SB Financial Group, Inc. Q1 FY2026 earnings call

• First quarter represented a solid start for SB Financial with balance sheet performance across the franchise. - Marked first full anniversary of Marblehead acquisition, which is a solid contributor to funding base and franchise stability. - Net income $4.3 million, 61st consecutive quarter of profitability. - Loan balances increased, deposits grew, non-interest income improved. - Focus on five key strategic initiatives including growing and diversifying revenue, operational excellence, etc. - Mortgage originations, peak title performance, Marblehead acquisition's impact on funding and deposit growth, client relationship approach, operational excellence with expense management, strong capital levels, and sound asset quality.

Net income was $4.3 million with diluted EPS $0.69. Tangible book value per share ended the quarter at $18.45. Loan balances increased by approximately $92 million from the prior year quarter. Total deposits in the quarter were $1.37 billion, up over $100 million from the prior year. Non-interest income improved to $4.7 million. Non-performing assets totaled $4.8 million or 0.3% of total assets. Mortgage originations totaled approximately $66 million. Peak title continued to perform well. The Marblehead acquisition contributed to funding base and franchise stability. Loan-to-deposit ratio at quarter end was 86%.

• Anticipate approximately 25% increase in mortgage volume for the second quarter sequentially from the linked quarter. - Guided lower on buyback for 2026 as prices are at or near adjusted tangible book values. - Expecting to repeat second quarter mortgage volume in third quarter if things stay as they are. - Hopeful on expense side with efficiencies and conversion to Fiserv being a net zero in 2026 but a bit of a headwind in 2027. - Continues to look at M&A opportunities in the region.

• Potential impact of geopolitical risks on ag portfolio not yet seen but noted. - Competition in deposit pricing and loan growth. - Concerns about sub-debt call potentially impacting capital outlay and buyback posture. - Market disruption could end, which has been beneficial but not over yet. - Need to be cautious with credit risk and not take undue risks.

Q: Brian Martin asks about loan growth outlook, especially in newer markets like Angola, Napoleon, and Gahanna, and pipeline.

A: Angola and Napoleon have great potential with solid staff, Angola on verge of positive P&L, Napoleon due to market disruption. Gahanna likely to become full-service office by end of year. Pipeline has decent growth with focus on expanding breadth.

Q: Brian asks about margin, liquidity, and deposit competition.

A: Margin down 5 basis points from link quarter due to liquidity, expecting margin to move up a few basis points in second quarter. Deposit costs trending higher but market disruption impact may change.

Q: Brian asks about mortgage outlook.

A: Hopeful on mortgage volume with hired high-producing MLOs, pipeline at $35 million, expecting $90-ish million in second quarter and repetition in third quarter.

Q: Brian asks about expenses.

A: Run rate in good shape with operational efficiencies, technology spend rearview mirror, conversion to Fiserv to be net zero in 2026 but headwind in 2027.

Q: Brian asks about capital deployment.

A: Buyback lower due to price near adjusted tangible book value, sub-debt in June to consider, looking at M&A opportunities.

Q: Brian asks about credit risk.

A: Credit quality stable, clients' balance sheets liquid, personal guarantees, good projects, but precautious on risk taken.

Q: Brian asks about deposit growth.

A: Expecting down quarter in second quarter on deposit side, likely to be at 90% loan to deposit ratio, market disruption has been beneficial for garnering relationships.