SB Financial Group(US:SBFG)2022-01-28 20:59Financial Data and Key Metrics Changes - The company reported a net income of $3.3 million for Q4 2021, yielding a return on average assets of 0.99% and a pretax pre-provision ROAA of 1.22% [8][22] - Net interest income decreased by 1.9% year-over-year to $9.1 million, while organic loan growth was up $18.5 million or 2.3% [9][22] - Total operating revenue declined by $2.5 million or 13.7% due to reduced PPP forgiveness revenue and mortgage gains [22][24] - Noninterest income decreased to $6.6 million from $8.9 million in the prior year quarter, remaining flat compared to the linked quarter [11][22] - Tangible book value increased by $1.30 or 8% year-over-year to $17.60 per share [9] Business Line Data and Key Metrics Changes - Mortgage origination volume was $127 million, down 25% year-over-year, with total mortgage origination for 2021 at nearly $600 million, down $94 million from the previous year [10][14] - Wealth management assets under management reached a record level of $618 million, up $60 million or 11% from the prior year [14] - The Title insurance business contributed $2.1 million to noninterest income for the year, with over $500,000 in revenue for the quarter [12][13] Market Data and Key Metrics Changes - Loan balances excluding PPP effects were up $18.5 million or 2.3% year-over-year, while deposits increased by $64 million or 6.1% [9][15] - The company processed less than 50 PPP loans outstanding with a balance of just $2 million by year-end [15] Company Strategy and Development Direction - The company focuses on five key strategic initiatives: growing and diversifying revenue, achieving more scale through organic growth or M&A, expanding products and services, deploying technology for customized client interactions, and maintaining strong asset quality [10] - The company aims to reaffirm its commitment to traditional SBA 7A lending across its footprint, with plans to retain smaller government-guaranteed loans to bolster its balance sheet [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging environment but noted that client liquidity remains strong, with expectations for clients to initiate expansion projects [15][19] - The company models two rate hikes for 2022, with potential for more depending on market conditions [45][60] Other Important Information - The company repurchased 48,000 shares in the quarter and over 500,000 shares for the year, returning nearly $12.5 million to shareholders through buybacks and cash dividends [29][31] - The company has maintained a healthy reserve level, with reserves now at 1.68% of total loans, a year-over-year increase of 10% [20] Q&A Session Summary Question: Update on mortgage production and gain on sale margin outlook for 2022 - Management indicated that they expect continued innovation in mortgage products and anticipate a decline in gain on sale margins to around 2% by mid-2022 [36][40] Question: Thoughts on funding costs and potential rate hikes - Management believes they have reached the bottom of funding costs and models two rate hikes for 2022, with potential for more depending on market conditions [42][45] Question: Outlook for loan growth and pipeline status - Management noted that while loan growth has slowed, the pipeline is beginning to grow, with optimism for activity across their footprint [46][47] Question: Insights on technology investments and overall expenses for 2022 - Management highlighted that technology investments are crucial for retaining talent and improving client services, with expectations for expense growth to moderate in 2022 [51][53] Question: Capital management and M&A opportunities - Management is looking for opportunistic M&A targets while maintaining a disciplined approach to capital management [55][57]