Q3 2022 SB Financial Group Inc Earnings Call
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.
They will begin with remarks by management and open the conference to be investment community for questions and answers.
I'll turn the conference over to the survey kits with SB financial. Please go ahead Sir.
Good morning, everyone I'd like to remind you that this conference call is being broadcast live over the internet and it'll be archived and available on our website at IR that your state Bank Dot com.
Joining me today are Mark Klein, Chairman, President and CEO and Joe.
I haven't seen our chief financial Officer.
This call may contain forward looking statements regarding SB financial's performance anticipated plans operational results and objectives.
Well, we're looking statements are based on management's expectations and are subject to a number of risks and uncertainties that could cause actual results to good luck.
So different materially from those expressed or implied on our call today.
We have identified a number of different factors, but then the forward looking statements.
Our earnings release, which Youre encouraged to review.
The Nashville undertakes no obligation to update any forward looking statement, except as required by law. After the date of this call.
In addition to the financial results presented in accordance with GAAP This call.
It also contains 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. Huang.
Thank you Sarah and good morning, everyone. Thanks for joining Tony Constantino me for our third quarter 2022 conference call and webcast.
The high level highlights for the quarter include net income $3 3 million down 761019% all from the prior year quarter.
It would be up 9% when you exclude the PPP program and a small MSR recapture on.
On a year to date basis, net income 9 million diluted EPS $1 27 down from two O eight EPS last year or a decline of 81 per share.
So mortgage lending in both this year and last EPS would have been up 14 cents per share year over year.
Return on average assets, one 3% return on equity and narrow 11 per ton.
Net interest income $10 4 million was up eight 7% linked quarter and four 1% from the prior year loan growth and interest rate increases.
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 ordinary.
Paired to the prior year annualized our loan growth for the first nine months of the year with a healthy 16, 6%.
<unk> grew from $14 1 million, but were down nearly 26 million from the prior year.
Expenses were down from both the fourth quarter by three 9%.
By seven 7%.
Mortgage origination volume for the quarter was nearly 69 million and for the trailing 12 months are now originated $388 million.
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 point for sure.
Last year the reduction of 63%.
Asset quality metrics remained strong with non performing assets at just 40 basis points.
And therefore, a loss for the year now stand at a net recovery of $19.
We continue to attribute our success to our continued commitment to our five key strategic initiatives that we've talked about for a number of quarters and that's continuing to diversify our revenue balancing net interest income and fee based business lines more scale.
Which for US is organic growth more products and services more scope with more households, and more services and cross sell products in those households.
Worse.
Excellence in our operations through better deployment of technology and of course, lastly asset quality first revenue diversity.
This quarter mortgage volume and loan sale gains were down from the prior year, 55% on volume to nearly $69 million and 78% on.
Gangs to 876000.
The impact of higher rates as evidenced in the percentage of mix of volume for the quarter with refinance at just 11% and purchase and construction of 89%. This compares to the third quarter of last year when the split between refinance volume was 52% and purchase business 48%.
Honestly significantly more balanced the relationships, we have built with reorders over the past decade, plus are paying dividends in this pivot to the purchase mark.
Noninterest income decreased two 4 million from the prior year quarter of $6 6 million.
The current quarter includes a mortgage servicing recapture all 65000 compared to a recapture up 248000 and.
In the third quarter of last year.
Noninterest income to total revenue for the year still remains strong at 33%, but well below our traditional levels of near 40%.
Our wealth management team continues to provide stable and consistent revenue in the quarter of 930000.
<unk> continues on pace to deliver annual revenue of $4 million. Despite our wealth assets under management now down 8 million year to date, we are still performing better than the past.
Thanks.
In line with the S&P 500 index quarterly different risk profiles.
Baseline and our decline was 15, 4% and the S&P 500 index down $15, three NASDAQ index down nearly 29%.
Second initiative more scale loan growth in the quarter was quite strong as we were up $30 million from the linked quarter and up $81 million <unk> from the prior year quarter all of our regional markets have solid pipelines, we continue to prospect and call aggressively.
With this quarterly growth noted we have now grown five our last six quarters up over 100 million from $815 million of balances to over 925 million or 13, 4%.
We intend to continue to drive organic growth as we entered the commercial arena of one of our newer markets.
Apple's Indiana.
We feel confident this market is complementary to our higher touch.
Our relationship based model that has been.
Similar potential to that of our growth markets like Columbus Fort Wayne Finley.
The linked quarter growth in our deposit portfolio was welcome and reflect the hard work of our bankers are executed and reaching out to our current clients and prospects proactively.
We continue to see strong competition for funding in each of our markets, both bank and non bank competition.
We clearly intend to remain relevant in this retail driven spaces, we continue to seek lower cost money to grow our loan book.
Our loan to deposit ratio was up again this quarter to 85%.
And as we enter a bit closer to our historical levels, which would be somewhere in the 90 days.
The increase of one six percentage points was the result of the increased deposit market as much.
Third is our strategy to develop deeper relationships.
More services in those households.
As we discussed in prior quarters. The success, we garnered in the PPP program enabled us to capture over 200, new relationships and expand on 920 existing months each driving more scope.
Our SBA strategy post pandemic is accelerating.
This quarter, our SBA business line contributed 125000 revenue as we have begun to witness more traction in the demand for seven of enhancements.
We continue to have high expectations for SBA originations this year and beyond that ones that will drive us to the top quartile of nationwide producers of SBA models.
Although our transition from PPP program to seven a program originations. This year has been lower than in Florida than we expected we have originated over $6 million. This year to date in July .
I am happy to report that our pipeline stands at $15 million in as strong as we've ever seen since the onset of the pandemic.
All business lines benefited this quarter from continuing to work internationally by making proactive referrals to one another and different business lines.
In fact today, our bankers have now.
Over 100, <unk> to another team leading to nearly 600 closure girls for an incremental additional $57 million of new business.
To ensure our culture remains a collaborative one we recently hired a corporate sales champion too.
To expand key sales initiatives and drive best practices to complement and pending sales strategy is associated with RV CRM platform Salesforce.
Operational excellence, our fourth theme.
Our mortgage business line has enabled us to drive noninterest income to peer leading metrics with an average of 40% of total revenue over the last seven years.
This success is also reflected in the growth of our servicing portfolio that now stands at nearly 9000 households on approximately $1 4 billion generates.
$3 4 million and servicing revenue annually.
With the reduction and.
Originated residential sample products and lower gain on sale, we continue to supplement our understanding.
Net interest margin on portfolio products, albeit with some <unk>.
<unk> duration risk as we've mentioned in prior quarters.
However, it has the market eventually.
What do you feel we are well positioned to capitalize on potentially the next wave of refinancing opportunities should they appear.
As such our expanding we're expanding our pay for performance variable base pay and that allows that to deliver something to ambulate near that 460 million average production per year.
With individuals Hello production declining from an average of approximately $30 million to $15 million today.
Continue on our path to identify more producers to deliver that 500 million from 'twenty two producers at the end of 'twenty, one 'twenty five last quarter to 27 today.
Our retail staff will continue to complement our first mortgage producers by delivering consumer second mortgages and home equity lines to continue to improve scale.
Once again as I imagined the expense levels year over year and compared to linked quarter decline principally from lower mortgage loan volume.
Expenses related to that production.
With reduced operational expenses and the business plan, we discussed last quarter. We continue to have the processing capacity to deliver something near our historical average last one we can sort of the cross selling opportunities associated with those guys all households through our new CRM platform, we identify a clearer path to potentially greater organic balance sheet grow.
<unk>.
Retail office walk in activity continues to moderate in the face of a fairly strong commitment.
To a more efficient digital delivery channels.
As we reported last quarter, we are consolidating much of our daily digital and telephonic client transaction into our new contact center.
When we deliver greater clarity on our service level commitments by optimizing our new CRM Salesforce as I imagine, we stand to improve both client intimacy and organic growth potential.
And finally.
Asset quality.
We understand there are a number of uncertainties associated with the economy. However, we have yet to identify any deterioration in our customers' financial position.
While we are not satisfied any provision thus far in this year, despite our over $100 million smart growth, we remain comfortable with our current reserve levels due in part to that $5 5 million and we set aside the last couple of years.
Coverage of nonperforming loans, which we feel is a key metric that demonstrates the strength of our portfolio stood at 313% at the end of the quarter, our strong underwriting process should continue to pay dividends as we prepare to pivot.
As the credit cycle matures.
Now I'll tell you I'll give us a little more detail on our quarterly performance.
Thanks, Mark and good morning, everyone again for the quarter, we had GAAP net income of $3 3 million and then $9 million for the first nine months and some highlights from the quarter.
Total operating revenue was up one 5% from the linked quarter, but was down $13 two for the third quarter of 'twenty one.
Winds in the mortgage business has been offset by loan growth and improved margins.
Loan sales delivered gains of 1 million from mortgage small business and for the nine months total loan sale gains and $4 2 million.
March revenue was up 837000, or eight 7% for the linked quarter and when we adjust for a PPP loan interest income was higher by $1 3 million from the prior year or 14, 7%.
And Additionally, if we adjust operating revenue remove the impact of Pvp in the entire mortgage business line.
We have positive revenue growth $19, two and 16, 1% the linked and prior year quarters, respectively.
As we break down further the third quarter income statement.
Looking at margin first the impact of the PPP initiative was minimal in the quarter as well.
We're down to just one remaining credit.
However, the year over year comparisons is still material to our results.
While adding just 114000 to margin in the 2022 first nine months.
TTP added $3 3 million for the prior year similar period.
Adjusting average loan yields for both periods would result in a 21 basis point improvement from the prior year and up 36 basis points from the linked quarter.
The improvement in loan yields and shifted mix out of cash and securities drove a similar improvement in earning asset yields.
With our loan growth of low double digits funding needs have accelerated in 2022.
We have needed to fund that growth with retail deposit offerings at the margin and selective wholesale funding options.
While we plan to allow our investment portfolio to decline over time with scheduled amortization, our expected loan growth will continue to require higher deposits and borrowings funding.
As we look at that funding cost for the third quarter, our deposit cost of funds came in at 31 basis points with the cost of interest bearing liabilities of 58. This compares to 21 and 39 basis points, respectively from the linked quarter.
From the linked quarter debated on our earning asset yield was 32 basis points and interest bearing liabilities was 13.
Clearly competition has intensified for funding and we expect that deposit in overall funding costs continue to rise in the coming quarters.
Net interest margin at 346 expanded 30 basis points for the linked quarter and compared to the prior year was up 25 basis points and wouldn't be up 55 basis points with TPP is excluded.
The significant NIM improvement from the linked quarter was driven by a positive change in mix on the asset side of the balance sheet as interest bearing cash was allocated loans and deposit levels would have declined.
Year over year comparisons for total noninterest income, which was down 39%.
Are compromised by the expected declines in mortgage revenue and the impact of the servicing rights for cash.
If we look at the quarter and exclude the mortgage gain on sale of the MSR recapture noninterest income was up over 26% for the prior year with the adjusted growth driven by better customer services higher servicing income and better swap activity.
Our fee income to average assets was still a strong one 2% for the quarter and one 5% for the first nine months of 'twenty two.
While down from both the prior year and our historical average we are still above the 75th percentile of our 65 bank.
Peer group.
Which as Mark indicated earlier.
Diversity is one of our strengths and our key initiatives with not only mortgage wealth swaps and that service fee income we discussed.
As I discussed last quarter residential gain on sale yields continued to stabilize it came in at two 4% in the quarter and for the year or at 232%.
This quarter, our sale percentage of originated loans with just 57%.
And 62% for the year as we've done much more portfolio in private client loan origination. These.
These levels continue to be well off from our traditional 85% sale percentage.
Market value of our mortgage servicing rights improved slightly this quarter with a calculated fair value of 114 basis points.
This fair value was up three basis points for the linked quarter and up 30 basis points to the prior year. We now have a servicing right balance of $13 5 million and a smaller remaining temporary impairment of 262000.
Expenses of $10 4 million were down from both the linked quarter in the prior year as our volume business declined expense levels move in concert. However, our revenue redemption of 13, 2% from the prior year was nearly double our expenses declined seven 7%.
But if we compare that to the linked quarter revenue growth.
Was one 5% while expenses declined three 9%.
We expect that revenue growth will continue to improve quarter over quarter with better margins, while expenses will be at or slightly lower than the $10 4 million level from this quarter.
As we turn to the balance sheet loan Outstandings at September 30 stood at $925 million or 71% for lab tests, which compares to 63%.
At the prior year.
The third quarter saw another significant mix shift within our earning assets as cash and securities declined by over $24 million.
From the linked quarter, while loans grew $30 million and deposits grew 14 months.
Our loan to deposit ratio ended the quarter up over nine percentage points from the prior year.
Historically, we have limited our investment portfolio to allow for higher loan growth.
But we have moved from less than 10% of our assets in bonds in December of 19.
2019 to the COVID-19%.
Our excess cash was invested.
We were cognizant to remain shorter duration and focus on cash flow instead of yield but that is subjected us a higher market value deterioration.
We're comfortable now that portfolio has an average duration of just over five years and should provide ample cash flow to expand to fund expected loan.
Looking at our capital position, we finished the quarter at $114 6 million down 29, 7% and 26% from the prior year with our equity to asset ratio standing at eight 8%. However, when we exclude the OCI temporary valuation adjustment of $33 4 million our equity grew to $1.
<unk> for the prior year and would be 11, 4% on an equity to assets basis.
Even after over $6 million in stock buyback and $3 3 million in dividends.
We continue to buy back shares in the quarter was 77396 repurchased in year to date, we have repurchased over 300000 shares or four 4% of total shares outstanding.
We expect to continue our buyback our.
Our shares at these current prices funded with organic net income.
Finally, all of our asset quality metrics are stable to positive and charge offs continued to be well controlled for both the quarter and year to date.
Total delinquency levels of just 31 basis points in the quarter and were down from both the linked quarter and the prior year currently our level of allowance to loans is 149%, which is better than the major exchange traded banks for $1 billion to $100 billion by $32.
I will now turn the call back over to Ron.
Thank you Tony I want to conclude as we've done in prior quarters acknowledging the dividend announcement, we made last week of 12, five cents per share, which represents a 27% payout ratio and a dividend yield of 294%.
Through nine months, our loan growth and higher rates of help you offset the expected decline that we've certainly realizing the residential mortgage arena. Additionally, we continue to feel good about our markets.
We generated the product lineup, we have in our prospects for continued balance sheet growth.
Consumer households are strong with lower cost leverage, resulting in a lower overall debt to income ratios and robust disposable income fueled by that three 5% unemployment market.
We continue to see positive economic growth absent much stronger resistance should inflation persist.
Now I'll turn the call back over to Sarah for any question sure. Thank you and we're now ready for our first question.
Thank you now begin the question and answer session.
That's a good question Press Star then one on your telephone.
Using a speakerphone please pick up your handset before pressing the keys.
Withdraw your question.
Please press Star then two.
This time, we'll pause momentarily to assemble the roster.
First question from Brian Martin with Janney Montgomery. Please go ahead.
Hey, good morning, guys.
Hey, Brian one Brian .
Just a couple for me just a high level just on the on the mortgage Oh, I guess whoever it maybe mark just on or Tony just on I guess your outlook here I know you talked about kind of the dynamics in some of the lenders you look in the MLR, which is looking to bring on but just as far as how to think about kind of the shift we've seen with rates and Disney.
General outlook as far as kind of the volume volume outlook Youre thinking about here over the next couple of quarters and the gain on sale margins and just kind of sale percentage just any commentary that you can offer on the forward look here as far as just how to think about mortgage given the changes we've seen.
Yes, just a couple of comments, Brian obviously, we remain bullish on it and we like the 9000 households, we probably have one five to maybe 1.6 service for household. So we're pretty excited about utilizing salesforce to deepen that relationship that said as Tony and I both have indicated.
The state a whole market at summit is substantially higher than where we were so we're doing some of that five five to six six and a quarter kind of mortgage portfolio product, which is keeping it on our books and positioning us for potential refinancing.
Yes, we I call on record a number of quarters that the.
The variable is not the number it's a number of producers that we just hired two high level producers.
In the Indianapolis market, which is going to support our efforts down there.
And that 500 as a number that we've concentrated on albeit substantially the last sold in the secondary market because of the product.
But that's where we've landed.
Dropping to 15.
Per.
Would you do the math it would have a snare.
Only producers plus or minus so that's where we're headed and we seem to be finding some of those people because the other ones have begun to exit the business climate and Tony I don't know what numbers, we have an airport.
So so Brian .
About $260 million through the nine months of originations, we're going to we're going to end up somewhere between 300 to 320 for the full year, depending on how things roll out here in Q4.
I would say our $2 two five gain on sale yield is going to be pretty static here in Q4, maybe slightly up in 'twenty three.
Certainly looking in 'twenty three to improve on that 325 total number.
<unk>, 6% to 10%, we'll see how that goes we think we can pick that up from competition fallen away as opposed to the overall market and we just think we're going to get a bigger share of what is going to be kind of flat to slightly down market clearly refinance is going to remain at about 10% to 15% of total volume.
We think through the end of 2003, two week ADC some moderation in rate.
Okay, and I guess your sale per cent, it's Tony I guess, you're still comfortable I guess continuing to put it on the books for now I guess, I don't know where that kind of peaks out as far as how much appetite you have to to continue to do that just with the arm products versus you know the the fixed rate, but is that that just generally how to think about it.
You'll continue to see that grow.
Yes, I think that.
That's really the one non open question I think we're still getting quality clients I think the arm product is attractive now because of I think the shock impact of a 7%.
Freddie Mac fixed rate I do think those rates will come down a bit and I think people will get more used to it. So do I think we're going to get back to an 85% to 90% sale percentage no I wouldn't think so in 'twenty three we're probably going to inch towards that 70 to 75 because were currently kind of in that 60% range, which I think is an anomaly that would be.
That low.
Yeah.
Okay. That's perfect that's helpful and so it sounds like there's plans to hire.
Do a fair amount of hiring potentially in 'twenty three is how to think about that mortgage number you've hired a couple of recently, but this is it seems like there's good opportunity to continue to add those folks.
Well when I read about.
Okay.
What's going on in some of these places.
Capitalize on the refinance market, where we're really happy that we've got the relationships, we have Ryan with a real traffic.
Coming to this purchase market I think that's going to play well into our cards at what we've done with a strong lenders that we have.
We're just kind of go after the first part of it and we're going to hire good producers in good markets and again, we're going to get back to the average that we're built for Housewives, we continued to cut expenses and potentially FTE.
Yeah, Okay, perfect and then just to I guess kind of two others here just on the loan growth outlook. I mean, it's been really good as you guys have outlined particularly a year to date.
How should we think about that one just rates being up it seems like concerns in the market as it is the outlook you know kind of the pipeline for loan growth.
<unk> seen kind of leading indicators suggest that slowing is it still pretty active in your outlook. As you know are still very positive just kind of curious how you know the fed actions are impacting your outlook there.
Yes, I think some of it Brian is the fact that.
We have taken some duration risk in the last year year and a half in those lower rates have kept people and the deals, albeit with lower cap rates with some people have begun to take hold profit off the table with lower cap rates, but that said that seems to have stabilized and we continue to make a lot of calls as I mentioned aggressively as I mentioned, we just hired.
Higher corporate sales champion Thats going to get in the weeds for with all of our salespeople and all of our business lines and just give us a little more intentional with.
The digital platform, we have and the new CRM platform. We have so we can take those 9000 households in take up from one six service for household because they largely came because of the mortgage business line and hopefully expand them into two and three that's we're going to build organically.
I'm bullish on what we've done again.
Now in Indianapolis market.
Trying to gain some traction in the commercial arena down there, albeit slow again with a slowdown in the economy.
Seth on the branch a number of times, including today, but generally speaking we're still seeing good opportunities and the nice thing is we've got some nice diverse markets that we're in I think it's all playing well into our overall model.
Okay, and the pipelines today, it sounds like you're still pretty optimistic about growth for 2023, I mean, maybe not at the pace, obviously, you've put up this year, but it's still pretty pretty positive on the potential there.
I think generally again I think you know that.
The fed's moves are going to be data dependent.
If if they can ease off of the brakes here going into 'twenty, three I think that will be positive.
I think it really depends on how the economy reacts.
Car sales are.
Our Dallas still are we still got three 5% unemployment or where the people are going to come from work.
But they've got some work to do in <unk>.
The economy responds well I think we're going to continue to find clients that want to lever up a little bit, albeit with well duration risk on our side.
Yeah Okay.
That's helpful and maybe just maybe for Tony on the margin Tony just the margin expansion.
Can you just talk about it I guess, maybe how the how the margin react over the next quarter or so and just if we do see a pause by the fed does to the betas continue to kind of kept the deposit betas continue to kind of catch up or maybe you've got a couple more quarters of expansion and then you start to see a maybe a little bit of a decline in the margin.
As those betas deposit betas catch up and kind of overtake the loan beta but just.
Just trying to think about how the margin trends here over the next you know two to four quarters.
Yeah, I think that's I think that's spot on.
And although the data is kind of approved but three times what deposit betas did in the quarter I would expect will be kind of one to one in Q4.
We fully expect there to be 75 basis points here. This afternoon, and maybe one more here of some number and then somewhat of a pause.
I think it's.
Really most of our margin expansion is driven obviously by the loan growth expectation I would think in Q4 loans, we're going to have a few pay offs that are going to kind of keep us Navy levels are slightly up here in Q4.
We did call it 100 million on a year over year basis, with maybe half of that on residential mortgage I certainly expect as we go forward residential mortgage as a percentage of our growth is going to drop to call. It 25% to 30% I don't think we'll do as much.
On portfolios we have.
But the pipelines are good so I think margin is going to continue to improve.
In Q4 and in Q1, and then it's going to be I think relatively stable as deposit cost catch up and funding cost cut into that asset margin improvement.
Okay and most of the improvement Tony is it's a combination of just the assets repricing upward and then just the remix youre talking about if you're funding it sounds like you're funding most of the growth from the cash flows on the securities portfolio. That's that's the plan at this point.
Yeah, I mean, we're going to have.
Call it $10 million to $12 million of cash flow in Q4 from the bond portfolio, which we won't roll over and we will just have that just fund.
Loan growth still feel fairly good that we can be stable to slightly up on the deposit side be it may be a little bit higher obviously than what we're currently paying and I think that mix and the overall growth is a big function and driving margin.
Gotcha Okay.
M P.
Perfect and maybe just one last one just on the unexpected side I mean, the trends were very favorable this quarter. Just a few just given the actions you took on I've just come from an efficiency standpoint, and just being a little bit less production of mortgage but just it sounds like this.
The rate of expenses this quarter level of expenses this quarter Appeals appears like a.
You know kind of a baseline level, you're not expecting a lot of growth out there is that.
Fair or just you know when you think about next year the inflationary pressures. If we can just what's the best way to think about.
How to capture some of those drags if you will from the inflationary standpoint into the expense base as we look at next year.
Brian .
Enel side, we've seen.
Bit of a change in narrative, we felt some open slots, but as you might expect we're going to be fairly deliberate.
As we have eliminated all over time, we're going to be looking hard at all positions that open up as to whether we fill it out.
Which obviously.
<unk> expense on our expense side, which would be personnel. So we're looking at everything as we speak we know we need to be more efficient in our fixed ratio not where it needs to be we try to improve it by.
Proofing, our scale, which.
We're okay with growing medium too.
The upper quartile on growth, which I think we've done a nice job of growing the balance sheet.
We certainly need to continue to have a concentration on not only the commercial loans, but the C I and the deposits that come with it to Richard advantage, that's going to be a critical piece of our growth because that's how we're going to make the margins we need to incrementally expand our the average is adding the incremental higher which is what we're going to concentrate on.
But that said we continue to remain fairly bullish on where we find ourselves.
Gotcha, Okay. No that's helpful and I guess just the last one really was just on a.
Just the provision line or just reserving going forward with the growth I guess is it you guys have had a handful of quarters here with no provision given the strength of the credit quality and you know kind of growing into the reserve is.
We as we think about going forward I guess should we start to expect some I guess this is the reserve level now at a level you feel like it's sustainable and we just provisioning for growth at this point is that kind of how to think about it or is.
Is there still a little bit more recapture on that on the reserve.
So again, we're pretty bullish on our underwriting process.
We've had great results of course, everybody has in this market.
Finally, I want to find out how the economy reacts I think will dictate a little bit of the path forward that said I think we need to continue to consider.
And definitely what we intend to do in 2023, which is probably going to beg. Some increase worked pretty contained at the 14815 down from a $1 six or so.
Where we were before but I would say in 'twenty, three thats going to brag, a little bit of a contribution.
<unk> contribution to the reserve, we've never released any.
Im really pleased that we took $5 5 million from the goodwill that we realize on the PPP program and start going into reserve, that's paying dividends as we speak today, but I do think there'll need to be some addressing all the reserve side going into 2023, because we intend to continue to grow.
Yeah, Okay that makes sense and just you Mark you mentioned just your outlook on SBA It seems a.
A bit more bullish maybe than it has been as.
Is that you know like I guess kind of I guess, that's your expectation that we should see a little bit more.
Revenue growth next year out of that business, given kind of trends youre seeing now it sounds like the pipeline was as strong as it's been and maybe I misunderstood your comments, but it seemed like you are pretty optimistic there.
Well again, we had great traction as you know Brian you know six years ago seven years ago, we developed the strategy in SBA, but wanted to be in the top 100 in the U S. You had probably $50 million in five years and in PPP.
We hit the pause button did $112 million of PPP now we're back at seven eight we love the seven eight program as I mentioned that we've got.
$6 million, so far this year, but we want to get back to the top quartile of banks that do produce SBA in the country and we think we've got the right people out in the market. We think we're in the right markets and again in this environment, where the economy is changing a little bit as I mentioned before we love replacing <unk>.
With that and we love to enhance that they can give us the yields are marginally higher.
We're kind of in the driver seat on <unk>.
Gathering those deposits were on project based financing, we don't get deposits, they're just project financing CRE, which doesn't do anything for the liability side of the balance sheet. So yes, we're more bullish on SBA, we can make great things happen on that and we take good care of our producers to doing so.
Like to get us back to 2023 more of that $15 million to $20 million at least.
Just because we've got great targets, and how endy gives us even more potential.
Right, Okay, perfect that Todd. Thank you guys for taking the questions and nice quarter.
Yeah, that's right Brian .
Thank you and again.
Justin Please press Star then one.
At this time, we have no further questions I will turn the call back over to Mr. Mark Klein for closing remarks. Please go ahead.
Thank you again, thanks for joining us we look forward to joining you all again in January with our fourth quarter of 2022 results. Thanks again for joining and good day take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.