SB Financial Group(SBFG) - 2025 Q3 - Quarterly Results

Financial Performance - Net income for FQ3 2025 was $4 million, with diluted earnings per share of $0.64, representing an increase of approximately 83% compared to the prior year quarter[13] - Total operating revenue rose to $16.6 million, a 15.9% increase from $14.3 million in the prior year[35] - Noninterest income increased by 2.9% year-over-year to $4.2 million, driven by increased mortgage servicing rights and title service fees[22] - Total mortgage banking contribution was nearly $1.5 million, up over 10% compared to the third quarter of 2024[40] Asset and Loan Growth - Loan growth was approximately $80.6 million, or 7.8%, marking the sixth consecutive quarter of sequential loan growth[14] - The company expects a high single-digit level of loan growth in 2026, funded by bond portfolio runoff and 4% to 5% deposit growth[42] - There are approximately $40 million of unused line commitments expected to be funded in the next 6 to 12 months[56] Deposits and Interest Income - Deposits grew by nearly $103 million, or 9%, including $51 million related to Marblehead, with overall deposit growth at 4.5% when excluding Marblehead[14] - Net interest income totaled $12.3 million, a 21% increase from $10.2 million in FQ3 2024, with a 30% annualized growth rate from the linked quarter[14] - The net interest margin peaked at 3.48% this quarter, with expectations of funding costs rising in the future[37] - Loan yields reached a new high of 5.95%, up 23 basis points, contributing to an earning asset yield increase of 18 basis points to 5.31%[36] Expenses and Operating Costs - Operating expenses decreased by 3% from the linked quarter and increased by only $500,000 or 4.5% from the prior year[41] - Total expenses for Q4 are expected to remain around $11.5 million, leading to an estimated total of approximately $46 million for the entire year of 2025[77] - The expense outlook indicates ongoing pressure due to technology investments and talent acquisition, which may complicate future balance sheet expansion[76] Credit Quality and Allowance - Charge-offs returned to historic levels, with nonperforming assets totaling $4.9 million and an allowance for credit losses at 1.44% of total loans[33] - The allowance for credit losses increased by 1 basis point, remaining consistent with portfolio trends[45] - Total delinquencies were slightly lower at 45 basis points, with total classified loans down nearly $1.3 million or 21% from the prior year[45] - The coverage of non-performing assets (NPAs) is expected to exceed 0.40% as the company continues to manage its credit portfolio effectively[72] Shareholder Returns and Capital Management - A dividend of $0.155 per share was announced, equating to a 3.1% yield and 24% of earnings, marking the 13th consecutive year of increased annual dividend payouts[48] - The company repurchased 101,000 shares at an average price of just under $20, totaling $4.5 million for the year[44] - The company plans to slow down share buybacks to retain capital for potential acquisitions while maintaining a meaningful shareholder dividend above $4 million next year[88] Strategic Initiatives - The company is targeting a $100 million agricultural lending portfolio within a year, reflecting renewed emphasis on agricultural lending opportunities[32] - The Marblehead transaction integration is progressing well, with expectations of leveraging the brand's 117-year history to pursue new opportunities[85] - The company is focusing on expanding into Henry County, which has $800 million in deposits, with a significant portion currently held in community banks[86] - A pipeline of $37 million includes about $12 million in refinances, indicating a potential increase in refinancing activity if rates drop below 6%[82] Future Outlook - Mortgage volume is anticipated to rise by about 15% in Q4, reaching approximately $80 million, compared to $68 million in the previous quarter[77] - The company is structured to handle mortgage volumes between $450 million and $500 million, with hopes to achieve a volume in the 400 range as interest rates decline[80]