SB Financial Group Announces Third Quarter 2024 Results
DEFIANCE, Ohio, Oct. 24, 2024 (GLOBE NEWSWIRE) -- SB Financial Group, Inc. (NASDAQ:SBFG) ("SB Financial" or the "Company"), a diversified financial services company providing full-service community banking, mortgage banking, wealth management, private client and title insurance services today reported earnings for the third quarter ended September 30, 2024.
Third Quarter 2024 Highlights compared to the third quarter of the prior year:
Net income of $2.4 million, down 12.4 percent with Diluted Earnings Per Share ("EPS") of $0.35. EPS is up 3.0% when adjusted for mortgage servicing rights impairment in both periods.
Net interest income totaled $10.2 million, a 6.8 percent increase from $9.5 million.
Total loans increased to $1.03 billion, up by $40.9 million or 4.1 percent.
Tangible book value per share ended the quarter at $16.49, up $3.40 per share or 26.0%.
Nine Months Ended September 30, 2024, highlights over prior-year nine months include:
Mortgage Banking Revenue increased to $4.7 million, up by 7.6 percent from $4.4 million.
Noninterest income increased 2.2% to $12.5 million, up from $12.2 million.
Noninterest expense increased 1.1% to $32.0 million, up from $31.6 million.
Trailing Twelve Months Ended September 30, 2024, highlights compared to the prior year:
Diluted EPS was $1.74 for the twelve months ended September 2024, reflecting a 3.6% increase from the prior twelve months of $1.68.
Total deposits reached $1.16 billion by the end of September 2024, marking a 6.8% growth from $1.09 billion at the same time in 2023.
Mortgage origination volume was $228.3 million for the trailing twelve months, while the servicing portfolio increased by 2.9% to $1.41 billion.
Earnings Highlights
Three Months Ended
Nine Months Ended
($ in thousands, except per share & ratios)
Sep. 2024
Sep. 2023
% Change
Sep. 2024
Sep. 2023
% Change
Operating revenue
$
14,309
$
13,699
4.5
%
$
41,485
$
41,879
-0.9
%
Interest income
16,548
14,796
11.8
%
47,502
43,026
10.4
%
Interest expense
6,362
5,260
21.0
%
18,477
13,337
38.5
%
Net interest income
10,186
9,536
6.8
%
29,025
29,689
-2.2
%
Provision (recovery) for credit losses
200
(6
)
3433.3
%
200
389
-48.6
%
Noninterest income
4,123
4,163
-1.0
%
12,460
12,190
2.2
%
Noninterest expense
11,003
10,481
5.0
%
31,956
31,593
1.1
%
Net income
2,354
2,687
-12.4
%
7,835
8,212
-4.6
%
Earnings per diluted share
0.35
0.39
-10.3
%
1.17
1.18
-0.8
%
Return on average assets
0.68
%
0.80
%
-15.0
%
0.77
%
0.81
%
-4.9
%
Return on average equity
7.32
%
8.73
%
-16.2
%
8.41
%
8.72
%
-3.6
%
"We delivered strong operational performance during the September quarter with our pretax preprovision earnings up over 14% when we adjust for the servicing rights impairment," stated Mark A. Klein, Chairman, President, and CEO. "We are on track with our Marblehead acquisition and are especially pleased that we have increased the tangible book value per share by 26% in the last year."
"Our Loan Book expanded to $1.03 billion, an increase of $40.9 million, underscoring our disciplined approach to portfolio expansion. Despite market pressures from interest rates, our deposits increased by $74.2 million or 6.8% year-over-year reaching $1.16 billion," added Mr. Klein.
RESULTS OF OPERATIONS
Consolidated Revenue
In the third quarter of 2024, core earnings and margins rose with operating revenue rising to $14.3 million, a 4.5% increase from the $13.7 million in the prior year. While net interest income rose to $10.2 million, a 6.8% increase year-over-year, the Company faced pressure from rising deposit costs, which drove a 21% increase in interest expenses. Despite this, net interest margin saw a slight expansion, increasing by 9 basis points compared to the same period last year, reaching 3.17%.
Noninterest income was down 1.0%, however, when adjusted for the servicing rights impairment and the gain on sale of assets, it was up nearly 4%. Mortgage gain on sale had its best quarter since the first quarter of 2022 and we saw solid increases in Title insurance revenue (up 13%) and Wealth management revenue (up 5%).
Mortgage Loan Business
In the third quarter of 2024, SB Financial Group recorded a 15.5% year-over-year increase in mortgage loan originations, reaching $70.7 million, up from $61.2 million in the corresponding period last year. This strong performance reflects our ability to capitalize on favorable market conditions and underscores the resilience of the housing sector, which continues to show signs of strength despite broader economic challenges. Mortgage sales followed this growth, reaching $61.3 million, or 86.6% of total originations. This represents a 13.3% year-over-year increase from $54.1 million, signaling our ongoing success in expanding our market reach and maintaining a competitive position. The sales volume highlights the robustness of our operations, even as competition intensifies in the residential lending space.
However, mortgage banking net revenue decreased to $1.35 million, down 17.9% from $1.65 million in the prior year. This decline was primarily driven by a negative Originated Mortgage Servicing Rights ("OMSR") valuation adjustment of $465 thousand this quarter, significantly impacting net loan servicing fees. This reflects broader market headwinds, including shifts in borrower behavior and refinancing rates, which put pressure on servicing valuations. Despite this, gains from the sale of mortgages and continued efficiency in our operations helped partially offset the decline. The mortgage servicing portfolio expanded by 2.9%, reaching $1.41 billion. This steady growth in our servicing portfolio is a testament to our commitment to building long-term, sustainable relationships.
Mr. Klein stated, "This quarter has showcased improved efficiency in our mortgage operations. Although our results slightly missed our internal targets, the shortfall primarily reflects the heightened competitiveness and shifting dynamics within the mortgage market. Despite these challenges, our proactive measures, including expanding our origination teams, including closing our first loan from the Cincinnati market, have positioned us to capitalize on market opportunities and maintain our momentum."
Mortgage Banking
($ in thousands)
Sep. 2024
Jun. 2024
Mar. 2024
Dec. 2023
Sep. 2023
Prior Year Growth
Mortgage originations
$
70,715
$
75,110
$
42,912
$
39,566
$
61,200
$
9,515
Mortgage sales
61,271
55,835
36,623
33,362
54,085
7,186
Mortgage servicing portfolio
1,406,273
1,389,805
1,371,713
1,366,667
1,367,209
39,064
Mortgage servicing rights
14,357
14,548
14,191
13,906
13,893
464
Revenue
Loan servicing fees
874
862
855
855
850
24
OMSR amortization
(370
)
(335
)
(273
)
(282
)
(334
)
(36
)
Net administrative fees
504
527
582
573
516
(12
)
OMSR valuation adjustment
(465
)
38
181
(12
)
(78
)
(387
)
Net loan servicing fees
39
565
763
561
438
(399
)
Gain on sale of mortgages
1,311
1,277
781
747
1,207
104
Mortgage banking revenue, net
$
1,350
$
1,842
$
1,544
$
1,308
$
1,645
$
(295
)
Noninterest Income and Noninterest Expense
For the third quarter of 2024, SB Financial Group's noninterest income slightly declined to $4.12 million, representing a 1.0% decrease compared to $4.16 million in the third quarter of 2023. This minor reduction was primarily driven by lower mortgage loan servicing fees, which fell from $438 thousand in the third quarter of 2023 to $39 thousand in the third quarter of 2024, reflecting significant pressure in the mortgage servicing market. Furthermore, other noninterest income also contributed to the decline. However, this was partially offset by an increase in wealth management fees, which rose by 5.4% to $882 thousand, and a gain on the sale of mortgage loans and OMSR, which increased to $1.31 million from $1.21 million in the prior-year quarter. The gain on the sale of assets further contributed positively with $200 thousand realized this quarter.
Noninterest expenses for the third quarter were reported at $11.0 million, reflecting a 5.0% increase compared to $10.5 million in the third quarter of 2023. This rise was primarily driven by the increase of additional talent, which rose by 10.3% to $6.06 million, along with a 17% increase in data processing fees to $758 thousand. While certain expense categories saw reductions, such as other expenses, which decreased to $804 thousand from $1.1 million in the prior year, these declines were not sufficient enough to offset the overall increase in operating expenses.
Noninterest Income/Noninterest Expense
($ in thousands, except ratios)
Sep. 2024
Jun. 2024
Mar. 2024
Dec. 2023
Sep. 2023
Prior Year Growth
Noninterest Income (NII)
$
4,123
$
4,386
$
3,951
$
5,531
$
4,163
$
(40
)
NII / Total Revenue
28.8
%
31.5
%
30.1
%
36.6
%
30.4
%
-1.6
%
NII / Average Assets
1.2
%
1.3
%
1.2
%
1.7
%
1.2
%
0.0
%
Total Revenue Growth
4.5
%
-0.6
%
-6.1
%
3.4
%
-5.3
%
-0.9
%
Noninterest Expense (NIE)
$
11,003
$
10,671
$
10,282
$
10,369
$
10,481
$
522
Efficiency Ratio
76.8
%
75.9
%
78.2
%
68.4
%
79.0
%
-2.2
%
NIE / Average Assets
3.2
%
3.2
%
3.1
%
3.1
%
3.1
%
0.1
%
Net Noninterest Expense/Avg. Assets
-2.0
%
-1.9
%
-1.9
%
-1.4
%
-1.9
%
-0.1
%
Total Expense Growth
5.0
%
3.2
%
-4.6
%
1.0
%
0.9
%
5.0
%
Mr. Klein commented on the financial performance, stating, "Our noninterest income continues to show resilience, supported by gains from mortgage-related activities and consistent wealth management performance. As expected, the competitive environment and market fluctuations impacted servicing fees. On the expense side, our focus remains on managing costs related to growth initiatives, and we are committed to optimizing our cost structure to maintain operational efficiency and deliver sustained value to our stakeholders."
Balance Sheet
As of September 30, 2024, SB Financial Group continued to demonstrate financial stability, with total assets increasing to $1.39 billion, a 5.1% increase from $1.33 billion at the end of the prior-year period. This growth underscores our ability to maintain a robust financial position amidst changing market conditions.
Our loan portfolio remained strong, standing at $1.03 billion, up by $40.9 million or 4.1% compared to the prior year. This growth highlights our effective lending practices and strong demand in the credit market. Additionally, cash and cash equivalents increased significantly to $49.3 million, up 159.1% from $19.0 million a year ago, enhancing our liquidity position and providing us with greater flexibility in navigating economic uncertainties.
Deposits increased to $1.16 billion, reflecting a 6.8% growth compared to the prior-year figure of $1.09 billion, driven by increases across all interest-bearing deposit categories. This growth reflects continued trust from our clients and a solid base to support ongoing operations.
Shareholders' equity expanded significantly to $132.8 million, a 5.9% increase from the linked quarter and an 18.2% year-over-year rise, underscoring our commitment to driving shareholder value. This improvement can be attributed to retained earnings growth and an improvement in accumulated comprehensive losses. The year-over-year growth in shareholders' equity reflects our focus on strengthening the balance sheet and optimizing capital allocation strategies.
Mr. Klein, commented, "In 2024, we have maintained a disciplined and proactive approach to our growth and capital management, aligning closely with our strategic objectives. Our ability to sustain and grow our loan portfolio, even in a highly competitive market, demonstrates the resilience of our business model and the effectiveness of our relationship-driven lending practices. Furthermore, the year-over-year increase in shareholders' equity highlights our continued commitment to delivering shareholder value. We remain poised to leverage future opportunities that will further fortify our financial position and ensure long-term prosperity for our stakeholders."
Loan Balances
($ in thousands, except ratios)
Sep. 2024
Jun. 2024
Mar. 2024
Dec. 2023
Sep. 2023
Annual Growth
Commercial
$
123,821
$
123,287
$
120,016
$
126,716
$
120,325
$
3,496
% of Total
12.0
%
12.3
%
12.1
%
12.7
%
12.2
%
2.9
%
Commercial RE
459,449
434,967
429,362
424,041
421,736
37,713
% of Total
44.6
%
43.3
%
43.3
%
42.4
%
42.6
%
8.9
%
Agriculture
64,887
64,329
62,365
65,659
60,928
3,959
% of Total
6.3
%
6.4
%
6.3
%
6.6
%
6.2
%
6.5
%
Residential RE
314,010
316,233
314,668
318,123
320,306
(6,296
)
% of Total
30.5
%
31.5
%
31.7
%
31.8
%
32.4
%
-2.0
%
Consumer & Other
67,788
66,574
65,141
65,673
65,726
2,062
% of Total
6.6
%
6.6
%
6.6
%
6.6
%
6.6
%
3.1
%
Total Loans
$
1,029,955
$
1,005,390
$
991,552
$
1,000,212
$
989,021
$
40,934
Total Growth Percentage
4.1
%
Deposit Balances
($ in thousands, except ratios)
Sep. 2024
Jun. 2024
Mar. 2024
Dec. 2023
Sep. 2023
Annual Growth
Non-Int DDA
$
222,425
$
208,244
$
219,395
$
228,713
$
224,182
$
(1,757
)
% of Total
19.2
%
18.7
%
19.7
%
21.4
%
20.7
%
-0.8
%
Interest DDA
202,097
190,857
169,171
166,413
174,729
27,368
% of Total
17.4
%
17.1
%
15.2
%
15.5
%
16.1
%
15.7
%
Savings
241,761
231,855
244,157
216,965
226,077
15,684
% of Total
20.8
%
20.8
%
21.9
%
20.3
%
20.8
%
6.9
%
Money Market
228,182
225,650
221,362
202,605
216,565
11,617
% of Total
19.7
%
20.2
%
19.9
%
18.9
%
20.0
%
5.4
%
Time Deposits
265,068
258,582
258,257
255,509
243,766
21,302
% of Total
22.9
%
23.2
%
23.2
%
23.9
%
22.5
%
8.7
%
Total Deposits
$
1,159,533
$
1,115,188
$
1,112,342
$
1,070,205
$
1,085,319
$
74,214
Total Growth Percentage
6.8
%
Asset Quality
SB Financial Group's commitment to maintaining exceptional asset quality remained strong through the third quarter of 2024. As of September 2024, nonperforming loans constituted 0.54% of total loans, an increase from 0.47% in the prior quarter. While the allowance for credit losses coverage stood at 276.8% of nonperforming loans—below the 330% reported in the linked quarter—it remains robust, signaling a conservative approach to risk management.
Additionally, the net loan charge-offs to average loans ratio was a modest 0.01%, further highlighting SB Financial Group's effective loan repayment management. Collectively, these metrics reinforce our reputation for disciplined risk oversight and credit administration.
Mr. Klein concluded, "Our third quarter performance underscores our continued commitment to maintaining high asset quality. Although we observed a slight increase in nonperforming loans and a decrease in our reserve coverage ratio, our allowance for credit losses remains robust. This, coupled with our disciplined approach to credit risk management, demonstrates our focus on preserving the long-term strength of our loan portfolio and ensuring stability amidst ongoing economic shifts."
Nonperforming Assets
Annual Change
($ in thousands, except ratios)
Sep. 2024
Jun. 2024
Mar. 2024
Dec. 2023
Sep. 2023
Commercial & Agriculture
$
2,899
$
2,781
$
897
$
748
$
717
$
2,182
% of Total Com./Ag. loans
1.54
%
1.48
%
0.49
%
0.39
%
0.40
%
304.3
%
Commercial RE
813
475
49
168
222
591
% of Total CRE loans
0.18
%
0.11
%
0.01
%
0.04
%
0.05
%
266.2
%
Residential RE
1,536
1,247
1,295
1,690
2,182
(646
)
% of Total Res. RE loans
0.49
%
0.39
%
0.41
%
0.53
%
0.68
%
-29.6
%
Consumer & Other
270
231
193
212
208
62
% of Total Con./Oth. loans
0.40
%
0.35
%
0.30
%
0.32
%
0.32
%
29.8
%
Total Nonaccruing Loans
5,518
4,734
2,434
2,818
3,329
2,189
% of Total loans
0.54
%
0.47
%
0.25
%
0.28
%
0.34
%
65.8
%
Foreclosed Assets and Other Assets
-
510
510
511
629
(629
)
Total Change (%)
-100.0
%
Total Nonperforming Assets
$
5,518
$
5,244
$
2,944
$
3,329
$
3,958
$
1,560
% of Total assets
0.40
%
0.39
%
0.22
%
0.25
%
0.30
%
39.41
%
Webcast and Conference Call
The Company will hold the third quarter 2024 earnings conference call and webcast on October 25, 2024, at 11:00 a.m. EDT. Interested parties may access the conference call by dialing 1-888-338-9469. The webcast can be accessed at ir.yourstatebank.com. An audio replay of the call will be available on the Company's website.
About SB Financial Group
Headquartered in Defiance, Ohio, SB Financial is a diversified financial services holding company for the State Bank & Trust Company (State Bank) and SBFG Title, LLC dba Peak Title (Peak Title). State Bank provides a full range of financial services for consumers and small businesses, including wealth management, private client services, mortgage banking and commercial and agricultural lending, operating through a total of 23 offices: 22 in nine Ohio counties and one in Fort Wayne, Indiana, and 23 ATMs. State Bank has six loan production offices located throughout the Tri-State region of Ohio, Indiana and Michigan. Peak Title provides title insurance and title opinions throughout the Tri-State region. SB Financial's common stock is listed on the NASDAQ Capital Market with the ticker symbol "SBFG".
Forward-Looking Statements
Certain statements within this document, which are not statements of historical fact, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, and actual results may differ materially from those predicted by the forward-looking statements. These risks and uncertainties include, but are not limited to, risks and uncertainties inherent in the national and regional banking industry, changes in economic conditions in the market areas in which SB Financial and its subsidiaries operate, changes in policies by regulatory agencies, changes in accounting standards and policies, changes in tax laws, fluctuations in interest rates, demand for loans in the market areas in SB Financial and its subsidiaries operate, increases in FDIC insurance premiums, changes in the competitive environment, losses of significant customers, geopolitical events, the loss of key personnel and other risks identified in SB Financial's Annual Report on Form 10-K and documents subsequently filed by SB Financial with the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made, and SB Financial undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made, except as required by law. All subsequent written and oral forward-looking statements attributable to SB Financial or any person acting on its behalf are qualified by these cautionary statements.
Non-GAAP Financial Measures
This press release contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles ("GAAP"). Non-GAAP financial measures, specifically pre-tax, pre-provision income, tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, return on average tangible common equity, total interest income, FTE, net interest income, FTE and net interest margin, FTE are used by the Company's management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. In addition, the Company excludes the OMSR valuation adjustment and any gain on sale of assets from net income to report a non-GAAP adjusted net income level. Although management believes these non-GAAP measures are useful to investors by providing a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
Investor Contact Information:
Mark A. KleinChairman, President and Chief Executive
Anthony V. CosentinoExecutive Vice President and Chief Financial
SB FINANCIAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS - (Unaudited)
September
June
March
December
September
($ in thousands)
2024
2024
2024
2023
2023
ASSETS
Cash and due from banks
$
49,348
$
21,983
$
26,602
$
22,965
$
19,049
Interest bearing time deposits
1,706
2,417
2,417
1,535
1,180
Available-for-sale securities
211,511
207,856
213,239
219,708
212,768
Loans held for sale
8,927
7,864
4,730
2,525
3,206
Loans, net of unearned income
1,029,955
1,005,390
991,552
1,000,212
989,021
Allowance for credit losses
(15,278
)
(15,612
)
(15,643
)
(15,786
)
(15,790
)
Premises and equipment, net
20,715
20,860
20,985
21,378
21,934
Federal Reserve and FHLB Stock, at cost
5,223
5,204
6,512
7,279
6,261
Foreclosed assets and other assets
-
510
510
511
629
Interest receivable
4,842
4,818
3,706
4,657
6,673
Goodwill
23,239
23,239
23,239
23,239
23,239
Cash value of life insurance
30,488
30,294
30,103
29,121
29,291
Mortgage servicing rights
14,357
14,548
14,191
13,906
13,893
Other assets
8,916
12,815
13,869
11,999
15,120
Total assets
$
1,393,949
$
1,342,186
$
1,336,012
$
1,343,249
$
1,326,474
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non interest bearing demand
$
222,425
$
208,244
$
219,395
$
228,713
$
224,182
Interest bearing demand
202,097
190,857
169,171
166,413
174,729
Savings
241,761
231,855
244,157
216,965
226,077
Money market
228,182
225,650
221,362
202,605
216,565
Time deposits
265,068
258,582
258,257
255,509
243,766
Total deposits
1,159,533
1,115,188
1,112,342
1,070,205
1,085,319
Short-term borrowings
15,240
15,178
12,916
13,387
16,519
Federal Home Loan Bank advances
35,000
35,000
35,000
83,600
59,500
Trust preferred securities
10,310
10,310
10,310
10,310
10,310
Subordinated debt net of issuance costs
19,678
19,666
19,654
19,642
19,630
Interest payable
3,374
2,944
2,772
2,443
2,216
Other liabilities
17,973
18,421
19,295
19,320
20,632
Total liabilities
1,261,108
1,216,707
1,212,289
1,218,907
1,214,126
Shareholders' Equity
Common stock
61,319
61,319
61,319
61,319
61,319
Additional paid-in capital
15,090
15,195
14,978
15,124
15,037
Retained earnings
113,515
112,104
109,938
108,486
105,521
Accumulated other comprehensive loss
(24,870
)
