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SB FINANCIAL GROUP, INC. (SBFG)·Q3 2025 Earnings Summary

Executive Summary

  • SB Financial delivered a clean beat in Q3: operating revenue of $16.578M rose 15.9% YoY and topped S&P Global consensus by ~35% (consensus $12.300M*), while Primary EPS of $0.68 exceeded $0.62 consensus*; GAAP diluted EPS was $0.64 .
    Estimates: S&P Global (Street) consensus; values marked with * sourced from S&P Global.
  • Net interest margin held at 3.48% (up 32 bps YoY) with net interest income up 21.1% YoY; fee income was stable at $4.244M, though down sequentially on a larger MSR impairment .
  • Credit remained a strength: NPAs fell to 0.32% of assets from 0.41% in Q2 and 0.40% a year ago; ACL/loans at 1.44% with 345% NPL coverage; net charge-offs were ~0% annualized .
  • Management guided to Q4 expenses ~$11.5M, Q4 loan growth similar to Q3 (+$15–$20M), 2026 loan growth of $80–$100M, and NIM around 3.5% through 2026 amid rising deposit competition; quarterly dividend raised to $0.155 .
  • Stock setup: beats on both EPS and revenue, improving asset quality, and a dividend lift are positive catalysts; watch for 2026 funding cost pressure and CRE concentration in Columbus as key debate points .

What Went Well and What Went Wrong

  • What Went Well

    • Broad beat: Primary EPS $0.68 vs $0.62 consensus* and revenue $16.578M vs $12.300M consensus*; GAAP EPS $0.64 up 83% YoY .
      Estimates: S&P Global.
    • Balance sheet growth with stable NIM: loans +7.8% YoY to $1.111B and deposits +8.9% YoY to $1.263B; NIM steady at 3.48% QoQ and +32 bps YoY .
    • Credit improvement: NPAs down to 0.32% of assets; mgmt targeting ~0.25% in coming quarters; six straight quarters of sequential loan growth; “59th consecutive quarter of profitability” .

  • What Went Wrong

    • Sequential revenue dip: operating revenue fell 3.5% QoQ as mortgage banking revenue decreased from Q2 ($1.486M vs $2.159M), driven by a larger negative MSR mark (-$301k) .
    • Expense ratio ticked up: efficiency ratio 69.0% vs 68.9% in Q2 (still improved YoY); noninterest expense up 4.5% YoY on salaries, equipment, and professional fees .
    • Funding competition ahead: CFO flagged Q3 as likely NIM peak and warned of rising deposit competition into early 2026; excess liquidity deployment constrained by funding cost outlook .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Operating Revenue ($USD Millions)$14.309 $17.176 $16.578
Diluted EPS (GAAP)$0.35 $0.60 $0.64
Diluted EPS (Adjusted)$0.41 $0.58 $0.68
Net Interest Income ($USD Millions)$10.186 $12.128 $12.334
Noninterest Income ($USD Millions)$4.123 $5.048 $4.244
Provision for Credit Losses ($USD Millions)$0.200 $0.597 $0.124
Net Interest Margin (%)3.16% 3.48% 3.48%
Efficiency Ratio (%)76.78% 68.90% 69.00%
ROAA (%)0.68% 1.03% 1.07%
Loans, End of Period ($USD Billions)$1.030 $1.095 $1.111
Deposits, End of Period ($USD Billions)$1.160 $1.250 $1.263
Nonperforming Assets / Total Assets (%)0.40% 0.41% 0.32%

Revenue Mix and Fee Detail

MetricQ3 2024Q2 2025Q3 2025
Net Interest Income ($USD Millions)$10.186 $12.128 $12.334
Noninterest Income ($USD Millions)$4.123 $5.048 $4.244
Noninterest Income / Total Revenue (%)28.8% 29.4% 25.6%

Key Operating KPIs

KPIQ3 2024Q2 2025Q3 2025
Mortgage Originations ($USD Millions)$70.715 $97.901 $67.609
Mortgage Banking Rev., net ($USD Millions)$1.350 $2.159 $1.486
OMSR Valuation Adjustment ($USD Millions)-$0.465 $0.159 -$0.301
Mortgage Servicing Portfolio ($USD Millions)$1,406.273 $1,456.374 $1,470.360
Net Charge-offs / Avg Loans (ann.)0.01% 0.02% 0.00%
ACL / Total Loans (%)1.48% 1.43% 1.44%

Estimates vs. Actual (S&P Global)

MetricConsensusActualSurprise
EPS (Primary, $)$0.62*$0.68 (Primary); GAAP diluted: $0.64 +$0.06 (Primary); +$0.02 vs GAAP*
Revenue ($USD Millions)$12.300*$16.578 +$4.278*

Values retrieved from S&P Global.
Note: S&P “Primary EPS” actual for Q3 2025 aligns with the company’s adjusted diluted EPS ($0.68), while GAAP diluted EPS was $0.64 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin2026Not disclosedExpect ~3.5% NIM to hold through 2026; Q3 likely margin peak amid rising funding competition New qualitative outlook
Noninterest ExpenseQ4 2025Not disclosed~$11.5M total NIE in Q4 New detail
Loan GrowthQ4 2025Not disclosedSimilar to Q3: +$15–$20M expected New detail
Loan GrowthFY 2026Not disclosed+$80–$100M; ~40% funded by existing commitments New detail
Mortgage OriginationsQ4 2025Not disclosed~$80M in Q4, +~15% QoQ New detail
Mortgage OriginationsFY 2026Not disclosed$320–$350M baseline; “outside chance” to ~$400M (“four handle”) New detail
DividendQ4 2025 payout$0.150 prior quarter Raised to $0.155 per share, ~24% payout ratio Raised
Capital Returns2025–2026Opportunistic buybacks ongoing Expect slower buybacks to preserve optionality for M&A Lower pace
Credit ReservesNext ~12 monthsNot disclosedReserve likely at high end; ~$16M next year as loans grow; coverage >400% if NPAs fall to ~0.25% New qualitative outlook

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025, Q2 2025)Current Period (Q3 2025)Trend
Net Interest Margin & FundingNIM expanded to 3.40% in Q1; to 3.48% in Q2; funding costs stable NIM 3.48% (likely peak); deposit competition expected to intensify into early 2026 Stable at peak; caution on funding
Loan Growth & MixFourth/fifth straight sequential growth; CRE in Columbus a driver Sixth straight quarter; YoY +7.8%; CRE <50% of loans; Columbus ~40% balances Positive growth; monitor CRE mix
Deposits & LiquidityDeposits +14% YoY in Q1/Q2; Marblehead low-cost deposits added Deposits +8.9% YoY; 2,500 Marblehead accounts at ~1.2% avg cost; $50–$75M excess liquidity Solid base; plan to deploy liquidity
Mortgage BankingQ1 subdued; Q2 stronger with positive MSR mark Q3 revenue down QoQ; pipeline improving with sub-6% 30-year; Q4 ~$80M outlook Near-term recovery potential
Asset QualityNPAs ~0.41% Q1/Q2; robust coverage NPAs improved to 0.32%; target ~0.25%; net charge-offs ~0% Improving
M&A/IntegrationClosed Marblehead in Q1; first full quarter contribution in Q2 Integration completed; low-cost deposits retained; preparing Napoleon, OH entry Positive integration; expansion
Capital ReturnsQ1: repurchased ~26k shares; Q2: ~124k Q3: ~101k repurchased; dividend increased; buybacks to slow for M&A optionality Balanced, shifting to optionality

Management Commentary

  • CEO Mark Klein: “Net income for the third quarter was $4.0 million… GAAP DEPS of $0.64 up 82.9% from the prior year… second full quarter of contribution from the Marblehead acquisition” .
  • On revenue and discipline: “We remain focused on executing a balanced growth strategy, maintaining diversified sources of revenue, and exercising disciplined expense management” .
  • On asset quality: “We were especially pleased with the improvement in non-performing loans… We remain focused on maintaining conservative credit practices while supporting prudent growth” .
  • CFO Tony Cosentino: “We believe that this quarter will likely represent the low point on funding costs, as well as the peak in our net interest margin of 3.48%… funding costs will likely rise to offset margin appreciation” .
  • On forward drivers: “Anticipated further reductions by the Federal Reserve, potentially expanding mortgage volume… should provide the tailwind we expect” .

Q&A Highlights

  • Loan growth pipeline and hiring: New seasoned agricultural and market lenders expected to support growth; Q4 loan growth seen at +$15–$20M; 2026 +$80–$100M with ~40% from existing commitments .
  • NIM and funding: Management sees 3.5% as sustainable through 2026, but expects deposit competition to intensify in early 2026; cautious on deploying $50–$75M overnight liquidity while competition rises .
  • Credit reserves: Allowance likely remains at high end; potential improvement in NPAs by another 5–10 bps; reserve dollars could be ~$16M next year as balances grow .
  • Expense outlook: Q4 NIE guided to ~$11.5M; 2026 expense growth targeted at ~3–4% with hybrid branch strategy efficiencies .
  • Mortgage outlook: Q4 originations ~$80M; 2026 baseline $320–$350M with “outside chance” to ~$400M if rates sustain sub-6% .
  • Capital allocation: Dividend raised to $0.155; buybacks likely slower to preserve capital for potential transactions .

Estimates Context

  • Q3 2025 beat on both lines versus S&P Global consensus: Primary EPS $0.68 vs $0.62* and revenue $16.578M vs $12.300M*; GAAP diluted EPS was $0.64 .
  • Street models may move higher given stronger-than-expected net interest income, stable NIM, and improved credit; watch for potential 2026 NIM headwinds as funding costs rise, which could temper outer-year revisions .
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Quality beat with improving credit: Strong revenue/EPS surprise, NPA ratio down to 0.32%, and near-zero net charge-offs bolster the quality of earnings .
  • NIM likely at/near peak: 3.48% margin should be sustainable near-term, but deposit competition into 2026 is the key risk to model assumptions .
  • Loan growth cadence intact: Management guided Q4 growth similar to Q3 and high single-digit trajectory into 2026; monitor Columbus CRE concentration and new market expansions (Napoleon, ag lending) .
  • Mortgage lever to falling rates: Sequentially softer Q3 mortgage revenue sets up for Q4 rebound; sustained sub-6% rates could push 2026 toward the high end of originations .
  • Capital return and flexibility: Dividend increased; buybacks remain opportunistic but may slow to retain M&A optionality—supportive of medium-term franchise growth .
  • Watch the cost line: Q4 expense guide of ~$11.5M and 2026 growth of ~3–4% offer visibility; execution on hybrid branch model could further aid efficiency .
  • Valuation catalysts: Continued beats, dividend growth, and visible credit improvement versus peers could support multiple expansion; funding cost dynamics are the swing factor for 2026 NIM .
Notes on sources:
- Company results, KPIs, balance sheet and credit data from Q3 2025 8-K/press release exhibits **[767405_0001213900-25-106163_ea026397301ex99-1_sbfin.htm:0]** **[767405_0001213900-25-106163_ea026397301ex99-1_sbfin.htm:1]** **[767405_0001213900-25-106163_ea026397301ex99-1_sbfin.htm:2]** **[767405_0001213900-25-106163_ea026397301ex99-1_sbfin.htm:3]** **[767405_0001213900-25-106163_ea026397301ex99-1_sbfin.htm:4]** **[767405_0001213900-25-106163_ea026397301ex99-1_sbfin.htm:6]** **[767405_0001213900-25-106163_ea026397301ex99-1_sbfin.htm:7]** **[767405_0001213900-25-106163_ea026397301ex99-1_sbfin.htm:8]** **[767405_0001213900-25-106163_ea026397301ex99-1_sbfin.htm:9]** and the 10/30 press release **[767405_0c3966d93277452d958b4896690ecdf3_0]**-**[767405_0c3966d93277452d958b4896690ecdf3_6]**, Q2 press release **[767405_44eaf8e65d374094a44af9ec9e0f8347_0]**-**[767405_44eaf8e65d374094a44af9ec9e0f8347_6]**, Q1 press release **[767405_3ddbb0ddaae74ef4b101edf787b70706_0]**-**[767405_3ddbb0ddaae74ef4b101edf787b70706_5]**.
- Management commentary and guidance from Q3 2025 earnings call transcript **[0000767405_2221610_1]**-**[0000767405_2221610_12]**.
- Street consensus estimates from S&P Global via GetEstimates (values marked with *).