SB Financial Group, Inc. Announces Fourth-Quarter and Full-Year 2014 Results

DEFIANCE, Ohio, Jan. 21, 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 fourth quarter and full year ended December 31, 2014.

Fourth-quarter highlights include:

• Net income of $1.5 million for the fourth quarter represented a 25.0 percent increase over the prior year fourth quarter
• Loan growth up $39.0 million, or 8.2 percent, from the prior year
• Fully tax equivalent (FTE) revenue up 8.9 percent from the prior year
• Net interest margin (FTE) of 3.73 percent for the quarter was up 16 basis points from the prior year
• Asset quality remained strong for the quarter, with the nonperforming asset ratio at 0.92 percent at December 31, 2014
• Operating expenses were up slightly compared with the year-ago fourth quarter, but down 7.6 percent from the linked quarter

Full-year 2014 highlights include:

• Net income of $5.3 million, or $1.07 per diluted share, compared to $5.2 million, or $1.07 per diluted share, for the prior year
• Total revenue (FTE) of $34.1 million, which was down 2.9 percent from the prior year
• Total operating expense of $26.0 million, which was down 2.1 percent from the prior year

"We are pleased with our solid fourth-quarter results," said Mark Klein, President and Chief Executive Officer of SB Financial.  "We continue to drive performance improvement in our Company as we implement our strategic initiatives to diversify our revenue streams, achieve operational excellence and expand our market presence.  During the quarter, we had robust mortgage production, solid balance sheet growth, expense control and stable asset quality.  Additionally, we successfully completed our preferred stock offering and announced our re-entry into the Findlay, Ohio market."

RESULTS OF OPERATIONS

Consolidated Revenue

Total revenue, consisting of net interest income on a fully tax equivalent (FTE) basis and noninterest income, was up 8.9 percent from the fourth quarter of 2013, but down 5.3 percent from the linked quarter.

• Net interest income (FTE) was up 9.9 percent for the fourth quarter, and up 2.8 percent compared to the linked quarter.  For the full year, net interest income (FTE) was up 1.0 percent. 
• Net interest margin (FTE) was up 16 basis points for the fourth quarter, and up 9 basis points from the linked quarter.  Margin for the full year was down 13 basis points.
• Net interest margin was impacted by the payoff of our fixed rate trust preferred securities late in the third quarter.  For the fourth quarter, this early payoff increased margin by 15 basis points.
• Noninterest income was up 7.3 percent for the fourth quarter, but down 16.9 percent from the linked quarter.  For the full year, noninterest income was down 8.7 percent.

Total revenue, consisting of net interest income on an FTE basis and noninterest income, for the twelve months of 2014 was $34.1 million, compared to $35.2 million for the twelve months of 2013 or a 2.9 percent decline.  The twelve-month results were impacted by lower mortgage origination volume during the first half of 2014 and the reduction in the yield on earning assets.

Mortgage Loan Business

Mortgage loan originations for the fourth quarter of 2014 were $52.1 million, up $12.4 million, or 31.2 percent, from the year-ago fourth quarter.  For the twelve months of 2014, mortgage loan originations were $219.7 million, down from $248.8 million for the twelve months of 2013 or an 11.7 percent decline.

Net mortgage banking income, consisting of gains on the sale of mortgage loans and net loan servicing fees, was $1.0 million for the fourth quarter of 2014, compared to $1.0 million for the year-ago quarter.  The mortgage servicing valuation adjustment for the fourth-quarter 2014 was a negative $0.19 million, down $0.25 million from the linked quarter.  The mortgage servicing portfolio at December 31, 2014, was $665.7 million, up $59.7 million from $606.0 million, or 9.9 percent, from December 31, 2013.

Mr. Klein noted, "Our mortgage volumes for the quarter were strong compared to the prior year.  While 2014 volumes were lower than in previous years, we were pleased that 93 percent of this year's activity was from new SB Financial clients."

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 $330.8 million as of December 31, 2014.  For the fourth quarter of 2014, fee income as a percentage of total revenue was 36.5 percent, down slightly from the prior year.  For the twelve months of 2014, fee income as a percentage of total revenue was 38.0 percent.

For the fourth quarter of 2014, noninterest expense (NIE) was up $0.2 million, or 2.7 percent, compared to the fourth quarter of 2013.  For the twelve months of 2014, operating expenses were down $0.6 million, or 2.1 percent, compared to the twelve months of 2013.  When adjusted for the trust preferred securities prepayment, expenses for the twelve months of 2014 were down $1.0 million, or 3.7 percent, compared to the prior-year period.

"In the current interest-rate environment, our fee income continues to be a competitive strength," Mr. Klein stated. "For the fourth quarter, our fee income included the sale of several SBA credits, which delivered $143,000 in gains.  We have been actively pursuing SBA loans all year and our pipeline is strengthening." 

Balance Sheet

Total assets as of December 31, 2014, were $684.2 million, up 8.3 percent from a year ago.  Total equity as of December 31, 2014, was $75.7 million, up 34.5 percent from a year ago.  Equity balances included the net impact of our capital raise completed in the fourth quarter, which added $14.0 million to total equity through the public offering of depository shares representing 1/100^th interest in our 6.50 percent Noncumulative Convertible Preferred Shares, Series A.

Total loans held for investment were $516.3 million at December 31, 2014, up $39.0 million, or 8.2 percent, from December 31, 2013.  Residential real estate loans accounted for the majority of growth, up $18.8 million, or 18.8 percent.  Commercial real estate and agricultural loans rose $11.7 million, or 5.7 percent, and $7.0 million, or 17.9 percent, respectively.

The investment portfolio, including Federal Reserve Bank and Federal Home Loan Bank stock, of $89.0 million represented 13.0 percent of assets at December 31, 2014, and was down slightly from a year ago. Deposit balances of $550.9 million at December 31, 2014, increased by $32.7 million, or 6.3 percent since December 31, 2013.  Growth from the prior year included $17.8 million in checking and $14.9 million in savings and time deposit balances.

Mr. Klein said, "We continued to see solid growth in our loan portfolio during the fourth quarter, primarily as a result of higher residential and commercial real estate loan activity.  Our equity balances improved substantially this quarter after the completion of a very successful preferred stock offering."

Asset Quality

SB Financial continues to improve its asset quality, reporting nonperforming assets of $6.3 million as of December 31, 2014, down $1.0 million, or 13.2 percent, from the year-ago quarter.  Already trending better than our key peer metrics, the 0.92 percent of nonperforming assets to total assets continues a trend of sub 1.0 percent for the last three quarters.  Coverage of problem loans by the loan loss allowance was 113.0 percent at December 31, 2014, up from the 105.8 percent at December 31, 2013.

Capitalization

Improving capital ratios remains an important focus of management.  The tangible equity ratio improved by 36 basis points over the past year and stood at 6.8 percent as of December 31, 2014.  All bank regulatory ratios remain in excess of "well-capitalized" levels.  At December 31, 2014, State Bank's Total Risk-Based Capital was estimated to be $63.5 million, $21.2 million above the "well-capitalized" level.  The Total Risk-Based Capital Ratio is estimated at 12.5 percent.

The Company will hold a related conference call and webcast on January 22, at 10:00 a.m. EST.  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 seven northwestern Ohio counties and one center in Fort Wayne, Indiana, as well as two loan production offices located in Columbus, Ohio, and one loan production office located 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 preferred stock is 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