SB Financial Group, Inc.

Good morning and welcome to the SB Financial second quarter 2026 conference call and webcast. I would like to inform you that this conference call is being recorded and that all participants are in a listen-only mode. We will begin with remarks by management and then open the conference up to the investment community for questions and answers. I will now turn the conference over to Sara Mikas with SB Financial. Please go ahead, Sara.

Thank you and good morning everyone. I'd like to remind you that this conference call is being broadcast live over the internet and will be archived and available on our website at ir.yourstatebank.com. Joining me today are Mark Klein, Chairman, President, and CEO, Tony Cosentino, Chief Financial Officer, and Steve Walz, Chief Lending Officer. Today's presentation may contain forward-looking information. cautionary statements about this information as well as reconciliations of non-GAAP financial measures are included in today's earnings release materials as well as our FCC filings. These materials are available on our website and we encourage participants to refer to them for a complete discussion of risk factors and forward-looking statements. These statements speak only as of the date made and SB Financial undertakes no obligation to update them. I will now turn the call over to Mr. Klein.

Thank you, Sarah, and good morning, everyone. Welcome to our second quarter 2026 conference call and webcast. The second quarter of 2026 represented a period of strong execution across our franchise, reflecting the consistency and resilience of our diversified revenue operating model. Our results reflected balanced performance across all business lines, supported by high quality organic loan growth, stable reoccurring and net interest income, expanded non-interest fee revenue, and disciplined expense management. This quarter also marked the 18th month milestone of the Marblehead acquisition, and we now view that transaction as a significant contributor to our funding base, expanding our presence in northern Ohio and driving overall franchise stability. Highlights for this quarter include net income at $4.5 million with diluted earnings per share of $0.72 compared to $0.60 diluted EPS reported in the prior year quarter. This now marks our 62nd consecutive quarter of operational profitability. tangible book value per share entered at 19.04, an increase of approximately 16% from the 1644 in the prior year quarter. When we screwed AOCI and adjusted tangible book, we're at 22.57. Net interest income expanded to 13 million, up 6.8% from the 12.1 million in the prior year quarter, driven by stable funding dynamics and expanding asset yields. Loan balance has reached $1.19 billion, reflecting an increase of approximately $95 million or 8.7% from the prior year quarter, a slight increase of $8.4 million from the linked quarter. This extends our trend of sequential loan growth to nine consecutive quarters. Total deposits climbed to $1.39 billion, an increase of $141 million, or just over 11% from the prior year quarter and up $19.3 million or 1.4% sequentially from the linked quarter. Non-interest income finished at $5 million, accounting for approximately 28% of our total operating revenue as we continue to maintain stable fee-based revenue streams. Non-interest expense run rate remained well controlled finishing the quarter at 12.1 million compared to 11.9 million for the prior year quarter. And asset quality remains a key characteristic of our company and a clear competitive advantage. Total non-performing assets declined to 4.4 million, representing just 0.27% of our total assets, a reduction of over 28% compared to the prior year. Our proactive approach to managing problem assets combined with our robust internal loan reviews has successfully driven down our overall non-occurring balances. We continue to remain focused on our five key strategic initiatives, as we have indicated in many prior quarters. That's growing and diversifying revenue, adding more scale to the organization to improve efficiency, expanding the number of households and services in those households, operational excellence, and, of course, asset quality. Let's look a little closer at the revenue diversity. Mortgage originations for the quarter rebounded strongly from the first quarter to $79.3 million, representing an increase of approximately 21% from the linked quarter, although production was down compared to the $97.9 million in the prior year period. The current residential pipeline has continued to stabilize at the $25 to $30 million level. Our teams continue to struggle with mortgage rates remaining well above the 6% mark, which we feel is critical in moving into a more balanced split between purchase and refinance. Although our mortgage volume has been below expectations, we have had a number of success stories from individual MLOs and from our regions. Specifically, our newest region, Cincinnati, has delivered nearly $20 million in volume during our first half of this year. higher by more than 50% from the same period in 2025. Individually, we have four MLOs that have eclipsed $10 million in volume. And additionally, six more originators are at the 50% level of their 2026 goal commitment. This quarter's volume growth represents a positive pivot from the volume constraints we witnessed throughout 2025 and the slow seasonal start we experienced from the first quarter of the year. throughout that lower volume cycle, we made the deliberate strategic decision to keep our core processing infrastructure and originator teams fully intact. That operational discipline continues to yield results today, providing us with the capacity to eventually capture expanded market volume without adding incremental overhead.