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SB Financial Group, Inc. Announces Second-Quarter and Six-Month 2019 Earnings

DEFIANCE, Ohio, July 23, 2019 /PRNewswire/ -- SB Financial Group, Inc. (SBFG) ("SB Financial" or the "Company"), a diversified financial services company providing full-service community banking, mortgage banking and wealth management, today reported earnings for the second-quarter and six months ended June 30, 2019.

Second-quarter 2019 highlights over prior-year second quarter include:

  • Total assets increased to $1.03 billion, up $84.3 million, or 8.9 percent
  • Net income of $2.6 million; adjusted net income due to servicing rights impairment of $3.2 million
  • Diluted earnings per share (EPS) of $0.33; adjusted EPS of $0.40
  • Tangible book value (TBV) per share increased 8.6 percent to $15.83 per share

Six months ended June 30, 2019, highlights over prior-year six months include:

  • Net income of $4.9 million; adjusted net income of $6.0 million, which is up $0.5 million or 8.0 percent
  • Diluted EPS of $0.61; adjusted EPS of $0.75
  • Return on Average Assets (ROA) of 0.96 percent; adjusted 1.07 percent
  • Net interest margin (NIM) of 3.84 percent down 5 basis points

Second-quarter 2019, trailing twelve-month highlights include:

  • Loan growth of $61.2 million, or 8.1 percent
  • Deposit growth of $86.5 million, or 11.5 percent
  • Mortgage origination volume of $324.0 million; servicing portfolio of $1.11 billion

 

Highlights

Three Months Ended


Six Months Ended

($ in thousands, except per share & ratios)

Jun. 2019

Jun. 2018

% Change


Jun. 2019

Jun. 2018

% Change

Operating revenue 

$12,523

$12,673

-1.2%


$23,863

$24,616

-3.1%

Interest income 

11,151

9,732

14.6%


21,649

18,583

16.5%

Interest expense

2,319

1,308

77.3%


4,477

2,459

82.1%

Net interest income 

8,832

8,424

4.8%


17,172

16,124

6.5%

Provision for loan losses

200

300

-33.3%


200

600

-66.7%

Noninterest income

3,691

4,249

-13.1%


6,691

8,492

-21.2%

Noninterest expense

9,108

8,579

6.2%


17,734

17,206

3.1%

Net income 

2,627

3,107

-15.4%


4,853

5,560

-12.7%

Earnings per diluted share

0.33

0.40

-17.5%


0.61

0.75

-18.7%

Return on average assets

1.03%

1.35%

-23.7%


0.96%

1.21%

-20.7%

Return on average equity

7.92%

10.02%

-21.0%


7.36%

9.64%

-23.7%









Non-GAAP Measures








Adjusted net income

$3,172

$3,122

1.6%


$5,957

$5,514

8.0%

Adjusted diluted EPS

0.40

0.40

0.0%


0.75

0.74

1.4%

Adjusted return on average assets

1.09%

1.35%

-19.3%


1.07%

1.20%

-10.8%

Net interest margin (FTE)

3.88%

4.14%

-6.3%


3.84%

3.89%

-1.3%

"We delivered increased second-quarter net income compared to the prior-year quarter, when we adjust for the impairment to our mortgage servicing rights," said Mark A. Klein, Chairman, President and CEO of SB Financial.  Our operating results included a very strong loan growth quarter, as we added over $32 million, and over the last 12 months, $61 million.  Also, this quarter had a strong rebound in our mortgage origination volume of $98 million, increasing originations over the last 12 months to $324 million."

RESULTS OF OPERATIONS

Consolidated Revenue

Total operating revenue, consisting of net interest income and noninterest income, was down 1.2 percent from the second quarter of 2018, but up 10.4 percent from the linked quarter.

  • Net interest income was up 4.8 percent from the year-ago quarter, and up 5.9 percent from the linked quarter.
  • Net interest margin (FTE) was down 26 basis points from the year-ago quarter, but up 7 basis points from the linked quarter.
  • Noninterest income was down 13.1 percent from the year-ago quarter, but up 23.0 percent from the linked quarter.

Funding costs, primarily from retail deposits have increased from the prior year and from the linked quarter.  Deposit cost of funds for the most recent quarter of 1.01 percent are up from the prior year quarter of 0.59 percent.  From the linked quarter, deposit cost of funds are up only six basis points from 0.95 percent.

Mortgage Loan Business

Mortgage loan originations for the second quarter of 2019 were $98.4 million, down $11.0 million, or 10.1 percent, from the year-ago quarter.  Total sales of originated loans were $71.0 million, down $8.2 million, or 10.3 percent from the year-ago quarter.

Net mortgage banking income, consisting of gains on the sale of mortgage loans and net loan servicing fees, was $1.2 million for the second quarter of 2019, compared to $2.3 million for the year-ago quarter.  The mortgage servicing valuation adjustment for the second quarter of 2019 was a negative $0.7 million, compared to a negative adjustment of $0.02 million for the second quarter of 2018.  The aggregate servicing valuation impairment ended the quarter at $1.6 million.  The mortgage-servicing portfolio at June 30, 2019, was $1.11 billion, up $0.08 billion, or 8.0 percent, from $1.03 billion at June 30, 2018.

Mr. Klein noted, "Although our earnings were impacted by the $0.7 million impairment in the quarter and $1.4 million for all of 2019, we are encouraged by the strong mortgage quarter that included purchase volume of $91 million or 93 percent and refinance volume of $7 million or 7 percent.  Our current pipeline exceeds $50 million and we continue to attract targeted clients."

Mortgage Banking






($ in thousands)

Jun. 2019

Mar. 2019

Dec. 2018

Sep. 2018

Jun. 2018

Mortgage originations

$98,447

$51,417

$78,829

$95,289

$109,466

Mortgage sales

70,993

43,472

60,345

80,555

79,162

Mortgage servicing portfolio

1,112,857

1,094,060

1,084,678

1,066,402

1,030,780

Mortgage servicing rights

10,264

10,838

11,347

11,129

10,634













Mortgage servicing revenue:






Loan servicing fees

691

682

673

653

636

OMSR amortization

(460)

(254)

(300)

(318)

(367)

Net administrative fees

231

428

373

335

269

OMSR valuation adjustment

(690)

(708)

(68)

(62)

(22)

Net loan servicing fees

(459)

(280)

305

273

247

Gain on sale of mortgages

1,678

1,192

1,646

2,066

2,058

Mortgage banking revenue, net

$1,219

$912

$1,951

$2,339

$2,305

Noninterest Income and Noninterest Expense

SB Financial's noninterest income includes revenue from a diverse group of services, such as wealth management, deposit fees, residential loan sales, title agency revenue and the sale of Small Business Administration (SBA) loans.  SBA activity for the quarter consisted of total loan volume of $4.1 million and gains of $0.1 million.  Wealth management assets under the Company's care stood at $479.4 million as of June 30, 2019.  In the first full quarter of operation, the title agency business delivered revenue of $0.3 million.  For the second quarter of 2019, noninterest income as a percentage of total revenue was 29.5 percent, with the YTD percentage at 33.9 percent when adjusted for the impairment. 

For the second quarter of 2019, noninterest expense (NIE) of $9.1 million was up $0.5 million, or 6.2 percent, compared to the same quarter last year.  Compared to the linked quarter, NIE was also up $0.5 million.  Expense growth was the result of higher mortgage commissions, merit increases and the addition of a title agency.  We continue to add resources of both technology and personnel in order to meet the expanded needs of our operations, information technology and risk management functions.

Noninterest Income / Noninterest Expense 






($ in thousands, except ratios)

Jun. 2019

Mar. 2019

Dec. 2018

Sep. 2018

Jun. 2018

Noninterest Income (NII)

$3,691

$3,000

$3,930

$4,202

$4,249

NII / Total Revenue

29.5%

26.5%

31.3%

33.0%

33.5%

NII / Average Assets

1.5%

1.2%

1.6%

1.8%

1.8%







Noninterest Expense (NIE)

$9,108

$8,626

$8,852

$8,789

$8,579

Efficiency Ratio

72.7%

76.1%

70.6%

69.0%

67.7%

NIE / Average Assets

3.6%

3.5%

3.6%

3.7%

3.7%

Net Noninterest Expense/Avg. Assets

-2.1%

-2.3%

-2.0%

-1.9%

-1.9%

Balance Sheet

Total assets as of June 30, 2019, were $1.03 billion, up $84.3 million, or 8.9 percent, from a year ago.  Total equity as of June 30, 2019, was $133.9 million, up 7.1 percent from a year ago, and comprised 13.0 percent of total assets. 

Total loans held for investment were $814.5 million at June 30, 2019, up $61.2 million, or 8.1 percent, from June 30, 2018 and up $32.0 million or 16.4 percent annualized for the quarter.  From the prior year, commercial loans were up $28.7 million, or 24.9 percent, with residential real estate rising $18.9 million, or 10.9 percent.

The investment portfolio of $89.9 million, including Federal Reserve Bank and Federal Home Loan Bank stock, represented 8.7 percent of assets at June 30, 2019.  Deposit balances of $839.4 million at June 30, 2019, increased by $86.5 million, or 11.5 percent, since June 30, 2018.  Growth from the prior year included $10.3 million in checking and $76.2 million in savings, money market and time deposit balances.

Mr. Klein stated, "Our balance sheet metrics improved this quarter with 16.4 percent annualized loan growth and $12 million in deposit growth.  Compared to the prior year, deposit growth of 11.5 percent fully funded our 8.1 percent loan growth.  Our asset quality metrics and coverage ratio remain in the top quartile of our peer group."

Loan Balance







($ in thousands, except ratios)

Jun. 2019

Mar. 2019

Dec. 2018

Sep. 2018

Jun. 2018

Annual
Growth

Commercial

$143,798

$136,201

$127,640

$119,810

$115,140

$28,658

     % of Total

17.7%

17.4%

16.5%

15.5%

15.3%

24.9%

Commercial RE

360,491

343,900

340,791

356,563

350,266

10,225

     % of Total

44.2%

43.9%

44.2%

46.2%

46.5%

2.9%

Agriculture

54,317

50,620

52,012

52,814

52,466

1,851

     % of Total

6.7%

6.5%

6.7%

6.8%

7.0%

3.5%

Residential RE

191,642

187,548

187,104

178,033

172,773

18,869

     % of Total

23.5%

24.0%

24.2%

23.1%

22.9%

10.9%

Consumer & Other

64,261

64,254

64,336

64,478

62,640

1,621

     % of Total

7.9%

8.2%

8.3%

8.4%

8.3%

2.6%

Total Loans

$814,509

$782,523

$771,883

$771,698

$753,285

$61,224

Total Growth Percentage






8.1%















Deposit Balance







($ in thousands, except ratios)

Jun. 2019

Mar. 2019

Dec. 2018

Sep. 2018

Jun. 2018

Annual
Growth

Non-Int DDA

$141,216

$146,327

$144,592

$134,747

$131,125

$10,091

     % of Total

16.8%

17.7%

18.0%

17.1%

17.4%

7.7%

Interest DDA

129,710

132,101

130,628

130,897

129,486

224

     % of Total

15.5%

16.0%

16.3%

16.6%

17.2%

0.2%

Savings

118,931

115,272

104,444

114,213

118,108

823

     % of Total

14.1%

13.8%

12.9%

14.4%

15.7%

0.7%

Money Market

175,455

175,334

181,426

170,190

151,228

24,227

     % of Total

20.9%

21.2%

22.6%

21.6%

20.1%

16.0%

Certificates

274,062

258,624

241,462

239,379

222,932

51,130

     % of Total

32.7%

31.2%

30.1%

30.3%

29.6%

22.9%

Total Deposits

$839,374

$827,658

$802,552

$789,426

$752,879

$86,495

Total Growth Percentage






11.5%

Asset Quality

SB Financial's nonperforming assets to total assets ratio of 0.43 percent continues to be in the top quartile of its 65-bank peer group.  The coverage of problem loans by the loan loss allowance was at 212 percent at June 30, 2019, down from 264 percent at June 30, 2018. 

Summary of Nonperforming Assets






Annual
Growth

($ in thousands, except ratios)

Jun. 2019

Mar. 2019

Dec. 2018

Sep. 2018

Jun. 2018

Commercial & Agriculture

$674

$998

$731

$360

$33

$641

% of Total Com./Ag. loans

0.34%

0.53%

0.41%

0.21%

0.02%

1942.4%

Commercial RE 

208

212

218

228

234

(26)

% of Total CRE loans

0.06%

0.06%

0.06%

0.06%

0.07%

-11.1%

Residential RE

1,768

1,612

1,738

1,541

1,634

134

% of Total Res. RE loans

0.92%

0.86%

0.93%

0.87%

0.95%

8.2%

Consumer & Other

456

325

219

252

221

235

% of Total Con./Oth. loans  

0.71%

0.51%

0.34%

0.39%

0.35%

106.3%

Total Nonaccruing Loans 

3,106

3,147

2,906

2,381

2,122

984

% of Total loans

0.38%

0.40%

0.38%

0.31%

0.28%

46.4%

Accruing Restructured Loans

814

827

928

940

1,101

(287)

Total Growth (%)






-26.1%

Total Nonaccruing & Restructured Loans

3,920

3,974

3,834

3,321

3,223

697

% of Total loans

0.48%

0.51%

0.50%

0.43%

0.43%

21.6%

Foreclosed Assets

530

313

131

105

16

514

Total Growth (%)






3212.5%

Total Nonperforming Assets

$4,450

$4,287

$3,965

$3,426

$3,239

$1,211

% of Total assets

0.43%

0.42%

0.40%

0.35%

0.34%

37.4%


Webcast and Conference Call

The Company will hold a related conference call and webcast on July 24, 2019, 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 http://www.yoursbfinancial.com/investorrelations.html.  An audio replay of the call will be available on the SB Financial 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 20 offices; 19 in nine Ohio counties and one in Fort Wayne, Indiana, and 25 full-service ATMs.  State Bank has seven loan production offices located throughout the Tri-State region of Ohio, Indiana and Michigan.  Peak Title provides title insurance and opinions throughout the Tri-State region. SB Financial's common stock is listed on the NASDAQ Capital Market under the symbol "SBFG".  SB Financial's preferred stock is listed on the NASDAQ Capital Market under the symbol "SBFGP". 

In May 2019, SB Financial was ranked #94 on the American Banker Magazine's list of Top 200 Publicly Traded Community Banks and Thrifts based on three-year average return on equity ("ROE").

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

In addition to results presented in accordance with GAAP, this release contains certain non-GAAP financial measures. Management believes that including certain non-GAAP financial measures will provide investors with information useful in understanding the Company's financial performance, its performance trends and financial position. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results.

Investor Contact Information:
Anthony V. Cosentino
Executive Vice President and 
Chief Financial Officer
Tony.Cosentino@YourStateBank.com

 

SB FINANCIAL GROUP, INC.  

CONSOLIDATED BALANCE SHEETS - (Unaudited)





















June


March


December


September


June





($ in thousands)


2019


2019


2018


2018


2018

















ASSETS













Cash and due from banks


$       42,786


$       62,962


$       48,363


$       45,515


$       24,413



Available-for-sale securities


85,261


95,802


90,969


84,114


89,911



Loans held for sale


9,579


4,346


4,445


6,888


7,551



Loans, net of unearned income


814,509


782,523


771,883


771,698


753,285



Allowance for loan losses


(8,306)


(8,121)


(8,167)


(8,489)


(8,494)



Premises and equipment, net


23,150


23,270


22,084


21,900


21,683



Federal Reserve and FHLB Stock, at cost


4,648


4,123


4,123


4,123


3,748



Foreclosed assets held for sale, net


530


313


131


105


16



Interest receivable


3,209


3,123


2,822


2,433


2,000



Goodwill and other intangibles


17,836


17,838


16,401


16,404


16,406



Cash value of life insurance


17,051


16,966


16,834


16,745


16,656



Mortgage servicing rights


10,264


10,838


11,365


11,129


10,633



Other assets


8,606


7,288


5,575


6,615


6,977




















Total assets


$  1,029,123


$  1,021,271


$     986,828


$     979,180


$     944,785















































LIABILITIES AND SHAREHOLDERS' EQUITY













Deposits














Non interest bearing demand


$     141,216


$     146,327


$     144,592


$     134,747


$     131,125




Interest bearing demand


129,710


132,101


130,628


130,897


129,486




Savings


118,931


115,272


104,444


114,213


118,108




Money market


175,455


175,334


181,426


170,190


151,228




Time deposits


274,062


258,624


241,462


239,379


222,932




















Total deposits


839,374


827,658


802,552


789,426


752,879


















Repurchase agreements


13,968


12,255


15,184


15,539


18,191



Federal Home Loan Bank advances


16,000


24,000


16,000


24,500


26,500



Trust preferred securities


10,310


10,310


10,310


10,310


10,310



Interest payable


1,188


1,123


909


891


685



Other liabilities


14,346


14,419


11,438


11,405


11,116




















Total liabilities


895,186


889,765


856,393


852,071


819,681


















Shareholders' Equity














Preferred stock


13,978


13,978


13,979


13,979


13,983




Common stock


40,486


40,486


40,485


40,485


40,481




Additional paid-in capital


15,259


15,143


15,226


15,160


15,098




Retained earnings


67,236


65,438


64,012


61,854


59,503




Accumulated other comprehensive income/(loss)

801


124


(552)


(1,654)


(1,240)




Treasury stock


(3,823)


(3,663)


(2,715)


(2,715)


(2,721)




















Total equity


133,937


131,506


130,435


127,109


125,104




















Total liabilities and shareholders' equity


$  1,029,123


$  1,021,271


$     986,828


$     979,180


$     944,785


 

SB FINANCIAL GROUP, INC.





CONSOLIDATED STATEMENTS OF INCOME - (Unaudited)























($ in thousands, except per share & ratios)


At and for the Three Months Ended



Six Months Ended























June


March


December


September


June



June


June

Interest income



2019


2019


2018


2018


2018



2019


2018


Loans

















  Taxable 


$     10,182


$        9,427


$        9,661


$        9,499


$        8,968



$        19,609


$        17,108


  Tax exempt


73


62


55


42


36



135


57


Securities

















  Taxable 


802


911


822


610


613



1,713


1,186


  Tax exempt


94


98


100


107


115



192


232





















Total interest income


11,151


10,498


10,638


10,258


9,732



21,649


18,583



















Interest expense


















Deposits


2,092


1,918


1,776


1,472


1,091



4,010


2,066


Repurchase agreements & other


17


26


10


11


6



43


16


Federal Home Loan Bank advances


100


100


131


140


110



200


189


Trust preferred securities


110


114


107


106


101



224


188





















Total interest expense


2,319


2,158


2,024


1,729


1,308



4,477


2,459





































Net interest income


8,832


8,340


8,614


8,529


8,424



17,172


16,124




















Provision for loan losses 


200


-


-


-


300



200


600



















Net interest income after provision
















  for loan losses



8,632


8,340


8,614


8,529


8,124



16,972


15,524



















Noninterest income


















Wealth Management Fees


783


734


717


705


710



1,517


1,449


Customer service fees


689


631


679


672


675



1,320


1,319


Gain on sale of mtg. loans & OMSR


1,678


1,192


1,646


2,066


2,058



2,870


3,158


Mortgage loan servicing fees, net


(459)


(280)


305


273


247



(739)


718


Gain on sale of non-mortgage loans


216


327


295


125


150



543


810


Title insurance income


308


19


-


-


-



327


-


Net gain on sales of securities


206


-


-


70


-



206


-


Gain/(loss) on sale of assets


(5)


(2)


14


-


60



(7)


21


Other


275


379


274


291


349



654


1,017





















Total noninterest income


3,691


3,000


3,930


4,202


4,249



6,691


8,492



















Noninterest expense

















Salaries and employee benefits


5,305


4,902


5,108


5,372


5,201



10,207


10,140


Net occupancy expense


627


645


600


588


560



1,272


1,209


Equipment expense


665


711


756


667


637



1,376


1,466


Data processing fees


488


443


466


489


418



931


856


Professional fees


649


617


532


393


504



1,266


923


Marketing expense


246


239


262


197


204



485


425


Telephone and communication


112


115


121


124


128



227


250


Postage and delivery expense


81


84


66


83


63



165


137


State, local and other taxes


247


255


180


177


176



502


362


Employee expense


236


153


283


243


220



389


386


Other expenses


452


462


478


456


468



914


1,052





















Total noninterest expense


9,108


8,626


8,852


8,789


8,579



17,734


17,206





































Income before income tax expense


3,215


2,714


3,692


3,942


3,794



5,929


6,810




















Income tax expense


588


488


732


824


687



1,076


1,250



















Net income 




$        2,627


$        2,226


$        2,960


$        3,118


$        3,107



$          4,853


$          5,560



















Preferred Share Dividends 


243


244


243


244


244



487


488



















Net income available to common shareholders


2,384


1,982


2,717


2,874


2,863



4,366


5,072



















Common share data:

















Basic earnings per common share


$          0.37


$          0.31


$          0.42


$          0.45


$          0.45



$            0.68


$            0.85




















Diluted earnings per common share


$          0.33


$          0.28


$          0.37


$          0.39


$          0.40



$            0.61


$            0.75



















Average shares outstanding (in thousands):

















Basic:


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