DEFIANCE, Ohio, April 19, 2018 /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 first-quarter ended March 31, 2018.

First-quarter 2018 highlights over prior-year first quarter include:

• Total assets increased to $925.6 million, up $78.8 million or 9.3 percent
• Net income of $2.5 million, an increase of 23.1 percent
• Operating revenue of $11.9 million, up $1.6 million or 15.9 percent
• Return on average assets of 1.08 percent, up 12 basis points or 12.5 percent
• Diluted earnings per share (EPS) of $0.35, an increase of $0.04 per share, or 12.9 percent

First-quarter 2018 trailing twelve-month highlights include:

• Loan growth of $80.5 million, or 12.8 percent
• Deposit growth of $35.9 million, or 5.0 percent
• Mortgage origination volume of $58.5 million, an increase of 3.2 percent, or $1.8 million; servicing portfolio of $1.00 billion, up 9.5 percent, or $0.09 billion

 

"SB Financial Group's first-quarter diluted EPS was up 13 percent compared to the prior-year quarter. The quarter included not only the impact of the 2017 tax cuts but also the increased number of shares as a result of our capital raise that we completed in February," said Mark A. Klein, Chairman, President and CEO of SB Financial.  Operating results included a strong SBA quarter, 13 percent year-over-year loan growth and improved asset quality metrics."

RESULTS OF OPERATIONS

Consolidated Revenue

Total operating revenue, consisting of net interest income and noninterest income, was up 15.9 percent from the first quarter of 2017, and up 1.7 percent from the linked quarter.

• Net interest income was up 18.3 percent from the year-ago quarter, and up 0.6 percent from the linked quarter.
• Net interest margin (FTE) was up 27 basis points from the year-ago quarter, but down 10 basis points from the linked quarter. The year-over-year increase was due to higher loan volume, and higher earning asset yields.
• Noninterest income was up 11.6 percent from the year-ago quarter, and up 3.7 percent from the linked quarter.

Mortgage Loan Business

Mortgage loan originations for the first quarter of 2018 were $58.5 million, up $1.8 million, or 3.2 percent, from the year-ago quarter.  Total sales of originated loans were $40.6 million, down $9.9 million, or 19.6 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 $1.6 million for the first quarter of 2018, compared to $1.6 million for the year-ago quarter.  The mortgage servicing valuation adjustment for the first quarter 2018 was a positive $0.09 million, compared to a positive adjustment of $0.03 million for the first quarter of 2017.  The aggregate servicing valuation impairment ended the quarter at $0.2 million.  The mortgage servicing portfolio at March 31, 2018, was $1.00 billion, up $0.09 billion, or 9.5 percent, from $0.92 billion at March 31, 2017.

Mr. Klein noted, "We continue to see the mortgage origination business constrained by limited housing inventory in all of our markets.  We are encouraged, however, by the significant increase in our pipeline late in the quarter."

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 and the sale of Small Business Administration loans (SBA).  SBA activity for the quarter was significant, with total loan volume of $10.6 million and gains of $0.6 million.  Wealth management assets under the Company's care stood at $411.7 million as of March 31, 2018.  For the first quarter of 2018, noninterest income as a percentage of total revenue was 35.5 percent.  The recapture of mortgage servicing rights positively impacted the quarter by $0.09 million.  The Company completed the sale of our item processing division, DCM, in the quarter, resulting in total revenue of $0.4 million, slightly above the prior year.

For the first quarter of 2018, noninterest expense (NIE) of $8.6 million, was up $1.2 million, or 16.9 percent, compared to the same quarter last year.  In the quarter, we had higher commission for SBA sales, (of $0.1 million) expenses related to the sale of DCM (of $0.2 million) and several of the previously announced tax initiatives (of $0.2 million). Compared to the linked quarter, NIE was up $0.5 million, or 6.4 percent. 

Mr. Klein stated, "We sold several large SBA credits in the quarter that had been in process for some time, this resulted in our largest SBA production quarter since we expanded this business line in 2014.  The sale of DCM, while immaterial to our results, allows our team to focus on our core banking competencies.  Expenses were also higher but we were proud to share some of our tax savings with our staff and communities."

Balance Sheet

Total assets as of March 31, 2018, were $925.6 million, up $78.8 million, or 9.3 percent, from a year ago.  Total equity as of March 31, 2018, was $122.9 million, up 39.7 percent, from a year ago, and accounted for 13.3 percent of total assets.  Both the equity and total assets reflect the $30 million common capital raise completed in the quarter.

Total loans held for investment were $707.2 million at March 31, 2018, up $80.5 million, or 12.8 percent, from March 31, 2017.  Commercial real estate loans were up $55.6 million, or 19.7 percent, and accounted for the majority of the total loan growth, while residential real estate also rose $15.1 million or 11.0 percent.

The investment portfolio of $95.7 million, including Federal Reserve Bank and Federal Home Loan Bank stock, represented 10.3 percent of assets at March 31, 2018, and was down 14.3 percent from the year-ago period.  Deposit balances of $748.8 million at March 31, 2018, increased by $35.9 million, or 5.0 percent, since March 31, 2017.  Growth from the prior year included $12.8 million in checking and $23.1 million in savings and time deposit balances.

"Along with the $11 million in SBA production, we had additional balance sheet loan growth in the quarter of $11 million.  Our $30 million increase in capital reflected the very positive response we experienced from our capital raise in February.  Additionally, we continued to improve asset quality in the quarter, with net charge offs at just 1 basis point and nonperforming assets at 38 basis points."

Asset Quality

SB Financial maintained its high-performing peer asset quality level during the quarter, reporting nonperforming assets of $3.5 million as of March 31, 2018, down $1.2 million, or 25.6 percent, from the year-ago quarter.  SB Financial's nonperforming assets to total assets ratio of 0.38 percent is in the top quartile of its 65-bank peer group.  The coverage of problem loans by the loan loss allowance was at 239 percent at March 31, 2018, up from 204 percent at March 31, 2017.

Webcast and Conference Call

The Company will hold a related conference call and webcast on April 20, 2018, 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). 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 banking centers; 19 in nine Ohio counties and one center in Fort Wayne, Indiana, and 25 full-service ATMs.  The Company has six loan production offices located throughout the Tri-State region of Ohio, Indiana and Michigan.  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 2017, SB Financial was ranked #145 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.

 

 

 

 

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SOURCE SB Financial Group, Inc.