Q2 2024 SB Financial Group Inc Earnings Call

Speaker Change: [music].

Operator: 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 Mekus of SB Financial. Please go ahead, Sarah.

Unknown Executive: 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.

Good morning, and welcome to the SB financial second quarter, 'twenty, 'twenty four conference call and webcast.

Speaker Change: I would like to inform you that this conference call is being recorded and that all participants are in a listen only mode.

Unknown Executive: We will begin with remarks by management, and then open the conference up to the investment community for questions and answers.

Speaker Change: We will begin with remarks by management and then open the conference up to the investment community for questions and answers.

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

I will now turn the conference over to Cerro Marquez with SB financial. Please go ahead Sir.

Unknown Executive: Sarah? Thank you.

Sarah S. Mekus: Thank you. Good morning, everyone.

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.yourstatebag.com.

Cerro Marquez: 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 and I are Scott you were state Bank dotcom.

Sarah Mekus: Joining me today are Mark Klein, Chairman, President, and CEO; Tony Cosentino, Chief Financial Officer; and Steve Walz, Chief Lending Officer. Today's presentation may contain forward-looking information, cautionary statements about this information, as well as reconciliation 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.

Sarah S. Mekus: 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 Walz, 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 in our SEC filing.

Speaker Change: Joining me today are Mark Klein, Chairman, President and CEO, Tony Cosentino, Chief Financial Officer, and Speedwell, Chief lending Officer.

Speaker Change: 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.

Speaker Change: Cereals are available on our website and we encourage participants to refer to them for a complete discussion of risk factors and forward looking statements.

Sarah S. Mekus: 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 Fincl undertakes no obligation to update them. I will now turn the call over to Mr. Klein.

These statements speak only as of the date made and SB financial undertakes no obligation to update them.

Mark Klein: 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%. Deluted earnings per share increased to 47 cents, a 6.8% increase from 44 cents that we delivered in the prior year quarter. Net 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 length quarter by nearly 14 million.

Speaker Change: I will now turn the call over to Mr. Klein.

Speaker Change: Yeah.

Mark A. Klein: Thank you, Sarah. And good morning, everyone.

Mark A. 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 one 2%.

Mark A. Klein: Welcome to our second quarter 2024 conference call and webcast. Highlights for this quarter include net income of 3.1 million, up 1.2%. Adjusted earnings per share increased to $0.47, a 6.8% increase from $0.44 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.

Speaker Change: Diluted earnings per share increased to 47 cents, a six 8% increase from 44 cents that we delivered in the prior year quarter.

Speaker Change: Net interest income totaled $9 7 million a decrease of 1.7% from $9 8 million in the second quarter of the prior year.

Mark A. Klein: Total loans increased to $1.01 billion, up over $20 million or 2.1% from the prior quarter and higher compared to the linked quarter by nearly $14 million; return on average assets increased 2.93%, up two basis points, while return on average equity declined slightly to 10.16% percent, 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. 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.

Speaker Change: Total loans increased to 1.11 billion.

Over $20 million or two 1% from the prior year quarter and higher compared to the linked quarter by nearly $14 million.

Mark Klein: Return on average assets increased to 0.93%, up to basis points, while return on average equity declined slightly to 10.16%, down 16 basis points. Tandard will book value per share increased to $15.26, up $1.45 or 11%, compared to the prior year, while adjusted Tandard will 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 Turling 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.

Speaker Change: Return on average assets increased to 93% up two basis points, while return on average equity declined slightly to 10.16% down 16 basis points.

Speaker Change: 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 and Tucson.

Speaker Change: 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.

Speaker Change: Mortgage originations for the trailing 12 months were 218 million delivering a servicing portfolio now at 1.3 dollars 9 billion or an increase of approximately two 7% from the prior year.

Mark A. Klein: 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 index expense amounted to $6 million, marking a slight decrease of 2% from the previous quarter.

Mark Klein: Total loans of 6 cents amounted to $6 million, marking a slight decrease of 2% from the length 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.

Speaker Change: Total interest expense amounted to $6 million.

Speaker Change: A slight decrease of 2% from the linked quarter.

Mark A. Klein: Operating expenses for the first six months were also down approximately 1% compared to the prior year same period. And finally, asset quality metrics continue 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.

Speaker Change: Operating expenses for the first six months were also down approximately 1% compared to the prior year same period.

Speaker Change: And finally asset quality metrics continued to improve.

Mark Klein: 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 pride behind 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 based grew by 44 million to 1.12 billion.

Speaker Change: Our strategic path forward remains hinge 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 I imagine shifting market conditions.

Speaker Change: Yeah.

Organic growth for scale.

Mark A. Klein: We achieved a 5.6% annualized growth rate in our portfolio this quarter. We have a very strong priority line in a number of markets, with the Columbus team providing the bulk of the expected growth for the second half of 2024. Deepening relationships, more scope.

Speaker Change: We achieved a five 6% annualized growth rate in our portfolio. This quarter, we have a very strong pipeline and a number of markets with the Columbus team, providing the bulk of the expected growth for the second half of 2024.

Speaker Change: Deepening our relationships more scope or.

Mark A. Klein: Our deposit base grew by $44 million to $1.12 billion. The Ohio Homebuyer 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 efficiency.

Our deposit base grew by 44 million to 1.12 billion.

Mark Klein: The Ohio Homebuyer Plus program that I mentioned briefly last quarter has been quite successful. To date, we have opened nearly 400 accounts with balances and 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-intersex expenses compared to the prior year quarter, delivering a net non-intersex expense ratio of negative 1.87%, with still a strategic goal of zero.

Speaker Change: The Ohio Homebuyer, 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.

Speaker Change: We're especially encouraged that over 25% of those accounts are new relationships to our bank.

Speaker Change: Excellence in operations, we have developed a stronger bench to ensure durable operational efficiencies.

Mark A. Klein: 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 a still a strategic goal of zero. Asset quality remains robust, as 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 in 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.

Speaker Change: As a result, we've experienced a modest three 2% increase in noninterest expenses compared to the prior year quarter, delivering a net noninterest expense ratio of negative 1.87%, what's still a strategic goal of zero.

Mark Klein: As a 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 dildin 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.

Speaker Change: Asset quality remains robust evidenced by a low nonperforming asset ratio of 0.39% of total assets.

Speaker Change: While this metric has had a minor shift and we remain confident.

Speaker Change: 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.

Mark A. Klein: 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 origination.

Now looking just a bit closer at revenue diversity.

Speaker Change: Our mortgage businesses originated over $75 million and volume an increase of nearly 15% from a 65 million in the prior year quarter.

Speaker Change: Mortgage sales reached over 55 million, representing a 74% of total originations.

Mark A. Klein: Well, 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.

Speaker Change: While certainly below our capacity, we feel certainly better about the direction of this business line.

Mark Klein: 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.

Speaker Change: Our Indianapolis office has delivered nearly 30% of our total volume thus far this year.

Speaker Change: We're also seeing opportunities to add mortgage originators throughout our entire footprint.

Speaker Change: As we indicated last quarter, we have solidified the roulette the leadership of this business line, where should ensure that opportunities for expansion and product growth remain front of mind.

Mark Klein: We're also excited to confirm that we will be venturing into another dynamical high-market, Cincinnati. We have landed a seasoned market leader that will not want to 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-interesting comes stabilized at 4.4 million, benefiting from gains in mortgage servicing rights and customer service fees. Our title and service business and wealth management services, despite market challenges, remain key areas for future growth.

Speaker Change: We're also excited to confirm that we will be entering into another dynamic, Ohio market Cincinnati.

Mark A. Klein: 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 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.

Speaker Change: We have landed a season market later that will not only produce.

Speaker Change: Also work to build out a team of local professionals as well.

Speaker Change: 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.

Speaker Change: Noninterest income stabilized at $4 4 million benefiting from gains in mortgage servicing rights.

Speaker Change: And customer service fees.

Mark A. Klein: 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 regions 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 of deposit growth, as I indicated earlier this quarter, we were up by 3.1 million compared to the length of the quarter and up 4.1% from the prior year. Deposit costs have slowed as total interest expense declined from the length of the quarter for the first time in over two years.

Speaker Change: Our title insurance business and wealth management services, despite market challenges remain key areas for future growth.

Mark Klein: We believe the growth trajectory and 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 from deposit growth has accelerated. Again, as I indicated earlier, this quarter we were up by 3.1 million compared to the length quarter and up 4.1% from the prior year. The deposit costs have slowed, as total interest expense declined from the length quarter for the first time in over two years.

Speaker Change: 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 regions and business lines.

Speaker Change: We are focused on coordinating events with our key community leaders and C. O I's what's the goal of introducing these unique businesses to a much wider population.

On a scale from 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 four 1% from the prior year.

Speaker Change: Posit costs have slowed as total interest expense declined from the linked quarter for the first time in over two years.

Mark Klein: We touched on earlier the success of the home buyer plus program, and we expect to continue the ad 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 a year-over-year basis. Did show growth from the length 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.

Mark A. Klein: 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, and while not up to our historical standards of high single-digit growth on a year over year basis, it did show growth from the length of the quarter, and we are starting to see the positive impact of the calling efforts from the last several years.

Speaker Change: 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.

Speaker Change: Yeah.

Speaker Change: Loan growth is certainly gaining traction well not up to our historical standards of high single digit growth on year over year basis did show growth from the linked quarter and were starting to see the positive impact to our pipeline of the calling efforts from the last several years.

Mark A. Klein: 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, and this quarter, we strengthened it. Our equity to asset ratio grew to 9.35%, and the Tangible Equity to Tangible Assets ratio increased to 7.2%.

Speaker Change: 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.

Mark Klein: 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, and 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 1 ratio for the bank remains 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 context center with more fintech platforms, aiming to deepen our penetration and improve our level of services per household.

Given our diverse markets.

Speaker Change: <unk> and commitments growing our loan portfolio remains a top priority as we move through the second half of 2024.

Speaker Change: Our strong equity foundation, certainly a prerequisite to our growth.

Speaker Change: This quarter, we strengthened.

Speaker Change: Our equity to asset ratio grew to $9 three 5%.

Speaker Change: Our tangible equity to tangible assets ratio increased to seven 2%.

Mark A. Klein: And our common equity tier one ratio for the bank remains strong at 13.89% In terms of deepening existing relationships and gaining 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.

Speaker Change: And our common equity tier one ratio for the bank remained strong at 13.89%.

In terms of deepening existing relationships more scope.

Speaker Change: Continue to embrace technology to enhance client engagement.

Speaker Change: We have further integrated our corporate sales champion and new contact center with more fintech platforms.

Speaker Change: Amy to deepen our penetration and improve our level of services per household.

Mark Klein: And for this 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 owners 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 and includes SBA lending opportunities, both sold and portfolio loans.

Mark A. Klein: Emphasis continues on organic expansion opportunities. Significant resources have been added to our management team in the greater Columbus market, where we anticipate accelerated balanced growth in both CRE and C&I 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 it, 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. With a current pipeline of now over 7 million, we are poised to see meaningful contributions to future revenue as we assist small business clients with proper balance sheet structure to optimize cash flow.

Emphasis continues on organic expansion opportunities.

Speaker Change: So they never got resources have been added to our management team in the greater Columbus market, where we anticipate accelerated balanced growth in both CRE and CNI arenas.

Speaker Change: Our optimism comes with an extended team that now includes four local commercial lenders with local support staff and a new professional treasury management specialists to drive funding opportunities at a level below the margin.

Speaker Change: 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.

Mark Klein: With a current pipeline of now over 70 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 Morgan's business line remains a key driver for our company. Despite the challenges posed by higher industries, our Morgan's 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%.

Speaker Change: With a current pipeline of now over $7 million, we are poised to see meaningful contributions to future revenues.

Speaker Change: As we assess small business clients with proper balance sheet structure.

Speaker Change: To optimize cash flow.

Mark A. Klein: 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 this was well in line with our traditional levels with gain on sale yields on par with historical averages at 2.3%.

Speaker Change: Speaking to operational excellence the mortgage business line remains a key driver for our company.

Speaker Change: Alright, the challenges posed by higher interest rates, our mortgage business continues to perform quite well.

Speaker Change: In addition to the gain on sale revenue of $1 $3 million achieved this quarter revenue from our servicing portfolio was a healthy 862000, and we sold over 74% of our originated volume and well in line with our tradition levels was gain on sale yields on par with historical averages at two 3%.

Mark Klein: This approach of an 8020 sale to portfolio origination level novelness supports our client's needs, but also ensures the sustainability of our mortgage operations. The change in the market dynamics is evidence. Evident, over 94% of our volume thus far in 2024 has been for purchase or new construction transactions. Refinance volume is certainly a distant memory.

Mark A. Klein: 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 operation. The change in market dynamics is evident, 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 that underscores the effectiveness of our risk management strategy.

Speaker Change: 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.

Speaker Change: The change in the market dynamics as evidenced.

Speaker Change: Evident and that over 94% of our volume thus far in 2024.

Speaker Change: Has it been for purchase or new construction transactions.

Speaker Change: Refinance volume is certainly a distant memory.

Mark Klein: 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.

Speaker Change: Finally on asset quality.

Speaker Change: Clearly a focus of ours since.

Speaker Change: The great recession.

Speaker Change: In fact, net recoveries were actually positive this quarter and underscores the effectiveness of our risk management strategies.

Mark A. Klein: 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 the S, 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 Cosentino, for some additional comments on our quarterly performance. Tony?

Speaker Change: 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.

Speaker Change: Yeah.

Speaker Change: The coverage of our nonperforming portfolio remains comprehensive showcasing not only our commitment to maintaining a healthy loan portfolio, but also building ample reserves as well.

Mark Klein: Now, I'd like to turn the call over to our CFO, Tony Castino, for some additional comments on our quarterly performance.

Speaker Change: Now I'd like to turn the call over to our CFO, Tony Casciano for some additional comments on our quarterly performance Tony.

Tony Cosentino: Tony? Thanks, Mark.

Anthony V. Cosentino: Thanks Mark, and good morning everyone. For the second quarter of 2024, as Mark indicated, we recorded net income of $3.1 million, with an EPS of $0.47. When we combine that with our first quarter performance, net income for the year is $5.5 million, delivering a full year EPS of $0.82 and slightly higher than the prior year for six months of $0.79. Total operating revenue experienced a slight downturn, declining by 1% year over year, influenced by pressures from the competitive interest rate environment and money market fluctuations.

Unknown Executive: Thanks, Mark and good morning, everyone for the second quarter of 2024 as Mark indicated we recorded net income of $3 1 million.

Tony Cosentino: Good morning, everyone. For the second quarter of 2024's, Mark indicated we recorded net income of 3.1 million with an EPS of 47 cents. When we combine that with our first quarter performance, net income for the year is 5.5 million, delivering a full year EPS of 82 cents and slightly higher than the prior year for six months of 79 cents. Total operating revenue experienced a slight downturn, declining by 1 percent year over year, influenced by pressures in the competitive interest rate environment and money market fluctuations. We did recapture mortgage servicing rights revenue this quarter as a slight volatility in rates improved the valuation of our servicing portfolio.

Speaker Change: With an EPS of <unk> 47 cents.

Speaker Change: When we combine that with our first quarter performance net income for the year is $5 5 million delivered.

Speaker Change: Delivering our full year EPS of <unk>, 82, and slightly higher than the prior year first six months of 79%.

Speaker Change: Total operating revenue experienced a slight downturn declining by 1% year over year influenced by pressures from a competitive interest rate environment and money market fluctuations.

Anthony V. Cosentino: We did recapture mortgage servicing rights revenue this quarter as a slight volatility in rates improved the valuation of our servicing portfolio. At quarter end, the servicing portfolio was valued at $1.39 billion, up by 2.7%. On net interest margin, our net interest margin ended the quarter at 3.11% on a tax equivalent basis, reflecting the asset mix shift and current market conditions. This represents a 12 basis point increase in the prior quarter.

Speaker Change: We did recapture mortgage servicing rights revenue this quarter is a slight volatility in rates improve the valuation of our servicing portfolio.

Tony Cosentino: At quarter end, the servicing portfolio was valued at 1.39 billion, up by 2.7 percent. On net interest margin, on net interest margin, ended the quarter at 3.11 percent on a tax equivalent basis, reflecting the asset makeshift and current market conditions. This represents a 12 basis point increase in the link quarter, with funding costs stabilizing and contractual loan repricing on approximately 150 million over the next six to nine months. We anticipate further improvements in asset yields and operating revenue. Cycle-to-date betas continue to be in that positive, with the earning asset beta at 35 and the funding beta at 32.

Speaker Change: At quarter end, the servicing portfolio was valued at $1 39 billion up by two 7%.

Speaker Change: Our net interest margin and net interest margin ended the quarter at $3, one 1% on a tax equivalent basis, reflecting the asset mix shift and current market conditions.

Speaker Change: This represents a 12 basis point increase from the linked quarter.

Anthony V. Cosentino: With funding costs stabilizing and contractual loan repricing of approximately $150 million over the next six to nine months, we anticipate further improvements in asset yields and operating revenue. Cycle to date betas continue to be a net positive, with the earning asset beta at 35 and the funding beta at 32. The efficiency of our balance sheet has been a focus, with an emphasis on maintaining a healthy loan to deposit ratio of nearly 92% and Cost Effective Capital Management.

Speaker Change: With funding costs stabilizing and contractual loan repricing on approximately $150 million over the next six to nine months.

Speaker Change: We anticipate further improvements in asset yields and operating revenue.

Cycle to date betas continue to be a net positive with the earning asset data at 35 and the funding data at 32.

Tony Cosentino: The efficiency of our balance sheet has been a focus, with an emphasis on maintaining a healthy loan deposit ratio of nearly 92 percent and cost-effective capital management. This strategic focus has allowed us to support anticipated loan growth while maintaining a strong liquidity profile. Our investment portfolio is calibrated to support projected loan growth and provide a base level of liquidity. We project about 25 million in amortizations annually, which should reduce the portfolio to our strategic goal of 12 percent sometime in late 2025. The current portfolio yield of 2.76 percent ensures that each dollar amortize will potentially drive interest income higher by a minimum of 300 basis points on the redeployed funds.

Speaker Change: The efficiency of our balance sheet has been a focus with an emphasis on maintaining a healthy loan to deposit ratio of nearly 92%.

Cost effective capital management.

Anthony V. Cosentino: This strategic focus has allowed us to support anticipated loan growth while maintaining a strong liquidity profile. Our investment portfolio is calibrated to support projected loan growth and provide a base level of liquidity. We project about $25 million in amortizations annually, which should reduce the portfolio to our strategic goal of 12% sometime in late 2025. The current portfolio's yield of 2.76% ensures that each dollar amortized will potentially drive interest income higher by a minimum. 300 basis points on the redeployment and on Expense Management, which remains a strategic focus. Our non-interest expenses were essentially flat when we adjusted for the commission expense related to the 15% increase in mortgage volume.

Speaker Change: This strategic focus has allowed us to support anticipated loan growth, while maintaining a strong liquidity profile.

Speaker Change: Our investment portfolio.

Speaker Change: Is calibrated to support projected loan growth and provide a base level of liquidity.

Speaker Change: We project about $25 million in Amortizations annually, which should reduce the portfolio to our strategic goal of 12% sometime in late 2025.

Speaker Change: The current portfolio yield of 276% ensures that each dollar amortize will potentially drive interest income higher by a minimum of 300 basis points on the redeployed funds.

Tony Cosentino: On expense management, which remains a strategic focus, our non-interest expenses were essentially flat when we adjust for the commission expense related to the 15 percent increase in mortgage volume. Total expenses for the quarter of 10.7 million remained relatively consistent with the total expenses recorded in the past four quarters, and we remain focused on controlling our expense base.

Speaker Change: On expense management.

Speaker Change: Which remains a strategic focus.

Speaker Change: Our noninterest expenses were essentially flat when we adjust for the commission expense related to the 15% increase in mortgage volume.

Anthony V. Cosentino: Total expenses for the quarter of $10.7 million remained relatively consistent with the total expenses recorded in the past four quarters, and we remain focused on controlling our expenses. Now we turn to the balance sheet, specifically wholesale funding management. Our strategic initiatives in loan growth and deposit management have been supported by the effective management of our wholesale funding. Specifically, deposit growth and portfolio paydowns have allowed us to eliminate over 46 million in variable rate average cost FHLB borrowings of 5.5% in the last 12 months.

Total expenses for the quarter of $10 7 million remained relatively consistent with the total expenses recorded in the past four quarters.

Speaker Change: And we remain focused on controlling our expense base.

Tony Cosentino: Now, as we turn to the balance sheet and specifically on wholesale funding management, our strategic initiatives and loan growth and deposit management have been supported by the effective management of our wholesale funding. Specifically, deposit growth and portfolio pay downs have allowed us to eliminate over 46 million in variable rate average cost FHLV borrowing of 5.5 percent in the last 12 months. This is evident in our ability to maintain competitive funding costs despite market volatility. The balance sheet reflects stable figures for FHLV advances and subordinated debt as compared to the link quarter.

Speaker Change: Now as we turn to the balance sheet and specifically on wholesale funding management.

Speaker Change: Our strategic initiatives of loan growth and deposit management had been supported by the effective management of our wholesale funding.

Speaker Change: Specifically deposit growth and portfolio pay downs have allowed us to eliminate over $46 million in variable rate average cost F. Hlv borrowings of five 5% in the last 12 months.

Anthony V. Cosentino: This is evident in our ability to maintain competitive funding costs despite market volatility. The balance sheet reflects stable figures for FHLB advances and subordinated debt as compared to the linked quarter. Our Investment Portfolio Strategy We've strategically realigned our investment portfolio to enhance liquidity, which is crucial for supporting anticipated loan growth. This approach is visible in the minor adjustments and is available for sale securities, ensuring that we diversify asset types to bolster financial stability and prepare for future opportunities.

Speaker Change: This is evident in our ability to maintain competitive funding costs despite market volatility.

Speaker Change: The balance sheet reflects stable figures for <unk> advances and subordinated debt as compared to the linked quarter.

Tony Cosentino: Our investment portfolio strategy, we've strategically re-aligned our investment portfolio to enhance liquidity, which is crucial for supporting anticipated loan growth. This approach is visible in the minor adjustments and are available for sale securities, ensuring that we diversify asset types to bolster financial stability and prepare for future opportunities.

Our investment portfolio strategy, we have strategically realigned our investment portfolio to enhance liquidity, which is crucial for supporting anticipated loan growth.

This approach is visible in the minor adjustments in our available for sale securities ensuring that.

Speaker Change: Diversify asset types to bolster financial stability and prepare for future opportunities.

Tony Cosentino: And on credit losses management, our proactive risk manager strategies are highlighted by our study allowance for credit losses currently at 15.6 million. This consistent level underscores our commitment to financial prudence and our ability to mitigate potential risks effectively.

Anthony V. Cosentino: And on credit losses management, our proactive risk manager strategies are highlighted by our steady allowance for credit losses, currently at $15.6 million. This consistent level underscores our commitment to financial prudence and our ability to mitigate potential risks affected. (inaudible) Capital Strength and Shareholder Value. The strength of our capital structure continues to be robust, as evidenced by our shareholders' equity totaling $125.5 million, which is up nearly 7% compared to the prior year. We further enhance shareholder value this quarter by continuing to repurchase our shares at average prices below tangible book value. I'll now turn the call back over to Mark.

Speaker Change: And on credit losses management, our proactive risk management strategies are highlighted by our steady allowance for credit losses currently at $15 6 million.

Speaker Change: This consistent level underscores our commitment to financial prudence in our ability to mitigate potential risks effectively.

Tony Cosentino: And finally, capital strength and shareholder value. The strength of our capital structure continues to be robust as evidence by our shareholders' equity totaling 125.5 million. which is up nearly 7% compared to the prior year. We further enhance shareholder value this quarter by continuing to re-purchase our shares at average prices below tangible look value.

Speaker Change: And finally.

Speaker Change: Capital strength and shareholder value.

Speaker Change: The strength of our capital structure continues to be robust as evidenced by our shareholders equity totaled $125 5 million.

Speaker Change: Which is up nearly 7% compared to the prior year.

We further enhanced shareholder value this quarter by continuing to repurchase our shares at average prices below tangible book value.

Mark Klein: I'll now turn the call back over to Mark. Thank you, Tony. Overall, it was a very nice quarter for us. We made substantial progress across a number of fronts and saw meaningful contributions from each of our business lines and each of our regions.

Speaker Change: I'll now turn the call back over to Mark.

Mark A. Klein: Thank you, Tony. Overall, it was a very nice quarter for us. We made substantial progress across a number of fronts and saw meaningful contributions from each of our business lines and each of our regions. I'm excited for the opportunities that our new team in Columbus will deliver, and I'm optimistic that the Cincinnati market, through the efforts of our new leader, will deliver results well in line with our experiences from entering other growing markets, other metropolitan growing markets, like Columbus and Indianapolis. Now we'll open the call up for questions. We'll now begin the question.

Speaker Change: Thank you Tony overall, it was a very nice quarter for US we have made substantial progress across a number of fronts and saw meaningful contributions from each of our business lines and each of our regions.

Mark Klein: I'm excited for the opportunities that our new team in Columbus will deliver in an optimistic that the Cincinnati market through the efforts of our new leader will deliver results well in line with our experiences from having entered other growing markets, other metropolitan growing markets like Columbus and Indianapolis.

Mark A. Klein: I am excited for the opportunities that our new team in Columbus will deliver and I'm optimistic that the Cincinnati market through the efforts of our new later will deliver results while in line with our experiences from having entered other growing markets other metropolitan growing markets like Columbus, and Indianapolis novel.

Unknown Executive: Now we'll open the call up for questions. I'll now begin the question and answer session. If you would like to ask a question, you may press star, then one on a touch tone phone. To withdraw your question, please press star, then two. We will pause momentarily to assemble our roster.

Mark A. Klein: Well open the call up for questions.

Operator: We will now begin the question and answer session. If you would like to ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. We will pause momentarily to assemble our roster. Our first question comes from Brian Martin with Janney Montgomery. Please go ahead.

Speaker Change: I will now begin the question and answer session.

Speaker Change: I'd like to ask a question you May Press Star then one on a touchtone phone.

Speaker Change: To withdraw your question. Please press Star then two.

Speaker Change: We will pause momentarily to assemble our roster.

Speaker Change: Okay.

Brian Martin: Our first question comes from Brian Martin with Janie Montgomery. Please go ahead. Hey, good morning, guys. Hey, Brian. Nice to have you with us. Yeah, thanks. So I joined the minute or two late marks. I may have missed some of your comment on, but I was just wondering just kind of on your long growth outlook. I know I think you mentioned maybe being optimistic on that as you kind of look the back half of the year or just into next year. But can you just talk about what you're outlook there as it's just what you're hearing from your customers in terms of demand or opportunities out there?

Brian Joseph Martin: Hey, Brian. It's nice to have you with us. Yeah, thanks. So I joined a minute or two late, Mark, so I may have missed some of your comment, but I was just wondering, just kind of on your loan growth outlook. You know, I think you mentioned maybe being, you know, optimistic on that as you kind of look at the back half of the year or just into next year. But can you just talk about what your outlook there is? Is it just kind of what you're hearing from your customers in terms of, you know, demand or opportunities out there?

Speaker Change: Yeah.

Speaker Change: Our first question comes from Brian Martin with Janney Montgomery. Please go ahead.

Brian Joseph Martin: Hey, good morning, guys.

Brian Joseph Martin: Hey, Brian and Brian Nice Stephanie with it yeah. Thanks, So I joined the minute or two late marks I may have missed some of your comment on but I was just wondering just kind of on your on your loan growth outlook I know I think you mentioned maybe being off.

Speaker Change: Optimistic on that as you kind of look the back half of the year just into next year, but.

Speaker Change: Can you just talk about what what your outlook there or is it just kind of what you're hearing from your customers in terms of demand or opportunities out there.

Mark Klein: Sure. Seems like our loan clients have digested higher rates a bit more easily of recent. We continue to find good traction in CRE C and I as well knows a bit more difficult to find, but we still have a focus on that. But clearly, Brian, with our new leader, new commercial lender and Columbus, as well as support staff and treasure management, individual Columbus, our expectations remain high. We would like to certainly think we can get back to that middle to upper single digit growth level that we've been more used to. Clearly, the funding is available, and we have some other opportunities to find and locate additional funding below the margin.

Mark A. Klein: Sure, seems like our loan clients have digested higher rates a bit more easily of late; we continue to find good traction in CRE; CNI, as we all know, is a bit more difficult to find, but we still have a focus on that. But clearly, Brian, with our new leader, new commercial lender in Columbus, as well as support staff and treasury management individual in Columbus, our expectations remain high. We would certainly like to think we can get back to that middle to upper single-digit growth level that we've been more used to.

Speaker Change: Sure It seems like our.

Brian Joseph Martin: Our our loan clients have digested higher rates are a bit more easily of recent we continue to find a good traction in CRE C&I as we all know is up a bit more difficult to find but we still have a focus on that but clearly Brian with our new leader, a new commercial lender and Columbus as well.

Brian Joseph Martin: Support staff and Treasury management individual in Columbus, our expectations remain high.

Brian Joseph Martin: We would like to certainly think we can get back to that.

Brian Joseph Martin: Middle to upper single digit growth level that we've been more used to.

Mark A. Klein: Clearly, the funding is available, and we have some other opportunities to find and locate additional funding below the margin. So we're excited about the growth, and of course, Steve Walz, our Chief Lending Officer, is here as well. Generally aligned and optimistic.

Brian Joseph Martin: Clearly the funding is available and we have some other opportunities to find locate additional funding below the margin.

Mark Klein: So we're excited about the growth, and of course, Steve Walts, our Chief Lending Officer, is here as well.

Steven A. Walz: So we're excited about the growth in and of course, Steve Walsh, Our Chief lending officer is here as well and I would ask Steve to opine, a little bit on our pipeline and in our projected gross Dave I think we're gen.

Steven Walz: And I would ask Steve to a pine a little bit on our pipeline and the projected growth. Steve, I think we're generally aligned and optimistic. No, certainly Mark, I would agree with your comments earlier regarding the Columbus, Mark and our expectations going into the second half of the year there, in particular with the new leadership and not to be overlooked. And this may be more of an early 25 play, but I went over, looked the addition of the dedicated experience TM professional that we've added there. You know, it's marked out of C, and our relationships tend to take a little time to cultivate and bring them before.

Steven A. Walz: Generally aligned and optimistic.

Steven A. Walz: No, certainly, Mark, I would agree with your comments earlier regarding the Columbus Mark and our expectations going into the second half of the year there, in particular with the new leadership and not to be overlooked, and this may well probably be more of an early-25 play, but I wouldn't overlook the addition of the dedicated experienced TM professional that we've added there. You know, as Mark noted, CNI relationships tend to take a little time to cultivate and bring to So I do think that it's going to be meaningful.

Steven A. Walz: No certainly mark I would I would agree with with your comments earlier regarding the Columbus market and our expectations going into the second half of the year. There in particular with the new leadership and not to be overlooked in this may.

Speaker Change: To be more of an early 'twenty five but.

Speaker Change: I Wouldnt overlook. The addition of the dedicated experienced GM professional that we've added there as Mark noted C&I relationships does take a little time to call.

Mark Klein: So I do think that's going to be meaningful. I thought our balance is frankly at 630 would be a little more robust. We had a few number of meaningful loans. is not closed by 630 that I thought would. They closed here in the first couple of weeks of July. So we've got a good start. I think into Q3, and as Mark does, looking good for the second half of the year to meet those expectations we had at the start of the year. Yeah, final comment, Brian. You know, that single single digit would be okay. But the 8% that we average for seven or eight years almost consistently is certainly more in the CEO's appetite.

Speaker Change: Going to the horse so I do think that's going to be meaningful I thought our balances frankly at 630 would be a little more robust we had.

Steven A. Walz: I thought our balance, frankly, at 630 would be a little more robust. We had a few numbers of meaningful loans not closed by 630 that I thought they would have closed here in the first couple weeks of July. So we've got a good start, I think into Q3 and, as Mark knows, looking good for the second half of the year to meet those expectations we had at the start of the year.

Speaker Change: A number of meaningful loans.

Speaker Change: Not close by 630 that I thought would they closed during the first couple of weeks of July. So we've got a good start I think into Q3 and as Mark that was looking good for the second half of the year to meet those expectations we had at the.

Mark A. Klein: Yeah, final comment Brian, you know that single single digit would be okay, But the 8% that we averaged for seven or eight years, almost consistently, It's certainly more in the CEO's appetite. So again, we have a pretty nice pipeline, and we seem to be finding some really nice projects That are all for all for the taking, as we see them today. So we continue to be pretty optimistic on that front.

Speaker Change: Start of the year, Yeah final comment Brian.

Speaker Change: Single single digit would be okay.

Speaker Change: But the 8% that we averaged four seven or eight years almost consistent with.

It's certainly more than the Ceos appetite.

Brian Martin: So again, we have a pretty nice pipeline, and we seem to be finding some really nice projects that's all for all for the taking as we see them today. So we continue to be pretty optimistic on that front. Okay. That's good news. Thanks.

Speaker Change: Well again, we have a pretty nice pipeline and we seem to be finding some really nice projects. That's all for all for the taking of as we see them. Today. So we can tend to be pretty optimistic on that front. Okay.

Brian Joseph Martin: Okay, that's good news. Thanks. And then how about just on the mortgage side? It looks like, you know, some positive developments there with the, you know, kind of entrance into Cincinnati, but just, and, you know, maybe some potential benefit from rates here. So just wondering how you're thinking about the back half of the year in terms of mortgages and then just the contributions that, you know, Cincinnati can bring to the table here.

Speaker Change: Okay. That's good news thanks, and then how about just on the mortgage. It also looks like you have some positive developments there with the kind of entrance into Cincinnati, but just and you know maybe some potential benefit from rates here. So just wondering how youre thinking about the back half of the year in terms of of mortgage and then just the.

Mark Klein: And then how about just on the mortgage also looks like some positive developments there with the kind of entrance into Cincinnati, but just and maybe some potential benefit from rates here. So just wondering how you're thinking about the back half of the year in terms of mortgage and then just the contributions that Cincinnati can bring to the table here. Sure. From a valiant perspective, we're beginning to see a little inertia getting us to that 300 million kind of run rate that would get us back to our once perceived minimum number of 500 million, which the Cincinnati initiative certainly has a lot of potential.

Speaker Change: <unk> that.

Speaker Change: Cincinnati can can bring to the table here.

Mark A. Klein: Sure, from a volume perspective, we're beginning to see a little inertia getting us to that 300 million kind of run rate that would get us back to our once perceived minimum number of 500 million, which this Cincinnati initiative certainly has a lot of potential. The gentleman has been hired.

Speaker Change: Sure from a from a volume perspective, we're beginning to see a little inertia getting us to that $300 million kind of run rate that would get us back to our.

Speaker Change: Once perceived minimum number of 500 million, which are the Cincinnati initiative, certainly has a lot of potential. The gentleman has been hired we found someone who is well versed in the market who has a plethora of experience. So I was gonna have obviously produce as well as find the team and we've enjoyed the opportunities that we've had in the Columbus market.

Mark A. Klein: We found someone who's well versed in the market, who has a plethora of experience, who's going to obviously produce as well as find the team, and we've enjoyed the opportunities that we've had in the Columbus market for now, you know, 12-14 years, in Indy for a few years, and, as we all know, it's all about people and the team.

Mark Klein: The gentleman has been hired. We found someone who's well versed in the market who has a plethora of experience who's going to obviously produce as well as find the team. And we've enjoyed the opportunities that we've had in the Columbus market for now, you know, 12, 14 years. Indy for a few years, and of course now Cincinnati. And as we all know, it's all about people and the team, and we're optimistic about how they're going to contribute. As in an apples has come on, I think we mentioned that they've contributed about a third of the volume, as we speak.

Speaker Change: Now 12 14 years and.

Speaker Change: Andy for a few years and of course, now Cincinnati and as we all know it's all about people and the team and we're optimistic about how theyre going to contribute.

Mark A. Klein: And we're optimistic about how they're going to contribute as Indianapolis has come on. I think we mentioned that they've contributed about a third of the volume as we speak. And we thought going into Indianapolis, they would become another Columbus. And I think our optimism is finding roots and delivering. And I don't think anything is different in the Cincinnati market as far as the volume. We're going to be looking for predominantly sold mortgages. We certainly have a pipeline of commercial loans for funding. So sold loans are certainly going to be the focus.

Speaker Change: As Indianapolis has come on and I think we mentioned that I think contributed about a third of the volume as we speak and we thought going into Indianapolis, They would become another Columbus and I think our our optimism is finding our routes and delivering and I don't think anything is different in the Cincinnati market.

Mark Klein: And we thought going into any an apple say would become another Columbus. And I think our optimism is finding roots and delivering. And I don't think anything is different than the Cincinnati market. As far as the volume, we're going to be looking for predominantly sold mortgages. We have certainly a pipeline commercial for our funding. So sold loans is certainly going to be the focus. Yeah, Brian, you know, our base cases we said today is, you know, a six and a half to maybe a six and a quarter, you know, 30 year rate, which probably delivers 130 million to 140 million of volume between now and the end of the year.

Speaker Change: As far as the volume, we're going to be looking for predominantly sold mortgages we.

Speaker Change: We have certainly a pipeline with commercial for funding. So sold loans is certainly going to be the focus.

Anthony V. Cosentino: Yeah, Brian, as we said today, our base case, as we said today, is, you know, a six and a half to maybe a six and a quarter, 30 year rate, which probably delivers 130 million to 140 million of volume between now and the end of the year. We feel like if we can get another 25 to, you know, three eighths of a move down below six, I think that adds probably another 35 to 40 million So, you know, we think the 250 range for the full year, and 275 is pretty much the base case. But we're certainly optimistic that it's going to get better based upon the expectation of rate changes.

Brian Joseph Martin: Yes, Brian.

Brian Joseph Martin: Our base case as we sit today is a six and a half to maybe a six and a quarter.

Brian Joseph Martin: 30 year rate, which probably delivers 130 million to $140 million of volume between now and the end of the year.

Tony Cosentino: We feel like if we can get another 25 to, you know, three eighths of a move down below six, I think that adds probably another 35 to 40 million between now and the end of the year. So, but, you know, we think the 250 range for the full year; the 275 is pretty much the base case, but we're certainly optimistic that's going to get better based upon the expectation of rate changes going forward. Yeah. And then 25, even maybe a bit more optimistic if those rates come down. Tony and Cincinnati, you know, begins to really gain some momentum.

Brian Joseph Martin: We feel like if we can get another 25 to three eighths of a move down below six I think that it's probably another $35 million to $40 million between now and the end of the year. So, but we think the $2 50 range for the full year to $2 75 is pretty much the base case, but we're certainly optimistic that is going to get better.

Brian Joseph Martin: Based upon the expectation of rate changes going forward.

Anthony V. Cosentino: Yeah, and then 25 even maybe a bit more optimistic if those rates come down, Tony, and Cincinnati really begin to gain some momentum.

Brian Joseph Martin: And then 25, even maybe a bit more optimistic if those rates come down Tony and Cincinnati begins to really gain some momentum.

Mark Klein: Yeah, absolutely, because, you know, I think the leadership person is probably a 15 to 20 million dollar a year individual and, you know, if we can get a team like we have in Indianapolis, that's a 50 to 60 million dollar at a minimum kind of. That's the region. And I think Brian taken on to that. We certainly see certainly an expansion in the multi family housing, which hopefully will free up certainly more single family financing opportunities. So it seems like the supply is somewhat equaling demand, and that in and of itself, not just the rates, but also the inventory increasing will certainly add some fuel to our fire.

Anthony V. Cosentino: Yeah, absolutely. Because, you know, I think we think the leadership person is probably a $15 to $20 million a year individual. And, you know, if we can get a team like we have in Indianapolis, that's $50 to $60 million at a minimum kind of region. And I think, Brian, tagging on to that, we certainly see an expansion in multi-family housing, which hopefully will free up more single-family financing opportunities. So it seems like the supply is somewhat equaling demand, and that, in and of itself, not just the rates but also the inventory increase will certainly add some fuel to our fire.

Tony: Yeah, absolutely because I think we think the leadership person is probably a $15 million to $20 million a year individual and you know if we can get a team like we have in Indiana, Indianapolis, that's at $50 million to $60 million.

At a minimum kind of the region and I think Brian tagging onto that we certainly see certainly an expansion in the multi family housing, which hopefully it will free up certainly more single family financing opportunities. So it seems like the.

Brian Joseph Martin: The supply is.

Brian Joseph Martin: Somewhat equaling demand then that in and of itself not just the rates, but also the inventory, increasing where I'll certainly add some fuel to our fire.

Brian Joseph Martin: Gotcha. Okay.

Brian Martin: Got to. Okay.

Brian Martin: And then I guess also feels like the, you know, the outlook for margin is optimistic. So when you talked about the borrowings going down, you know, the last 12 months and, you know, the benefits from the home buyer programs, I guess, is the outlook on margin, you know, a bit better than expected or just kind of how are you thinking about that? If you continue to have the ability to fund it, that the lower rates and you're getting, you know, a bit higher yields on the loans. It feels like that. Projection the margin here just kind of, you know, where do you see the margin, having, you know, given the outlook and then also factoring in kind of the potential for a, you know, rate cutter to here, maybe in the back half of the year.

Speaker Change: Gotcha, Okay, and then I guess also it feels like the.

Brian Joseph Martin: And then I guess it also feels like the, you know, the outlook for margin is optimistic. Tony, you talked about borrowings going down, you know, over the last 12 months and, you know, the benefit from the Home Buyer Program. So I guess, is the outlook on margin, you know, a bit better than expected, or just kind of how are you thinking about that? If you continue to have this ability to fund it at lower rates and you're getting, you know, a bit higher yields on the loans, it feels like that trajectory on the margin here just kind of where do you see the margin heading, you know, given the outlook and then also factoring in kind of the potential for a rate cut or two here maybe in the back half of the year.

Speaker Change: The outlook for margin is optimistic Tony you talked about the borrowings are going down.

Speaker Change: Last 12 months and you know that.

Speaker Change: The benefit from the Homebuyer program, So I guess.

Speaker Change: Is the outlook on margin.

Speaker Change: Better than than you expected or just kind of how are you thinking about that if you continue to have this ability to fund it at the lower rates and you're getting.

Speaker Change: A bit higher yields on the loans it feels like that trajectory on the margin here, just kind of where do you see the margin heading.

Speaker Change: Given given the outlook and then also factoring in kind of the potential for a rate cut or two here maybe in the back half of the year.

Anthony V. Cosentino: Yeah, and I think, you know, I've been generally pessimistic about margin moving higher. You know, if you asked me 90 days ago, I'd say we'd be kind of lucky to get to this level that we're at in this quarter.

Tony Cosentino: Yeah, and I think, you know, I've been generally pessimistic on margin moving higher. You know, if you asked me 90 days ago, I'd say it, you know, we'd be kind of lucky to get to this level that we at in this quarter. I am certainly more optimistic today. You know, the loans we're looking at, you know, I think the base levels, the kind of seven in the quarter range that we're seeing, that seems to be the marketplaces kind of accepted that. We are, you know, despite what maybe I've read in a number of earnings releases, we're not seeing as much deposit competition on rate here than maybe some others are identifying, but we'll see, and we do think stabilization is pretty much come to our deposit base.

Speaker Change: Yeah, and I think you know.

Speaker Change: I've been generally pessimistic on on margin moving higher.

Speaker Change: If you asked me 90 days ago, I'd say, we'd be kind of lucky to get to this level that we had in this quarter.

Anthony V. Cosentino: I am certainly more optimistic today. You know, the loans we're looking at, I think the base levels, the kind of seven and a quarter range that we're seeing, the marketplace has kind of accepted that. We are, you know, despite what maybe I've read in a number of earnings releases, we're not seeing as much deposit competition on rates here than maybe some others are identifying. But we'll see.

Speaker Change: I am certainly more optimistic today.

Speaker Change: The loans, we're looking at I think the base levels that kind of seven and a quarter range that we're seeing that seems to be the market places kind of accepted that.

Speaker Change: We are you know.

Speaker Change: Despite what maybe I've read in a number of earnings releases Youre not seeing as much deposit competition on right here than maybe some others are are identifying but we will see and we do think stabilization has pretty much come to our deposit base.

Anthony V. Cosentino: And we do think stabilization has pretty much come to our deposit base. And, you know, contractual re-pricing is significant, 15% of our portfolio, which drives it up 300 basis points at minimum. So I am more optimistic. I think we're going to continue to see positive moves in margin every quarter. You know, you're never going to get back to the 375 range, but I do think, kind of, that mid-threes is potential as you get into 25.

Steven Walz: And, you know, contractual re-fricing is significant, you know, 15% of our portfolio, which drives it up 300 basis points a minute. So I am more optimistic. I think we're going to continue to see positive, positive move in margin every quarter. You know, you're never going to get back to the 375 range, but I do think, you know, kind of that mid threes is potential as you get into 25. Well, Amber, I just tagged on, and that was a 92% loan to deposit ratio. We can be a little bit more selective. We've started to see marginally higher rate deals that we've been competitive on.

Speaker Change: And contractual repricing is significant 15% of our portfolio, which drives it up 300 basis points at a minimum so I am more optimistic I think we're going to continue to see positive positive move in margin every quarter.

Speaker Change: You know you never going to get back to the $3 75 range, but I do think you know kind of that mid threes as potential as you get into 'twenty five.

Mark A. Klein: Well, and Brian, just to tag on to that with a 92% loan to deposit ratio, we can be a little bit more selective. We started to see marginally higher rate deals that we've been competitive on. So I agree with Tony with the repricing that we have coming in the pipeline from see what maybe how many basis points that we think, Tony, that we might see on 150 million?

Brian Joseph Martin: And Brian just to tag on to that with a 92% loan to deposit ratio, we can be a little bit more selective are we starting to see marginally higher rate deals that we've been competitive on so I agree with Tony what the repricing that we have coming in the pipeline.

Tony Cosentino: So I agree with Tony with the repricing that we have coming in the pipeline from maybe how many basis points that we think, Tony, that we might see on 150 million. Yeah, I'm at a minimum 275 on not repricing because all of that was at, you know, kind of high threes. You know, so I think that's generally where it should be. So Brian, it's incremental ads as well as increasing the average with some repricing. So I'm like every other CEO; I'm a little more optimistic. Maybe then, Tony, we have a good balance, so to speak, on where we see that going, but clearly we're encouraged by the slowing of the intersex fence on the funding.

G: From G what maybe how.

Speaker Change: How many basis points that we think we might see on a.

$150 million yeah.

Anthony V. Cosentino: I'm at a minimum 275 on that repricing because all of that was at, you know, kind of high threes, you know, so I think that's generally where it should be. So Brian,

G: At a minimum $2 75 on the repricing because all of that was that kind of high threes.

Speaker Change: So I think that's generally where it should be so bryan it's incremental adds as well as increasing the average with some repricing. So.

Mark A. Klein: So Brian, it's incremental ads as well as increasing the average with some repricing. So, like every other CEO, I'm a little more optimistic, maybe than Tony. We have a good balance, so to speak, on where we see that going, but clearly, we're encouraged by the slowing of the interest expense on the funding side.

Bryan: Yeah like every other seat you all know more optimistic maybe than now Tony we have a good balance so to speak on where we see that going but.

Speaker Change: Clearly we are encouraged by the slowing of the interest expense on the funding side.

Brian Martin: Yeah, no, it was positive in the quarter. And Tony, just that repricing, what was the, it's 150 million, the repricies, maybe 250 to 300 basis points higher, is that what you said in over the next 12 months? Yes, yes. Okay, so 150 million at 250 to 300 basis points higher coming in there. So, okay.

Brian Joseph Martin: Yeah, no, it was positive in the quarter. And Tony, just that repricing, what was it? It's 150 million that reprices, maybe, you know, 250 to 300 basis points higher. Is that what you said? And over the next 12 months? Yes.

Speaker Change: No that was positive in the quarter and Tony just that repricing what was the it's 150 million dairy prices, maybe 250 to 300 basis points higher is that what you said in over the next 12 months.

Speaker Change: Yes, yes.

Brian Joseph Martin: Okay, so 150 million at 250 to 300 basis points higher coming in there, so, okay. And then, just as far as, you know, the credit outlook, it still feels, you know, pretty healthy in terms of, you know, how you're thinking about the reserve levels, I guess. Is the expectation that maybe you can, you know, credit holds that, that, you know, reserve coverage may moderate a bit, you know, given the favorable trends you're still seeing, or, you know, no real problem with credit formation on.

Speaker Change: Okay, so $150 million at $2 50 to 300 basis points higher AR coming in there. So okay and then just as far as you know the credit outlook.

Mark Klein: And then just as far as the credit outlook, you know, it still feels, you know, pretty healthy in terms of, you know, how you're thinking about the reserve levels. I guess, is the expectation that maybe you can, you know, credit holds that, that you know, reserve coverage may moderate a bit, given the favorable trends you're still seeing that, you know, no real problem credit formation out there? Yeah, Brian, from a high level, again, we've seen a little bit of stress in a couple of relationships, but, you know, we're well secured and pretty optimistic on where those are going to go.

Speaker Change: It still feels pretty healthy in terms of how youre thinking about the reserve levels. I guess is your expectation that maybe you can.

Speaker Change: Hope that that reserve coverage may moderate a bit given the favorable trends, you're still seeing that no real problem credit formation out there.

Brian Joseph Martin: Yeah, Brian, from a high level, again, we've seen a little bit of stress in a couple of relationships, but, you know, we're well secured and pretty optimistic about where those are going to go. But, again, Tony and I are kind of good bookends on that. I want, you know, 30 million in reserve, and Tony's happy with 1516 coverage.

Speaker Change: Yeah, Brian from a high level again.

Speaker Change: A little bit of stress in a couple of a couple of relationships, but we're well secured and pretty optimistic on where those are going to go but.

Mark Klein: But again, Tony and I are kind of good bookends on that. I want, you know, 30 million reserve, and Tony is happy with a 1516 coverage. But I think we're pretty optimistic about our portfolio and credit quality and our review process.

Tony: Again, Tony and I are kind of a good book ends on that I want a $30 million of reserve and Tony as happy with a 1516 coverage but.

Speaker Change: I think we're pretty optimistic about our our portfolio and our credit quality in our review process, but.

Steven Walz: But Steve Walsh can, you know, maybe make a few comments relative to the two that, you know, maybe have gone classified, don't you? Yeah, Brian, we had a little uptick in delinquency here. They weren't anything we didn't see coming, as marked noted. We do have a very robust internal loan review process. So these were ones we had been watching. We don't think there's anything going on in our portfolio. We don't understand; our credit standards have not changed over the years. Meaningfully, so we remain confident in our credit culture. So I think in the reviews we have done specifically in relation to our CRE portfolio continues to show the leases are strong and balanced and the principles behind the significance.

Steven A. Walz: But I think we're pretty optimistic about our portfolio and credit quality and our review process. But Steve Walz can, you know, maybe make a few comments relative to the two that, you know, maybe have gone Unknown Speaker Yeah, Brian, we had a little uptick in delinquency here. They weren't anything we didn't see coming. As Mark noted, we do have a very robust internal loan review process, so these were ones we had been watching. We don't think there's anything going on in our portfolio. We don't understand

Speaker Change: Steve Walsh can maybe make a few comments relative to the two that maybe have gone.

Speaker Change: Classified Tony or yeah, Brian we had a little uptick in delinquency here. They werent anything we didn't see coming as Mark noted, we do have a very robust internal loan review process. So these were ones. We had been watching we don't think there's anything going on our portfolio. We don't understand our credit standards have not changed over there.

Steven A. Walz: Our credit standards have not changed meaningfully over the years, so we remain confident in our credit culture. So I think the reviews we have done specifically in relation to our CRE portfolio continue to show the leases are strong and balanced, and the principles behind them are significant. So I think we feel pretty good about where we are, and I think we know our portfolio well.

Speaker Change: Years meaningfully so we remain confident in our credit culture. So I think in the reviews, we've done specifically in relation to our CRE portfolio continues to show the leases are strong and balanced and the principles behind them.

Tony Cosentino: So I think we feel pretty good about where we are, and I think we know our portfolio well. And I think, you know, Brian, I just add, you know, we ended the quarter 155 reserve to loans. You know, I think loan growth generally is going to move that directionally south. You know, we were certainly extremely comfortable when we were in the 130 range, given our credit risk portfolio portfolio and amount of loan reviews we do. I don't think we'll get back there, but I do think we're headed towards kind of that mid 140 range, which would still put us to the high end of our peer group and still provide very solid coverage.

Speaker Change: Significant so I think we feel pretty good about where we are and I think we know our portfolio well.

Anthony V. Cosentino: And I think, you know, Brian, I'd just add, you know, we ended the quarter at 155 reserve to loans. I think loan growth generally is going to move that directionally south. You know, we were certainly extremely comfortable when we were in the 130 range, given our credit risk portfolio and the amount of loan reviews we do. I don't think we'll get back there, but I do think we're headed towards kind of that mid-140 range, which would still put us at the high end of our peer group and still provide very solid coverage.

Speaker Change: And thanks, too I think.

Speaker Change: Brian.

Just add you know we ended the quarter at $1 55 reserve to loans I think loan growth generally is going to move that directionally South we were certainly extremely comfortable when we're in the $1 30 range given our credit risk portfolio.

Speaker Change: Portfolio in the amount of loan reviews, we do I don't think we'll get back there, but I do think we're headed towards kind of that mid $1 40 range, which would still put us at the high end of our peer group and still provide.

Very solid coverage.

Steven Walz: Yeah, certainly better than, you know, better than peer at that level and just the couple of credits that you talked about. It's really, if they were credits you already knew about, I guess the expectation there seems like it's just a timing issue; you get those resolved and not really any significant lost content is what it sounds like. Is that fair? That is a fair statement, Brian. Those are generally well-secured loans or supported by SBA guarantees. As you know, the challenge, unfortunately, is any problem takes time and effort to resolve in that arena, but we don't expect any lost concerns there.

Brian Joseph Martin: Yeah, certainly better than, you know, better than peers at that level. And just a couple of credits that Steve talked about really, if they were credits you already knew about, I guess the expectation there seems like it's just a timing issue, you get those resolved, and not really any significant loss content, is what it sounds like. Is that that fair?

Speaker Change: Certainly better than the.

Speaker Change: Better than peer at that level and just.

Speaker Change: A couple of credits.

Speaker Change: You've talked about really if they were credits you already knew about I guess your expectation there. It seems like it's just a timing issue as you get those resolved and not really any significant loss content is what it sounds like is that is that fair.

Steven A. Walz: That is a fair statement, Brian. Those are generally well-secured loans. We're supported by SBA guarantees. As you know, the challenge, unfortunately, is that any problem takes time and effort to resolve in that arena, but we don't expect any loss. Yeah, okay.

Speaker Change: That is a fair statement, Brian we are those are generally well secured loans are supported by SBA guarantees as you know the challenge. Unfortunately has any problem. It takes time and effort to resolve in that arena, but we don't expect any loss concerns there.

Brian Martin: Yeah, okay.

Brian Joseph Martin: Okay. All right. That's all I had, guys.

Brian Martin: All right. That's all I had, guys. I a lot of encouraging things there, so I appreciate it. Thanks, Brian.

Speaker Change: Okay.

Speaker Change: Hi.

Speaker Change: Thats, all I had guys well a lot of encouraging things there. So I appreciate it.

Brian Joseph Martin: A lot of encouraging things there, so I appreciate it. Thanks, Brian.

Speaker Change: Thanks, Brian and thanks, Brian.

Speaker Change: Yeah.

Unknown Executive: Again, if you have a question, please press star, then one.

Operator: Again, if you have a question, please press star then 1. If there are no further questions, I will now turn the call back to Mark Klein.

Speaker Change: Again, if you have a question. Please press Star then one.

Speaker Change: As a result.

Speaker Change: Yes.

Mark Klein: Seeing no further questions, I will now turn the call back to Mark Klein. Thank you. Once again, thanks for joining us.

Speaker Change: Seeing no further questions I will now turn the call back to Mark Klein.

Mark A. Klein: Thank you. Once again, thanks for joining us. I look forward to speaking with you in October about third quarter 2024 results. Thanks for joining us. Goodbye. The conference is now concluded. Thank you for attending.

Mark A. Klein: Thank you and once again, thanks for joining us I look forward to speaking with you in October for third quarter of 2024 results. Thanks for joining goodbye.

Unknown Executive: I look forward to speaking with you in October for a third quarter of 2024 results. Thanks for joining. Goodbye.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Unknown Executive: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Mark A. Klein: [music].

Mark A. Klein: Yeah.

Operator: , , , , , , , , , ,

Mark A. Klein: Yeah.

Mark A. Klein: [music].