Melissa Short - Executive Assistant Mark Klein - Chairman, President, Chief Executive Officer Tony Cosentino - Chief Financial Officer

Good morning and welcome to the SB Financial First Quarter 2016 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today’s event is being recorded. I’d now like to turn the conference over to Melissa Short, Executive Assistant. Please go ahead, ma’am.

Good morning, everyone. I would like to remind you that this conference call is being broadcast live over the Internet and will also be archived and available on our website at www.yoursbfinancial.com under Investor Relations. Joining me today are Mark Klein, Chairman, President and CEO; Tony Cosentino, Chief Financial Officer; and Jon Gathman, Senior Lending Officer. Before I turn the call over to Mr. Klein, let me add that this call may contain forward-looking statements regarding SB Financial Group's financial performance, anticipated plans, operational results and objectives. Forward-looking statements are based on management's expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied on our call today. We have identified a number of different factors within the forward-looking statements at the end of our earnings release and you are encouraged to review those factors. SB Financial Group undertakes no obligation to update any forward-looking statement, except as required by law, after the date of this call. In addition to the financial results presented in accordance with GAAP, this call will also contain certain non-GAAP financial measures. I will now turn the call over to Mr. Klein.

Thank you, Melissa, and good morning, everyone. Welcome to our first quarter webcast for 2016 we are coming off of great year last year where we achieved the 88 percentile performance of peer group banks and we’re certainly using that momentum to drive us the higher performance this year. As a result, this quarter we’ve yield greater income, record loan growth, positive operating leverage and market leading asset quality. After I make some general comments, Tony Cosentino, our CFO, as with prior quarters will dive into some more of our details. Highlights for this quarter include GAAP net income of $1.66 million, a 10.6% improvement over the prior year, with the return on average assets of 87 basis points for the quarter. Net income available to common shares for the quarter was $1.41 million or $0.26 per share, representing approximately a 13% improvement over the prior year quarter. This quarter’s double-digit improvement comes on the heels of a record profitable 2015 that we’ve yield $6.7 million in net income or $1.18 earnings per share. Our loan balances expanded for the quarter over $18 million or approximately 14% annualized from the prior year end and over $65 million for the year and improvement of nearly 13%. Top line revenue for the quarter declined modestly by 1.4% from the linked quarter, but expanded by 4.6% over the prior year quarter. Representative of our profit improvement for the quarter, this top line growth follows a robust 2015 revenue growth of over 15%. Expenses for the quarter increased less than 1% from the linked quarter and increased 3.78% compared to the year ago quarter. Wealth management revenue decreased to $633,000 or 1.8% compared to the linked quarter and declined 4% from the year ago quarter due to lower assets under our management. Mortgage origination…

Thanks, Mark, and good morning, everyone. As Mark stated, we accomplished a number of good things this quarter and our 13% increase in diluted EPS from the prior year reflects those activities. It is always great to start the year with strong results and we are quite pleased with our performance in the first quarter as well as our outlook for 2016. So let’s review some of the detail. First, total operating revenue on a fully tax equivalent basis was up 4.5% from the prior year, but down just slightly 1.5% from the linked quarter. Second, loan growth, up $65 million from the prior year or 12.8%; mortgage and SBA loan production delivered gains of $1.3 million and $400,000 respectively in the quarter. And lastly, we had the negative valuation adjustment to our mortgage servicing asset in the quarter. As we break down further the income statement starting with net interest margin, net interest income on a fully taxable equivalent basis was up from the prior year by 10.2% and up 2.1% from the linked quarter. End of period loan balances from the prior year were up $65.4 million and were up $19.5 million or 14% annualized to the linked quarter. This quarter’s loan growth surpassed the very strong fourth quarter of 2015 when we added $16.8 million of balance sheet loan growth. Our average earning asset yields increased by 4 basis points to 4.18 from prior year. On the funding side, we experienced a slight increase in the cost of our interest bearing liabilities which came in at 51 basis points, up 2 basis points from the prior year. We had anticipated and have realized that our asset growth expectations would require us to compete more aggressively for retail funding. Net interest margin at 3.75% was up 4 basis…

Thank you, Tony. Overall, it was a great start to the New Year. The first quarter demonstrated growth in a number of areas including revenue, non-interest income, loan sale gains, loan portfolio, mortgage originations, SBI loans and households collectively. These trends lead to the earnings per share improvement as we mentioned at 13%. As with each of our prior quarter, these improvements were consistent with and reflective of our commitment and collective level of execution. Recently, during our 2016 annual meeting, we revealed a new vision for our company for the planning period 2016 to 2018. Our new vision is to perform not at just the top quartile that we outlined a few years ago and achieved in 2015, but at the top decile among our 65 bank peer group. Additionally, we also intent to drive our balance sheet to the $1 billion mark with organic growth that we’ve done and deliver and perhaps also a strategic acquisition. As it has been said, a problem well stated has solved. For us, our path to top decile performance lies not only with the strategies that I have just discussed, but more importantly our level of execution. Our intention is to identify more and better strategies that will expedite our travel to this new designation of best-in-class performance. We remain well positioned to capitalize on our strengths as we pursue these market opportunities. At this time, I will send it back to Melisa for questions and comments. Melisa?

Operator, we are now ready for our first question.

Thank you, ma’am. We will now begin the question-and-answer session. [Operator Instructions]

While we are waiting for questions to gather, I would like to remind you that today's call will be accessible on our website at www.yoursbfinancial.com under Investor Relations.

[Operator Instructions] I’m sorry, no questions at this time ma’am. I’d like to turn it back over to Mark Klein for any closing remarks.

Great, thank you. Once again, thank you all for joining us this morning. We are proud of the quarter we turned in. We are looking forward to the next three quarters and particularly in revealing our second quarter to each of you in July. Thanks for joining. Have a good week.

Thank you, sir. Today’s conference has now concluded and we thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.