SB FINANCIAL GROUP, INC. (SBFG)·Q2 2025 Earnings Summary

Executive Summary

• SB Financial delivered a strong Q2 2025: GAAP diluted EPS $0.60 and adjusted EPS $0.58, up 27.7% and 26.1% year-over-year; operating revenue rose 22.3% to $17.2M, supported by 25.6% growth in net interest income and 15.1% in noninterest income .
• Versus S&P Global consensus, SBFG posted a beat on normalized EPS (actual $0.58 vs $0.54) and revenue (actual $16.42M vs $11.80M); estimate counts were thin (1 covering analyst), so magnitude should be interpreted cautiously* [GetEstimates].
• Management flagged tailwinds: net interest margin expanded to 3.48% (+36 bps YoY) with CFO guiding to ~3.70% in Q3; asset quality expected to improve with anticipated ~$1.5M decline in NPAs in Q3 .
• Balance sheet growth continued: loans +8.9% YoY (+$89.3M) and deposits +12.1% YoY (+$134.6M) with Marblehead low-cost deposits largely retained; TBV/share rose 7.7% YoY to $16.44 .
• Potential stock catalysts: continued margin expansion toward ~3.70%, resolution of NPAs, mortgage banking momentum (originations $97.9M; pipeline ~$34M), and Russell 2000 re-addition .

What Went Well and What Went Wrong

What Went Well

• Margin and earnings momentum: Net interest margin reached 3.48% (highest since Q4 2022), fueling EPS growth; CEO: “Net income…$3.9 million…GAAP DEPS of $0.60 up 27.7 percent…first full quarter of contribution from the Marblehead acquisition” .
• Diversified fee strength: Noninterest income rose 15.1% YoY to $5.0M, driven by mortgage gains and title revenue; mortgage banking net revenue $2.159M (best since Q1 2022), with gain-on-sale yield ~2.13% YTD 2025 .
• Growth and integration: Loans +$89.3M YoY; deposits +$134.6M YoY (incl. ~$51M from Marblehead) with near-100% retention six months post-close .

What Went Wrong

• Efficiency still elevated: Efficiency ratio improved to 68.9%, but expense growth (+11.1% YoY to $11.9M) reflects salary/benefits, data processing, and professional fees .
• Asset quality mixed: NPAs ticked up YoY to $6.2M (0.42% of assets); allowance coverage robust, but NPAs higher than prior year; provision rose to $597k .
• Linked-quarter deposit drawdown: Deposits declined $21.4M QoQ due to seasonal public fund distributions; management expects stability with treasury wins amid market disruption .

Financial Results

Segment breakdown – Loan balances ($USD Thousands)

Deposit breakdown ($USD Thousands)

KPIs – Mortgage and Asset Quality

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “Our solid second quarter performance reflects the first full quarter of contribution from the Marblehead acquisition which strengthened our liquidity position and further expanded our market presence in Northern Ohio.”
• CFO: “The gain on sale yield thus far in 2025 is 2.13%,…sale percentage of originations of nearly 83% is ideal for the profitability model we need in this business line.”
• CEO on margin and growth: “Net interest margin this quarter up 36 basis points to nearly 3.5%...Columbus…driving the bulk of our loan growth.”
• CFO on outlook: “We’re probably up another 10-ish basis points here in Q3 and it probably peaks out at…3.70%…If we can hold a 3.70% margin…that’s going to be a great day.”
• CEO on mortgage: “We could see that magical $400 [million] number and beyond…we’ve always contended we’re built for [~$500M].”

Q&A Highlights

• Mortgage outlook: Management sees full-year originations ≥$300M, with potential ~$400M if rates decline; strong production from Indianapolis and Cincinnati teams .
• Margin trajectory: CFO anticipates ~+10 bps QoQ NIM to ~3.70% in Q3, supported by loan repricing and deposit retention; funding pressure acknowledged longer-term .
• Loan pipeline: ~$40M undrawn construction to fund over next 12–18 months, baseline $10–$15M per quarter, alongside ongoing calling activity .
• Provision/credit: Expect NPA reduction of ~$1.5M in Q3; provision pace likely below H1 levels absent macro deterioration .
• Capital deployment: Q2 buybacks were “oversized” on value; plan to slow in Q3 to preserve flexibility for organic expansion and potential M&A .

Estimates Context

Values retrieved from S&P Global.*

Implications:

• Q2 2025 shows a beat on normalized EPS (+$0.04 vs consensus) and revenue (+$4.62M vs consensus); thin coverage warrants caution in extrapolating magnitude* [GetEstimates].

Key Takeaways for Investors

• Earnings quality improving: NIM expansion to 3.48% and guidance toward ~3.70% in Q3 points to continued net interest income growth .
• Mortgage momentum: Originations $97.9M and pipeline ~$34M suggest sustained fee tailwinds; gain-on-sale yields near historical norms .
• Asset quality trajectory: Robust coverage (265%) with expected ~$1.5M NPA decline in Q3 could temper provision needs and support EPS .
• Balance sheet growth: CRE and consumer drive loan mix; deposits broadly stable YoY with seasonal QoQ dynamics; liquidity ample (loan-to-deposit 87.6%) .
• Capital stance: Dividend increased; buybacks likely slower in Q3 to preserve optionality for organic growth and potential M&A .
• Execution focus: Efficiency ratio improved to 68.9%; continued cost discipline alongside revenue diversification (mortgage, title, wealth) .
• Near-term trading setup: Positive catalysts include NIM expansion and NPA resolution; monitor competitor pricing pressure and deposit betas as potential offsets .

Notes on Non-GAAP and Disclosures

• Adjusted EPS excludes OMSR valuation effects and merger costs; adjusted diluted EPS was $0.58 in Q2 (vs GAAP $0.60) .
• Non-GAAP reconciliations provided in the 8-K exhibit and press release .
• Company assets were $1.49B at Q2 2025; loans $1.09B; deposits $1.25B; TBV/share $16.44 .