A lot of banking companies have used their savings from the 2017 federal tax overhaul to award cash bonuses to employees.
Defiance, Ohio-based SB Financial Group, Inc., has put a bit of a twist on the sharing – by paying its 250 staffers to engage in philanthropic endeavors aimed at bettering the communities where they work and live.
“Our plan … is to provide employees with paid, personal time off in exchange for completion of pre-arranged, philanthropic activities we hope to identify in organizations across our footprint,” said Mark A. Klein, president and CEO. “We are working diligently to ensure our communities and employees realize the benefit of this program.”
SB Financial operates as State Bank & Trust in Ohio and Indiana (it has a single branch in Fort Wayne). The company has $876 million in assets — and a goal of soon hitting $1 billion. Mainly a residential home lender, it posted record earnings of $11.1 million in 2017, which, in his annual report to shareholders, Klein called the best performance in the last 14 years at the company.
Aside from making it into the billion dollar club, SB Financial has set some other goals it believes are reachable with a little effort. Among them are to increase profits by way of diversifying its revenue stream. Already in 2017 some 38 percent of its net operating income came from fee-based products including wealth management services, saleable loans, and item processing (through a subsidiary that works with community banks in the Midwest).
SB Financial also intends to strengthen its penetration in all markets. It’s growing the number of households it serves — and the number of product and service relationships each household has. Geographically, it’s strongest in four counties in northwest Ohio where it has long had a presence. It admits that its presence is minimal in new areas such as Columbus and Toledo. But therein lies potential; SB Financial has said that 98 percent of the $52 million growth in loan volume year-over-year came from its three newest markets — Columbus, Findlay and Toledo.
I posed a few questions to Klein about bank operations:
Q: You posted 2017 net income that, even without the tax benefit, showed decent improvement over 2016. What led the charge here — more offices, more loans per office (or officer), bigger loans, etc.?
Mark Klein: This past year we grew our loan balances by $52 million and generated additional net interest margin. Our three growth markets, Findlay, Columbus, and Toledo (all in Ohio) drove this expansion. We also generated $15.6 million in SBA loan volume and sold over $11 million for $1.2 million in loan sale gains, a 60 percent increase from 2016. Additionally, we also realized a 16 percent increase in assets under management in our wealth management business line.
Q: Since late 2016 you’ve opened a real estate loan office (Warsaw, Ind.), a business development office (Westlake, Ohio) and a full service branch (Bowling Green, Ohio). All three have slightly different charges. Do you have a goal of eventually turning everything into a branch, or are you happy with tailoring the effort of each office to the perceived needs of the new community?
M.K.: Each market truly has a role to play in our strategy to add scale to our operation to improve performance. Warsaw was opened specifically to drive residential real estate lending. Westlake was opened to house a seasoned wealth management professional and a new SBA lender. And finally we opened a full-service office in Bowling Green to augment the approximately $30 million in loans we currently have in that growing college town.
Q: Can you give us a timeline for when you will divulge more specific plans to use your supplemental share offering proceeds? (The company sold 1.66 million shares of common stock early this year, netting $30 million). No sense in raising all that cash and then not deploying it.
M.K.: We intend to use the proceeds from the capital raise for general corporate purposes, which include contributions to our bank subsidiary to improve our regulatory capital, and for investments at the holding company level. We are always looking for acquisition opportunities and the additional capital raised will better position us for those opportunities.
Our vision includes becoming a $1 billion, high performing, and Russell 2000 participating financial institution.