SB Financial Group, Inc.

Good morning, and welcome to the SB Financial second quarter 2024 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 Merkus with SB Financial. Please go ahead, Sarah. Sarah?

Thank you. Good morning, everyone. I'd 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. 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. 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.

Thank you, Sarah, and good morning, everyone. Welcome to our second quarter 2024 conference call and webcast. Highlights for this quarter include net income of $3.1 million, up 1.2%. Diluted earnings per share increased to 47 cents, a 6.8% increase from 44 cents that we delivered in the prior year quarter. Net interest income totaled 9.7 million, a decrease of 1.7% from 9.8 million in the second quarter of the prior year. Total loans increased to 1.01 billion, up over 20 million or 2.1% from the prior year quarter. and higher compared to the linked quarter by nearly 14 million. Return on average assets increased to 0.93%, up two basis points, while return on average equity declined slightly to 10.16%, down 16 basis points. Tangible book value per share increased to $15.26, up $1.45, or 11%, compared to the prior year, while adjusted tangible book value increased to $20.02. Our mortgage banking revenue increased by 18.8% to $1.8 million this quarter, demonstrating our strong operational performance compared to the same period last year. Mortgage originations for the trailing 12 months were $218 million, delivering a servicing portfolio now of $1.39 billion, or an increase of approximately 2.7% from the prior year. Total interest expense amounted to $6 million, marking a slight decrease of 2% from the linked quarter. Operating expenses for the first six months were also down approximately 1% compared to the prior year same period. And finally, asset quality metrics continued to improve. Our strategic path forward remains hinged on our five key initiatives. First, revenue diversity. As I mentioned, our mortgage banking net revenue increased by 18.8% to nearly 2 million from the previous year, demonstrating our initiatives to balance net interest income with fee-based revenue amidst shifting market conditions. Organic growth for scale. We achieved a 5.6% annualized growth rate in our portfolio this quarter. We have a very strong pipeline in a number of markets with the Columbus team providing the bulk of the expected growth for the second half of 2024. Deepening in relationships, more scope. Our deposit base grew by $44 million to $1.12 billion. The Ohio Home Buyer Plus program that I mentioned briefly last quarter has been quite successful. To date, we have opened nearly 400 accounts with balances in excess of $40 million at a weighted rate well below our margin and the market. We're especially encouraged that over 25% of those accounts are new relationships to our bank. Excellence in operations, we have developed a stronger bench to ensure durable operational efficiencies. As a result, we've experienced a modest 3.2% increase in non-interest expenses compared to the prior year quarter, delivering a net non-interest expense ratio of negative 1.87% with still a strategic goal of zero. Asset quality remains robust, evidenced by a low non-performing asset ratio of 0.39% of total assets. While this metric has had a minor shift, we remain confident of our diligent approach and continued commitment to prudent portfolio administration. In fact, our classified loans balances declined over 25% compared to the prior year period. Now looking just a bit closer at revenue diversity, our mortgage businesses originated over $75 million in volume, an increase of nearly 15% from the $65 million in the prior year quarter. Mortgage sales reached over $55 million, representing 74% of total originations. While certainly below our capacity, we feel certainly better about the direction of this business line. Our Indianapolis office has delivered nearly 30% of our total volume thus far this year, and we're also seeing opportunities to add mortgage originators throughout our entire footprint. As we indicated last quarter, we have solidified the leadership of this business line, which should ensure that opportunities for expansion and product growth remain front of mind. We're also excited to confirm that we will be venturing into Another dynamic Ohio market, Cincinnati. We have landed a seasoned market leader that will not only produce, but will also work to build out a team of local professionals as well. With his background and market presence, we are confident that the residential real estate lending levels will rival those of our other growth markets of Columbus and Indianapolis in fairly short order. Non-interest income stabilized at $4.4 million, benefiting from gains in mortgage servicing rights and customer service fees. Our title insurance business and wealth management services, despite market challenges, remain key areas for future growth. We believe the growth trajectory in both divisions will be positively influenced by our holistic approach to client care, which includes coordinated outreach and referrals across all reasons and business lines. We are focused on coordinating events with our key community leaders and COIs with the goal of introducing these unique businesses to a much wider population. On the scale front, deposit growth has accelerated. Again, as I indicated earlier, this quarter we were up by 3.1 million compared to the linked quarter and up 4.1% from the prior year. Deposit costs have slowed. as total interest expense declined from the length quarter for the first time in over two years. We touched on earlier the success of the Home Buyer Plus program, and we expect to continue to add clients and expand this portfolio well into the third and fourth quarters. Loan growth is certainly gaining traction, while not up to our historical standards of high single-digit growth on year-over-year basis. did show growth from the linked quarter, and we are starting to see the positive impact to our pipeline of the calling efforts from the last several years. Over the last 12 months, we have had loan production of $164 million, excluding residential mortgage lending, and right in line with total production from the prior 12-month period. Given our diverse markets, capacity, and commitments, growing our loan portfolio remains a top priority as we move through the second half of 2024. A strong equity foundation is certainly a prerequisite to our growth. In this quarter, we strengthened it. Our equity to asset ratio grew to 9.35%. Our tangible equity to tangible assets ratio increased to 7.2%. And our common equity tier one ratio for the bank remained strong at 13.89%. In terms of deepening existing relationships more scope, we continue to embrace technology to enhance client engagement. We have further integrated our corporate sales champion and new contact center with more FinTech platforms, aiming to deepen our penetration and improve our level of services per household. Emphasis continues on organic expansion opportunities. Significant resources have been added to our management team in the greater Columbus market where we anticipate accelerated balance growth in both CRE and CNI arenas. Our optimism comes with an extended team that now includes four local commercial lenders with local support staff and a new professional treasury management specialist to drive funding opportunities at a level below the margin. We continue to build momentum from previous calling efforts and reap the benefits of the groundwork we laid in the previous quarters to focus on organic growth that includes SBA lending opportunities, both sold and portfolio loans. With a current pipeline of now over $7 million, we are poised to see meaningful contributions to future revenues as we assist small business clients with proper balance sheet structure to optimize cash flow. Speaking to operational excellence, the mortgage business line remains a key driver for our company. Despite the challenges posed by higher interest rates, our mortgage business continues to perform quite well. In addition to the gain on sale revenue of $1.3 million achieved this quarter, revenue from our servicing portfolio was a healthy $862,000. We sold over 74% of our originated volume and well in line with our traditional levels with gain on sale yields on par with historical averages at 2.3%. This approach of an 80-20 sale-to-portfolio origination level not only supports our clients' needs, but also ensures the sustainability of our mortgage operations. The change in the market dynamics is evident in that over 94% of our volume thus far in 2024 has been for purchase or new construction transactions. Refinance volume is certainly a distant memory. Finally, on asset quality, clearly a focus of ours since the Great Recession. In fact, net recoveries were actually positive this quarter and underscores the effectiveness of our risk management strategies. Our proactive internal loan review program continues to play a crucial role in early identification and mitigation of potential client stress, ensuring we address issues well before they escalate. The coverage of our non-performing portfolio remains comprehensive, showcasing not only our commitment to maintaining a healthy loan portfolio, but also building ample reserves as well. Now I'd like to turn the call over to our CFO, Tony Costantino, for some additional comments on our quarterly performance. Tony?