Cuộc họp công bố kết quả kinh doanh quý 3/2026 của SB Financial (SBFG): Tăng trưởng dư nợ cho vay và mở rộng biên lãi thuần (NIM)

Thông tin chính

• SB Financial đã báo cáo lợi nhuận ròng quý 3/2026 đạt 3,9 triệu USD và lãi cơ bản trên cổ phiếu (EPS) pha loãng đạt 0,63 USD, so với mức 4,0 triệu USD và 0,64 USD của quý liền trước. Đây là quý thứ 63 liên tiếp ngân hàng này ghi nhận có lãi.
• Tổng doanh thu hoạt động tăng 9,0% so với cùng kỳ năm ngoái lên 18,1 triệu USD. Thu nhập lãi thuần tăng 8,8% lên 13,4 triệu USD, trong khi biên thu nhập lãi thuần (NIM) mở rộng 7 điểm cơ bản so với quý trước lên 3,50%.
• Dư nợ cho vay đạt 1,22 tỷ USD, tăng 9,8% so với cùng kỳ năm ngoái và tăng 2,5% so với quý trước. Kết quả này kéo dài đà tăng trưởng dư nợ cho vay theo quý lên 10 quý liên tiếp.
• Tiền gửi tăng 9,5% so với cùng kỳ năm ngoái lên 1,38 tỷ USD nhưng giảm 8,3 triệu USD so với quý trước do sự rút vốn đã được dự báo trước của một khách hàng bán buôn lớn. Tiền gửi không tính lãi tăng 11,5 triệu USD so với quý trước lên 270 triệu USD.
• Chất lượng tài sản tiếp tục ổn định, với tài sản xấu ở mức 4,3 triệu USD, tương đương 0,27% tổng tài sản. Tỷ lệ bao phủ nợ xấu vượt 500%, và tỷ lệ xóa nợ ròng ở mức dưới 1 điểm cơ bản so với tổng dư nợ bình quân.
• Ban lãnh đạo dự báo tăng trưởng dư nợ cho vay ở mức một chữ số cao, khoảng 8% đến 8,5% trong năm 2027. Ngân hàng cũng dự kiến mức tăng trưởng chi phí đã chuẩn hóa từ 4% đến 5%, phản ánh chi phí nhân sự, y tế và công nghệ tăng cao.

Dữ liệu tài chính cốt lõi

Kết quả hoạt động kinh doanh và vận hành

Cho vay thương mại tiếp tục là động lực tăng trưởng chính. Ban lãnh đạo cho biết khoảng 70% mức tăng trưởng gần đây đến từ thị trường Columbus. Danh mục cho vay thương mại tiềm năng đang triển khai vượt 53 triệu USD, trong khi danh mục cho vay xây dựng thương mại có thể đóng góp thêm 15 triệu USD đến 25 triệu USD tăng trưởng, sau khi trừ đi các dự án chuyển sang hình thức tài trợ dài hạn từ đại lý tài chính.

Dư nợ cho vay bất động sản thương mại đạt tổng cộng 643 triệu USD. Tỷ trọng cho vay văn phòng tiếp tục ở mức dưới 5,5% tổng danh mục cho vay, và ban lãnh đạo cho biết không có phân khúc nào khác chiếm quá 10% danh mục cho vay hiện tại, ngoại trừ thế chấp nhà ở dân dụng.

Doanh số phát hành thế chấp đạt gần 78 triệu USD, tăng gần 15% so với cùng kỳ năm ngoái mặc dù lãi suất thế chấp vẫn ở mức 7% trở lên trong phần lớn thời gian của quý. Doanh thu từ hoạt động ngân hàng thế chấp đạt 1,8 triệu USD, bao gồm 946.000 USD phí dịch vụ và 1,26 triệu USD lợi nhuận từ bán khoản vay. Danh mục quản lý dịch vụ thế chấp nhà ở đạt tổng cộng 1,52 tỷ USD.

Peak Title đã tạo ra 514.000 USD doanh thu. Tài sản quản lý thuộc mảng quản lý tài sản và môi giới đạt 578 triệu USD vào cuối quý. Dư nợ cho vay nông nghiệp tăng 28% so với cùng kỳ năm ngoái lên gần 84 triệu USD, trong khi doanh số cho vay SBA tăng 24% lên 5,2 triệu USD.

Các văn phòng tại Angola, Indiana và Napoleon, Ohio đã cùng nhau huy động được hơn 25 triệu USD tiền gửi cốt lõi chi phí thấp và phát hành 21 triệu USD dư nợ cho vay. Trong suốt chiến dịch mở rộng, SB Financial đã thu hút thêm khoảng 586 quan hệ khách hàng.

Công ty đã nâng mức cổ tức hàng quý lên 0,165 USD cho mỗi cổ phiếu. Ban lãnh đạo cho biết mức này tương đương với tỷ suất cổ tức quy năm khoảng 2,2% và tỷ lệ chi trả cổ tức là 26%, đánh dấu năm thứ 14 liên tiếp tăng chi trả cổ tức hàng năm.

Triển vọng từ ban lãnh đạo

Ban lãnh đạo lập kế hoạch tăng trưởng dư nợ cho vay khoảng 8% đến 8,5% trong năm 2027, được hỗ trợ bởi mảng bất động sản thương mại, cho vay thương mại và công nghiệp, cùng hoạt động xây dựng. Triển vọng này phụ thuộc một phần vào tỷ lệ chuyển đổi danh mục cho vay tiềm năng và đà tăng trưởng tiếp tục ngoài thị trường Columbus.

Đối với biên thu nhập lãi thuần (NIM), ban lãnh đạo dự kiến sẽ giảm vài điểm cơ bản trong quý 4/2026, đi ngang trong quý 1/2027 và tăng tốc vào khoảng giữa năm 2027. Mô hình cơ sở của ngân hàng giả định có hai lần tăng lãi suất cho đến cuối năm 2027, với mức 3,50% đến 3,51% được mô tả là vùng cao của khoảng biên kỳ vọng.

Doanh số phát hành thế chấp dự kiến đạt khoảng 50 triệu USD đến 60 triệu USD trong quý 4, nâng quy mô cả năm 2026 lên khoảng 280 triệu USD. Ban lãnh đạo đặt mục tiêu tăng trưởng 10% đến 15% trong năm 2027, tùy thuộc vào biến động của lãi suất dài hạn.

Ban lãnh đạo dự kiến mức tăng trưởng chi phí hoạt động đã chuẩn hóa từ 4% đến 5% trong năm 2027. Chi phí đãi ngộ, chi phí y tế cao hơn và chi tiêu công nghệ mở rộng dự kiến sẽ tiếp tục tạo áp lực, mặc dù các chi phí tư vấn và triển khai liên quan đến chuyển đổi hiện tại được mô tả là theo dự án và không thường xuyên.

Rủi ro và các yếu tố cần theo dõi

Lãi suất thế chấp từ 7% đến 7,5% tiếp tục hạn chế hoạt động phát hành mới và tái cấp vốn. Mục tiêu tăng trưởng thế chấp năm 2027 của ban lãnh đạo phụ thuộc vào xu hướng của lãi suất trái phiếu kỳ hạn 10 năm và chi phí vay vốn nói chung.

Chi phí hoạt động tăng nhanh hơn doanh thu trong quý do SB Financial đầu tư vào nhân sự quản lý thương mại và nguồn vốn, tiền thưởng hiệu suất, phúc lợi y tế và chuyển đổi công nghệ. Ban lãnh đạo thừa nhận rằng chi phí nhân sự và y tế đang tăng nhanh hơn so với dự kiến trước đó.

Cạnh tranh tiền gửi và chi phí huy động vốn vẫn là những biến số quan trọng. Mặc dù công ty cho biết họ không dựa vào việc trả lãi suất tiền gửi cao hơn thị trường, ban lãnh đạo lưu ý rằng họ có thể tăng lãi suất chào thầu thêm 25 đến 30 điểm cơ bản nếu cần thêm nguồn vốn huy động.

Điểm nhấn phiên hỏi đáp với chuyên gia phân tích

• Tăng trưởng dư nợ cho vay: Ban lãnh đạo nhắc lại mục tiêu tăng trưởng khoảng 8% đến 8,5% cho năm 2027. Columbus tiếp tục là thị trường dẫn đầu, trong khi các khu vực khác dự kiến sẽ đóng góp nhiều hơn trong quý 4/2026 và năm tới.
• Năng lực nguồn vốn: SB Financial đã báo cáo khoảng 65 triệu USD thanh khoản thặng dư, điều mà ban lãnh đạo tin rằng có thể đáp ứng hầu hết danh mục cho vay tiềm năng hiện tại. Tăng trưởng tiền gửi dựa trên quan hệ khách hàng tiếp tục được kỳ vọng sẽ hỗ trợ thêm cho hoạt động cho vay.
• Mức độ nhạy cảm với lãi suất: Ban lãnh đạo ước tính mỗi lần tăng lãi suất 25 điểm cơ bản có thể mang lại lợi ích quy năm từ 600.000 USD đến 700.000 USD trước khi tính đến việc định giá lại tiền gửi và các thay đổi khác trên bảng cân đối kế toán.
• Triển vọng mảng thế chấp: Doanh số phát hành trong quý 4 dự kiến đạt từ 50 triệu USD đến 60 triệu USD. Kịch bản cơ sở của ban lãnh đạo hướng tới quy mô cho vay thế chấp nằm trong vùng thấp của khoảng 300 triệu USD cho năm 2027.
• Triển vọng chi phí: Ban lãnh đạo dự kiến mức tăng chi phí đã chuẩn hóa từ 4% đến 5% trong năm 2027, với khả năng chi tiêu mạnh hơn nếu điều đó hỗ trợ đòn bẩy hoạt động và quy mô sản xuất/kinh doanh cao hơn.

Toàn văn cuộc họp báo cáo kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good afternoon and welcome to the SB Financial Third Quarter 2026 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 we will open the conference up to the investment community for questions and answers. I will now turn the conference over to Sarah Mekus with SB Financial. Please go ahead, Sarah.

Sarah Mekus

Good afternoon, 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.yourstatebank.com. Joining me today are Mark Klein, Chairman, President, and CEO; Tony Cosentino, Chief Financial Officer; and Steve Walls, 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 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. We will now turn the call over to Mr. Klein.

Mark Klein

Thank you, Sarah, and good afternoon, everyone. Welcome to our third quarter 2026 conference call and webcast. This quarter represented another period of disciplined execution and sustained momentum across our franchise. As we navigate the current interest rate environment, our diversified operating revenue model continued to deliver the structural resilience required to gather scale, our top-line revenue, and protect core profitability. We experienced balanced performance across our commercial lending operations and fee-based business lines, anchored by proactive margin management and sound credit administration. While planned investments in core systems and commercial services temporarily increased expenses this quarter, our strong fee generation and measured margin expansion provided a constructive offset. We are pleased with our quarterly performance, always with a keen eye on prudent capital management and deployment, organic scale, and long-term shareholder value creation.

Highlights for this quarter include net income at $3.9 million with diluted earnings per share of $0.63, compared to $4 million or $0.64 per diluted share last quarter, marking now our 63rd consecutive quarter of profitability. Total operating revenue reached $18.1 million, an increase of 9% from $16.6 million for the year-ago quarter, driven by net interest income that advanced 8.8% to $13.4 million. Loan balances reached $1.22 billion, reflecting an increase of $108 million or 9.8% from the prior year quarter, and an increase of $29 million or 2.5% from the linked quarter. This performance extends our trend of sequential loan growth now to 10 consecutive quarters. Total deposits finished at $1.38 billion, up $120 million or 9.5% year over year. Our core relationship model continues to provide positive momentum. However, total balances contracted modestly by $8.3 million from the linked quarter due to the anticipated runoff of a rather large wholesale relationship that Tony discussed on our call last quarter.

Non-interest income finished at $4.7 million, up 9.6% year-over-year, and accounted for nearly 26% of our total operating revenue, demonstrating the ongoing value of our diversified fee-based business lines. Tangible book value per share ended the quarter at $18.65, up $1.44 or 8.3% year over year, with our adjusted tangible book value per share (when excluding AOCI) expanding now to $23.03. Asset quality remains a key benchmark in our quarterly performance. As such, total non-performing assets finished at $4.3 million, representing just 0.27% of total assets, and down 5 basis points from the linked quarter. We continue our journey to deliver on our 5 key strategic initiatives we discussed in many prior quarters: revenue growth and diversity for improved performance, greater scale for efficiency improvement, expanded scope for additional services in each household, operational excellence for a stronger brand, and always top-tier asset quality. Taking a little closer look at our revenue diversity, our first initiative focuses on revenue diversity that serves as our structural defense across all economic cycles.

Fee-based teams, driven primarily by our 25 MLOs, executed with precision throughout the quarter. However, with mortgage interest rates at or above the 7% mark for much of the quarter, industry-wide refinance activity has certainly been limited. Given this headwind, we were pleased to deliver mortgage originations for the quarter of nearly $78 million, noting an improvement of nearly 15% over the prior year period. Entering the fourth quarter, our residential pipeline remains consistent at $20 million to $25 million level. Complementing our constrained origination momentum was our steady annual income from our sold residential servicing portfolio that reached now $1.52 billion this quarter, delivering nearly $1 million in servicing fees with $2.8 million earned year-to-date. When combined with our proactive servicing rights hedge, they provide a vital buffer to earnings momentum. Beyond mortgage banking, Peak Title delivered $514,000 in revenue supported by internal commercial lending referrals. And our wealth management team delivered solid top-line support that helped offset mounting margin pressure. Our second key initiative is greater scale to improve efficiency.

The broader market presence identifies opportunities to scale up. For deposit, retention, and expansion remain a priority as the industry broadly deals with funding pressures and mounting competition. Our teams delivered exceptional execution this quarter, highlighted by our non-interest-bearing checking accounts that expanded by $11.5 million from the linked quarter to reach $270 million, representing nearly 20% of our total deposit base. All of this core deposit activity has provided a very stable deposit cost of funds coming in for the quarter at 1.81%, up just 2 basis points from the prior year. This level of high-quality core deposit growth reflects our strong community bank brand and proactive approach to client care. Ongoing consolidation and market disruption across our footprint continue to create significant organic in-market balance sheet growth opportunities. Our commercial lending and TM teams have been on the street and engaging with clients and prospects that seek a more responsive, relationship-based banking partner amid all the disruption. Campaign to date, we have obtained approximately 586 new relationships, including balances that are nearly 30% of our longer-term goal of securing organic growth of $500 million in new loans, deposits, mortgages, and wealth assets.

Furthermore, our targeted de novo office expansions are demonstrating constructive, measured progress. Both our Angola, Indiana, and Napoleon, Ohio offices continue to exceed expectations and have combined to deliver now over $25 million of local, lower-cost core deposits, and $21 million in market-yielding loan balances. Our third initiative centers on deepening existing client relationships for greater scope. Of course, by scope, we mean capturing a larger share of the client's wallet through the identification of comprehensive multi-product solutions. In fact, our hybrid office strategy is specifically designed to facilitate this approach, driving cross-functional internal referrals between our commercial and retail lending teams, mortgage originators, and wealth management advisors. Within this framework, our wealth management division continues to provide a robust array of advisory services with total wealth and brokerage assets under management, finishing the quarter at $578 million. Our alliance with Advisory Alpha, we discussed in prior quarters, is progressing exactly as planned, allowing for a methodical transition of client portfolios to an an enhanced platform and one that provides our clients with direct access to institutional-grade investment solutions. Finally, as we continue to seek a higher level of engagement with our client base to provide a greater level of services per household.

This strategy includes more robust data analytics that enables our sales staff to work smarter and more intentionally with their client base and their unique book of loans and deposits. Measuring growth initiatives per producer is a continuous function at their fingertips and provides immediate feedback on productivity and their level of goal attainment. Our level of engagement has enabled us to expand our number of households now to over 33,000, inclusive of our wealth relationships, credit card portfolio, and our 9,000 households sold mortgage portfolio. Fourth initiative is excellence in operational activity. Achieving scale requires not just top-line growth, but discipline and alignment with our operational activity. The robust $29 million linked quarter loan expansion we achieved this quarter was driven by commercial lending production capacity we have intentionally built over the past several years across greater Columbus, northern Ohio, and eastern Indiana markets. Entering the fourth quarter, our production capacity is apparent, as we now have an active commercial pipeline of over $53 million.

When we include our commercial construction pipeline, we will have another $15 million to $25 million of growth net of projects that we funded in prior years that will be seeking long-term permanent agency financing. Our operating expenses were slightly elevated this quarter at $13 million, reflecting deliberate investments to support our expanding operational footprint. They are tied to 3 operational drivers: adding talented commercial and TM leadership in growth markets, seasonal performance incentive accruals aligned with our loan portfolio expansion, and front-loaded implementation and consulting expenditures required to support our credit card and core platform outsourcing conversions. These technology expenditures are clearly project-driven, non-recurring, and lay the groundwork for greater operating efficiency as we continue to scale up. Despite these elevated transition costs, our underlying financial foundation remains exceptionally solid. Balance sheet capital strength is robust, providing the necessary support for our growth initiatives. Total shareholders' equity ended the quarter at over $144 million, representing a 5.4% increase from the $137 million reported a year ago.

When we exclude the temporary AOCI adjustment, capital is up $11.1 million or 6.9%. And finally, asset quality. Our fifth and final strategic initiative is maintaining top-tier asset quality. Our non-performing assets remain near historic lows at just 27 basis points of total assets. Our disciplined credit oversight is further reflected in the level of our core criticized and classified loan portfolios. Criticized loans dropped sharply year-over-year to $331,000, while our classified loans year-over-year declined by over 24% to just $3.6 million. We also continue to see measured progress in our specialized lending sectors. Agricultural lending portfolio reached nearly $84 million at quarter end, expanding 28% year over year. While slightly below our original 12-month timeline identified last year, we remain firmly committed to growing this key sector and expect to cross our $100 million portfolio goal within the next several quarters.

Likewise, SBA lending production has escalated to now this year $5.2 million or a 24% increase over the prior year. While production is below our expectations, we have added $3.1 million to our balance sheet growth, while gain on sale revenue has now risen to $235,000 and 124% over the same period last year. With that, I will turn the call over to Tony Cosentino, our CFO, to expand on the quarter's financial performance. Tony?

Anthony Cosentino

Thanks, Mark, and again, good afternoon, everyone. Let me outline some highlights and important details regarding the third quarter. On the income statement, as Mark indicated, total operating revenue expanded to $18.1 million or 9% over the year-ago quarter and up 5% annualized from the $17.9 million recorded in the linked quarter. With a strong loan pipeline, Mark, as mentioned, we expect continued growth in interest income. That interest income was driven primarily by our growth of top-line revenue, with total interest income advancing to $20.5 million, an increase of 9.1% from $18.8 million recorded in the prior year. This easily outpaced our interest expense growth of $627,000, which reached $7.1 million, allowing net interest income to advance 8.8% year over year to $13.4 million.

Our net interest margin ratio rebounded this quarter, expanding by 2 basis points year over year to 3.5%, and up 7 basis points sequentially from 3.43% in the linked quarter. This margin recovery was driven by our earning asset yields expanding by 15 basis points from the linked quarter. We continue to see the benefits of our expanded balance sheet that includes ongoing upward repricing across our interest-earning assets. Non-interest income finished the quarter at $4.7 million, up 9.6% from the prior year quarter. Our core mortgage banking contribution reached $1.8 million, up nearly 20%, compared to the third quarter of 2025. Mortgage banking was supported by core loan servicing fees contributing $946,000, while gain on sale of mortgages finished at $1.26 million, generating a gain on sale margin of 1.9%. This quarter, our hedging program was instrumental in managing our market's interest rate volatility, generating $319,000 in revenue with over $500,000 produced year-to-date.

And lastly, we had an OMSR valuation recapture of $43,000 compared to a negative $301,000 impairment in the prior year. Operating expenses totaled $13.2 million for the quarter, up 14.4% from $11.5 million in the prior year. This change reflects the impact of adding talented producers across our footprint alongside higher employee medical expenses and seasonal performance incentive accruals. Collectively, salaries and employee benefits rose to $7.3 million. Additionally, our year-over-year expense comparison was impacted by higher data processing fees, rising to $1.12 million from $723,000 in the prior year and $693,000 in the linked quarter. These line items absorb the necessary consulting and implementation costs for our upcoming credit card and core outsourcing conversions. The efficiency ratio for the quarter was above our recent range, which is average 68% over the last 4 quarters.

The efficiency aberration is reflective of these conversion and personnel investments. However, when we look at operating leverage for the 9-month period, revenue has expanded 8.8% compared to operating expense growth of 4.1% for an operating leverage of 2.1x. Turning again to the balance sheet, loan growth continued to outpace our peer banks and ended the quarter at $1.22 billion, pushing our loans to asset ratio up to a healthy 75.5% compared to 73.4% from the linked quarter. Commercial real estate outstandings continue to drive our loan portfolio balance at $643 million. But we maintain strict granular credit management protocols. Specifically, our exposure to office space remains under 5.5% of our total loan portfolio and excluding residential mortgage portfolio balance. No other segment is higher than 10% of our current loan book.

The loan-to-deposit ratio at quarter end was 88.1%. This included total deposits rising to $1.38 billion. As we highlighted on our last call, we finally realized the migration of a large rate-sensitive institutional deposit into the wholesale market sector. Overall, balance sheet liquidity stayed at a healthy level, and we can comfortably fund our anticipated loan closings well into the fourth quarter and beyond without reliance on wholesale markets for funding. On capital management during the quarter, we continued to adjust our share buyback to just 6,700 shares at an average cost of $2,671. Our approach conserved capital flexibility and avoided shareholder dilution due to our recent market appreciation that exceeded tangible book value of $18.65 at month end by $9.96. As we discussed on our last call, our stock is now trading at over 1.5x tangible book, up from 1.3x in the second quarter and just 1.1x over the same quarter last year.

Moderating our buyback pace from the 28,000 shares repurchased last quarter is a deliberate strategy that preserves the balance sheet flexibility required to support our organic loan growth while continuing to provide a firm floor for our market price. And lastly, to asset quality, our allowance for credit losses was 1.3834% compared to 1.38% in the linked quarter and 1.44% in the prior year. Coverage of non-performing loans now exceeds 500%, consistent with the linked quarter and well above the 345% reported in the prior year period. Net charge-offs as a percentage of average loans returned to historical lows at less than 1 basis point. Down from 6 basis points in the linked quarter and comparable to the prior year. Total loan delinquency ended the period under 34 basis points, and when we exclude those loans on non-accrual, our delinquency rate is effectively 0. I will now turn the call back over to Mark.

Mark Klein

Thank you, Tony. We enter the final quarter of '26 encouraged by the sustained momentum across our commercial lending operations and core deposit gathering. Total assets under our care now exceeding $3.7 billion. Our diversified business model continues to provide the resilient foundation necessary to navigate shifting rate cycles as we scale our bank toward the $2 billion-plus balance sheet objective. This quarter we are also pleased to announce the increase of our quarterly dividend to $0.165 per share and in line with our longer-term goal to elevate our payout as scheduled every other quarter. This dividend represents an annualized yield of approximately 2.2% and a conservative 26% payout ratio for our 14th consecutive year of increased annual dividend payouts. Now let's open the call up to questions from our investment community.

Operator

We will now begin the question and answer session. [Operator Instructions] And the first question comes from Brian Martin with Brean Capital. Please go ahead.

Phần hỏi đáp

Brian Martin

Hey, good afternoon, guys. Yes, thanks. You know the loan growth you guys talked about was obviously been a nice track record here in recent quarters and just wondering how you're thinking about that, you know, where the pipeline sits today heading into 4Q and you know, kind of next year and any impact you'd expect, you know, given the rate environment. Any thoughts on that would be helpful.

Mark Klein

Yeah, we're looking, of course, we're in the throes of budgeting as we speak. As we've done in prior years, we've averaged around 8% to 8.5% high single digit. Generally, Brian, I think that's where we're looking at in '27. Clearly, Columbus has been the all-star, providing 70% roughly of our growth. Other markets hopefully are going to kick in here this fourth quarter as well as on in the next year. But we have a solid, Steve can speak to the pipeline, but we have a solid commercial pipeline and also a construction C&D pipeline that could be in the $20 million to $30 million, $40 million net after a few credits exit that have been generally poised for institution kind of financing as they stabilize. So we've got a really strong pipeline when you include both facets. Any comments to?

Unknown Speaker

Yes, sure. Just piggyback on that, Brian. I think we feel very good about the pipeline referenced in the earlier comments. Those pulling through. The interest rate environment going forward into the year ahead. Obviously, you know, many folks expect that the rate, those longer term rates will will moderate or at least not continue to grow too aggressively. As we referenced earlier, Columbus is a big deal, a big part of our growth. One of the reasons that market remains robust and not impervious to rates, but perhaps less influenced by rates. A big piece of the puzzle down there is medical as well as educational and those expenditures tend to support that local economy in a way that interest rates don't necessarily impact greatest. We feel good about the public.

Brian Martin

the following year as well. So good pipeline. Yes, okay, and more on the commercial side. CNI and CRE is that I know you also mentioned the AG mark, but you know CRE and CNI is kind of the primary drivers of the growth. Yes, certainly CRE primarily, you know, look at our balance sheet, you can see that, but we continue to explore C&I opportunities and the associated deposits that come with those. Got you. Okay, perfect. And then just on the funding side, just Tony, you talked about the liquidity. So I guess just in terms of deposit growth, how are you, you know, given the competition out there today and your current balance sheet structure? I mean, how are you thinking about deposits in the next quarter or next couple of quarters, just in terms of funding the growth.

Anthony Cosentino

Yes, as I've stated probably every quarter on this call this year, I've been surprised by our level of deposit growth. You know, clearly we've had disruption in our markets through acquisition and other things that have inured to our benefit. I do think we've been able to grow substantially without being a market leader on rate. So I think at any time we probably could, you know, kick it up 25 to 30 basis points if needed to fund where we are. So we have about $65 million of excess liquidity as we sit today. I think that covers most of our current pipeline plus.

Mark Klein

And if we have normalized deposit growth on into '27, I feel pretty good about funding anything else. And Brian, just 1 follow-up comment. It's not like we've been attracting high-cost deposits well above the margin. It's a general direct reflection of our TM talent that we've hired. We have a new gentleman, Shawn, down in Columbus and individuals across Ohio and Northeast Indiana. So that kind of strategy to bring on TM talent is paying dividends.

Brian Martin

Yes, no, that's a good point, Mark. So, okay. How about just last two for me is just the on the margin Tony? I guess in terms of just you know kind of big picture if we we expect a few potential rate hikes here. Just broadly how how you'd expect the margin to kind of to absorb or if those hikes are just how to think about them in the coming quarters here.

Anthony Cosentino

Yes, so, you know, relative to what our current portfolio is, you know, call it, you know, every 25 basis points is probably, you know, call it a $600,000, $700,000 annualized impact to the good for us, given where we are in terms of prime rate financing, assuming nothing else happens. Obviously, there's going to be a reaction on the deposit side there. So, you know how well we manage that delivers that going forward. Our base model is kind of 2 rate increases from now till the end of '27, which I think is fairly conservative and in line with our expectation that still our margin ratio is going to be probably a couple basis points ticked down in 4Q, as it traditionally does, kind of stay flat in 1Q and then accelerate in the midpoints next year. kind of our typical model. But I would think I still believe 350 to 351 is kind of at the upper end of where we're going to achieve.

Brian Martin

going forward. Got you. Okay, that's helpful. And how about last one just on maybe just touch on the mortgage outlook? I mean, obviously with rates where they are, it's a tough market out there. But in terms of how you're thinking about, you know, kind of production and yields in that business, you know, what would you, kind of what's your, you know, big picture outlook there and how we think about, you know, before quarter and then really more heading into '27.

Mark Klein

Well, clearly, Brian, the 7% to 7.5% has put up a major constraint on that business line. That said, we still continue to see some nice activity in the 3-1-5-1 construction lending that we put in our books. It eventually goes Freddie Fannie. And, of course, we continue to field some requests on the higher-end private client mortgages that we put in our books on a variable basis. Tony's got 1 number, I always have a more optimistic number because I think we're going to get a play on the 10-year, which hasn't come yet. But looking in the next year from this year, we're clearly looking for a 10% to 15% increase of where we've found ourselves in '26 on in the '27. But as you know, that's going to be dictated by where the 10-year goes and where rates go. It's definitely taken the pressure off the business line because a bigger balance sheet, operating revenue more NIM is paying dividends because it's the gift that keeps on giving versus doing mortgages of $500 million every year, every time to generate that fee-based revenue.

Anthony Cosentino

I would just add, Brian, you know, I think, you know, we're probably looking at a $50 million to $60 million quarter in 4Q, which, you know, lends the year, call it $280 million. You know, we call, you know, 10% to 15%. That tells us we're in the low 3s for '27. I think on a base model. I still think if we had full disclosure, I think most of the people out there would be shocked at some of our MLOs and the volume they're doing. We have some real stars that even in very tough markets can do significant mortgage volume. Fortunately, it's just not, you know, the depth of all of our MLOs is not to that level, but it is an impressive performance by a number of our participants.

Mark Klein

people. And Brian, the old adage, and we certainly are reflective of this, 80% of our volume comes from 20% of our producers. So like Tony said, we've got some people that do $30 million, $20 million, and $30 million to $35 million every year, whether rates are 12%, 6%, or 5%. We certainly want to find more of those kind of people, but in the interim, we like our positioning, and we're looking for a better '27.

Brian Martin

Got you. Okay. And last one for me was just on expenses. You know, obviously a little noise. You talked about it, Mark, or just if we think into '27, given, you know, the current run rate or just how to think about a decent run rate heading into 4Q in the next year, how are you thinking about that in terms of other additional spends you may have or any thoughts there would be helpful.

Mark Klein

Before Tony fields that question, Brian, at a high level, people, technology and benefits are taking an inordinate bigger bite of the margin revenue. So much like all banks, scale continues to be a big deal for us, but they're increasing at an increasing pace.

Anthony Cosentino

Yes, I I think you know add on to Mark's comments. You know I've been relatively you know, positive that our expense levels can be, you know, kind of under control as we look at 4Q and into '27. I'm turning a bit. I mean, we're seeing more and more on the ground of people costs and medical that is rising at a pretty alarming rate. I do think we're still going to have, you know, call it a normalized 4% to 5% base level of expense growth in '27, but that's certainly higher than where I was, call it 6 months ago. And we do have some expanded technology costs that are gonna take a little bit of a bite. And we've improved our people IQ out there with some of the staff we've hired. And with that comes a little bit higher level of pay to compensate them, but that's kind of the game. Yes, and you know, I hate to say this out loud, Brian, but.

Mark Klein

And Tony, the bet is we'll get higher levels of production from a broader talent base.

Anthony Cosentino

take a double-digit expense growth if we can grow operating leverage 2x to 2.5x and that's kind of the game we played for a number of years and it seemed to have worked out.

Brian Martin

Yes, plus. Yeah, and I just your point about the expenses Tony kind of the run rate that we saw in the 4Q in the third quarter here. You know, just kind of framing it with you if it's a little bit higher growth rate than you have in the past, you know, going into '27, it's best to look at it kind of maybe more year over year. So full year '26 to '27 being a higher growth rate or just use something more along the lines of the current run rate is a better, you know, given it had some of that impact in there, just what's the best way to think about it in terms of how to building going forward? Yes, okay, well cool. I appreciate all the color, guys. Thanks and congrats on a nice quarter.

Mark Klein

Thanks, Brian.

Anthony Cosentino

Thanks, Brian. Appreciate it.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Mark Klein for any closing remarks.

Mark Klein

Once again, thanks for joining us this afternoon. Appreciate your participation in our growth of our franchise. We look forward to speaking with you in January to update you on our full '26 operating performance. Thanks and have a good day.

Operator

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

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