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DEFIANCE, Ohio, July 23, 2019 /PRNewswire/ -- SB Financial Group, Inc. (NASDAQ: 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 second-quarter and six months ended June 30, 2019.
Second-quarter 2019 highlights over prior-year second quarter include:
Six months ended June 30, 2019, highlights over prior-year six months include:
Second-quarter 2019, trailing twelve-month highlights include:
"We delivered increased second-quarter net income compared to the prior-year quarter, when we adjust for the impairment to our mortgage servicing rights," said Mark A. Klein, Chairman, President and CEO of SB Financial. Our operating results included a very strong loan growth quarter, as we added over $32 million, and over the last 12 months, $61 million. Also, this quarter had a strong rebound in our mortgage origination volume of $98 million, increasing originations over the last 12 months to $324 million."
RESULTS OF OPERATIONS
Consolidated Revenue
Total operating revenue, consisting of net interest income and noninterest income, was down 1.2 percent from the second quarter of 2018, but up 10.4 percent from the linked quarter.
Funding costs, primarily from retail deposits have increased from the prior year and from the linked quarter. Deposit cost of funds for the most recent quarter of 1.01 percent are up from the prior year quarter of 0.59 percent. From the linked quarter, deposit cost of funds are up only six basis points from 0.95 percent.
Mortgage Loan Business
Mortgage loan originations for the second quarter of 2019 were $98.4 million, down $11.0 million, or 10.1 percent, from the year-ago quarter. Total sales of originated loans were $71.0 million, down $8.2 million, or 10.3 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 $1.2 million for the second quarter of 2019, compared to $2.3 million for the year-ago quarter. The mortgage servicing valuation adjustment for the second quarter of 2019 was a negative $0.7 million, compared to a negative adjustment of $0.02 million for the second quarter of 2018. The aggregate servicing valuation impairment ended the quarter at $1.6 million. The mortgage-servicing portfolio at June 30, 2019, was $1.11 billion, up $0.08 billion, or 8.0 percent, from $1.03 billion at June 30, 2018.
Mr. Klein noted, "Although our earnings were impacted by the $0.7 million impairment in the quarter and $1.4 million for all of 2019, we are encouraged by the strong mortgage quarter that included purchase volume of $91 million or 93 percent and refinance volume of $7 million or 7 percent. Our current pipeline exceeds $50 million and we continue to attract targeted clients."
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, title agency revenue and the sale of Small Business Administration (SBA) loans. SBA activity for the quarter consisted of total loan volume of $4.1 million and gains of $0.1 million. Wealth management assets under the Company's care stood at $479.4 million as of June 30, 2019. In the first full quarter of operation, the title agency business delivered revenue of $0.3 million. For the second quarter of 2019, noninterest income as a percentage of total revenue was 29.5 percent, with the YTD percentage at 33.9 percent when adjusted for the impairment.
For the second quarter of 2019, noninterest expense (NIE) of $9.1 million was up $0.5 million, or 6.2 percent, compared to the same quarter last year. Compared to the linked quarter, NIE was also up $0.5 million. Expense growth was the result of higher mortgage commissions, merit increases and the addition of a title agency. We continue to add resources of both technology and personnel in order to meet the expanded needs of our operations, information technology and risk management functions.
Balance Sheet
Total assets as of June 30, 2019, were $1.03 billion, up $84.3 million, or 8.9 percent, from a year ago. Total equity as of June 30, 2019, was $133.9 million, up 7.1 percent from a year ago, and comprised 13.0 percent of total assets.
Total loans held for investment were $814.5 million at June 30, 2019, up $61.2 million, or 8.1 percent, from June 30, 2018 and up $32.0 million or 16.4 percent annualized for the quarter. From the prior year, commercial loans were up $28.7 million, or 24.9 percent, with residential real estate rising $18.9 million, or 10.9 percent.
The investment portfolio of $89.9 million, including Federal Reserve Bank and Federal Home Loan Bank stock, represented 8.7 percent of assets at June 30, 2019. Deposit balances of $839.4 million at June 30, 2019, increased by $86.5 million, or 11.5 percent, since June 30, 2018. Growth from the prior year included $10.3 million in checking and $76.2 million in savings, money market and time deposit balances.
Mr. Klein stated, "Our balance sheet metrics improved this quarter with 16.4 percent annualized loan growth and $12 million in deposit growth. Compared to the prior year, deposit growth of 11.5 percent fully funded our 8.1 percent loan growth. Our asset quality metrics and coverage ratio remain in the top quartile of our peer group."
Asset Quality
SB Financial's nonperforming assets to total assets ratio of 0.43 percent continues to be in the top quartile of its 65-bank peer group. The coverage of problem loans by the loan loss allowance was at 212 percent at June 30, 2019, down from 264 percent at June 30, 2018.
Webcast and Conference Call
The Company will hold a related conference call and webcast on July 24, 2019, 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) 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 20 offices; 19 in nine Ohio counties and one in Fort Wayne, Indiana, and 25 full-service ATMs. State Bank has seven loan production offices located throughout the Tri-State region of Ohio, Indiana and Michigan. Peak Title provides title insurance and opinions throughout the Tri-State region. 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 2019, SB Financial was ranked #94 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.
Investor Contact Information: Anthony V. CosentinoExecutive Vice President and Chief Financial OfficerTony.Cosentino@YourStateBank.com
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SOURCE SB Financial Group, Inc.
