SB Financial Group, Inc. (SBFG) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate strong financial performance with a 27% increase in EPS, consistent loan and deposit growth, and improved asset quality. Management's optimistic guidance on mortgage production and expense control, despite some concerns about margin pressure, supports a positive sentiment. The strategic market expansion and shareholder returns further boost confidence. Overall, the positive aspects outweigh the negatives, suggesting a likely stock price increase in the 2% to 8% range.
Key Financial Performance
Net Income $3.9 million, diluted EPS of $0.63, up $0.08 or approximately 15% compared to the prior year quarter. Adjusted EPS of $0.65, marking the 60th consecutive quarter of profitability.
Full Year GAAP EPS $2.19, representing a 27% increase over 2024 EPS of $1.72 and 18% over the 2025 budget.
Tangible Book Value Per Share Ended the quarter at $18, up from $16 last year, a 12.5% increase. Adjusted tangible book value now rests at $21.44 per share.
Net Interest Income $12.7 million for the quarter, an increase of nearly 17% from $10.9 million in Q4 2024. For the year, it rose to $48.4 million, representing an increase of $8.5 million or 21%. 50% of the increase came from a larger balance sheet and 50% from wider margins.
Loan Growth $70 million for the quarter, a 25% annualized increase. Year-over-year growth of $133.9 million or 12.8%, marking 7 consecutive quarters of sequential loan growth. Driven by commercial lending activity in Greater Columbus and contributions from a new agricultural lender.
Total Deposits Increased by $45 million for the quarter, a 14% annualized increase. Year-over-year growth of nearly $155 million or 13%, including $47 million from the Marblehead acquisition. Excluding acquired balances, deposits grew 9.3%.
Total Assets Under Care Expanded by $62 million for the quarter, representing annualized growth of 7%. Reached $3.6 billion, including $1.5 billion in bank assets, a $1.5 billion residential servicing portfolio, and $566 million in wealth assets.
Mortgage Originations $72.4 million for the quarter, down from the prior year but up compared to the linked quarter. Annual volume was $278 million, up 8% compared to the prior year, with loan sales volume increasing by $34 million or 16%.
Noninterest Income $3.7 million for the quarter, down 18.6% from the prior year and 12.6% from the linked quarter. Full year noninterest income was $17.1 million, consistent with recent years. Decrease driven by reduced mortgage servicing rights and other fee-based revenue.
Operating Expenses Declined approximately 2.3% from the linked quarter but increased slightly compared to the prior year. Full year expense growth, excluding one-time merger costs, was 7.7%, below the 15.1% full year revenue growth.
Nonperforming Loans to Total Loans Declined to 0.39%, down from both the linked quarter and prior year period. Nonperforming assets also decreased sequentially and year-over-year.
Allowance for Credit Losses Remained at 1.36% of total loans, providing 352% coverage of nonperforming assets. Total delinquencies increased slightly from the linked quarter but decreased by $1.6 million year-over-year.
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Operating Highlights
Mortgage originations: Totaled $278 million for the year, an 8% increase compared to the prior year. Loan sales volume increased by 16% compared to 2024.
Wealth Management initiatives: Expanded resources and capabilities through partnership with Advisory Alpha, aiming to enhance client base and market dynamics knowledge starting in 2026.
Columbus market expansion: Achieved $73 million in commercial lending activity in the Greater Columbus market in 2025.
New market entries: Early success in Napoleon, Ohio, and Angola, Indiana markets with $15 million in loan growth during the quarter. Fort Wayne, Indiana, identified as a growth market with a new commercial lender.
Marblehead acquisition: Successfully integrated Marblehead team and customers, adding $47 million in deposits and nearly 2,500 deposit accounts.
Loan growth: Achieved 12.8% annual growth, marking 7 consecutive quarters of sequential loan growth.
Deposit growth: Total deposits increased by $155 million or 13% year-over-year, including $45 million in the quarter.
Asset quality: Nonperforming loans declined to 0.39%, with allowance for credit losses at 1.36% of total loans.
Strategic initiatives: Focused on growing and diversifying revenue, expanding footprint, operational excellence, and maintaining asset quality.
Agricultural lending: New agricultural lender added, resulting in $19 million in funded loan growth and $3 million in core deposits.
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Risk or Challenges
Mortgage Activity Pressure: Industry-wide mortgage activity, including volume at State Bank, remained under pressure, impacting revenue from this segment.
Fee-Based Revenue Decline: Fee-based business line revenue decreased from historical averages, pulling back from 35% to 26% of total revenue.
Noninterest Income Decline: Noninterest income was down 18.6% from the prior year quarter and 12.6% from the linked quarter, driven by decreased mortgage servicing rights and other fee-based revenue.
Missed Residential Market Expectations: Residential mortgage volume missed budget levels by approximately 28%, reflecting challenges in the housing market and limited inventory.
Credit Relationship Pressures: Isolated pressure in certain credit relationships required active management to sustain overall credit quality.
Loan Delinquencies: Total delinquencies increased by 4 basis points from the linked quarter, indicating some deterioration in loan performance.
Interest Expense Increase: Total interest expense for the quarter increased by more than 10% year-over-year, reflecting higher funding costs.
Asset Quality Risks: Charge-offs rose to 4 basis points in the fourth quarter, up from 0 basis points in the third quarter, though still minimal for the year.
Operational Integration Challenges: The integration of the Marblehead acquisition required significant effort, though it has transitioned to execution phase.
Economic Sensitivity: The company remains sensitive to rate changes, as even a 0.25 point drop in rates could significantly impact mortgage activity.
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Guidance & Outlook
Future Loan Growth: The company expects ongoing organic loan growth in 2026, supported by continued deposit growth and reallocation of bond proceeds.
Mortgage Banking Contribution: Volumes are expected to climb in 2026 by low to mid-double digits while maintaining traditional sales levels of 85%.
Market Expansion: The company plans to leverage its success in the Columbus market to other regions in 2026, including Napoleon, Ohio, and Angola, Indiana, with a focus on Fort Wayne, Indiana, as a growth market.
Wealth Management Initiatives: New initiatives within the Wealth Management group will begin in 2026, leveraging expanded resources and capabilities from a partnership with Advisory Alpha.
Agricultural Lending: The company expects continued growth in agricultural lending, supported by a new agricultural lender and a seasoned production leader.
Asset Quality Improvement: Plans to further reduce the non-performing loan portfolio in the first half of 2026 with workout plans in place to improve metrics with minimal losses.
Capital Management: The company intends to focus on disciplined execution across all markets, optimize lending team production capacity, and drive cross-sales in its retail footprint to grow core deposits.
Dividend Policy: The company announced a dividend of $0.155 per share, completing its 13th consecutive year of increasing annual dividend payouts.
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Shareholder Return Plan
Dividend Announcement: A dividend of $0.155 per share was announced, equating to approximately a 2.8% yield and representing 25% of the company's earnings. This marks the 13th consecutive year of increasing the annual dividend payout.
Share Repurchase Program: During the fourth quarter, the company repurchased nearly 32,000 shares of stock at an average price of just under $21 per share. For the full year, a total of over 283,000 shares were repurchased for $5.5 million, utilizing 40% of the company's earnings. The average price for the year was just over $19 per share.
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Key Q&A
Q:Can you elaborate on your comments on margin and outlook, particularly regarding deposit pricing and asset repricing?
A:Deposit pricing showed stress due to higher competitive pricing and client requests, leading to a forecasted gradual decline in NIM by 5-7 basis points in 2026. There are $125-$140 million of loans slated to reprice in the first 9 months of 2026, which could offset some deposit pressures. Loan pricing remains accretive to NIM, and the bank is optimistic about booking more loans in 2026.
Q:What is the current pricing for new loan production?
A:New loan production is typically priced at 300 basis points over the corresponding treasury, with most loans priced relative to the 3- or 5-year treasury index.
Q:What is the outlook for mortgage production growth in 2026?
A:Mortgage production is expected to grow by 10%, reaching $310-$330 million. With additional lenders, the upper range could reach $350-$375 million. The bank has capacity for $400 million+ in production if market conditions improve.
Q:What are your expectations for expense growth in 2026?
A:Expense growth is expected to be maintained at 3.5%-4%. Positive operating leverage is anticipated to be 1.5-2x, with efforts to constrain expenses and improve operating leverage to drive net income to $15 million in 2026.
Q:What is the status of the loan pipeline and its impact on NII growth?
A:The loan pipeline remains strong, particularly in Columbus and other urban markets. Growth in ag lending and new capacity in Fort Wayne are expected to contribute. Half of the $8 million operating revenue expansion in 2025 came from a bigger balance sheet, and similar growth is expected in 2026.
Q:What is the outlook for credit quality and reserve levels in 2026?
A:Credit quality is improving, though slower than desired. The reserve ratio is expected to trend down by 3-4 basis points, remaining at 130, which is at the top end of the peer group. Provision funding is expected to remain flat compared to 2025.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on how they plan to achieve the $500 million incremental business goal, citing high credit standards as a potential limitation. Additionally, while they expressed optimism about improving operating leverage and credit quality, the responses lacked detailed strategies or timelines for achieving these improvements.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Indiana market
ROA basis
access
activity volume
ag
contribution
contributor
core deposit
credit fundamental
deposit balance
dynamic
engagement
experience
fee
flexibility
footprint scale
foundation
franchise
funding profile
initiative
interest expense
knowledge
lender
lending
loan allowance
loan deposit
mix
opportunity market
period
place
point basis
point loan
progress
refinance
repricing
sheet expansion
sheet loan
staffing
strength
success
term value
trend
volume level
SBFG Transcript
SB Financial Group, Inc. (SBFG) Q4 2025 Earnings Call Transcript
Positive1-30
The earnings call summary and Q&A indicate strong financial performance with a 27% increase in EPS, consistent loan and deposit growth, and improved asset quality. Management's optimistic guidance on mortgage production and expense control, despite some concerns about margin pressure, supports a positive sentiment. The strategic market expansion and shareholder returns further boost confidence. Overall, the positive aspects outweigh the negatives, suggesting a likely stock price increase in the 2% to 8% range.
SB Financial Group, Inc. (SBFG) Q3 2025 Earnings Call Transcript
Positive10-31
The earnings call reveals strong financial performance with high loan yields and stable funding costs. The Q&A section highlights robust loan growth, particularly in Columbus and the agricultural sector, and plans to manage expenses effectively. Although management was vague about competitive deposit impacts, the overall outlook is positive with expected margin stability and improved credit quality. The company's strategic focus on growth and efficiency, combined with optimistic guidance on mortgage volume, supports a positive sentiment. However, no market cap data limits the prediction's precision.
SB Financial Group, Inc. (SBFG) Q2 2025 Earnings Call Transcript
Positive7-25
The earnings call highlights strong financial performance with increased mortgage originations, commercial real estate loans, and noninterest income. Despite a slight increase in operating expenses, the company maintains a robust allowance for credit losses and anticipates improved asset quality. Optimistic guidance in mortgage and loan growth, along with stable net interest margin projections, further support a positive outlook. The Q&A section reinforces this sentiment, with management expressing confidence in achieving ambitious targets and managing expenses effectively. Overall, these factors suggest a likely positive stock price movement in the short term.
SB Financial Group, Inc. (SBFG) Q1 2025 Earnings Call Transcript
Unknown5-2
The earnings call shows mixed signals: strong loan growth, improved net interest income, and a record high in deposits are positive. However, challenges in mortgage origination, increased operating expenses, and potential risks in asset quality are concerning. The Q&A section reveals some uncertainty around loan growth and economic factors. Despite a dividend increase and share repurchase, these positives are offset by the cautious outlook on deposits and margins. Given these mixed factors, the stock price is likely to remain stable, hence a neutral sentiment.
SBFG Report
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