SB FINANCIAL GROUP INC

Previous wording

Increase profitability through ongoing diversification of revenue streams: For the twelve months ended December 31, 2023, the Company generated $17.7 million in noninterest income, or 31.1 percent of total operating revenue, from fee-based products. These revenue sources include fees generated from saleable residential mortgage loans, retail deposit products, wealth management services, saleable business-based loans (small business and farm service) and title agency revenue. For the twelve months ended December 31, 2022, the Company generated $18.2 million in noninterest income, or 31.6 percent of total operating revenue from fee-based products.

Current wording

Increase profitability through ongoing diversification of revenue streams: For the twelve months ended December 31, 2024, the Company generated $17.0 million in noninterest income, or 29.9 percent of total operating revenue, from fee-based products. These revenue sources include fees generated from saleable residential mortgage loans, retail deposit products, wealth management services, saleable business-based loans (small business and farm service) and title agency revenue. For the twelve months ended December 31, 2023, the Company generated $17.7 million in noninterest income, or 31.1 percent of total operating revenue from fee-based products.

Previous wording

Strengthen our penetration in all markets served: Over our 119-year history of continuous operation in Northwest Ohio, we have established a significant presence in our traditional markets in Defiance, Fulton, Paulding and Williams counties in Ohio. In our newer markets of Bowling Green, Columbus, Findlay, Toledo (Ohio) and Ft. Wayne (Indiana), our current market penetration is minimal but we believe our potential for growth is significant. Over the past few years, we have expanded and committed additional resources to our presence in the Findlay and Edgerton markets in particular; however, we continue to seek to expand the presence and penetration in all of our markets.

Current wording

Strengthen our penetration in all markets served: Over our 122-year history of continuous operation in Northwest Ohio, we have established a significant presence in our traditional markets in Defiance, Fulton, Paulding and Williams counties in Ohio. In our newer markets of Bowling Green, Columbus, Findlay, Toledo (Ohio) and Ft. Wayne (Indiana), our current market penetration is minimal, but we believe our potential for growth is significant. Over the past few years, we have expanded and committed additional resources to our presence in the Findlay and Edgerton markets in particular; however, we continue to seek to expand the presence and penetration in all of our markets. On January 17, 2025, we established our presence in Ottawa County with the acquisition of The Marblehead Bank located in Marblehead, Ohio.

Previous wording

Expand product utilization by new and existing customers: As of December 31, 2023, we operated in 14 counties in Northwest Ohio, Central Ohio and Northeast Indiana with 23 full service offices, 23 ATM’s and six loan production offices. Combined in the 14 counties of operation, we command 4.4 percent of the deposit market share, which has steadily grown.

Current wording

Expand product utilization by new and existing customers: As of December 31, 2024, we operated in 14 counties in Northwest Ohio, Central Ohio and Northeast Indiana with 23 full-service offices, 23 ATM’s and seven loan production offices. Combined in the 14 counties of operation, we command 0.94 percent of the deposit market share, which has steadily grown. In our traditional markets of Northwest Ohio, the deposit market share is 4.40 percent.

Previous wording

Deliver gains in operational excellence: Our management team believes that becoming and remaining a high-performance financial services company will depend upon seamlessly and consistently delivering operational excellence, as demonstrated by the Company’s leadership in the origination and servicing of residential mortgage loans. As of December 31, 2023, the Company serviced 8,549 residential mortgage loans with an aggregate principal balance of $1.37 billion. As of December 31, 2022, the Company serviced 8,514 loans with an aggregate principal balance of $1.35 billion.

Current wording

Deliver gains in operational excellence: Our management team believes that becoming and remaining a high-performance financial services company will depend upon seamlessly and consistently delivering operational excellence, as demonstrated by the Company’s leadership in the origination and servicing of residential mortgage loans. As of December 31, 2024, the Company serviced 8,750 residential mortgage loans with an aggregate principal balance of $1.43 billion. As of December 31, 2023, the Company serviced 8,549 loans with an aggregate principal balance of $1.37 billion.

Previous wording

Sustain asset quality: As of December 31, 2023, the Company’s asset quality metrics remained strong. Specifically, total nonperforming assets were $3.3 million, or 0.25 percent of total assets. Total delinquent loans at December 31, 2023 were 0.15 percent of total loans. As of December 31, 2022, the Company had total nonperforming assets of $5.1 million, or 0.38 percent of total assets. Total delinquent loans at December 31, 2022 were 0.27 percent of total loans.

Current wording

Sustain asset quality: As of December 31, 2024, the Company’s asset quality metrics remained strong. Specifically, total nonperforming assets were $5.5 million, or 0.40 percent of total assets. Total delinquent loans at December 31, 2024 were 0.63 percent of total loans. As of December 31, 2023, the Company had total nonperforming assets of $3.3 million, or 0.25 percent of total assets. Total delinquent loans at December 31, 2023 were 0.15 percent of total loans.

Previous wording

The successful execution of these five strategies have enabled the Company to improve financial performance across a broad series of metrics. These metrics over the last five years are outlined in the following table. Specifically, the Company has increased total assets by $303.8 million, or 29.3 percent. The growth has been on both sides of the balance sheet over the five year period, with loans growing $174.7 million or 21.2 percent and deposits growing $230.0 million or 27.4 percent.

Current wording

The successful execution of these five strategies has enabled the Company to improve financial performance across a broad series of metrics. These metrics over the last five years are outlined in the following table. Specifically, the Company has increased total assets by $121.7 million, or 9.7 percent. The growth has been on both sides of the balance sheet over the five-year period, with loans growing $174.0 million or 19.9 percent and deposits growing $103.6 million or 9.9 percent.

Previous wording

During the prior five-year period, the Company has raised capital through the issuance of debt securities to the market, which has improved capital significantly and expanded liquidity for potential strategic expansion. Strategic expansion has also occurred during the period with the acquisition of a small community bank (The Edon State Bank of Edon, Ohio) in 2020, the opening of three branch offices and the acquisition of two full service title agencies.

Current wording

During the prior five-year period, the Company has raised capital through the issuance of debt securities to the market, which has improved capital significantly and expanded liquidity for potential strategic expansion. Strategic expansion has also occurred during the period with the acquisition of a small community bank (The Edon State Bank of Edon, Ohio) in 2020, the opening of three branch offices and the acquisition of two full-service title agencies. As detailed in Note 23, we closed on an acquisition of another small community bank in Marblehead, Ohio on January 17, 2025.

Previous wording

Total assets at December 31, 2023, were $1.343 billion, compared to $1.335 billion at December 31, 2022. Loans (excluding loans held for sale) were $1.000 billion at December 31, 2023, compared to $962.1 million at December 31, 2022. Total deposits were $1.070 billion at December 31, 2023, compared to $1.087 billion at December 31, 2022. As client balance sheets and liquidity was utilized in the economy, deposit levels moderated and assets were reallocated from cash and securities into loans.

Current wording

Total assets at December 31, 2024, were $1.38 billion, compared to $1.34 billion at December 31, 2023. Loans (excluding loans held for sale) were $1.05 billion at December 31, 2024, compared to $1.00 billion at December 31, 2023. Total deposits were $1.15 billion at December 31, 2024, compared to $1.07 billion at December 31, 2023. The Company continued to allocate the reductions in our bond portfolio, from scheduled amortization, into higher yielding loan balances.

Previous wording

Loans held for investment (“HFI”) increased $38.1 million, or 4.0 percent, to $1.0 billion at December 31, 2023, which was due to an increase in residential and commercial real estate lending during 2023. The Company booked a much higher portion of residential real estate production on the balance sheet as increases in rates moved customers to variable rate mortgage products.

Current wording

Loans held for investment (“HFI”) increased $46.5 million, or 4.7 percent, to $1.05 billion at December 31, 2024, which was due to an increase in commercial real estate lending during 2024. The Company allowed the residential real estate to amortize and minimal new production on the balance sheet was generated.

Previous wording

Concentrations of Credit Risk: The Company makes commercial, real estate and installment loans to customers located mainly in the Tri-State region of Ohio, Indiana and Michigan. Commercial loans include loans collateralized by commercial real estate, business assets and, in the case of agricultural loans, crops and farm equipment and the loans are expected to be repaid from cash flow from operations of businesses. As of December 31, 2023, commercial business and agricultural loans made up approximately 19.2 percent of the HFI loan portfolio while commercial real estate loans accounted for approximately 42.4 percent of the HFI loan portfolio. As of December 31, 2023, residential first mortgage loans, which are secured by first mortgages on residential real estate, made up approximately 31.8 percent of the HFI portfolio, while consumer loans to individuals, which are primarily secured by consumer assets, made up approximately 6.6 percent of the HFI loan portfolio.

Current wording

Concentrations of Credit Risk: The Company makes commercial, real estate and installment loans to customers located mainly in the Tri-State region of Ohio, Indiana and Michigan. Commercial loans include loans collateralized by commercial real estate, business assets and, in the case of agricultural loans, crops and farm equipment and the loans are expected to be repaid from cash flow from operations of businesses. As of December 31, 2024, commercial business and agricultural loans made up approximately 18.0 percent of the HFI loan portfolio while commercial real estate loans accounted for approximately 43.9 percent of the HFI loan portfolio. As of December 31, 2024, residential first mortgage loans, which are secured by first mortgages on residential real estate, made up approximately 30.0 percent of the HFI portfolio, while consumer loans to individuals, which are primarily secured by consumer assets, made up approximately 6.5 percent of the HFI loan portfolio.

Previous wording

Maturities and Sensitivities of Loans to Changes in Interest Rates: The following table shows the maturity distribution of loans outstanding as of December 31, 2023. The amounts have been categorized between loans with a fixed or floating interest rate (floating rate loans have an adjustable interest rate that changes in accordance to a rate index).

Current wording

Maturities and Sensitivities of Loans to Changes in Interest Rates: The following table shows the maturity distribution of loans outstanding as of December 31, 2024. The amounts have been categorized between loans with a fixed or floating interest rate (floating rate loans have an adjustable interest rate that changes based on a rate index).

Previous wording

Shareholders’ equity at December 31, 2023, was $124.3 million, or 9.3 percent of total assets compared to $118.4 million or 8.9 percent of total assets at December 31, 2022. Retained earnings increased during the year due to earnings of $12.1 million less dividends paid to common shareholders of $3.6 million and repurchases of Company common shares of $3.5 million. The fair market value of the bond portfolio improved slightly during 2023 due to the valuation adjustment on the portfolio, which resulted in accumulated other comprehensive income (“AOCI”) falling to $29.8 million from $32.1 million.

Current wording

Shareholders’ equity at December 31, 2024, was $127.5 million, or 9.2 percent of total assets compared to $124.3 million or 9.3 percent of total assets at December 31, 2023. Retained earnings increased during the year due to earnings of $11.5 million less dividends paid to common shareholders of $3.8 million and repurchases of Company common shares of $4.7 million. The fair market value of the bond portfolio declined slightly during 2024 due to the valuation adjustment on the portfolio, which resulted in accumulated other comprehensive loss (“AOCI”) rising to $30.2 million from $29.8 million.

Previous wording

The Company continued to repurchase its own common shares during the year under the Company’s repurchase program authorized by the Board of Directors on December 21, 2022. Specifically, the Company repurchased 244,325 shares during 2023 at an average price of $13.98 per share. As of December 31, 2023, the Company had 255,675 shares remaining of the 500,000 shares authorized for repurchase under the Company’s existing share repurchase program, which expires December 31, 2024.

Current wording

The Company continued to repurchase its own common shares during the year under the Company’s publicly announced share repurchase programs. Specifically, the Company repurchased 253,817 shares during 2024 at an average price of $18.43 per share. On December 18, 2024, the Company’s Board of Directors approved a share repurchase program authorizing the repurchase of 500,000 shares through December 31, 2026. As of December 31, 2024, the Company had repurchased a total of 17,460 shares, and 482,540 shares remained available for purchase, under this program. The December 18, 2024, share repurchase program replaced the Company’s prior repurchase program announced on December 21, 2022, under which an aggregate of 500,000 common shares of the Company were repurchased through December 2024.

Previous wording

Nonperforming assets totaled $3.3 million, or 0.25 percent of total assets at December 31, 2023, a decrease of $1.1 million, or 25.3 percent from 2022. The Company had total net charge-offs on loans of $92,000 in 2023, as compared to net recoveries of $13,000 in 2022. The Company’s ACL at December 31, 2023, now covers nonperforming loans at 560 percent, up from 319 percent at December 31, 2022.

Current wording

Nonperforming assets totaled $5.5 million, or 0.40 percent of total assets at December 31, 2024, an increase of $2.2 million, or 65.7 percent from 2023. The Company had total net charge-offs on loans of $250,000 in 2024, as compared to net charge-offs of $92,000 in 2023. The Company’s ACL at December 31, 2024, now covers nonperforming loans at 274 percent, down from 560 percent at December 31, 2023.

Previous wording

The Company has substantially increased its reserve level over the last several years. Specifically, the Company’s ACL balance has increased from $8.8 million at December 31, 2019 to $15.8 million at December 31, 2023, which reflects an increase of $7.0 million, or 80 percent. This increase was the result of $6.7 million in provision expense during the period and minimal charge-offs, which were just $0.8 million over the four-year period. The reserve increased during 2023 due to the one-time CECL adjustment of $1.4 million taken in January of 2023 upon the Company’s adoption of the CECL methodology.

Current wording

The Company has substantially increased its reserve level over the last several years. Specifically, the Company’s ACL balance has increased from $8.8 million at December 31, 2019 to $15.1 million at December 31, 2024, which reflects an increase of $6.3 million, or 72 percent. This increase was the result of $6.8 million in provision expense during the period and $1.0 million in net charge-offs over the five-year period. The reserve increased during 2023 due to the one-time CECL adjustment of $1.4 million taken in January of 2023 upon the Company’s adoption of the CECL methodology.

Previous wording

Net income for 2022 was $12.5 million, or $1.77 per diluted share, compared with net income of $18.3 million, or $2.56 per diluted share, for 2021. State Bank reported net income for 2022 of $13.4 million, which was down from the $18.6 million in net income in 2021. SBFG Title reported net income for 2022 of $0.4 million, which was down from net income of $0.5 million in 2021.

Current wording

Net income for 2024 was $11.5 million, or $1.72 per diluted share, compared with net income of $12.1 million, or $1.75 per diluted share, for 2023. State Bank reported net income for 2024 of $13.0 million, which was down slightly from the $13.3 million of net income in 2023. SBFG Title reported net income for 2024 of $0.36 million, which was up from net income of $0.24 million for 2023.

Previous wording

Net interest income was $39.3 million for 2023 and decreased slightly from net income of $39.4 million for 2022. Average earning assets increased slightly to $1.25 billion in 2023, compared to $1.23 billion in 2022, primarily due to the increase in our loan portfolio, partially offset by lower cash and securities. The consolidated 2023 full year net interest margin on an fully-taxable equivalent (“FTE”) basis decreased 6 basis points to 3.16 percent compared to 3.22 percent for the full year of 2022.

Current wording

Net interest income was $39.9 million for 2024 and increased slightly from net interest income of $39.3 million for 2023. Average earning assets increased slightly to $1.27 billion in 2024, compared to $1.25 billion in 2023, primarily due to the increase in our loan portfolio, partially offset by lower cash and securities. The consolidated 2024 full year net interest margin on a fully-taxable equivalent (“FTE”) basis was 3.16 percent compared to 3.16 percent for the full year of 2023.

Previous wording

Provision for credit losses was taken in 2023 in the amount of $0.32 million compared to zero provision taken during 2022. For 2023, net charge-offs totaled $0.1 million or 0.01 percent of average loans, compared to net recoveries of $0.01 million or (0.00) percent of average loans, for 2022.

Current wording

Provision for credit losses was taken in 2024 in the amount of $0.12 million compared to $0.32 million taken during 2023. For 2024, net charge-offs totaled $0.25 million or 0.02 percent of average loans, compared to net charge-offs of $0.01 million or 0.01 percent of average loans, for 2023.

Previous wording

Total noninterest income was $17.7 million for 2023 compared to $18.2 million for 2022, representing a decrease of $0.5 million, or 2.8 percent, year-over-year. Gains on sale of residential mortgage loans was down from 2022 by $0.7 million, or 16.0 percent. The Company sold $161.2 million of originated mortgages into the secondary market in 2023, which due to being slightly more than the amortization on the serviced portfolio, increased the size of our serviced loan portfolio to $1.367 billion at December 31, 2023 from $1.352 billion at December 31, 2022. Sales of non-mortgage loans (small business and farm credits) in 2023 was the same as in 2022 at $4.2 million. The Company saw its wealth management assets under management decline by $5.3 million to $501.8 million at December 31, 2023, with total wealth management fees declining $0.2 million to $3.5 million.

Current wording

Total noninterest income was $17.0 million for 2024 compared to $17.7 million for 2023, representing a decrease of $0.7 million, or 4.0 percent, year-over-year. Gains on sale of residential mortgage loans was up from 2023 by $0.96 million, or 26.5 percent. The Company sold $216.0 million of originated mortgages into the secondary market in 2024, which due to being higher than the amortization on the serviced portfolio, increased the size of our serviced loan portfolio to $1.428 billion at December 31, 2024 from $1.367 billion at December 31, 2023. Sales of non-mortgage loans (small business and farm credits) in 2024 was just $0.7 million. The Company saw its wealth management assets under management increase by $45.9 million to $547.7 million at December 31, 2024, with total wealth management fees of $3.5 million.

Previous wording

Total noninterest expense was $42.0 million for 2023 compared to $42.3 million for 2022, representing a $0.3 million, or 0.8 percent, decrease year-over-year. Total full-time equivalent employees ended 2023 at 251, which was down 17 from year end 2022.

Current wording

Total noninterest expense was $43.0 million for 2024 compared to $42.0 million for 2023, representing a $1.0 million, or 2.4 percent, increase year-over-year. Total full-time equivalent employees ended 2024 at 252, which was up 1 from year end 2023.

Previous wording

Liquidity relates primarily to the Company’s ability to fund loan demand, meet deposit customers’ withdrawal requirements and provide for operating expenses. Sources used to satisfy these needs consist of cash and due from banks, interest-bearing deposits in other financial institutions, securities available-for-sale, loans held for sale and borrowings from various sources. These assets, excluding the borrowings, are commonly referred to as liquid assets. Liquid assets were $246.7 million at December 31, 2023, which included pledged available-for-sale securities of $102.3 million, compared to liquid assets of $270.8 million at December 31, 2022.

Current wording

Liquidity relates primarily to the Company’s ability to fund loan demand, meet deposit customers’ withdrawal requirements and provide for operating expenses. Sources used to satisfy these needs consist of cash and due from banks, interest-bearing deposits in other financial institutions, securities available-for-sale, loans held for sale and borrowings from various sources. These assets, excluding the borrowings, are commonly referred to as liquid assets. Liquid assets were $235.9 million at December 31, 2024, which included pledged available-for-sale securities of $132.8 million, compared to liquid assets of $246.7 million at December 31, 2023.

Previous wording

The Company does not have material cash requirements for capital expenditures over the next year. Any cash needs for capital requirements would be funded by cash existing at the Company. It is not anticipated that the Company will be required to initiate external borrowings in order to fund ongoing operations.

Current wording

The Company does not have material cash requirements for capital expenditures over the next year. Any cash needs for capital requirements would be funded by cash existing at the Company.

Previous wording

The Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolio of $807.8 million at December 31, 2023, can and is readily used to collateralize borrowings, which is an additional source of liquidity. Management believes the Company’s current liquidity level, without these borrowings, is sufficient to meet its current and anticipated liquidity needs. At December 31, 2023, all eligible commercial real estate, residential first, multi-family mortgage and agricultural loans were pledged under a FHLB blanket lien.

Current wording

The Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolio of $852.6 million at December 31, 2024, can and is readily used to collateralize borrowings, which is an additional source of liquidity. Management believes the Company’s current liquidity level, without these borrowings, is sufficient to meet its current and anticipated liquidity needs. At December 31, 2024, all eligible commercial real estate, residential first, multi-family mortgage and agricultural loans were pledged under a FHLB blanket lien.

Previous wording

Significant additional off balance-sheet liquidity is available in the form of FHLB advances, unused federal funds lines from correspondent banks and the national certificate of deposit market. Management expects the risk of changes in off-balance-sheet arrangements to be immaterial to earnings. Based on the current collateralization requirements of the FHLB, approximately $81.9 million of additional borrowing capacity existed at December 31, 2023.

Current wording

Significant additional off balance-sheet liquidity is available in the form of FHLB advances, unused federal funds lines from correspondent banks and the national certificate of deposit market. Management expects the risk of changes in off-balance-sheet arrangements to be immaterial to earnings. Based on the current collateralization requirements of the FHLB, approximately $142.5 million of additional borrowing capacity existed at December 31, 2024.

Previous wording

At December 31, 2023 and 2022, the Company had $41.0 million and $56.0 million in federal funds lines available. The Company also had $105.5 million in unpledged securities at December 31, 2023 available for additional borrowings.

Current wording

At December 31, 2024 and 2023, the Company had $41.0 million in federal funds lines available. The Company also had $66.8 million in unpledged securities at December 31, 2024 available for additional borrowings.

Previous wording

The Company experienced positive cash flows from operating activities in 2023 and 2022. Net cash from operating activities was $14.0 million and $25.6 million for the years ended December 31, 2023 and 2022, respectively. Significant operating items for 2023 included gain on sale of loans of $4.0 million and net income of $12.1 million. Cash provided by the sale of loans held for sale were $161.2 million. Cash used in the origination of loans held for sale were $159.3 million.

Current wording

The Company experienced positive cash flows from operating activities in 2024 and 2023. Net cash from operating activities was $9.5 million and $14.0 million for the years ended December 31, 2024 and 2023, respectively. Significant operating items for 2024 included gain on sale of loans of $4.7 million and net income of $11.5 million. Cash provided by the sale of loans held for sale were $216.0 million. Cash used in the origination of loans held for sale were $217.8 million.

Previous wording

The Company experienced negative cash flows from investing activities in 2023 and 2022. Net cash used in investing activities was $17.4 million and $165.7 million for the years ended December 31, 2023 and 2022, respectively. A net increase in loans of $38.7 million was the primary change in 2023. The changes for 2022 include the purchase of available-for-sale securities of $50.6 million and net increase in loans of $139.7 million. The Company had proceeds from repayments, maturities, sales and calls of securities of $22.2 million and $35.9 million in 2023 and 2022, respectively.

Current wording

The Company experienced negative cash flows from investing activities in 2024 and 2023. Net cash used in investing activities was $28.9 million and $17.4 million for the years ended December 31, 2024 and 2023, respectively. A net increase in loans of $46.8 million was the primary change in 2024. The primary change for 2023 was a net increase in loans of $38.7 million. The Company had proceeds from repayments, maturities, sales and calls of securities of $18.8 million and $22.2 million in 2024 and 2023, respectively.

Previous wording

The Company experienced negative cash flows from financing activities in 2023 and positive cash flows in 2022. Net cash used in financing activities was $1.5 million and net cash provided by financing activities was $18.4 million for the years ended December 31, 2023 and 2022, respectively. Negative cash flows of $16.5 million and $26.4 million are attributable to the change in deposits for 2023 and 2022, respectively.

Current wording

The Company experienced positive cash flows from financing activities in 2024 and negative cash flows in 2023. Net cash provided by financing activities was $22.5 million and net cash used in financing activities was $1.5 million for the years ended December 31, 2024 and 2023, respectively. The increase in deposits of $82.4 million attributed to the positive cash flows in 2024 and the decrease in deposits of $16.5 million attributed to the negative cash flows in 2023.