Q2 2025 SB Financial Group Inc Earnings Call
Good morning and welcome to the SP Financial second quarter 2025 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 micas with SB Financial. Please go ahead Sarah.
Thank you and good morning, everyone. I'd like to remind you that this conference call is late being broadcast live over the internet, and will be archived and available on our website at IR yourstatebank.com.
Mark Klein: Joining me today are Mark Klein chairman, president and CEO.
Speaker Change: Tony Cosentino Chief Financial Officer and Steve walls. 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: 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.
Speaker Change: 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.
Mark Klein: Thank you, sir and good morning everyone.
Welcome to our second quarter 2025 conference call and webcast.
Mark Klein: We clearly approached this year with a fair bit of optimism that included. Favorable funding costs associated with our Marblehead acquisition uh a much larger balance sheet from an expanded Market presence, and a stable team of seasoned lenders all bound
By an improving economic environment.
Mark Klein: Well, 6 months in, we have met and exceeded our expectations.
On a go forward basis. We have positioned ourselves quite nicely
Mark Klein: to continue our trans and new outperform, our peers in the second half of this year.
Mark Klein: For this quarter.
Mark Klein: Net income was 3.9 million with diluted earnings per, share of 60 cents up, 13 cents, or nearly. 28% compared to the prior year quarter.
Mark Klein: When considering the surfacing rights recapture adjusted EPS was 58 cents for the quarter.
Mark Klein: Dan will book value per share into the quarter at $16.44?
Mark Klein: Up from 1526 last year or a 7.7% increase.
Mark Klein: That interest income totaled, 12.1 million increase of over 25%.
From a 9.7 million in the second quarter of last year.
Mark Klein: From the link quarter, net interest income accelerated at a 30% annualized pace.
Mark Klein: Loan growth, for the quarter was approximately 90 million up 8.9% from the prior year.
Mark Klein: and marking the now 5th consecutive quarter of sequential loan growth
Mark Klein: Deposits grew by over 12%, including Marblehead, deposits of 51 million.
Mark Klein: The schooling Marblehead deposits. Deposit growth would have been approximately 7.5.
Importantly, the deposits from Marblehead have remained nearly 100% intact, just 6 months after the acquisition.
Collectively this quarter assets under our Care. Now, exceed 3.5 billion, this includes our bank assets of 1.5 billion. Our residential servicing, portfolio of approximately 1.5 billion.
Mark Klein: And wealth assets under our care of 537 million.
It is this scale and revenue diversity that have driven our performance to a higher level.
Mark Klein: Mortgage originations for the quarter. Were just short of 98 million up from both the prior year and length quarters.
our pipeline remains strong, at nearly 34 million, reflecting continued momentum from our recent Investments and more High producing mlos
Mark Klein: Operating expenses decreased approximately 4.5% from the length quarter.
as the first quarter was elevated, due to 1 time conversion cost, we discussed in Prior quarters,
Mark Klein: charge off levels returned to more historic levels in the quarter at less than 2 basis points and our remaining asset quality metrics were consistent with the linked quarter.
Mark Klein: And finally, we were pleased to be added to the Russell 2000 Index. Once again, during the recent rebalancing,
Mark Klein: This Milestone reflects the Market's recognition of our strong financial performance, our commitment, to organic growth and overall brand value.
Mark Klein: We continue our Relentless focus on our strategic 5 key initiatives, as we've discussed in many quarters before Revenue, diversity with balance between Nim and fee-based, Revenue, organic growth, more households more services in households to gather greater scale and efficiency Improvement.
Deepening client relationships. Operational excellence.
Mark Klein: And top tier asset quality.
Mark Klein: Revenue diversity.
As I noted earlier, our mortgage group delivered, a strong Rebound in the second quarter with mortgage origination volume.
Mark Klein: Of approximately 98 million.
Mark Klein: Despite a slow start to the year.
Mark Klein: We believe borrowers have become more accustomed to the current rate environment leading to increased purchases as well as a bit of refinancing activities.
We've also benefited from our expanded team of mortgage Professionals in Cincinnati and Indianapolis.
Mark Klein: I want to highlight our Indianapolis team.
Mark Klein: With delivered its most successful quarter of production since Inception.
and the first quarter of 2019,
Mark Klein: They have an experienced team and we continue to be not only very high on that staff but that market as well.
We remain committed to the residential real estate business plan as it continues to provide us with entry points, into a variety of growth markets, within Central, and Southern Ohio.
Mark Klein: Even as we work to strengthen, our core markets and Northwest Ohio and Northeast Indiana.
Mark Klein: as with prior quarters, we've continued to
Mark Klein: evaluate our efficiency and capacity utilization and have hit paused as we've mentioned in Prior quarter on adding any additional support staff.
Mark Klein: Until volume levels Approach at least that 400 million dollar and your production mark.
Mark Klein: Overall, we still have ample Room to Grow within our current infrastructure.
As I mentioned our pipeline currently stands at 34 million which would point us toward our third quarter production to be well in line.
Mark Klein: With the 98 million. We delivered this quarter.
Clearly, the quarter continued, the pace of being a dominant purchase Market.
Mark Klein: In fact, our 98 million in volume, Just 4 million was a result of internal refinances.
Mark Klein: As a result 82% of our volume, this quarter was purchased transactions.
And right in line with the year to date, purchase transaction volume.
interestingly, now, with over 8,900 mortgage households, we serve a cross, our 16 County footprint,
Mark Klein: and with just approximately 2 Services per mortgage household, our potential
Mark Klein: to drive organic expansion with more products and services remains clearly front and center.
Non-interest income was up 15.1% from the prior year quarter at 5 million.
Mark Klein: And up 22.9% from the length quarter.
Mark Klein: The increase from the second quarter of 2024 was driven by increased gain on sale of mortgage loans, and Mortgage Services and rights as well as increased Title service fees and other related Revenue.
Again, this quarter, our Peak title affiliate outperformed, the mortgage Market in general and delivered Revenue growth. From every region,
Mark Klein: Year to date. They've now closed 564 transactions which is up over 34% from the first 6 months of 2024.
Mark Klein: They have exceeded our budget expectations by 27%.
Part of our product Suite.
Mark Klein: We have not discussed our wealth management division in a few quarters with the level of Market volatility and some unexpected annualization and amortizations of several relationships. Having affected their ability to add net asset growth this year. However,
Mark Klein: we continue to feel this business line is additive.
Mark Klein: To our brand and a true differentiator to a 1.5 billion Community Bank.
Overall, clients have remained very low.
Mark Klein: and our pursuit of our holistic client care model allows us to add 1 more service to our approximately 39,000 households,
Mark Klein: In addition, we are poised to announce a new strategic partnership. In the coming quarter, that will deliver more managerial and operational resources to the business line. That will not only benefit our current client base, but will also potentially add more depth to our financial advisor skill set,
Mark Klein: On the scale front.
Mark Klein: As we completed our first full quarter of operations, following the Marblehead acquisition.
We were pleased with the overall integration of their staff with State bank's team and their ability to retain Legacy relationships with their loyal client base and deep Community connections.
Mark Klein: This acquisition underscores our ability to balance relationship-driven, organic growth with targeted m&a opportunities.
Mark Klein: Deposits were up year-over-year but down slightly from the length quarter compared to the second quarter of 202024 total deposits were up 135 million or 12%.
Mark Klein: Reflecting our ability to drive deposit relationships in parallel, with extensions of credit.
Mark Klein: Excluding the 51 million in deposits from the acquisition, deposits grew by 84 million or 7.5%.
For the length quarter, we saw balances decline by 21 million.
as a portion of the seasonal public fund balances were distributed as we mentioned in the prior quarter,
Mark Klein: That said, we continue to have very positive conversations with clients and Prospects alike on the treasury side.
Mark Klein: As the current disruptions in our markets are opening up other opportunities to attract new commercial deposit relationships.
Mark Klein: As I mentioned overall, loan growth continues to be strong.
Mark Klein: When compared to the second quarter of 2024, our loan book grew, 89 million or approximately 9% and 6.4 million nearly 1% from the length quarter.
Mark Klein: Adjusting for Marble Head loan growth would have been 71 million or up 7.1% from the prior year.
Mark Klein: Our loan growth coupled with stable funding costs that Tony will detail in a bit, uh, in our webcast.
Mark Klein: Drove our net, interest margin this quarter up 36 basis points to nearly 3.5%.
Mark Klein: Which is the highest level we've experienced since the fourth quarter of 2022.
Mark Klein: Columbus has continued to provide positive momentum and is driving the bulk of our loan growth.
Mark Klein: That market is still very competitive but our 4 commercial lenders have ramped up their calling efforts substantially and order to counter the competitive landscape.
Mark Klein: I work to adjust. Our sails has led to our Columbus. Team adding new high-end relationships.
Mark Klein: That will continue to drive growth beyond the 400 million loan book that we currently serve.
Mark Klein: In that robust Market.
Mark Klein: In terms of deepening existing relationships, more scope, more services, and each household.
Mark Klein: We clearly take pride in the strength of our client relationships.
Mark Klein: and remain focused on delivering the products and services, our prospects want
Mark Klein: while deepening relationships through, innovative solutions that existing clients need
Mark Klein: As a key element of that commitment, we continue to expand our hybrid office model.
Mark Klein: That is geared to providing connectivity with clients through multiple communication, channels, and yet assist us with improving our operational efficiency.
Mark Klein: This is the exact model that will enable us to take market share in our newer expansion markets of Angola Indiana and soon to be Napoleon Ohio.
Office closures Andor consolidations.
As he's Lo local market Dynamic shift. We contend that customers will seek
stability and Care from an established partner.
Mark Klein: Like State Bank.
Mark Klein: In fact to capitalize on this disrupt disruption and ensure Regional and business line. Execution of our growth plans. We have identified specific, corporate initiatives and regional growth goals.
Mark Klein: These measurable plans are designed to deliver.
Us a greater percentage of the market that just might become available over the next 12 to 18 months as the crack in the landscape widens.
Mark Klein: With regard to operational excellence.
Mark Klein: Compared to the prior year, commercial real estate loans grouped by approximately 91 million.
Mark Klein: Consumer loans increased by over 12 million.
Cni allowance decreased by 3.4 million and agricultural. Loans also decreased by 3.4 million.
As we review our total production both on and off balance sheet, we delivered a 166 million and Loan volume across all business lines.
Which was up nearly 41% from the second quarter of 2024.
Mark Klein: Despite some short-term softness in the egg production Arena.
We remain quite positive on our ability to bolster long-term growth.
Mark Klein: Client loyalty remains high. As is our ability to customize solutions for our egg producers.
Mark Klein: Finally, we remain.
Mark Klein: Significant depository relationships with our client base that will undoubtedly open up more lending opportunities as capital needs arise.
Mark Klein: And finally asked that quality.
Mark Klein: We continue to reveal high levels of asset quality metrics.
Mark Klein: Charge all spelled to less than 2 basis points from a slightly elevated quarter elevated in the first quarter.
Non-performing assets, total 6.2 million and we remain focused on maintaining that strong asset quality as demonstrated by our continued management of our criticized and classified loans. Which stood at 7.2 million up to a slightly from 7.1 in the length quarter.
Our allowance for credit losses, remained, robust, at 1.43% of total loans.
I provided 265% coverage of non-performing assets.
Mark Klein: We continue to feel strongly that the credits that deteriorated in the early part of 2024 will be resolved in the short run with minimal Financial impact.
Mark Klein: Resolving. These credits will not only improve our asset quality metrics, but will also be a creative to our earnings with recaptured interest and fees.
Mark Klein: Now like to turn the call over to Tony for a few more comments on our quarterly performance Tony.
Thanks Mark and, uh, good morning everyone. Let me just outline. Some additional highlights and details of our second quarter results.
Mark Klein: First, in income statement review, starting with the net interest income.
Mark Klein: Interest income has been the Center Post of our Revenue expansion, thus far in 2025 and our results. This quarter reflect that growth.
Mark Klein: Specifically, our revenue from earning assets was 18.5 million up 2.8 million, or 18% higher than the prior year.
Mark Klein: From the linked quarter. The growth was 1.1 million which is a 25% annual growth rate and bodes. Well for our results, in the second half of this year.
Mark Klein: Interest expense is also higher but at a much lower level than the Top Line.
where the quarter interest expense was 6.3 million up 344,000 from the prior year,
Or less than 6%.
The yield on our interest, bearing liabilities is actually down from the prior year at 2.33%, compared to 2.48% a year prior.
as we look at non-interest income,
Non-interest income Rose from both the prior year and the link orders.
Mark Klein: With the percentage of non-interest income total revenue, moving more in line with our historical averages at 29.4%.
We did see the gain on sale of mortgage loans, title insurance, and other Revenue contributing meaningfully to the year-over-year Improvement illustrating, the value of a diversified Revenue stream.
Mark Klein: Our total Mortgage Banking contribution. This quarter of nearly 2.2 million was the highest. Since the first quarter of 2022
But also, to minimize our rate exposure as the pipeline expands.
Mark Klein: The gain on sale yield thus far in 2025 is 2.13%.
Mark Klein: which is up from
Mark Klein: 2024 and just slightly below the historic average.
Mark Klein: Our sale percentage of originations of nearly 83% is ideal for the profitability model we need in this business line.
Mark Klein: Operating expenses decreased compared to the link quarter as the 725,000 of merger costs were acred last quarter.
as we compare operating expenses to the prior year,
Mark Klein: Higher volume and inflation have resulted in the quarterly expense level of 11.9 million, to be higher.
By 1.2 million or 11%. However,
In concert with Revenue growth from the prior year quarter of 3.1 million or 22%.
Mark Klein: Our operating leverage was a strong positive 2 times.
Mark Klein: Turning. Now, to the balance sheet, beginning with loans, loan, growth continues on a positive trend line quarter over quarter.
Mark Klein: In addition to CRA, which has provided the bulk of our growth.
We have been pleased that traditional consumer loan, balances have grown over 18% as compared to the prior year.
Mark Klein: We have seen success with not only helocs, but but also with selectively targeted growth and used autos and Marine Lending.
Mark Klein: Our loan to deposit ratio moved up slightly in the quarter to 88% up from 86 in the link quarter.
We are very comfortable with our liquidity position and we can easily move to the mid 90s.
Mark Klein: With our on-hand liquidity of over 75 million without driving funding costs, higher.
Mark Klein: On deposits is as we had discussed in a webcast last month.
Our 331 deposit base had approximately 60 million of transitory deposits primarily from the public entities that we service.
Mark Klein: We expected that a large proportion of these funds would move back into these communities, and our deposit levels would move lower than just slightly above 1.2 billion.
Speaker Change: All of our deposit categories have moved higher since a year ago and as Mark indicated we are extremely pleased with the retention. We have seen from the Marblehead deposits.
Speaker Change: Finally a comment on our balance sheet betas. As we are hopefully approaching the beginning of a downward rate cycle.
Since the third quarter of 24, our loan beta is 16 basis points.
Speaker Change: Nearly equal to our cost of funds beta of 19 basis points.
Speaker Change: Concerning Capital Management during the quarter. We repurchased 124,000 shares at an average price of just under 19. Roughly 113% tangible book in 91% of tangible book, adjusted for aoci
Speaker Change: As Mark mentioned, our tangible book value per share was up 7.7% year-over-year and was up from the link quarter by 65 cents, driven by 1.4 million benefit on Ace, aoci higher earnings and a slight reduction in share count.
Speaker Change: And finally, on asset quality total delinquencies were slightly lower than the link quarter at 51 basis. Points with the bulk of that reduction in the 90-day plus category.
Speaker Change: And total provision expense for the quarter 597,000 driven by a higher level of unfunded commitments. And a slight weakening in the social economic factors, which drove our provision level higher.
Optimistically the second half of the Year may move provision lower. If the non-performing credits that Mark referenced a resolved in our favors, we anticipate and the economic metrics improve.
Speaker Change: our allowance increased this quarter to 15.6 million and we feel it is more than adequate based upon our underwriting strength and the inosiplex
Mark Klein: I'll now turn the call back over to mark.
Thank you Tony. We certainly remain very encouraged by our potential to deliver a strong performance in the second half of 2025.
Speaker Change: We anticipate positive resolutions to several non-performing credits in Q3 and our expense base is stabilized.
Speaker Change: With continued solid loan growth and the expectation that funding costs will be stable to slightly lower margin, expansion should continue.
Speaker Change: also, we believe that the likelihood of rate reductions in the near term has the potential
Speaker Change: to further expand our Residential Mortgage volume.
Speaker Change: We announced a dividend that this past week of 15 cents per share, equating to approximately 3.16% yield, and 25% of our earnings which That's Tony, mentioned, is in line with our long-term average of approximately 30%.
Sensory, restarted, the common dividend over 12 years ago.
Speaker Change: In closing.
Speaker Change: We remain quite pleased with the potential to grow. Our expanded region with the addition of Marble Head and we aggressively pursuing growth in markets where our competition presents us with more opportunities.
Speaker Change: We intend to focus on driving or organic balance sheet growth while maintaining discipline on operating efficiency cost management.
Speaker Change: And potentially opportunistic acquisitions.
Speaker Change: Now, let's open the call up for questions for us for the second quarter.
Speaker Change: Sarah.
Speaker Change: Thank you. We are now ready for your questions.
Thank you. If you'd like to ask a question. Please press star. Then 1 on your telephone keypad,
Speaker Change: If your question has already been addressed and you'd like to remove yourself from Q, please. Press star, then 2
Today's first question comes from, Brian. Martin at Jenny Montgomery. Please go ahead.
Speaker Change: Hey, good morning, guys.
Morning, Brian.
Speaker Change: Hey, Mark, maybe you could just start with just 2. Uh, short comment on, just on the mortgage Outlook. It seems, you know, pretty, uh, optimistic given, you know, you call and you call that Indie. Um, but just kind of getting back to at least you know the for the full year kind of getting back to around 300 million or 300 million. Plus that seems pretty achievable as you sit today given you know, the potential for lower rates and kind of the momentum in India. And um so maybe just a little comment on that if you
Speaker Change: Yeah, absolutely. Uh, we have approximately I think 28 or 29. Mlos, they're high. Producers. We've got the back room to support them. Uh, really 2 of our
Higher potential, markets of Cincinnati and Indianapolis are just gaining traction. Uh, their potential is as you might expect, it's quite high and and we're very bullish not only as I mentioned on the teams but also the markets. Uh, so I can continue to remain very optimistic and if we get a little play Brian on the 10 year, uh, we could see that magical 400 number and Beyond, uh, because it's Tony and I have talked before bottoming at 216 million a year ago. Um, we think it's just going to be the impetus to uh getting getting back to more of that 500 million that we've always contended we're built for. So remain optimistic with the number of producers and we certainly have the back room to pull it off and I think Tony's done a really nice job on, uh, the hedging position that we take, which really allows us to forward contract and make commitments with a pretty high pull through from all of our lenders and all of our markets.
Speaker Change: Got it. Okay, that's that's helpful. And uh, and just Tony the gain on sale margin. Pretty consistent with where it's kind of been. Nothing. No big movement, 1 way or the other on on how we think about that.
Tony: Yeah I think it you know we were we were down just slightly um you know maybe from historical I think generally pricing has been a little tighter this year. I do think it's going to be in that 2 215 to 2 and a quarter range, you know on out for the
Tony: Rest of 25 and into 26, that seems to be where the market is kind of settled at this point.
Speaker Change: Got you, okay. And then maybe just a little bit. Uh, whomever on just the optimism on on the loan, the loan growth. That was, you know about like um, you know, I think 2 6 million for the quarter I guess, just in thinking about, you know, the back cap, it sounds like you're pretty optimistic so just kind of the, the Run rate picking up from here. Sounds like it could be, I don't know if they were, you know, maybe payoffs in the quarter or just maybe slowed this quarter down a little bit but just
What's the pipeline look like and like, uh, and kind of how you thinking about, you know, the next 12 to 18 months on the loan growth side.
Speaker Change: Yeah, Steve can certainly chime in here but as you know, Brian as you've heard a number of quarters, uh Columbus, you know, Remains The Shining Star, uh, we continue to find, uh, great traction and CRA in that market, cni, is a little harder to come by. Uh, but again, we've got, uh, a number of seasoned commercial lenders. Uh, we just announced a plan to take market share from the disruption as I mentioned in the webcast. And uh we're clearly optimistic that not just Columbus, but other reasons like Toledo and and Finley and Fort Wayne will be additive to
Speaker Change: To that number. So we remain quite optimistic. And I know Steve Works directly with all of our lenders and I I think we're seeing Steve.
Speaker Change: some opportunities, but also
a bit more competitiveness.
Speaker Change: Uh, it's not something we shy away from, We're confident when we walk in the door. So I, I think the Run rate we're on right now, remains sustainable.
Speaker Change: Okay, and the pipeline today, you know, where does that stand? I mean relative like if you look at last quarter, this quarter and were there any payoffs in the quarter that you know kind of clip this this quarter a little bit slower than
Speaker Change: uh maybe I thought it would be or is it, you know, is it just like you say more competition related?
Speaker Change: There were some modest payoffs Brian nothing. I would say is, uh, uh the order. Yeah, nothing too. Out of the ordinary. We had a couple of, uh, things we expected to draw a little more on this quarter that were somewhat delayed, uh, by borrowers cash. But but I think we remain very comfortable with our Pipeline and Brian just a comment. We, we certainly have a a number of uh, sizable credits. That uh, again we've continued to stumble upon as we've identified disruption in the market. So uh, we're well prepared to uh, take advantage of the opportunities that are out there in the marketplace and I I'll just add on, you know, Brian. I think as we've said in the past, we probably have
40-ish type million of undrawn, construction type projects that um, those loans are closed, we have no issue with those. Um that are going to fully fund here between now and call it first second quarter of 26, so we think that's a baseline of call it 10 to 15 million, a quarter of volume that's going to fund up. Um that's in addition to, you know,
Speaker Change: Kind of our regular calling in in new activity that we've got on the street, the, the nice thing, Brian. And last comment. Nice thing is, as our rates adjust on credits that are ruling to to maturity.
The ruling to a higher rate and the good part is they're going to have to pay the same number somewhere else. So they're staying put, which is allowed us to do what we've said we've done on the Nim expansion.
Right. That which is what my just 1 question. You're just on the on the Outlook, it sounds like the margins got a nice Tailwind Tony or just the the cost of deposits or the cost of funding is you know, pretty stable here absent, you know, some fed action. So that feels like it's stabilized. Maybe there's a little room for incremental Improvement, but they continue to repricing within the loan book and uh, remix of the bonds, still seems like that the margins got a bit of a tailwind. And just kind of thinking, you know, over the next couple quarters kind of where you see the margin kind of more stabilizing, once you get continue to get a little bit of benefit here.
Speaker Change: Yeah, I think, you know, I I, I think rightly or wrongly I've, I've underestimated how much the margin has improved for us. Um, in the last call at 3 4 quarters. It, it has outpaced us. I think our ability to retain deposits and not having to chase yield on the funding costs has been, um, effective and we've retained, I don't know, Steve probably 90% of everything that's rolled over because our pricing on 3 and 5 year fhlb. And repricing is not that demon.
Speaker Change: Possibly far from what the market is. Uh so those customers are naturally rolling up the curve, we continue to have, you know, we're fairly short.
Uh term on our loan book. So we continue to have, you know, call it 100 to 150 million out every 12 months, that's going to rep price, uh at least for the next year and a half to 2 years, that's going to move up, call it 150 to 200 basis points. So if we're able to retain those and keep funding costs where they are, you're right. Margin has to have forward momentum.
Speaker Change: Okay, and just a longer term, like Tony. Where do you think the margin can stabilize given kind of the, the the environment we're in today, obviously much better than it has been, you know, where do you see it? Kind of, you know, flatlining? Once you kind of continue to get through some of the, the, the potential benefit we get from, you know, kind of the rate environment we're in. Yeah, I I think we're, you know, we're probably up another 10-ish basis points here in Q3 and, you know, probably it probably Peaks out at call it at 370 number, um, you know, and if we can hold a 370 margin on our balance sheet, um, that's going to be, you know, a great day. Um, I do know you, you know, funding pressure is going to come, there's no question in my mind, um, the disruption in the market as a mark talked about, I think there's some easy, um, movement our way, but there's going to be movement from competitors, to tighten that up.
Speaker Change: Yeah. Okay.
And you guys talked about some improvement on the credit side, those credits that came on you know, early last year. So I guess the that's the potential to maybe see a little bit of lift in
Speaker Change: you know, or benefit on the, on the, on the provision side, if you get some recoveries is that kind of how you're thinking about it at least in the, in the short term
Speaker Change: yeah, I think, you know,
Speaker Change: By even a, a fairly conservative estimate. We feel, we're going to
Speaker Change: Non-performing by 1.5 million or so here in Q3. Um and um, in addition to kind of recapture, as we talked about interest in fees, we think that Dynamic is going to give our
Overall asset quality, you know significant opportunities that you know I don't know that we'll be taking Reserve back but we certainly in all likelihood you know we put a million dollars aside thus far in provision to the first 6 months. I just don't see that pace in the second half of the year. Yeah if credit holds and you get some of this benefit uh more just lift there. So okay but the reserve kind of the reserve. We don't anticipate
Any losses really from, you know, of any consequence from now to the end of the year?
Speaker Change: Gotcha in that Reserve coverage Tony just kind of keep it you're I guess absent any macroeconomic change just kind of keep that pace Where It's At The Reserve coverage level.
Speaker Change: Well it's going to yeah it's going to naturally go up. I mean it's probably going to be in the mid-30s by the time we finish just because of the denominator is going to change in our favor. So you know but I would I would guess the allowance stays in that 156 to 159 range you know?
Through the end of the year and probably the first half of 26 spending on how things look.
Gotcha. Okay. And then last maybe just on the the capital, uh, you know, optionality I guess, as far as, you know, repurchasing shares looking at m&a, you know, kind of, I know the industry is seeing more pick up in m&a of late. Um, just wondering how you're thinking about m&a versus buyback versus just, you know, organic deployment, uh, into loans.
Speaker Change: Yeah, just 1 comment, Tony can certainly weigh in on that and Brian. But, uh, you know, on the m&a front, uh, we keep our ear to the ground, for opportunities. Uh, we're looking at potentials as, as we kind of speak, We Love Organic growth, but that doesn't mean that, you know, there's not going to be some opportunities out there. Uh, we know that's not going to be, uh, you know, the Panacea. So to speak to, you know, the scale issue that everyone's having. But uh, that said we continue to look at all angles, but clearly we have some, um, with our capital structure, we have certainly opportunities to do some of that but Tony comments. Yeah, I think, you know, I would say we had an oversized amount of the buyback in the second quarter given where the pricing was on the stock and what we felt was the opportunity. Um, you know, I think collectively Mark and I have looked at it and we're probably going to you know slow that down here in the third quarter because I do think we have some alternative opportunities. Um not that we have any, you know, capital deficiency either capital is just fine.
Speaker Change: Uh, but I think we do have some opportunity, not only for organic expansion as we've discussed, but I think there's some conversations that we need to maybe keep Capital, you know, at or above where it is today.
Speaker Change: Gotcha. And then a last 1 for me was just on the expenses. It sounds like, you know, a really nice job on that front just uh any
Speaker Change: Any big changes to the kind of the Run rates where we're at today in terms of, I know you talked about, not adding some staff to the mortgage. Obviously, if you don't get a little bit more scale but elsewhere kind of Investments. Uh, you know, this level is reasonably good. Maybe a little bit of growth from today's level just uh, any thoughts there and
Uh, well, clearly clearly brand as we've communicated many quarters, uh, you know, we got a, a variable based Compensation Plan across the board. We do well, our staff does well, that's including non- mortgage producers, but clearly, as mortgage production Rises, expenses will go up. But moral story is the scale that we've realized, I've recently helping us, uh, to deliver, you know, a better Roi. Uh, you know, at that nearly that 1% level and and higher, which is certainly, you know, the long-term goal. Always, uh, but that said, uh, we continue to to fight that battle because uh, expenses aren't going to go down and certainly technology, uh, continues to drive uh, you know, more expensive level up. But that said uh we know what the job to be done is and that's organic growth at most cost.
Speaker Change: So we're optimistic about where we're at today and, and we think we can continue to drive performance higher.
Speaker Change: Too. Okay.
Brian: Uh, I think that's all I had, guys. Thanks for taking the questions and congrats on a nice quarter. Yeah, thanks, Brian. See you?
Speaker Change: and as a reminder, ladies and gentlemen, if you'd like to ask a question, please,
and that concludes the question and answer session. I'd like to turn the conference back over to Mr. Klein for closing remarks.
Mark Klein: Thank you, sir. Thanks for joining us. Uh, this morning, nice to have you with us. Uh, we certainly look forward to speaking with you, uh, on our third quarter 2025 results,
Speaker Change: Uh soon, in October. Take care.
Have a wonderful day.
Thank you. Thank you.