SB Financial Group (NASDAQ:SBFG) management said fourth quarter and full-year 2025 results reflected continued execution across the franchise, with CEO Mark Klein calling it “one of the strongest earnings quarters and year in our history” despite ongoing pressure on mortgage activity across the industry.
Quarterly and full-year performance
For the fourth quarter, the company reported net income of $3.9 million and diluted earnings per share (EPS) of $0.63, up $0.08, or about 15%, from the prior-year quarter. Klein said recapture-adjusted EPS was $0.65, marking the company’s 60th consecutive quarter of profitability.
Net interest income growth and margin outlook
Net interest income for the quarter totaled $12.7 million, up nearly 17% from $10.9 million in the fourth quarter of 2024. From the prior quarter, net interest income increased 3.1%. For the full year, net interest income rose to $48.4 million, up $8.5 million, or 21%, with management attributing the increase roughly evenly to a larger balance sheet and wider margins.
CFO Tony Cosentino said total operating revenue in the fourth quarter rose to $16.4 million, up 6.3% year over year, and down 1% from the linked quarter, with net interest income the primary driver. He said loan yields were 5.94%, consistent with the prior quarter and up 19 basis points year over year, while the yield on earning assets improved 17 basis points to 5.32%.
On funding costs, Cosentino said total interest expense for the quarter was $6.6 million, up $610,000 from the prior-year period, and that the average rate on interest-bearing liabilities was 2.34%. He said funding costs benefited from core deposit growth and a favorable deposit mix shift, while noting costs could trend higher over time as rate dynamics evolve.
In response to an analyst question on margin, Cosentino said the company ended the quarter with net interest margin (NIM) around 3.51% and is forecasting a gradual decline in 2026 of about 5 to 7 basis points, driven by a higher funding cost mix and anticipated deposit pricing pressure. He also said the company had approximately $125 million to $140 million of loans contractually slated to reprice in the first nine months of 2026. Management added that new loan production has generally been priced at or above targeted margin levels, though competition remains stiff.
Loan and deposit growth; liquidity position
Klein said fourth-quarter loan growth was $70 million, or 25% annualized, and full-year loan growth was $133.9 million, or 12.8% year over year. He said this marked seven consecutive quarters of sequential loan growth and noted meaningful commercial lending activity “in and around the Greater Columbus market” of more than $73 million during the year, alongside contributions from a new agricultural lender in northern Ohio.
Total deposits increased $45 million in the quarter (14% annualized) and nearly $155 million year over year (13%). Klein said deposit growth included $47 million tied to the Marblehead acquisition, and that excluding acquired balances, deposits grew 9.3% versus the prior year. He said deposit balances and client relationships at Marblehead remained stable, with retention trends in line with expectations.
Cosentino said the loan-to-deposit ratio was 90.3%, remaining within the company’s targeted 90% to 95% operating range. He also said contingent liquidity was strong at more than $550 million, and management noted the balance sheet held about $50 million in excess liquidity and had access to $160 million in outstanding debt capacity.
Mortgage, fee income trends, and business line updates
Mortgage originations in the quarter were $72.4 million, down from the prior-year period but higher than the linked quarter, and Klein cited a pipeline in the $25 million to $30 million range. For the full year, management said annual mortgage volume was $278 million, about 28% below budget but more than 8% higher than the prior year; loan sales volume exceeded 2024 by nearly $34 million, or 16%. Klein said 73% of annual volume was purchase activity, 6% construction, and 20% refinance, and noted fourth-quarter originations included more than 42% refinance volume due to “a window of several rate reductions.”
Non-interest income was $3.7 million in the quarter, down 18.6% from the prior-year quarter and down 12.6% from the linked quarter. Cosentino said the decline reflected a negative contribution from other non-interest income driven by an OMSR impairment, while “core fee-based revenues remained relatively stable.” For the full year, non-interest income was about $17.1 million, “right at recent years’ levels,” according to Klein.
Management highlighted performance at Peak Title, saying the business increased full-year revenue by $413,000 to $2 million (up 25%) and expanded net income by $219,000 to $583,000 (up 60%). Klein also discussed wealth management initiatives tied to a partnership with Advisory Alpha, describing plans to bring additional professionals and capabilities to the company’s markets beginning in 2026.
Expenses, capital management, and asset quality
Operating expenses declined about 2.3% from the linked quarter and were up slightly from the prior year. Klein said full-year expense growth excluding one-time merger costs was 7.7%, compared with 15.1% full-year revenue growth, which he characterized as “core operating leverage of 2x.” In the Q&A, Cosentino said the company expects expense growth to be “pretty well maintained” around 3.5% to 4% in 2026 and still deliver positive operating leverage of roughly 1.5 to 2 times. Klein said he has challenged management to further improve the expense lever and discussed an internal goal of driving net income toward $15 million for 2026.
On capital actions, Cosentino said the company repurchased nearly 32,000 shares in the fourth quarter at an average price just under $21. For the full year, he said SB Financial repurchased a little over 283,000 shares for $5.5 million, using about 40% of earnings, at an average price just over $19 per share. Klein also said the company announced a dividend of $0.155 per share, equating to about a 2.8% yield and roughly 25% of earnings, which he said would mark the 13th consecutive year of increasing the annual dividend payout.
Asset quality metrics improved during the quarter, according to management. Klein said non-performing loans declined to 0.39% of total loans, and non-performing assets totaled $4.7 million. He cited criticized and classified loans of $5.7 million, down from $5.8 million in the linked quarter and $6.4 million a year earlier. The allowance for credit losses was 1.36% of total loans, providing 352% coverage of non-performing assets, and management said it expects to make additional progress reducing non-performing loans in the first half of 2026 with workout plans that should result in “minimal losses.”
Cosentino said total delinquencies increased 4 basis points sequentially to 49 basis points, while total delinquent loans decreased $1.6 million from the prior year. He added that the allowance for credit losses increased about $171,000 during the quarter due to loan growth and mix changes, though the allowance as a percentage of total loans declined 8 basis points as loan growth outpaced reserve builds.
Looking ahead, management emphasized continued focus on deposits, disciplined lending, and cross-selling across its footprint, while citing a healthy loan pipeline and ongoing opportunities tied to market consolidation and expansion efforts in markets including Columbus, Marblehead, Napoleon (Ohio), Angola (Indiana), and Fort Wayne (Indiana).
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.
