SB Financial Group, Inc.

Good morning and welcome to the SB Financial first quarter of 2022 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 Sarah McKinsey with SB Financial. Please go ahead, 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 website at ir.yourstatebank.com. Joining me today are Mark Klein, Chairman, President, and CEO, Tony Cosentino, Chief Financial Officer, and Steve Walls, Chief Lending Officer. This call may contain forward-looking statements regarding SB Financial's performance, anticipated plans, Operational results and objectives. Overlooking statements are based on management expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied on our call today. We have identified a number of different factors within the forward-looking statements at the end of our earnings release, which you are encouraged to review. SB Financial undertakes no obligation to update any forward-looking statements except as required by law as to the date of this call. In addition to the financial results presented in accordance with GAAP, this call will also contain certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our earnings for this. I will now turn the call over to Mr. Klein.

Thank you, Sarah. Good morning, everyone. Welcome. Nice to have you to our first quarter 2022 conference call and webcast. Last night we issued our earnings for the first quarter and we were pleased with the start of the year to what we all know may be a challenging year for many banks. In the midst of these headwinds, we remain focused on expanding households for greater scale, more services in those households, and remaining that preferred provider of additional services to our now over 36,000 households. At the same time, we were Especially pleased and honored to be included in KBW Bank's honor roll of high-performing banks for the second year running now. Inclusion in this select group of publicly traded banks this year, one of 17, is a strong statement to our earnings trend over the last 10 years. Highlights for this quarter include $900,000 pre-tax mortgage servicing right recapture, and include net income of $2.81 million, down $4.3 million from the prior year quarter. And when we adjust for non-GAAP impact in 2022, net income was $2.1 million. Earnings per share, $0.40, which is reduced to $0.38 per share when adjusting for the surfacing race recapture. Net interest income of $8.5 million, down nearly 12% from the prior year that was driven by the impact of PPP forgiveness. in 2021. Adjusting for the PPP impact would result in NIM generally flat to the prior year. Loan balances adjusted for PPP were up from the prior year quarter by just over $56 million and the linked quarter $28 million. Deposits continued to grow up $25 million from the linked quarter, $18 million from the prior year. Expenses down $50,000 due to lower mortgage commissions and higher vacancy levels. Mortgage origination volume, $97 million, down 38% from the prior year, 23% from the linked quarter. Asset quality metrics were improved from both the prior year and linked quarter. And our level of 42 basis points of non-performing assets remains strong. We were comfortable with a zero provision during the quarter due to our strong asset quality metrics, higher reserve level and negligible net charge-offs for the quarter. As we conveyed in our annual meeting and many quarters before, we continue to reiterate that future success of our company is driven by our five key initiatives. Growing and diversifying revenue, more scale with organic growth, and of course, M&A when opportunistic, more products and services for client-based excellence in operations and customized client communication, and of course, asset quality. First, revenue diversity. Peak title. Continued to provide support for residential mortgage efforts while expanding its reach into more clients outside of just State Bank. We completed the purchase of that small title agency in northwest Ohio at the end of 2021, and the integration into these markets with our lending team has been very well received. In addition, we now have a commercial lender to complement our existing residential real estate and title insurance business now in Indianapolis. In fact, we were able to do a bit of commercial title business in the quarter to supplement the decline in residential line. To ensure our commercial traction remains, we have even increased our incentives to our lenders to ensure they utilize their own title agency. And the results are beginning to pay off. Although mortgage resignations in the quarter were below $100 million, we feel good about the level of production in all of our markets given the headwinds from rising rates and continued compressed housing inventories. Over the last 12 months, we have still delivered nearly $550 million in total mortgage resignation volume. Our private client group mortgage product we developed in 2021 has enabled us to book approximately $57 million over the last 13 months, that we would have missed absent launching this initiative some time ago. Our wealth management group continues to be a key differentiator for our company, particularly as the number of our competitors appear to have adopted a more remote presence in this high-tech business line. Total assets under management ended the quarter at $561 million, and revenue generated for the quarter was $955,000. Secondly, more scale. Loan growth was positive in the quarter as we increased $28 million from the length quarter, net of PPP, or an annualized 13.6%. We now have had positive adjusted loan growth in three of our last four quarters. Compared to the prior year, net loans are up 7.1%, nearly all the way back to our high single-digit, low double-digit rate. That was more of the norm for our company pre-pandemic. Pipelines are building well in our markets, and as I mentioned earlier, we recently named a new market and lending executive in the robust Indianapolis market. This is a market that fits our product lineup well, and we expect to mirror the success that we have had in the Columbus market over time. Our deposit base expanded to 1.14 billion, up another 18 million from the prior year, with impending rise in rates, we do expect that deposit pricing will return to some normalcy during 2022. Although we still have ample liquidity, our customers have slowly begun to spend, and we will be focusing on hedging rising rates and continuing to grow deposits, albeit with a mild duration extension and appropriate pricing. Third, deeper relationships and more scope We ended the quarter with 1 million remaining in PPP loans. As we look back, we were able to help a number of our clients and acquire new ones as a result of our flexibility and commitment to assist our businesses with those liquidity needs. Our strategy was to take the majority of 5 million in fees from the program and build our loan loss reserve this past year by over 4.5 million, increasing it to nearly 14 million dollars. As it has turned out, the program was certainly a lot of work, as we all know, for our staff, as it was a significant disruption. But it was a great win for our franchise, a huge benefit to our clients, and particularly the 200 prospects that we've developed into new clients. Now that the end of the PPP program is within sight, we have eagerly returned to our traditional 7A SBA lending strategy, In fact, this quarter delivered gains on sale of $168,000. Operational excellence are 14. Mortgage refinance volume slowed in the quarter as the movement in rates made the refinance segment of our sporadicy certainly less attractive. For the quarter, 14% came from internal refinances, 23% from external refinances, and 13% came Pleased to report, purchase and construction lending was 63% of our volume. However, we are encountering low inventory in all of our markets and certainly increased competition for new deals. Expense levels for the quarter were down from the prior year, clearly having a third less in mortgage volume, reduced commission expense, and last year we also moved all of our support staff in the mortgage arena to more of a per-file compensation model, that has realigned our levels of compensation with our levels of production. We understand that the mortgage business line is highly variable, and our model continues to be built for 500 to 600 million in annual volume. We will continue to look for ways to make the business line more efficient and, of course, more profitable. As we have discussed in prior quarters, the variable here is not the level of production, but rather the number of producers to achieve that volume. As such, all of our regional real estate leaders are out recruiting MLOs every day. We think there will continue to be more disruption in the arena among our competitors. And as we remain committed to the business line, we expect to leverage our products, our brand, and our strong market presence to achieve our production goals. And finally, asset quality. As we revealed last quarter, we were confident that $1.6 million they have, and thereby has reduced overall NPAs by nearly one million for both the prior year and linked quarters. However, our level of non-performing loans is elevated a bit due to the slight increase in our residential loan portfolio. As our communities have begun to allow the foreclosure process to move forward, we do expect to improve our metrics in the coming quarters. As I stated earlier, record earnings in 2021 from PPP and mortgage sales allowed us to build our reserve level, which now stands, as I mentioned, $14 million, and 1.62% of loans. Net charge-offs were just $1,000 and a quarter, and we certainly have the runway within our reserve to easily handle anticipated loan growth throughout the year. Now I ask Tony to give us a few more details, Tony, if you would, on the quarterly performance.