SB Financial Group, Inc. (NASDAQ:SBFG) Q3 2022 Earnings Conference Call November 2, 2022 11:00 AM ET

Company Participants

Mark Klein - Chairman, President and CEO

Tony Cosentino - CFO

Sarah Mekus - Executive Assistant, Corporate Secretary

Conference Call Participants

Brian Martin - Janney Montgomery Scott

Operator

Good morning, and welcome to the SB Financial third quarter 2022 conference call and webcast. I’d like to inform you that this conference call is being recorded, and all participants are in listen-only mode. We will begin with remarks by management, then open the conference to the investment community for questions and answers.

I’ll now turn the conference over to Sarah Mekus with SB Financial. Please go ahead, Sarah.

Sarah Mekus

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; and Tony Cosentino, Chief Financial Officer.

This call may contain forward-looking statements regarding SB Financial’s performance, anticipated plans, operational results, and objectives. Forward-looking statements are based on management’s 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 after 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 release.

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

Mark Klein

Thank you, Sarah, and good morning, everyone. Thanks for joining Tony Cosentino with me for our third quarter 2022 conference call and webcast. At a high level, highlights for the quarter include, net income $3.3 million, down $761 and 19% off from the prior year quarter, but would be up 9% when you exclude the PPP program and small OMSR recapture. On a year-to-date base, net income $9 million, diluted EPS $1.27, down from $2.08 EPS last year, or a decline of $0.81 per share. Excluding the effects of mortgage lending in both this year and last, EPS would have been up $0.14 per share year-over-year. Return on average assets 1.03%. Return on equity nearly 11%. Net interest income $10.4 million, was up 8.7% from a linked quarter, and 4.1% from the prior year. Loan growth and interest rate increases have offset our higher funding costs. Loan balances from the linked quarter rose $30 million. When we adjust for PPP balances, loans were up $81.5 million, ordinarily 10% compared to the prior year. Annualized, our loan growth for the first nine months of the year was a healthy 16.6%. Deposits grew from the linked quarter by $14.1 million, but were down nearly $26 million from the prior year. Expenses were down from both the linked quarter by 3.9% and prior year by 7.7%. Mortgage origination buying for the quarter was nearly $69 million, and for the trailing 12 months, they’ve now originated $388 million, despite the effects of the headwinds of this rapidly rising rate environment. The mortgage business line contributed $6.1 million in total revenue for the first nine months of this year, compared to 16.4 same period last year, a reduction of 63%. Asset quality metrics remain strong, with non-performing assets at just four 40 basis points. And net loan losses for the year now stand at a net recovery of 19,000.