SB Financial Group, Inc. Announces First-Quarter 2015 Results

DEFIANCE, Ohio, April 27, 2015 /PRNewswire/ -- 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 and item processing services, today reported earnings for the first quarter ended March 31, 2015.

First-quarter highlights include:

• Net income of $1.5 million for the first quarter represented a 52.7 percent increase over the prior year first quarter
• Loan growth up $29.9 million, or 6.2 percent, from the prior year
• Fully tax equivalent (FTE) revenue up 23.2 percent from the prior year
• Net interest margin (FTE) of 3.71 percent for the quarter was up 25 basis points from the prior year
• Asset quality remained strong for the quarter, with the nonperforming asset ratio at 0.86 percent at March 31, 2015
• Positive operating leverage for the Company, as expenses were up 9.3 percent from the prior year

"We are pleased with our solid first-quarter results," said Mark Klein, President and Chief Executive Officer of SB Financial.  "We are especially pleased with our revenue growth for the quarter, which outpaced expense growth by 2.5 times." 

Klein continued, "Our mortgage volume of $75 million for the quarter exceeded  our expectations, and our secondary market sales for the quarter were the highest since the second quarter of 2013.  Our gains in Small Business Administration (SBA) loan sales  this quarter resulted from our concentrated calling efforts over the past year.  In addition to our robust financial results, we opened our 17^th banking center on March 23, 2015, in Findlay, Ohio."

RESULTS OF OPERATIONS

Consolidated Revenue

Total revenue, consisting of net interest income on a fully tax equivalent (FTE) basis and noninterest income, was up 23.2 percent from the first quarter of 2014, and up 5.2 percent from the linked quarter.

• Net interest income (FTE) was up 14.3 percent for the first quarter, and up 0.5 percent compared to the linked quarter.
• Net interest margin (FTE) was up 25 basis points for the first quarter, but down 2 basis points from the linked quarter.
• Net interest margin was impacted by the payoff of our fixed rate trust preferred securities late in the third quarter of 2014. For the first quarter, this early payoff increased margin by 18 basis points.
• Noninterest income was up 40.5 percent for the first quarter, and up 13.7 percent from the linked quarter.

Mortgage Loan Business

Mortgage loan originations for the first quarter of 2015 were $75.0 million, up $41.4 million, or 123.1 percent, from the year-ago first quarter.  

Net mortgage banking income, consisting of gains on the sale of mortgage loans and net loan servicing fees, was $1.46 million for the first quarter of 2015, compared to $0.82 million for the year-ago quarter.  The mortgage servicing valuation adjustment for the first-quarter 2015 was a negative $0.08 million.  Our servicing valuation impairment ended the quarter at $0.49 million.  The mortgage servicing portfolio at March 31, 2015, was $687.4 million, up $77.9 million, or 12.8 percent, from $609.4 million at March 31, 2014.

Mr. Klein noted, "Our mortgage origination and sales volumes for the quarter increased substantially from the prior year.  We experienced a higher level of refinance volume this quarter, 25 percent of total volume, as the sustained low rates impacted customer behavior.  Further, we are pleased by the immediate impact that our new Findlay team had in our success this quarter.  The mortgage pipeline in all of our markets remains quite strong."

Fee Income and Noninterest Expense

SB Financial's fee income includes revenue from a diverse group of services, such as wealth management, deposit fees and income from bank-owned life insurance.  Wealth management assets under management stood at $332.0 million as of March 31, 2015.  For the first quarter of 2015, fee income as a percentage of total revenue was 39.4 percent, up from the prior year level of 34.7 percent.  

For the first quarter of 2015, noninterest expense (NIE) was up $0.6 million, or 9.3 percent, compared to the first quarter of 2014.  Compared to the linked quarter, NIE was up $0.3 million or 4.4 percent.  The growth in expenses resulted from increased mortgage and SBA commissions and higher marketing costs related to customer and account acquisitions.

"Our fee income continues to be a competitive strength," Mr. Klein stated.  "Mortgage volume this quarter was enhanced by a number of SBA and Farm Service Agency (FSA) loan sale gains.  We feel very confident about our SBA pipeline, as our lenders have been striving to find and deliver SBA qualified prospects.  Wealth management put a number of structural changes in place over the past several months, and this line of business will be a key factor in our 2015 results." 

Balance Sheet

Total assets as of March 31, 2015, were $717.6 million, up 11.0 percent from a year ago.  Total equity as of March 31, 2015, was $77.1 million, up 34.2 percent from a year ago.  Equity balances included the net impact of our capital raise completed in the fourth quarter of 2014, which added $14.0 million to total equity through the public offering of depository shares, each representing a 1/100^th interest in our 6.50 percent Noncumulative Convertible Preferred Shares, Series A.

Total loans held for investment were $511.8 million at March 31, 2015, up $29.9 million, or 6.2 percent, from March 31, 2014.  Residential real estate loans accounted for the majority of growth, up $16.8 million, or 17.2 percent.  Commercial real estate and agricultural loans rose $5.1 million, or 2.4 percent, and $5.2 million, or 13.4 percent, respectively.

The investment portfolio, including Federal Reserve Bank and Federal Home Loan Bank stock, of $97.8 million represented 13.6 percent of assets at March 31, 2015, and was up slightly from a year ago.  Deposit balances of $578.3 million at March 31, 2015, increased by $27.4 million, or 5.0 percent since December 31, 2014.  Growth from December 31, 2014, included $10.9 million in checking and $16.5 million in savings and time deposit balances.

Mr. Klein said, "We continued to see solid growth of loans and deposits in our markets with the improving economy.  While we had some anticipated loan payoffs this quarter that held balances flat to the linked quarter, our pipeline is improving and we expect to show positive growth in the near term.  Nonperforming assets were down from the prior year by 9.0 percent, and our 86 basis point level of nonperforming assets is certainly in the top quartile."

Asset Quality

SB Financial continues to maintain top-quartile asset quality, reporting nonperforming assets of $6.2 million as of March 31, 2015, down $0.6 million, or 9.3 percent, from the year-ago quarter.  Already trending better than our peers' key metrics, our 0.86 percent of nonperforming assets to total assets remains in the top quartile of our peer group.  Our coverage of problem loans by the loan loss allowance was 114.3 percent at March 31, 2015, up from the 108.5 percent at March 31, 2014.

Capitalization

Improving capital ratios remains an important focus of management.  The tangible equity ratio improved by 20 basis points over the past year and stood at 6.6 percent as of March 31, 2015.  All bank and holding company regulatory ratios remain in excess of "well-capitalized" levels.  At March 31, 2015, SB Financial's Total Risk-Based Capital was estimated to be $75.3 million, with a ratio level of 14.0 percent.

Webcast and Conference Call

The Company will hold a related conference call and webcast on April 28, 2015, at 3:00 p.m. ET.  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 with two wholly-owned operating subsidiaries: State Bank and RDSI. State Bank provides a full range of financial services for consumers and small businesses, including wealth management, mortgage banking and commercial and agricultural lending, operating through 16 banking centers in eight northwestern Ohio counties and one center in Fort Wayne, Indiana, as well as two loan production offices located in Columbus, Ohio, and one in Angola, Indiana. RDSI provides item processing services to community banks located primarily in the Midwest. SB Financial's common stock is listed on the NASDAQ Capital Market under the symbol "SBFG".  SB Financial's depository shares, each representing a 1/100^th interest in our preferred shares, Series A are listed on the NASDAQ Capital Market under the symbol "SBFGP".  

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 providing certain non-GAAP financial measures provides 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.

SOURCE SB Financial Group, Inc.

Related Links

http://www.yoursbfinancial.com