SB Financial Group Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brain Martin - Janny - Analyst : Hey, good morning, guys. Yeah, thanks for having me. So the just maybe just mark, you mentioned some new hires on some kind of new talent and I guess I'm not sure if I was more referring to the on the mortgage side or on the lending side or both or maybe just can give a quick update on, you know, kind of changes recently.

Question: Brain Martin - Janny - Analyst : Got you. And with that, the, the commercial producer is that, was that the Columbus market or just in, you know, for all markets, I guess, kind of somewhat overseeing that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 25, 2024 / 3:00PM, SBFG.OQ - Q3 2024 SB Financial Group Inc Earnings Call

Question: Brain Martin - Janny - Analyst : Got you. Okay. that is super helpful. And then just on the loan growth outlook, I think you seem pretty optimistic heading into four Q and then kind of carrying that momentum into 2025. Is that, is that pretty accurate where it's, you know, loan growth ought to be in the mid upper single digits in terms of how you're thinking about the, how that translates to growth.

Question: Brain Martin - Janny - Analyst : Got you. Okay. That's perfect. And then, on the, just on the mortgage side, you also sound pretty optimistic in terms of, I thought you said it was maybe 20% growth outlook for 2025. And I guess it, I guess that seems to account for the, you know, the new entrance into Cincinnati and, and then just kind of the current rate environment is that kind of what the drivers of that are? And is that kind of consistent with how you're thinking about, you know, that the 20% is really in terms of production, you know, pretty achievable.

Question: Brain Martin - Janny - Analyst : Got you. Okay. Yeah. And then let's see, the other one was just on for Tony on the margin. It sounds as though the, the, the base was built last quarter or in the second quarter. And, you know, the outlook is pretty favorable here. Can you just talk about some of the dynamics of, you know, how if we do see a steady easing cycle here, you know, kind of how you think the margin plays out and then, you know, just kind of layering in how, you know, Marblehead, you know, contributes to that. You know, kind of baseline if you will would be helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 25, 2024 / 3:00PM, SBFG.OQ - Q3 2024 SB Financial Group Inc Earnings Call Anthony Cosentino - SB Financial Group Inc - Chief Financial Officer, Executive Vice President of the Company and State Bank Yeah. You know, I, I think Brian, the, you know, margin expanded in my sense a little bit wider this quarter than I really thought. I mean, I thought we'd be maybe 56 basis points up, kind of you know, eight basis points over the linked quarter was, was a pleasant surprise. You know, I think the mix is moving a little bit faster in our favor. And you know, I think we'll add another '25 (ish) million of, of loan growth here in Q4 kind of similar to what we had in Q3. And on and on the funding side, I think we're, you know, as Mark said, you know, it's been gradually increasing but certainly at a slower pace. And, you know, most of our rollovers, most of the market, you know, other than a few kind of outsiders have kind of settled in where we are today. So, as the CD book kind of rolls over, there's not as much of a significant increase. So, I think that the key in 2025 is contractual maturities getting to a high single digit growth rate on the loans which will improve our mix and really kind of stable funding, which I think will get our merge into the 330 range by the time we're sitting here 335 by the end of, you know, 2025.

Question: Brain Martin - Janny - Analyst : Okay. And the, and the transaction right now, you know, time wise as far as how you're thinking of when that, when that closes, what's the, what's the timeline there, you know, late first quarter? Is that how you're thinking? Anthony Cosentino - SB Financial Group Inc - Chief Financial Officer, Executive Vice President of the Company and State Bank Yeah, I mean, I think, you know, we're, we're deep in the, in the application process, they obviously need their shareholder approval which, you know, all senses, you know, kind of full steam ahead. I, you know, we'll get our approval hopefully here prior to the end of the year, you know, we'll close it, call it late January first part of February. And we'll have it on our books for, you know, 11 months here in, in 2025. You know, I don't think we'll do the actual conversion of the clients still obviously later in the year based upon, you know, the system constraints we have with our provider. But I think out of the gate, we'll be able to get them on board and have that accretive to our earnings base.

Question: Brain Martin - Janny - Analyst : Okay. That sounds, sounds good and maybe just one or two others just on the on the expense side. You guys have done a great job in managing and controlling expenses just how to think about, you know, the next couple of quarters or just in the 2025 kind of how we're, you know, looking at the run rate kind of inclusive of, you know, marble head, kind of how that, you know what that adds and just how you're thinking about, you know, the, the, the, the expense capabilities. Anthony Cosentino - SB Financial Group Inc - Chief Financial Officer, Executive Vice President of the Company and State Bank Yeah, I think, you know, we have $11 million of expense, you know, this quarter, you know, I think that's a pretty good baseline against 70 we're going to do 70 to call it $90 million a quarter of mortgage. So that's going to, you know, move up slightly one way or the other relative to that number. I don't anticipate significantly more talent acquisitions above where we are. And, but we will have some kind of year over year comparative. That'll be moderately higher. I do think we continue to have like all banks our size, we continue to have technology needs and constraints that we have to spend on to get better. And the key is can we drive revenue growth, offset those? But, you know, we're committed to keeping expenses in line with our expense growth slightly less and that's our expectation.

Question: Brain Martin - Janny - Analyst : Got you. No, that's helpful and Tony just want one back for the margin just so I kind of think about it, the margin expansion, you know, next quarter, next year, just kind of rolling forward inclusive of the the rate outlook. I mean, I guess is really predicated on, you know, getting the loan growth because right now it sounds like you could any pick up, you're getting, you know, absent any more competitive loan pricing is kind of in that, you know, 300 basis point range. So really the way to think about the margin is the, you know, the funding costs are flat to down and, you know, that really, it's just, you know, putting the liquidity from Marblehead and, you know, to work at, in, in higher yielding loans and just kind of remixing, I guess we're just, you know, that's kind of what drives the margin expansion here. Anthony Cosentino - SB Financial Group Inc - Chief Financial Officer, Executive Vice President of the Company and State Bank Yeah, absolutely. I, you know, I think, you know, my base model is, you know, kind of stable funding costs and then you look at, you know, kind of $25 million of, of bond amortization at a 275 to 3% range, you know, at a minimum, you get 5.5, which doesn't get you a whole lot of margin improvement. But if we can get, you know, $85 million of loan growth, call it that 8.5 to percent next year. That'll take up not only that liquidity but the $35 million from, from Marblehead. And then we're not as stressed on the funding side, Brian to have to, you know, go to higher pricing in order to fund that we should be able to remain, you know, fairly stable with our current base and not have to get in kind of the funding chase to, to fund our growth. And, you know, I think '25 is an excellent kind of window for us to really improve margin with loan growth and that's the critical, that's the critical factor for us next year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 25, 2024 / 3:00PM, SBFG.OQ - Q3 2024 SB Financial Group Inc Earnings Call