SB Financial Group Q1 Earnings Call Highlights

Key Points

• SB Financial reported net income of $4.3 million and diluted EPS of $0.69 for Q1, marking its 61st consecutive profitable quarter; tangible book value per share rose to $18.45 (adjusted excluding AOCI nearly $22), and the board declared a quarterly dividend of $0.16 while repurchasing ~29,000 shares.
• Total operating revenue increased 13.2% year-over-year to $17.4 million, driven by steady net interest income and improved fee income (notably mortgage servicing and title), while loans and deposits grew and new market entries in Angola and Napoleon, Ohio generated nearly $19 million in loans and $17 million in deposits in five months.
• Credit metrics were strong with non-performing assets at 0.3% of assets and an allowance for credit losses of 1.39%; management expects deposit growth to moderate, to operate around a ~90% loan-to-deposit ratio, sees potential margin improvement as liquidity eases, and is guiding lower on buybacks due to capital considerations.

SB Financial Group NASDAQ: SBFG reported what management described as a “solid start” to fiscal 2026, pointing to steady net interest income, improved fee-based revenue, disciplined expense management, and what it characterized as strong credit performance during its first-quarter earnings call on April 24.

Quarterly results highlight revenue mix and profitability streak

Chairman, President and CEO Mark Klein said the quarter “reinforces the consistency and resilience of our operating model,” with performance supported by loan growth, stable net interest income, improved non-interest revenue, and “sound credit quality.” Klein noted the quarter marked the first full anniversary of the Marblehead acquisition, which he said has contributed to the company’s funding base and expanded its presence in Northern Ohio.

Klein reported net income of $4.3 million and diluted EPS of $0.69, compared with GAAP diluted EPS of $0.33 in the first quarter of 2025. He said the quarter marked the company’s 61st consecutive quarter of profitability.

Tangible book value per share ended the quarter at $18.45, compared with $15.79 a year earlier and $18.00 at year-end, Klein said. He added that adjusted tangible book value per share, excluding AOCI, was “nearly $22.”

Chief Financial Officer Tony Cosentino said total operating revenue increased to $17.4 million, up 13.2% from $15.4 million a year earlier and up 6.1% from the linked quarter. Cosentino also discussed adjusted earnings, saying that when both years are adjusted for OMSR recapture and Marblehead merger costs, EPS would be $0.63 for the current period versus $0.42 in the year-ago quarter.

Net interest income steady; management discusses margin and funding

Net interest income was $12.7 million, compared with $11.3 million in the first quarter of 2025 and $12.7 million in the linked quarter, Klein said. Cosentino attributed the year-over-year increase primarily to balance sheet growth, portfolio mix, and repricing benefits.

Net interest margin was 3.49%, compared with 3.41% in the prior-year quarter and 3.52% in the linked quarter, Cosentino said. In response to a question about margin prospects in a stable rate environment, Cosentino said the quarter’s modest sequential decline was “really a function of being very liquid,” noting the company had “a lot of deposit growth” and wasn’t “terribly aggressive on the rate side.” He said he expects liquidity to “wane a little bit” in coming quarters and anticipated the margin could move “up a few basis points” in the second quarter as loan growth resumes.

Cosentino also addressed deposit costs, saying he had expected deposit costs to trend higher but that they have “continued to trend a bit lower.” However, he said he still believes competitors may become more aggressive given their focus on loan growth and need for funding.

Loan growth, deposits, and newer market expansion

Loan balances ended the quarter at approximately $1.18 billion, Cosentino said, with loans-to-assets at 74%. Klein said loan balances increased by about $92 million from the prior-year quarter and about $500,000 from the linked quarter, extending the company’s trend of sequential quarterly growth.

Total deposits were $1.37 billion, up from $1.27 billion a year earlier and $1.3 billion at year-end, Klein said. He described the year-over-year increase as more than $100 million, or nearly 8%, driven by organic deposit growth and stable client relationships.

During the Q&A, Klein highlighted momentum in newer markets, particularly Angola, Indiana, and Napoleon, Ohio, which the company entered recently. Klein said these two markets “exceeded our admittedly aggressive goals,” with nearly $19 million in loans and approximately $17 million in deposits in five months of operation. He described Napoleon as benefiting from industry consolidation and local “market disruption,” adding that Angola is nearing profitability.

Looking ahead, Klein and Chief Lending Officer Steve Walz discussed continued emphasis on disciplined growth. Walz said the company remains focused on expanding the breadth of its growth story beyond Columbus into other urban markets, consistent with “that high single digits we talked about previously.” Klein added that the company could grow faster but maintains underwriting discipline, saying management is “never going to get enough of yield to compensate for an undue amount of risk.”

Cosentino said he expects deposit growth to moderate in the second quarter due to some larger relationships moving out “through normal business cases.” He added that management expects to operate around a 90% loan-to-deposit ratio through the rest of the year and does not believe it needs to be “overly priced” on deposits to do so.

Fee income improves; mortgage and title contributions discussed

Non-interest income improved to $4.7 million, up from $4.1 million a year earlier and $3.7 million in the linked quarter, Klein said. He noted fee income represented 27% of total revenue, “slightly higher than the prior year and well ahead of the linked quarter.”

Cosentino said non-interest income increased about 14.7% year over year and 27% from the linked quarter, driven by higher mortgage loan servicing fees, stronger gains on sale of mortgage loans in OMSR, and improved gains on the sale of SBA loans. He said total mortgage banking contribution was $1.8 million, compared with $1.5 million in both the prior-year and linked quarters. He also noted the company’s hedging program “was in the money for the quarter” and helped offset disruption in rate markets.

Klein said mortgage originations totaled about $66 million, up from approximately $40 million in the first quarter of 2025 but down from about $72 million in the linked quarter. While he said volume was weaker than anticipated, he noted the pipeline stabilized around $35 million, and management anticipated roughly a 25% sequential increase in volume in the second quarter from the linked quarter.

In the Q&A, Cosentino said the company did “just shy of $30 million” in mortgage volume in March and expected “$90 million-ish” in the second quarter, with a similar pace possible in the third quarter if conditions hold. Klein said the company has been adding mortgage loan originators in several markets to support volume and household growth, noting hires in Cincinnati and Indianapolis and additional recruiting efforts.

Klein also said Peak Title “continued to perform well,” benefiting from internal referrals and traction with clients outside of the bank.

Expenses, capital actions, dividend, and credit quality

Non-interest expense totaled $11.9 million, Klein said, improving from the prior-year quarter but rising modestly from the linked quarter. Cosentino said operating expenses were down $500,000 year over year, reflecting the absence of one-time merger-related costs in the first quarter of 2025, and up $700,000 sequentially due to “normal quarterly expense variability.” The efficiency ratio was 68.1%, which Cosentino said was a meaningful improvement year over year.

On capital deployment, Cosentino said the company repurchased about 29,000 shares at an average price of $21.12. He said the company has guided lower on buybacks for 2026 as prices are at or near adjusted tangible book value and noted the potential call of subordinated debt in June could require a capital outlay. Klein said the company continues to monitor M&A opportunities, but nothing “transformative” was in progress.

Klein announced a quarterly dividend of $0.16 per share, which he said equates to an annualized yield of about 2.8% and represents roughly 25% of earnings.

Credit quality remained a key theme. Klein said non-performing assets totaled $4.8 million, or 0.3% of total assets, compared with $6.1 million, or 0.41%, in the year-ago quarter. He said delinquencies declined to 28 basis points. Cosentino added that a foreclosure on a large property elevated OREO while reducing non-performing loans by a similar amount, and he said management does not anticipate further write-downs from that relationship. The allowance for credit losses was 1.39% of total loans, and Cosentino said that excluding loans on non-accrual, the delinquency rate was “effectively zero.”

Looking ahead, Klein said the company remains focused on executing across its footprint, optimizing lending capacity, driving cross-sell activity for core deposits, and maintaining a balanced approach to risk as it works toward its longer-term goal of scaling the balance sheet toward $2 billion.

About SB Financial Group NASDAQ: SBFG

SB Financial Group, Inc NASDAQ: SBFG is the bank holding company for Star Financial Bank, a full-service community bank headquartered in Fort Wayne, Indiana. Through its wholly owned subsidiary, the company offers a broad portfolio of commercial and consumer banking products, including deposit accounts, lending solutions, mortgage origination and servicing, and cash management services.

In its commercial banking division, SB Financial Group provides working capital loans, equipment financing, commercial real estate lending and treasury management solutions designed for small- and mid-sized businesses.

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