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SB Financial Group Announces Second Quarter 2023 Results
Source: Nasdaq GlobeNewswire / 27 Jul 2023 16:15:02 America/New_York
DEFIANCE, Ohio, July 27, 2023 (GLOBE NEWSWIRE) -- 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, private client and title insurance services today reported earnings for the second quarter ended June 30, 2023.
Second quarter 2023 highlights over prior-year, second quarter include:
- Net income of $3.1 million increased 8.5 percent with diluted earnings per share (“EPS”) of $0.44
- Adjusted for Mortgage Servicing Rights recapture (“OMSR”), net income is higher by 16.7 percent
- Noninterest expense of $10.3 million declined 4.3 percent
- Improved asset quality with nonperforming assets declining from 37 to 26 basis points
Six months ended June 30, 2023, highlights over prior-year six months include:
- Net income of $5.5 million, down 2.2 percent
- Adjusted for OMSR recapture, net income is higher by 15.5 percent
- Noninterest expense of $21.1 million declined 2.5 percent
Second quarter 2023 trailing twelve-month highlights include:
- Loan growth of $89.2 million, or 10.0 percent
- Deposit decline of $0.6 million, or 0.1 percent
Earnings Highlights Three Months Ended Six Months Ended ($ in thousands, except per share & ratios) Jun. 2023 Jun. 2022 % Change Jun. 2023 Jun. 2022 % Change Operating revenue $ 14,190 $ 14,266 -0.5 % $ 28,180 $ 28,545 -1.3 % Interest income 14,406 10,474 37.5 % 28,230 19,869 42.1 % Interest expense 4,577 881 419.5 % 8,077 1,799 349.0 % Net interest income 9,829 9,593 2.5 % 20,153 18,070 11.5 % Provision for credit losses 145 - 0.0 % 395 - 0.0 % Noninterest income 4,361 4,673 -6.7 % 8,027 10,475 -23.4 % Noninterest expense 10,339 10,802 -4.3 % 21,112 21,661 -2.5 % Net income 3,075 2,834 8.5 % 5,525 5,647 -2.2 % Earnings per diluted share 0.44 0.40 10.0 % 0.79 0.79 0.0 % Return on average assets 0.91 % 0.87 % 4.6 % 0.82 % 0.85 % -3.5 % Return on average equity 10.01 % 8.89 % 12.6 % 9.01 % 8.46 % 6.5 % “We were pleased with the positive momentum we experienced this quarter in what is a difficult and volatile operating environment for Community Banks,” said Mark A. Klein, Chairman, President, and CEO of SB Financial. “We had linked quarter growth in loans and mortgage originations and deposits were down just 3.5 percent. Liquidity concerns and deposit rate competition continued to be our most significant challenge as our funding beta’s exceeded our earning asset beta’s for the first time since the Fed rate increases began in March of 2022. While margin compression consumed the narrative for the second quarter, on a positive note we did experience a further reduction in non-performing loans. Our nonperforming loan coverage ratio now stands in excess of 500 percent.”
RESULTS OF OPERATIONS
Consolidated Revenue
Total operating revenue, consisting of net interest income and noninterest income, was up from the linked quarter by 1.4 percent but less than the prior year quarter by 0.5 percent. Operating revenue continues to be impacted by much higher funding costs and the decline in mortgage banking revenue.
- Net interest income was down 4.8 percent from the linked quarter but up 2.5 percent from the prior year quarter.
- Net interest margin was flat compared to the prior year, as the increase in Earning Asset yields and balances has been offset by higher funding costs on deposits and wholesale borrowings.
- Noninterest income was down 6.7 percent from the year ago quarter, due to lower mortgage and Title insurance volume and a reduction in the recapture of temporary servicing rights.
Mortgage Loan Business
Mortgage loan originations for the second quarter of 2023 were $65.4 million, down $30.1 million, or 31.5 percent, from the prior year quarter. Total sales of originated loans experienced a slight decline compared to the prior year, at $47.9 million, down $2.0 million, or 4.0 percent.
Net mortgage banking revenue, consisting of gains on the sale of mortgage loans and net loan servicing fees, was $1.6 million for the second quarter of 2023, down from $1.8 million for the prior year quarter. The mortgage servicing valuation adjustment for the second quarter of 2023 was a negative $0.02 million, compared to a positive adjustment of $0.2 million for the second quarter of 2022. The servicing portfolio at June 30, 2023, was $1.35 billion, which was down 1.2 percent compared to the prior year.
Mr. Klein noted, “Mortgage volume continued to be constrained by higher rates and reduced inventory in our markets. Compared to the linked quarter, we were pleased that originations were higher by $16.0 million, or 32.5 percent as we added new MLOs in several of our key markets.”
Mortgage Banking ($ in thousands) Jun. 2023 Mar. 2023 Dec. 2022 Sep. 2022 Jun. 2022 Annual Growth Mortgage originations $ 65,387 $ 49,366 $ 51,219 $ 68,557 $ 95,454 $ (30,067 ) Mortgage sales 47,933 25,803 23,590 39,176 49,915 (1,982 ) Mortgage servicing portfolio 1,353,904 1,344,158 1,352,016 1,362,666 1,369,732 (15,828 ) Mortgage servicing rights 13,723 13,548 13,503 13,473 13,408 315 Mortgage servicing revenue Loan servicing fees 844 844 851 858 863 (19 ) OMSR amortization (334 ) (292 ) (310 ) (396 ) (496 ) 162 Net administrative fees 510 552 541 462 367 143 OMSR valuation adjustment (16 ) 56 86 65 239 (255 ) Net loan servicing fees 494 608 627 527 606 (112 ) Gain on sale of mortgages 1,056 599 550 876 1,196 (140 ) Mortgage banking revenue, net $ 1,550 $ 1,207 $ 1,177 $ 1,403 $ 1,802 $ (252 ) Noninterest Income and Noninterest Expense
Noninterest income for the quarter declined, from the prior year quarter by 6.7 percent; however, when compared to the linked quarter, fee income was higher by 19.0 percent. Gain-on-sale from mortgage loans, was down just slightly from the prior year; however, the increase in sale volume above 73 percent in the quarter resulted in a nearly 80 percent increase in this metric over the linked quarter. Apart from Title Insurance, our remaining fee categories, are generally in line with revenue from both the linked and prior-year quarters.
For the second quarter of 2023, noninterest expense of $10.3 million was down from both the linked and prior year quarters by over 4 percent. Rightsizing of the mortgage business line has resulted in staffing levels lower by over 5 percent compared to the prior year.
Mr. Klein stated, “Through the first half of the year, we have achieved positive operating leverage with expenses declining at nearly twice the rate of our revenue decline. When we exclude the non-core servicing rights recapture, revenue growth, year-to-date, is higher by 2.6 percent. We continue to examine all of our operations and resources as we look to manage expense levels into the second half of 2023.”
Noninterest Income/Noninterest Expense ($ in thousands, except ratios) Jun. 2023 Mar. 2023 Dec. 2022 Sep. 2022 Jun. 2022 Annual Growth Noninterest Income (NII) $ 4,361 $ 3,666 $ 3,713 $ 4,043 $ 4,673 $ (312 ) NII / Total Revenue 30.7 % 26.2 % 25.4 % 27.9 % 32.8 % -2.1 % NII / Average Assets 1.3 % 1.1 % 1.1 % 1.2 % 1.4 % -0.1 % Total Revenue Growth -0.5 % -2.0 % -6.7 % -13.2 % -9.1 % -6.7 % Noninterest Expense (NIE) $ 10,339 $ 10,773 $ 10,269 $ 10,384 $ 10,802 $ (463 ) Efficiency Ratio 72.7 % 76.9 % 70.2 % 71.6 % 75.6 % -2.9 % NIE / Average Assets 3.1 % 3.2 % 3.1 % 3.2 % 3.3 % -0.2 % Net Noninterest Expense/Avg. Assets -1.8 % -2.1 % -2.0 % -2.0 % -1.9 % 0.1 % Total Expense Growth -4.3 % -0.8 % -11.2 % -7.7 % -2.5 % -4.3 % Balance Sheet
As of June 30, 2023, total assets were $1.34 billion, in line with the linked quarter, and slightly higher compared to the prior year. This increase was driven by higher loan balances, partially offset by reductions in cash and investment securities. Total shareholders’ equity at June 30, 2023, was $117.7 million. Excluding the impact of the investment portfolio impairment, equity rose to $150.6 million, reflecting a 2.6 percent increase. During the quarter, we repurchased 91,260 shares of our Company stock, further demonstrating our commitment to enhancing shareholder value.
With our adoption of CECL on January 1st, our Allowance for Credit Losses rose in the quarter to $15.8 million, up 14.4 percent compared to the prior year. In the quarter, we added $375 thousand to the reserve offset by just $22 thousand in net charge-offs.
The investment portfolio of $228.0 million, represented 17.0 percent of assets at June 30, 2023, and was down $38.2 million or 14.2 percent from the year-ago period. Total loans held for investment were $984.8 million at June 30, 2023, up $89.2 million, or 10.0 percent, from June 30, 2022. Residential originations have offset the decline in Commercial loan originations we are seeing in the majority of our markets.
Deposit balances of $1.07 billion at June 30, 2023, were level to the prior year, but experienced a decline of 3.5 percent from the linked quarter. The shift in the mix of our deposit funding has driven the margin compression that we are experiencing. Currently, time deposits and demand deposits comprise 22.4 and 36.3 percent of total deposits, respectively, compared to 13.3 and 40.9 percent for the prior year.
Mr. Klein continued, “Loan growth continued in the quarter, although we are focused on reducing the reliance on our residential mortgage portfolio products to drive growth as we have a fairly broad base of high-level commercial leaders in our markets working to grow our commercial book. The challenge of funding our Company and maintaining our margins continued in the quarter. We still have access to significant additional liquidity and our level of uninsured deposits ended the quarter at 14.8 percent.”
Loan Balances ($ in thousands, except ratios) Jun. 2023 Mar. 2023 Dec. 2022 Sep. 2022 Jun. 2022 Annual Growth Commercial $ 123,226 $ 126,066 $ 128,393 $ 128,565 $ 127,711 $ (4,485 ) % of Total 12.5 % 12.9 % 13.3 % 13.9 % 14.3 % -3.5 % Commercial RE 417,412 419,024 412,809 404,710 404,260 13,152 % of Total 42.4 % 42.9 % 42.9 % 43.7 % 45.1 % 3.3 % Agriculture 58,222 57,761 64,505 60,522 60,586 (2,364 ) % of Total 5.9 % 5.9 % 6.7 % 6.5 % 6.8 % -3.9 % Residential RE 321,365 309,684 291,368 267,135 241,614 79,751 % of Total 32.6 % 31.7 % 30.3 % 28.9 % 27.0 % 33.0 % Consumer & Other 64,599 63,777 65,000 64,317 61,440 3,159 % of Total 6.6 % 6.5 % 6.8 % 7.0 % 6.9 % 5.1 % Total Loans $ 984,824 $ 976,312 $ 962,075 $ 925,249 $ 895,611 $ 89,213 Total Growth Percentage 10.0 % Deposit Balances ($ in thousands, except ratios) Jun. 2023 Mar. 2023 Dec. 2022 Sep. 2022 Jun. 2022 Annual Growth Non-Int DDA $ 218,411 $ 237,175 $ 256,799 $ 250,791 $ 239,676 $ (21,265 ) % of Total 20.4 % 21.4 % 23.6 % 23.1 % 22.4 % -8.9 % Interest DDA 170,282 188,497 191,719 199,523 198,286 (28,004 ) % of Total 15.9 % 17.0 % 17.6 % 18.4 % 18.5 % -14.1 % Savings 225,065 227,974 191,272 201,402 215,285 9,780 % of Total 21.0 % 20.5 % 17.6 % 18.5 % 20.1 % 4.5 % Money Market 217,681 222,203 255,995 258,975 276,274 (58,593 ) % of Total 20.3 % 20.0 % 23.6 % 23.8 % 25.8 % -21.2 % Time Deposits 239,717 234,295 190,880 175,202 142,258 97,459 % of Total 22.4 % 21.1 % 17.6 % 16.1 % 13.3 % 68.5 % Total Deposits $ 1,071,156 $ 1,110,144 $ 1,086,665 $ 1,085,893 $ 1,071,779 $ (623 ) Total Growth Percentage -0.1 % Asset Quality
SB Financial reported nonperforming assets of $3.5 million as of June 30, 2023, down $1.2 million or 25.2 percent from the year-ago quarter. The coverage ratio of problem loans to the allowance for credit losses was at 542.8 percent at June 30, 2023, which was up nearly 200 basis points from the prior year due to the expansion of the allowance from the CECL adjustment of $1.4 million and our reduction in problem loans.
Nonperforming Assets Annual Change ($ in thousands, except ratios) Jun. 2023 Mar. 2023 Dec. 2022 Sep. 2022 Jun. 2022 Commercial & Agriculture $ 170 $ 185 $ 114 $ 114 $ 140 $ 30 % of Total Com./Ag. loans 0.09 % 0.10 % 0.06 % 0.06 % 0.07 % 21.4 % Commercial RE 192 199 210 223 359 (167 ) % of Total CRE loans 0.05 % 0.05 % 0.05 % 0.06 % 0.09 % -46.5 % Residential RE 2,266 2,742 3,020 3,129 3,176 (910 ) % of Total Res. RE loans 0.71 % 0.89 % 1.04 % 1.17 % 1.31 % -28.7 % Consumer & Other 282 270 338 280 323 (41 ) % of Total Con./Oth. loans 0.44 % 0.42 % 0.52 % 0.44 % 0.53 % -12.7 % Total Nonaccruing Loans 2,910 3,396 3,682 3,746 3,998 (1,088 ) % of Total loans 0.30 % 0.35 % 0.38 % 0.40 % 0.45 % -27.2 % Foreclosed Assets and Other Assets 625 650 777 756 730 (105 ) Total Change (%) -14.4 % Total Nonperforming Assets $ 3,535 $ 4,046 $ 4,459 $ 4,502 $ 4,728 $ (1,193 ) % of Total assets 0.26 % 0.30 % 0.33 % 0.35 % 0.37 % -25.23 % Webcast and Conference Call
The Company will hold the second quarter 2023 earnings conference call and webcast on July 28, 2023, 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 ir.yourstatebank.com. An audio replay of the call will be available on the Company’s 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) and SBFG Title, LLC dba Peak Title (Peak Title). 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 23 offices: 22 in nine Ohio counties and one in Fort Wayne, Indiana, and 23 ATMs. State Bank has six loan production offices located throughout the Tri-State region of Ohio, Indiana and Michigan. Peak Title provides title insurance and title opinions throughout the Tri-State region. SB Financial’s common stock is listed on the NASDAQ Capital Market with the ticker symbol “SBFG”.
In May 2023, SB Financial was valued #163 on the American Banker Magazine’s list of top 200 publicly traded Community Bank and Thrifts based on three-year average return on equity.
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, the duration and scope of the COVID-19 outbreak in the United States and the market areas in which SB Financial and its subsidiaries operate, including the impact to the state and local economies of prolonged shelter in place orders and the pandemic generally, 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
This press release contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles (“GAAP”). Non-GAAP financial measures, specifically pre-tax, pre-provision income, tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, return on average tangible common equity, total interest income – FTE, net interest income – FTE and net interest margin – FTE are used by the Company’s management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. In addition, the Company excludes the OMSR impairment from net income to report anon-GAAP adjusted net income level. Although management believes these non-GAAP measures are useful to investors by providing a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
Investor Contact Information: Mark A. Klein
Chairman, President and
Chief Executive Officer
Mark.Klein@YourStateBank.com
Anthony V. Cosentino
Executive Vice President and
Chief Financial Officer
Tony.Cosentino@YourStateBank.comSB FINANCIAL GROUP, INC. CONSOLIDATED BALANCE SHEETS - (Unaudited) June March December September June ($ in thousands) 2023 2023 2022 2022 2022 ASSETS Cash and due from banks $ 20,993 $ 21,625 $ 27,817 $ 27,934 $ 29,567 Interest bearing time deposits 1,180 1,380 2,131 2,134 1,691 Available-for-sale securities 227,996 237,607 238,780 243,233 266,162 Loans held for sale 5,684 5,592 2,073 2,979 4,242 Loans, net of unearned income 984,824 976,312 962,075 925,249 895,611 Allowance for credit losses (15,795 ) (15,442 ) (13,818 ) (13,824 ) (13,801 ) Premises and equipment, net 22,230 22,621 22,829 22,842 23,122 Federal Reserve and FHLB Stock, at cost 7,634 6,054 6,326 5,230 5,303 Foreclosed assets and other assets 625 650 777 756 730 Interest receivable 4,079 3,926 4,091 3,556 3,256 Goodwill 23,239 23,239 23,239 23,239 23,239 Cash value of life insurance 29,183 29,024 28,870 28,713 28,556 Mortgage servicing rights 13,723 13,548 13,503 13,473 13,408 Other assets 15,840 15,157 16,940 17,863 12,886 Total assets $ 1,341,435 $ 1,341,293 $ 1,335,633 $ 1,303,377 $ 1,293,972 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Non interest bearing demand $ 218,411 $ 237,175 $ 256,799 $ 250,791 $ 239,676 Interest bearing demand 170,282 188,497 191,719 199,523 198,286 Savings 225,065 227,974 191,272 201,402 215,285 Money market 217,681 222,203 255,995 258,975 276,274 Time deposits 239,717 234,295 190,880 175,202 142,258 Total deposits 1,071,156 1,110,144 1,086,665 1,085,893 1,071,779 Short-term borrowings 21,118 15,998 14,923 19,754 30,772 Federal Home Loan Bank advances 81,300 44,500 60,000 35,000 25,000 Trust preferred securities 10,310 10,310 10,310 10,310 10,310 Subordinated debt net of issuance costs 19,618 19,606 19,594 19,582 19,570 Interest payable 1,866 1,441 769 623 307 Other liabilities 18,401 19,535 24,944 17,587 11,678 Total liabilities 1,223,769 1,221,534 1,217,205 1,188,749 1,169,416 Shareholders' Equity Common stock 61,319 61,319 61,319 61,319 61,319 Additional paid-in capital 15,154 14,953 15,087 15,000 15,069 Retained earnings 103,725 101,548 101,966 99,309 96,809 Accumulated other comprehensive loss (32,894 ) (29,671 ) (32,120 ) (33,426 ) (22,210 ) Treasury stock (29,638 ) (28,390 ) (27,824 ) (27,574 ) (26,431 ) Total shareholders' equity 117,666 119,759 118,428 114,628 124,556 Total liabilities and shareholders' equity $ 1,341,435 $ 1,341,293 $ 1,335,633 $ 1,303,377 $ 1,293,972 SB FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME - (Unaudited) ($ in thousands, except per share & ratios) At and for the Three Months Ended Six Months Ended June March December September June June June Interest income 2023 2023 2022 2022 2022 2023 2022 Loans Taxable $ 12,715 $ 12,126 $ 11,222 $ 10,084 $ 8,880 $ 24,841 $ 16,932 Tax exempt 121 116 109 92 73 237 134 Securities Taxable 1,524 1,535 1,559 1,536 1,469 3,059 2,704 Tax exempt 46 47 47 52 52 93 99 Total interest income 14,406 13,824 12,937 11,764 10,474 28,230 19,869 Interest expense Deposits 3,538 2,578 1,440 852 567 6,116 1,185 Repurchase agreements & other 9 10 7 8 11 19 24 Federal Home Loan Bank advances 664 553 258 180 38 1,217 77 Trust preferred securities 172 164 138 99 71 336 124 Subordinated debt 194 195 194 195 194 389 389 Total interest expense 4,577 3,500 2,037 1,334 881 8,077 1,799 Net interest income 9,829 10,324 10,900 10,430 9,593 20,153 18,070 Provision for credit losses 145 250 - - - 395 - Net interest income after provision for loan losses 9,684 10,074 10,900 10,430 9,593 19,758 18,070 Noninterest income Wealth management fees 940 917 907 930 936 1,857 1,891 Customer service fees 871 825 880 844 860 1,696 1,654 Gain on sale of mtg. loans & OMSR 1,056 599 550 876 1,196 1,655 2,872 Mortgage loan servicing fees, net 494 608 627 527 606 1,102 1,810 Gain on sale of non-mortgage loans 218 24 105 125 167 242 336 Title insurance revenue 455 373 454 476 697 828 1,299 Gain (loss) on sale of assets 15 (11 ) 18 (12 ) - 4 55 Other 312 331 172 277 211 643 558 Total noninterest income 4,361 3,666 3,713 4,043 4,673 8,027 10,475 Noninterest expense Salaries and employee benefits 5,721 5,913 5,677 5,858 6,418 11,634 12,607 Net occupancy expense 802 784 763 769 719 1,586 1,461 Equipment expense 1,002 981 1,017 918 827 1,983 1,681 Data processing fees 685 646 627 664 643 1,331 1,219 Professional fees 612 863 738 766 760 1,475 1,710 Marketing expense 213 198 258 200 222 411 453 Telephone and communication expense 124 121 124 134 105 245 216 Postage and delivery expense 78 87 121 75 110 165 226 State, local and other taxes 218 228 277 250 277 446 555 Employee expense 156 188 157 145 175 344 311 Other expenses 728 764 510 605 546 1,492 1,222 Total noninterest expense 10,339 10,773 10,269 10,384 10,802 21,112 21,661 Income before income tax expense 3,706 2,967 4,344 4,088 3,464 6,673 6,884 Income tax expense 631 517 811 746 630 1,148 1,237 Net income $ 3,075 $ 2,450 $ 3,533 $ 3,342 $ 2,834 $ 5,525 $ 5,647 Common share data: Basic earnings per common share $ 0.45 $ 0.35 $ 0.51 $ 0.48 $ 0.40 $ 0.80 $ 0.80 Diluted earnings per common share $ 0.44 $ 0.35 $ 0.50 $ 0.47 $ 0.40 $ 0.79 $ 0.79 Average shares outstanding (in thousands): Basic: 6,847 6,933 6,945 6,968 7,075 6,890 7,055 Diluted: 6,910 7,008 7,021 7,033 7,149 6,976 7,116 SB FINANCIAL GROUP, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS - (Unaudited) ($ in thousands, except per share & ratios) At and for the Three Months Ended Six Months Ended June March December September June June June SUMMARY OF OPERATIONS 2023 2023 2022 2022 2022 2023 2022 Net interest income $ 9,829 $ 10,324 $ 10,900 $ 10,430 $ 9,593 $ 20,153 $ 18,070 Tax-equivalent adjustment 44 43 41 38 33 88 62 Tax-equivalent net interest income 9,873 10,367 10,941 10,468 9,626 20,241 18,132 Provision for credit loss 145 250 - - - 395 - Noninterest income 4,361 3,666 3,713 4,043 4,673 8,027 10,475 Total operating revenue 14,190 13,990 14,613 14,473 14,266 28,180 28,545 Noninterest expense 10,339 10,773 10,269 10,384 10,802 21,112 21,661 Pre-tax pre-provision income 3,851 3,217 4,344 4,088 3,464 7,068 6,884 Pretax income 3,706 2,967 4,344 4,088 3,464 6,673 6,884 Net income 3,075 2,450 3,533 3,342 2,834 5,525 5,647 PER SHARE INFORMATION: Basic earnings per share (EPS) 0.45 0.35 0.51 0.48 0.40 0.80 0.80 Diluted earnings per share 0.44 0.35 0.50 0.47 0.40 0.79 0.79 Common dividends 0.130 0.125 0.125 0.120 0.120 0.255 0.235 Book value per common share 17.30 17.37 17.08 16.49 17.75 17.30 17.75 Tangible book value per common share (TBV) 13.81 13.93 13.65 13.07 14.36 13.81 14.36 Market price per common share 12.62 14.13 16.95 16.85 17.26 12.62 17.26 Market price to TBV 91.4 % 101.4 % 124.2 % 128.9 % 120.2 % 91.4 % 120.2 % Market price to trailing 12 month EPS 7.1 8.2 9.6 9.6 9.3 7.1 9.3 PERFORMANCE RATIOS: Return on average assets (ROAA) 0.91 % 0.73 % 1.08 % 1.03 % 0.87 % 0.82 % 0.85 % Pre-tax pre-provision ROAA 1.14 % 0.96 % 1.32 % 1.26 % 1.06 % 1.14 % 1.11 % Return on average equity 10.01 % 8.37 % 12.17 % 10.89 % 8.89 % 9.01 % 8.46 % Return on average tangible equity 12.40 % 10.50 % 15.30 % 13.51 % 10.93 % 11.18 % 10.30 % Efficiency ratio 72.71 % 76.85 % 70.16 % 71.63 % 75.60 % 74.77 % 75.76 % Earning asset yield 4.61 % 4.49 % 4.27 % 3.89 % 3.45 % 4.54 % 3.20 % Cost of interest bearing liabilities 1.90 % 1.46 % 0.90 % 0.58 % 0.39 % 1.69 % 0.38 % Net interest margin 3.15 % 3.35 % 3.60 % 3.45 % 3.16 % 3.24 % 2.91 % Tax equivalent effect 0.01 % 0.02 % 0.01 % 0.01 % 0.00 % 0.02 % 0.01 % Net interest margin, tax equivalent 3.16 % 3.37 % 3.61 % 3.46 % 3.16 % 3.26 % 2.92 % Non interest income/Average assets 1.30 % 1.10 % 1.13 % 1.24 % 1.43 % 1.20 % 1.58 % Non interest expense/Average assets 3.07 % 3.23 % 3.13 % 3.19 % 3.31 % 3.15 % 3.26 % Net noninterest expense/Average assets -1.78 % -2.13 % -2.00 % -1.95 % -1.88 % -1.95 % -1.68 % ASSET QUALITY RATIOS: Gross charge-offs 32 69 7 9 9 101 18 Recoveries 10 8 1 32 6 18 14 Net charge-offs 22 61 6 (23 ) 3 83 4 Nonaccruing loans/Total loans 0.30 % 0.35 % 0.38 % 0.40 % 0.45 % 0.30 % 0.45 % Nonperforming loans/Total loans 0.30 % 0.35 % 0.38 % 0.40 % 0.45 % 0.30 % 0.45 % Nonperforming assets/Loans & OREO 0.36 % 0.41 % 0.46 % 0.49 % 0.53 % 0.36 % 0.53 % Nonperforming assets/Total assets 0.26 % 0.30 % 0.33 % 0.35 % 0.37 % 0.26 % 0.37 % Allowance for credit loss/Nonperforming loans 542.78 % 454.71 % 375.29 % 369.03 % 345.20 % 542.78 % 345.20 % Allowance for credit loss/Total loans 1.60 % 1.58 % 1.44 % 1.49 % 1.54 % 1.60 % 1.54 % Net loan charge-offs/Average loans (ann.) 0.01 % 0.03 % 0.00 % (0.01 %) 0.00 % 0.02 % 0.00 % CAPITAL & LIQUIDITY RATIOS: Loans/ Deposits 91.94 % 87.94 % 88.53 % 85.21 % 83.56 % 91.94 % 83.56 % Equity/ Assets 8.77 % 8.93 % 8.87 % 8.79 % 9.63 % 8.77 % 9.63 % Tangible equity/Tangible assets 7.13 % 7.29 % 7.22 % 7.10 % 7.93 % 7.13 % 7.93 % Common equity tier 1 ratio (Bank) 13.18 % 13.44 % 13.42 % 13.23 % 13.21 % 13.18 % 13.21 % END OF PERIOD BALANCES Total assets 1,341,435 1,341,293 1,335,633 1,303,377 1,293,972 1,341,435 1,293,972 Total loans 984,824 976,312 962,075 925,249 895,611 984,824 895,611 Deposits 1,071,156 1,110,144 1,086,665 1,085,893 1,071,779 1,071,156 1,071,779 Stockholders equity 117,666 119,759 118,428 114,628 124,556 117,666 124,556 Goodwill and intangibles 23,710 23,732 23,753 23,770 23,787 23,710 23,787 Tangible equity 93,956 96,027 94,675 90,858 100,769 93,956 100,769 Mortgage servicing portfolio 1,353,904 1,344,158 1,352,016 1,362,666 1,369,732 1,353,904 1,369,732 Wealth/Brokerage assets under care 499,255 518,009 507,093 480,947 500,487 499,255 500,487 Total assets under care 3,194,594 3,203,460 3,194,742 3,146,990 3,164,191 3,194,594 3,164,191 Full-time equivalent employees 253 255 268 271 267 253 267 Period end common shares outstanding 6,803 6,894 6,935 6,950 7,017 6,803 7,017 Market capitalization (all) 85,857 97,419 117,556 117,113 121,105 85,857 121,105 AVERAGE BALANCES Total assets 1,346,010 1,335,056 1,314,419 1,302,297 1,305,815 1,341,918 1,328,216 Total earning assets 1,248,813 1,232,018 1,211,674 1,209,958 1,216,124 1,243,540 1,243,017 Total loans 988,348 970,813 937,898 909,909 870,439 979,629 851,736 Deposits 1,100,344 1,098,935 1,094,491 1,085,821 1,108,890 1,098,647 1,121,373 Stockholders equity 122,886 117,071 116,114 122,738 127,519 122,601 133,471 Goodwill and intangibles 23,721 23,743 23,761 23,778 23,796 23,732 23,798 Tangible equity 99,165 93,328 92,353 98,960 103,723 98,869 109,673 Average basic shares outstanding 6,847 6,933 6,945 6,968 7,075 6,890 7,055 Average diluted shares outstanding 6,910 7,008 7,021 7,033 7,149 6,976 7,116 SB FINANCIAL GROUP, INC. Rate Volume Analysis - (Unaudited) For the Three Months Ended Jun. 30, 2023 and 2022 ($ in thousands) Three Months Ended Jun. 30, 2023 Three Months Ended Jun. 30, 2022 Average Average Average Average Assets Balance Interest Rate Balance Interest Rate Taxable securities/cash $ 252,899 $ 1,524 2.41 % $ 337,226 $ 1,469 1.74 % Nontaxable securities 7,566 46 2.43 % 8,459 52 2.46 % Loans, net 988,348 12,836 5.19 % 870,439 8,953 4.11 % Total earning assets 1,248,813 14,406 4.61 % 1,216,124 10,474 3.45 % Cash and due from banks 3,952 7,177 Allowance for loan losses (15,556 ) (13,803 ) Premises and equipment 22,529 23,741 Other assets 86,272 72,576 Total assets $ 1,346,010 $ 1,305,815 Liabilities Savings, MMDA and interest bearing demand $ 621,999 $ 1,850 1.19 % $ 713,367 $ 353 0.20 % Time deposits 239,532 1,688 2.82 % 145,694 214 0.59 % Repurchase agreements & other 15,064 9 0.24 % 18,671 11 0.24 % Advances from Federal Home Loan Bank 57,495 664 4.62 % 3,989 38 3.81 % Trust preferred securities 10,310 172 6.67 % 10,310 71 2.75 % Subordinated debt 19,610 194 3.96 % 19,564 194 3.97 % Total interest bearing liabilities 964,010 4,577 1.90 % 911,595 881 0.39 % Non interest bearing demand 238,813 - 249,829 - Total funding 1,202,823 1.52 % 1,161,424 0.30 % Other liabilities 20,301 16,872 Total liabilities 1,223,124 1,178,296 Equity 122,886 127,519 Total liabilities and equity $ 1,346,010 $ 1,305,815 Net interest income $ 9,829 $ 9,593 Net interest income as a percent of average interest-earning assets - GAAP measure 3.15 % 3.16 % Net interest income as a percent of average interest-earning assets - non GAAP 3.16 % 3.16 % - Computed on a fully tax equivalent (FTE) basis Six Months Ended Jun. 30, 2023 Six Months Ended Jun. 30, 2022 Average Average Average Average Assets Balance Interest Rate Balance Interest Rate Taxable securities/cash $ 256,250 $ 3,059 2.39 % $ 383,272 $ 2,704 1.41 % Nontaxable securities 7,661 93 2.43 % 8,009 99 2.47 % Loans, net 979,629 25,078 5.12 % 851,736 17,066 4.01 % Total earning assets 1,243,540 28,230 4.54 % 1,243,017 19,869 3.20 % Cash and due from banks 4,019 7,593 Allowance for loan losses (15,162 ) (13,805 ) Premises and equipment 22,692 24,522 Other assets 86,829 66,889 Total assets $ 1,341,918 $ 1,328,216 Liabilities Savings, MMDA and interest bearing demand $ 629,061 $ 3,135 1.00 % $ 723,176 $ 751 0.21 % Time deposits 227,343 2,981 2.62 % 156,268 435 0.56 % Repurchase agreements & Other 16,832 19 0.23 % 21,876 24 0.22 % Advances from Federal Home Loan Bank 53,359 1,217 4.56 % 4,740 77 3.25 % Trust preferred securities 10,310 336 6.52 % 10,310 124 2.41 % Subordinated debt 19,604 389 3.97 % 19,558 389 3.98 % Total interest bearing liabilities 956,509 8,077 1.69 % 935,928 1,799 0.38 % Non interest bearing demand 242,243 1.35 % 241,929 0.31 % Total funding 1,198,752 1,177,857 Other liabilities 20,565 16,888 Total liabilities 1,219,317 1,194,745 Equity 122,601 133,471 Total liabilities and equity $ 1,341,918 $ 1,328,216 Net interest income $ 20,153 $ 18,070 Net interest income as a percent of average interest-earning assets - GAAP measure 3.24 % 2.91 % Net interest income as a percent of average interest-earning assets - non GAAP 3.26 % 2.92 % - Computed on a fully tax equivalent (FTE) basis Non-GAAP reconciliation Three Months Ended Six Months Ended ($ in thousands, except per share & ratios) Jun. 30, 2023 Jun. 30, 2022 Jun. 30, 2023 Jun. 30, 2022 Total Operating Revenue $ 14,190 $ 14,266 $ 28,180 $ 28,545 Adjustment to (deduct)/add OMSR recapture/impairment * 16 (239 ) (39 ) (1,128 ) Adjusted Total Operating Revenue 14,206 14,027 28,141 27,417 Income before Income Taxes 3,706 3,464 6,673 6,884 Adjustment for OMSR * 16 (239 ) (39 ) (1,128 ) Adjusted Income before Income Taxes 3,722 3,225 6,634 5,756 Provision for Income Taxes 631 630 1,148 1,237 Adjustment for OMSR ** 3 (50 ) (8 ) (237 ) Adjusted Provision for Income Taxes 634 580 1,140 1,001 Net Income 3,075 2,834 5,525 5,647 Adjustment for OMSR * 13 (189 ) (31 ) (891 ) Adjusted Net Income 3,088 2,645 5,494 4,756 Diluted Earnings per Share 0.44 0.40 0.79 0.79 Adjustment for OMSR * 0.00 (0.03 ) (0.00 ) (0.13 ) Adjusted Diluted Earnings per Share $ 0.45 $ 0.37 $ 0.79 $ 0.67 Return on Average Assets 0.91 % 0.87 % 0.82 % 0.85 % Adjustment for OMSR * 0.00 % -0.06 % -0.00 % -0.07 % Adjusted Return on Average Assets 0.92 % 0.81 % 0.82 % 0.78 % *valuation adjustment to the Company's mortgage servicing rights
**tax effect is calculated using a 21% statutory federal corporate income tax rate
