quarter and for the full year, up 11.5
percent; |
| | |
| ● | The
efficiency of our balance sheet continued to improve in the quarter as our loan to deposit
ratio rose to 91.9 percent and total loans to assets increasing to now, 73.4 percent. |
Now,
breaking down further the second quarter income statement, beginning with our margin:
| ● | For
the quarter, our net interest margin came in 3.16 percent, which is flat as compared to the
prior year due to the shift in our earning asset mix and a net negative beta of earning asset
yields vs. funding costs. Compared to the linked quarter, the impact of much higher funding
costs, as Mark mentioned, could not be overcome by our loan growth and the improvement in
earning asset yields. |
| ● | Cash
and securities as a percentage of total assets continued their reduction in the quarter as
they are now just 19.2 percent of total assets. This compares to 19.9 and 23.4 percent for
the linked and prior year quarters. The shift in mix has benefited interest income as evidenced
by the improvement in our earning asset yields. For the quarter, we had an earning asset
yield of 4.61 percent, up 12 basis points from the linked quarter and up 116 basis points
from the prior year. Interest income as a result of the balance sheet growth and yield improvement
was $14.4 million, up $582 thousand or 4.2 percent from the linked quarter and up $3.9 million
or 37.5 percent from the prior year quarter. |
| ● | As
we experienced last quarter, funding betas have exceeded earning asset betas from both the
linked quarter and the prior year. Deposit costs rose to 1.29 percent for the quarter, up
35 basis points from the linked quarter and up 109 basis points compared to the prior year
quarter. We expect that these negative betas will continue for the remainder of 2023 based
upon the current rate forecast, and that we will begin to see stabilization entering 2024. |
| ● | Fee
income as a percentage of average assets improved from the linked quarter to a level of 1.3
percent. The positives that we have discussed in Residential lending were supplemented by
better SBA sales volume. As Mark mentioned, we feel that the SBA product is well positioned
for the current economic environment. Additionally, we continue to see stable results in
our other fee income categories as compared to both the linked and prior year quarters. While
our GAAP operating revenue is down for the year, when we adjust for the servicing rights
recapture, total operating revenue growth on a core basis is actually a positive 2.6 percent
and when added to our operating expense reduction, is a $1.3-million-dollar cumulative pretax
change compared to the prior year. |
| ● | Mortgage
gain on sale yields came in right on the expectation for the quarter at 2.2 percent, which
is still below historical levels, but we anticipate this to be the floor on yields in 2023
and into 2024. Sale volume improved this quarter to nearly 75 percent and our pipelines are
running in the high 70s of saleable product. We continue to forecast 2023 origination levels
to be slightly below our breakeven level of approximately $350 million but we continue to
review resource allocation to preserve profitability. |
| ● | The
market value of our mortgage servicing rights stabilized in the quarter with a calculated
fair value of 123 basis points, which is up 12 basis points from the prior year. Our servicing
rights balance increased compared to the linked quarter at $13.7 million and remaining temporary
impairment was flat at just $137 thousand. |
| ● | As
has been our focus in 2023, total operating expenses were down from the linked quarter by
$434 thousand or 4 percent. When we look at year-to-date expenses, we are down $549 thousand
or 2.5 percent. This compares to our operating revenue decline for the year of 1.3 percent. |
Now,
turning to the balance sheet:
| ● | Total
assets of $1.34 billion were flat to the linked quarter and were up $47.5 million or 3.7
percent compared to the prior year. We were able to fund the growth in loans by the scheduled
amortization of our investment portfolio. We expect the investment portfolio to continue
to decline with that amortization and some prepayments over the next 18 months, when we would
stabilize the size of the portfolio at that new level. On the funding side, the deposit decline
from the linked quarter was replaced by higher borrowings from the Federal Home Loan Bank;
albeit at a marginally higher cost. Deposits, compared to the prior year were flat, which
required our loan growth of 10 percent to be funded by the investment portfolio runoff and
those higher FHLB borrowings. Our investment portfolio is now down by over 14 percent compared
to the prior year. However, since overall rates are generally flat to a bit higher, prepayments
as a source of funding, have been constrained. |
| ● | Tangible
common equity, including the AOCI impairment, declined slightly in the quarter to 7.13 percent
while tangible book value was stable at $13.81 per share including AOCI and 9.63 percent
excluding the temporary impairment . Regulatory capital continues to be strong with common-equity-tier-one
and total-risk-based-capital reported at 13.2 and 14.4 percent, respectively, at the end
of the quarter. We continued an aggressive buy back of our shares in the quarter, with 91
thousand shares repurchased at an average price of $13.67, which is well below the adjusted
tangible book value of our shares in the quarter that I just mentioned of $18.65. |
| ● | Our
loan loss allowance improved in the quarter and ended at 1.6 percent of total loans. Due
to the improvement in the economic factors and a reduction in our level of unfunded commitments,
our total provision expense for the quarter was just $145 thousand, net. We were, however,
able to add $375 thousand to the allowance and coupled with our low level of charge-offs,
the allowance level improved by two basis points compared to the linked quarter. |
| ● | Again
this quarter, we had positive momentum in our classified loans. For the quarter, our criticized
and classified loans now stand at just $8.9 million and are down 5.8 percent compared to
the linked quarter and down $3.3 million or 27.1 percent from the prior year quarter. |
| ● | Before
I return the call to Mark, a quick summary of our year-to-date EPS, which while flat to 2022
on a GAAP basis, would be up $0.12 per share or 18 percent when we exclude the impact of
the temporary servicing rights recapture from both years. |
I
will now turn the call back over to Mark.
Mark:
Thank
you, Tony.
| ● | Once
again, I want to conclude by acknowledging the dividend announcement we made this week of
$0.13 per share, which now equates to a 3.8 percent dividend yield and a nearly 30 percent
payout ratio. We continue to believe that our strong dividend and continued stock buyback
strategy will drive tangible book value improvement and maximize return to our shareholders. |
| ● | Optimistically,
we continue to expect higher performance; one that includes prudent, organic balance sheet
growth, asset mix corrections, expense control, and a return by us to more a traditional
ratio of non-interest income to total revenue at or near the 40% mark; albeit on a marginally
slowing economic front. |
Now,
I will turn the call back to Sarah for questions.
Sarah:
Thank
you, we are now ready for our first question.
Brian
Joseph Martin
Janney
Montgomery Scott LLC, Research Division
Just
maybe a couple of things I’m just going to touch on. It sounds like the loan outlook or growth sounds like the pipeline is pretty healthy
and maybe some people pulling back in the market. Just kind of want to confirm just kind of how you guys are thinking about loan growth.
Just I mean, hearing that’s positive, a lot of people with rates being up seem like there’s some activity slowing a bit. So just trying
to understand the loan growth.
And
then just, Tony, you talked about funding the loan growth. Just trying to understand, in the past, you’ve been kind of relying on some
of those securities portfolio runoff. You had some borrowings increase this quarter. Just want to understand if the loan growth you do
have, how you’re thinking about funding it here in the near term.
Mark
A. Klein
Chairman,
President & CEO
Yes,
Brian, just a quick comment. Steve Walz is here, our Chief Lending Officer. But from my seat, as you heard, we’re making tons of calls.
And we all agreed when we made the presentation of the ’23 budget to our Board that it’s going to take twice as much work to get half
as far. And I think our commitment to outwork the competition is somewhat evident in that $60 million pipeline.
But
Steve Walz is here, and he can kind of give us a little more color on where that’s coming from, Steve, and what you see in the next 2,
3 months.
Steven
A. Walz
Executive
VP & Chief Lending Officer
Sure. Thanks, Brian. Yes, we saw definitely some acceleration of our pipeline from the first
half. Some of the looks we saw in the first half, a lot of -- some investment CRE that given our commitment to asset quality didn’t
appeal to us. We are seeing some improvement not only in the volume of our pipeline but in the credit quality.
And
I think, Brian, some of that is due -- well, a few factors. Certainly recent economic indicators show some increasing confidence from
borrowers, consumers as well as businesses that take care of them. So we’re seeing more broad activity, but I think also, as Mark mentioned
earlier, some of the competition is pulling back. I think they have probably liquidity concerns that aren’t quite the concern they are
for us and allow us to perhaps pick up some new clients in the marketplace. So we’re seeing some opportunities from competitors as well
driving that.
And
as Mark mentioned, we saw some softness in our rural ag markets due to the strong earnings of our farm community, which is great for
asset quality but hasn’t resulted in as much borrowing from them. So that’s kind of the picture.
Anthony
V. Cosentino
Executive
VP & CFO
And
then a couple of what I think on that, Brian, you asked about funding. I think that still continues to be a challenge. And I do think,
as Mark said, we’re being a little bit more selective on what we’re looking at. But I think we’re willing to take a piece or 2 off of
our margin that we’ve been accustomed to in the past for good quality credits.
Because
we know most of our funding is now coming kind of at that 4.25% to 5% range on the margin. We’ve done okay on relationships. We certainly
could do better at any time, but that’s certainly kind of the bottom line. I think you’re still able to generate a fair amount of funding
dollars, call it, 100 basis points below the wholesale market. If you want to do that, the risk, obviously, is your current book of business
and how you manage that, which thus far, we feel like we’ve done a pretty good job.
Brian
Joseph Martin
Janney
Montgomery Scott LLC, Research Division
Okay.
So not much in the way of securities. I guess the growth you do have in the back half of the year, there’s not much opportunity to fund
it from the bond book at this point or even in the next year. So we should think about it being more growth in the balance sheet going
forward?
Anthony
V. Cosentino
Executive
VP & CFO
Yes.
I think we’re going to have kind of our normal $2 million to $3 million of amortization of the portfolio, some slight prepayments as
we get to some rate notches and some maturities. But it’s going to be, like we said, $30 million to $40 million that the portfolio is
going to decline, but that’s about it, not any kind of rapid prepayments.
Brian
Joseph Martin
Janney
Montgomery Scott LLC, Research Division
Yes.
Okay. That’s perfect. And then maybe just a couple of others, just on -- high level on the mortgage. I know you talked about, Tony, the
gain -- the margins sound like they’re at a bottom here, a trough and are either stable or up from here. That seems fair. And the sale
volume seems pretty -- definitely improved. Just as far as origination volume, how are you guys thinking about that? Just holistically
over the next couple of quarters or just 18 months, just how you think key things playing out there?
Anthony
V. Cosentino
Executive
VP & CFO
Well,
I think we’ve done $114 million through the first half of the year, call it, 32%. I would think we’re comfortable that we’re probably
in a $70 million to $80 million third quarter. I have a -- I guess I’d lean more to the upside on that at this point of what we’re seeing.
And then we’ll see how Q4 lands. So that kind of lands us somewhere between 2.50% to 2.85% for the full year, which I think is still,
as we’ve talked about, below that kind of 3.50% kind of Mendoza Line for us. But I think that lends towards a nice 2024.
Mark
A. Klein
Chairman,
President & CEO
And
Brian, just to comment, we -- as I mentioned, we continue to be very bullish on this new in Indianapolis market that we’ve descended
upon. We now have 5 producers there. Last month, they were at the top of the list on production. Still like some limited PCG kind of
mortgages kind of thing, but we’re very bullish on that market. And as we’ve discussed before, we think it can be all of what Columbus
has been in the past.
But
we have 5 high-level producers that get the concept, and we kind of like to classify them as self-propelled lawnmowers. They
want to do as much as volume as we want to do. So we’re bullish on that, and we think that’s going to certainly help us going
forward, where they get back to where we used to be, which is somewhere around a $500 million -- north of $500 million mark.
Brian
Joseph Martin
Janney
Montgomery Scott LLC, Research Division
Yes.
Okay. That’s helpful. And maybe just jump into the margin for a moment. Just as far as how you’re seeing things play out here with the
rate increase yesterday and then just growth outlook going forward and just the funding cost, how should we think about the margin over
the next couple of quarters? I mean, does it begin to trough? And then with the rate environment potentially being down next year, just
trying to understand the dynamics near term and then how we should think about the balance sheet being positioned with potentially seeing
rates drop.
Anthony
V. Cosentino
Executive
VP & CFO
Yes.
I think that you’re spot on there. And what we’ve seen is, I think the market has stabilized, if you can call it stabilization. I’d call
it that 4.5% to 5.25% range that’s where marginal retail funding is. And I think most community banks can kind of survive there. We’re
seeing loan pricing in the high 6s to low 7s, and that seems to be okay with our clients.
I
think our 3.16% margin is going to stay roughly in that range, I would think. I think we’ll start to get some slight improvement as we
get into 2024. We were very aggressive on being short term on our funding, so we’re going to have a lot roll-off. And if we do get rate
declines and if the market cooperates, I think we’ll start to take some funding costs off the table as we enter, call it, 2Q of ’24.
Mark
A. Klein
Chairman,
President & CEO
Being
a little more liability-sensitive.
Anthony
V. Cosentino
Executive
VP & CFO
Yes.
Yes.
Brian
Joseph Martin
Janney
Montgomery Scott LLC, Research Division
Yes.
But so really, this quarter, it could be a trough, Tony, as far as where the margin is and it’s flat to up from here? Is that kind of
what you’re seeing, there’s a little bit more pressure near term and then...
Anthony
V. Cosentino
Executive
VP & CFO
I
do think Q3 will have some -- still have some downward pressure just because as you’ve seen probably in all your banks that the rapid
acceleration of funding costs is just -- it’s just not really stopping. And there’s a lot of competition out there, which I tell there’s
-- which tells me on the funding side, there’s real liquidity strain, which is why, as Mark talked about, we’ve seen some of our competitors
pull back on the asset side because they just can’t find the funding.
Brian
Joseph Martin
Janney
Montgomery Scott LLC, Research Division
Got
you. Okay. That’s helpful. And maybe just the last one. Just on the -- the expenses have been really strong management-wise. Just understanding
what -- how that looks for the back half of the year, just kind of the run rate we’re at today, absent the swings in mortgage volume,
up or down, I guess, what -- is this a pretty good level? Are there more things and more initiatives you guys are undertaking? Or is
this a pretty good level?
Anthony
V. Cosentino
Executive
VP & CFO
Yes.
I think the $10.3 million to $10.5 million, as we’ve talked about, is kind of what we consider to be our core level of expense range.
I do think there’s probably some bias to the downside from that just because we continue to be, I think, very cognizant on the front
line. We’ve had pretty detailed instructive lessons with our teams about let’s understand what we’re doing and what we’re getting to.
We’re
on the back half of kind of our technological investments that we put in place. I don’t think that’s going to be a headwind going forward.
So it is going to be a bit of a volume game. I think we’ve rationalized some head count resources, as we’ve talked about. We’ve consolidated
some positions. We’ve done some other things. We’ve got management all in place that we think. So I don’t – I really don’t think
other than producers, that’s going to be our only kind of FTE increases going forward. So I -- long answer to what I think is this is
kind of our core level with a slight bias downward going forward, absent
volume constraints.
Brian
Joseph Martin
Janney
Montgomery Scott LLC, Research Division
Got
you. No, that’s helpful. And one other thing you mentioned, the SBA business. I guess it sounds as though you expect the momentum there
given the current market conditions to continue to be pretty healthy. Is that -- I don’t know how the -- I think you talked about the
pipeline, maybe I missed it but just understanding, is that similar -- whatever the level of kind of earnings this quarter was. Is that
kind of how to think about that going forward? Or is that -- anything ramping up from here? Or is it pretty consistent?
Mark
A. Klein
Chairman,
President & CEO
Well,
I think, Brian, it’s kind of consistent, but it’s also very bullish. As I mentioned, we think that SBA program as a preferred lender
really fits quite well into finding some of the deals we’re finding, which would be generally a replacement of equity with debt for companies
changing ownership because of aging management and so forth. It’s playing really well into that arena of the SBA. And we not only get
good yielding residual portfolio. We sell off the parts that we want. We keep some of it for net interest margin in comparison.
And
obviously, getting that C&I deposit account is really important, which they’re willing to do. So very bullish on that in a market
where the economy may be slowing a bit. And I think we’ve found what we’ve generally liked. We’re trying to score a few more of them
so that we can be more nimble with the process. But we expect that $15 million to $20 million in 2023 is kind of our bogey, and it gets
us back to where we pretty much landed before COVID.
Anthony
V. Cosentino
Executive
VP & CFO
And
I would just supplement there, Ryan. Traditionally, we’ve seen SBA, call it, as a percentage of that commercial loan pipeline to be in
the kind of mid- to high single digits. That number is, call it, 20% to 25% now. So that $60 million, you’ve got a fairly strong pipeline
out there. And again, those are a little bit more risky because they take a little bit longer, but that’s why you try to have a big pipeline
in there to get that to the bottom line.
Mark
A. Klein
Chairman,
President & CEO
And
Tony, some of it is on client need.
Anthony
V. Cosentino
Executive
VP & CFO
Yes.
Mark
A. Klein
Chairman,
President & CEO
But
Brian, half of it is on more appointed calling in those 1,900 calls, where we’re doing more calling on the C&I kind of thing, like
we talked about over a year ago. But it’s easier said than done because they’re harder to find, they’re more work, and they’re a little
-- more elusive. But it’s making some difference on the SBA platform.
Brian
Joseph Martin
Janney
Montgomery Scott LLC, Research Division
Right.
And on that 60 -- on that piece of the SBA portion, some of it’s going to go -- I guess, if that’s part of -- that’s a good chunk of
the pipeline. A good piece of that, if it gets done, gets sold and you keep a limited piece of it. So the $60 million pipeline per se
is somewhat diluted by some of that going for sale market and coming on balance sheet but getting the benefit both sides on the fee income
side and the piece you put on the balance sheet and the revenue. Is that how you think about it?
Mark
A. Klein
Chairman,
President & CEO
We’d
like to have our cake and eat it too. We’d love to be able to get the gain as well as the balanced growth. But you’re exactly right.
Some of that is going to be SBA, but we’re selectively deciding how they’re priced, what is the market value if we sell versus the breakeven
on the net interest margin. So we’re constantly deciding per deal.
What
do we do with it? Do we put it on our books and keep the gain longer term or do we sell it and take it upfront? And I know, Tony, we’re
kind of evaluating each one as we speak. And that’s probably a nice balance of each in there.
Brian
Joseph Martin
Janney
Montgomery Scott LLC, Research Division
Yes,
yes.
(If
there is a pause in the questions): While we’re waiting for additional questions, I would like to remind you that today’s
call will be accessible on our website at ir.yourstatebank.com.
Operator
(at the conclusion of the Q&A):
If
there are no further questions, I will now turn the call back to Mark Klein.
Mark:
Once
again, thanks for joining us this morning.
We
look forward to speaking with you in October to discuss our 3rd quarter 2023 results.
Good-bye.
16
v3.23.2
Cover
|
Jul. 28, 2023 |
Cover [Abstract] |
|
Document Type |
8-K
|
Amendment Flag |
false
|
Document Period End Date |
Jul. 28, 2023
|
Entity File Number |
0-13507
|
Entity Registrant Name |
SB FINANCIAL GROUP, INC
|
Entity Central Index Key |
0000767405
|
Entity Tax Identification Number |
34-1395608
|
Entity Incorporation, State or Country Code |
OH
|
Entity Address, Address Line One |
401 Clinton Street
|
Entity Address, City or Town |
Defiance
|
Entity Address, State or Province |
OH
|
Entity Address, Postal Zip Code |
43512
|
City Area Code |
419
|
Local Phone Number |
783-8950
|
Written Communications |
false
|
Soliciting Material |
false
|
Pre-commencement Tender Offer |
false
|
Pre-commencement Issuer Tender Offer |
false
|
Title of 12(b) Security |
Common Shares, No Par Value
6,851,040 Outstanding at August 4, 2023
|
Trading Symbol |
SBFG
|
Security Exchange Name |
NASDAQ
|
Entity Emerging Growth Company |
false
|
X |
- DefinitionBoolean flag that is true when the XBRL content amends previously-filed or accepted submission.
+ References
+ Details
Name: |
dei_AmendmentFlag |
Namespace Prefix: |
dei_ |
Data Type: |
xbrli:booleanItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionFor the EDGAR submission types of Form 8-K: the date of the report, the date of the earliest event reported; for the EDGAR submission types of Form N-1A: the filing date; for all other submission types: the end of the reporting or transition period. The format of the date is YYYY-MM-DD.
+ References
+ Details
Name: |
dei_DocumentPeriodEndDate |
Namespace Prefix: |
dei_ |
Data Type: |
xbrli:dateItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionThe type of document being provided (such as 10-K, 10-Q, 485BPOS, etc). The document type is limited to the same value as the supporting SEC submission type, or the word 'Other'.
+ References
+ Details
Name: |
dei_DocumentType |
Namespace Prefix: |
dei_ |
Data Type: |
dei:submissionTypeItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionAddress Line 1 such as Attn, Building Name, Street Name
+ References
+ Details
Name: |
dei_EntityAddressAddressLine1 |
Namespace Prefix: |
dei_ |
Data Type: |
xbrli:normalizedStringItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- Definition
+ References
+ Details
Name: |
dei_EntityAddressCityOrTown |
Namespace Prefix: |
dei_ |
Data Type: |
xbrli:normalizedStringItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionCode for the postal or zip code
+ References
+ Details
Name: |
dei_EntityAddressPostalZipCode |
Namespace Prefix: |
dei_ |
Data Type: |
xbrli:normalizedStringItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionName of the state or province.
+ References
+ Details
Name: |
dei_EntityAddressStateOrProvince |
Namespace Prefix: |
dei_ |
Data Type: |
dei:stateOrProvinceItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionA unique 10-digit SEC-issued value to identify entities that have filed disclosures with the SEC. It is commonly abbreviated as CIK.
+ ReferencesReference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Exchange Act -Number 240 -Section 12 -Subsection b-2
+ Details
Name: |
dei_EntityCentralIndexKey |
Namespace Prefix: |
dei_ |
Data Type: |
dei:centralIndexKeyItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionIndicate if registrant meets the emerging growth company criteria.
+ ReferencesReference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Exchange Act -Number 240 -Section 12 -Subsection b-2
+ Details
Name: |
dei_EntityEmergingGrowthCompany |
Namespace Prefix: |
dei_ |
Data Type: |
xbrli:booleanItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionCommission file number. The field allows up to 17 characters. The prefix may contain 1-3 digits, the sequence number may contain 1-8 digits, the optional suffix may contain 1-4 characters, and the fields are separated with a hyphen.
+ References
+ Details
Name: |
dei_EntityFileNumber |
Namespace Prefix: |
dei_ |
Data Type: |
dei:fileNumberItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionTwo-character EDGAR code representing the state or country of incorporation.
+ References
+ Details
Name: |
dei_EntityIncorporationStateCountryCode |
Namespace Prefix: |
dei_ |
Data Type: |
dei:edgarStateCountryItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionThe exact name of the entity filing the report as specified in its charter, which is required by forms filed with the SEC.
+ ReferencesReference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Exchange Act -Number 240 -Section 12 -Subsection b-2
+ Details
Name: |
dei_EntityRegistrantName |
Namespace Prefix: |
dei_ |
Data Type: |
xbrli:normalizedStringItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionThe Tax Identification Number (TIN), also known as an Employer Identification Number (EIN), is a unique 9-digit value assigned by the IRS.
+ ReferencesReference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Exchange Act -Number 240 -Section 12 -Subsection b-2
+ Details
Name: |
dei_EntityTaxIdentificationNumber |
Namespace Prefix: |
dei_ |
Data Type: |
dei:employerIdItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionLocal phone number for entity.
+ References
+ Details
Name: |
dei_LocalPhoneNumber |
Namespace Prefix: |
dei_ |
Data Type: |
xbrli:normalizedStringItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act.
+ ReferencesReference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Exchange Act -Number 240 -Section 13e -Subsection 4c
+ Details
Name: |
dei_PreCommencementIssuerTenderOffer |
Namespace Prefix: |
dei_ |
Data Type: |
xbrli:booleanItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act.
+ ReferencesReference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Exchange Act -Number 240 -Section 14d -Subsection 2b
+ Details
Name: |
dei_PreCommencementTenderOffer |
Namespace Prefix: |
dei_ |
Data Type: |
xbrli:booleanItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionTitle of a 12(b) registered security.
+ ReferencesReference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Exchange Act -Number 240 -Section 12 -Subsection b
+ Details
Name: |
dei_Security12bTitle |
Namespace Prefix: |
dei_ |
Data Type: |
dei:securityTitleItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionName of the Exchange on which a security is registered.
+ ReferencesReference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Exchange Act -Number 240 -Section 12 -Subsection d1-1
+ Details
Name: |
dei_SecurityExchangeName |
Namespace Prefix: |
dei_ |
Data Type: |
dei:edgarExchangeCodeItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as soliciting material pursuant to Rule 14a-12 under the Exchange Act.
+ ReferencesReference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Exchange Act -Section 14a -Number 240 -Subsection 12
+ Details
Name: |
dei_SolicitingMaterial |
Namespace Prefix: |
dei_ |
Data Type: |
xbrli:booleanItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionTrading symbol of an instrument as listed on an exchange.
+ References
+ Details
Name: |
dei_TradingSymbol |
Namespace Prefix: |
dei_ |
Data Type: |
dei:tradingSymbolItemType |
Balance Type: |
na |
Period Type: |
duration |
|
X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as written communications pursuant to Rule 425 under the Securities Act.
+ ReferencesReference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Securities Act -Number 230 -Section 425
+ Details
Name: |
dei_WrittenCommunications |
Namespace Prefix: |
dei_ |
Data Type: |
xbrli:booleanItemType |
Balance Type: |
na |
Period Type: |
duration |
|
SB Finanical (NASDAQ:SBFG)
Historical Stock Chart
From Jun 2024 to Jul 2024
SB Finanical (NASDAQ:SBFG)
Historical Stock Chart
From Jul 2023 to Jul 2024