SB Financial Group Inc. (SBFG) reported robust financial results for the fourth quarter of 2024, significantly surpassing analysts' expectations. The company posted an earnings per share (EPS) of $0.52, compared to the forecasted $0.36, and achieved revenue of $15.45 million against a projected $9.8 million. Following the earnings announcement, the stock rose 3.86% in after-hours trading, reflecting investor optimism.
Key Takeaways
- SB Financial's Q4 EPS of $0.52 exceeded forecasts by 44%.
- Revenue for the quarter was $15.45 million, outpacing expectations by 57.6%.
- The stock price increased by 3.86% post-earnings announcement.
- The company reported a 13.7% increase in net interest income year-over-year.
- SB Financial completed the acquisition of Marblehead Bancorp, enhancing its market position.
Company Performance
SB Financial demonstrated strong performance in the fourth quarter of 2024, with significant improvements in both EPS and revenue. This growth is attributed to a 13.7% year-over-year increase in net interest income and a strategic acquisition that expanded its market presence. The company's focus on loan growth and mortgage originations has positioned it well against competitors in the financial sector.
Financial Highlights
- Revenue: $15.45 million, up from $9.8 million forecasted
- Earnings per share: $0.52, exceeding the forecast of $0.36
- Net Interest Income: $10.9 million, a 13.7% increase from Q4 2023
- Loan Growth: $46.5 million, a 4.7% increase
- Book Value per Share: $16, a 7% increase
Earnings vs. Forecast
SB Financial's Q4 2024 results significantly exceeded market expectations, with an EPS surprise of 44% and a revenue beat of 57.6%. This performance marks a notable improvement compared to previous quarters, highlighting the company's effective growth strategies and operational efficiencies.
Market Reaction
Following the earnings announcement, SB Financial's stock experienced a 3.86% increase in after-hours trading, closing at $21.55. This positive movement reflects investor confidence in the company's financial health and future prospects. The stock is trading closer to its 52-week high of $23, indicating strong market sentiment.
Outlook & Guidance
Looking ahead, SB Financial is targeting $400 million in mortgage originations for 2025 and anticipates loan growth returning to high single digits. The company expects net interest margin expansion to 3.50-3.55% by the end of 2025, with the Marblehead acquisition projected to add $0.15-$0.25 to EPS.
Executive Commentary
CEO Mark Klein emphasized the company's strategic focus: "We're looking for something near the $400,000,000 mark in 2025." He also highlighted the importance of deposit management, stating, "We're going to go on offense... if the deposits are below the margin, we're going to find it." CFO Tony Cosentino addressed expense management, noting, "Expenses rose faster than revenue and we have got to get back to operating leverage of 1.2 to 1.5 times."
Q&A
During the earnings call, analysts inquired about SB Financial's mortgage market expansion plans in Cincinnati and Indiana, strategies for loan growth, and measures to address credit quality. The company outlined its focus on commercial and C&I loans and its commitment to resolving non-performing loans.
Risks and Challenges
- Market Competition: Increased competition in the mortgage sector could impact growth.
- Economic Conditions: Fluctuations in interest rates and economic uncertainty may affect financial performance.
- Regulatory Changes: Potential regulatory changes could pose compliance challenges.
- Credit Risk: Managing credit quality and non-performing loans remains a priority.
- Operational Costs: Controlling rising operational expenses is crucial for maintaining profitability.
Full transcript - SB Financial Group Inc (SBFG) Q4 2024:
Conference Operator: Good morning, and welcome to the SB Financial 4th Quarter 2024 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 Sarah Mekas with SB Financial. Please go ahead, Sarah.
Sarah Mekas, Investor Relations, SB Financial: 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 Wall, 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 SEC filings. These materials are also 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.
Mark Klein, Chairman, President and CEO, SB Financial: Thank you, Sarah, and good morning, everyone. Welcome to our Q4 2024 conference call and webcast. 2024 was definitely a year of expansion, one of some resilience and disciplined execution of our company. Despite a challenging economic environment marked by rising funding costs and evolving market dynamics, we delivered solid results underscoring the strength of our diversified revenue business model and our commitment to our key strategic initiatives. Let me begin by highlighting some of our key achievements for the quarter and for the full year.
However, before I begin, I would like to congratulate the SB Financial and Marblehead teams on successfully closing on the acquisition of the Marblehead Bank that was achieved this past Friday. We look forward to a very productive 2025 where we can provide the Marblehead clients and employees with all that State Bank team and our business lines have to offer. Highlights for the quarter include net income of $3,600,000 with diluted EPS of $0.55 which is down slightly compared to the prior year. However, when we adjust for the servicing rights impairment and the vis a vis share sale in 2023, EPS would be up $0.07 over the prior quarter or 16.7%. Canva book value per share ended the quarter at $16 up from 14.98 dollars or a 7% increase.
Net interest income totaled $10,900,000 an increase of 13.7% from the $9,600,000 in the Q4 of 2023. From the linked quarter, margin revenue accelerated at a 28% annualized pace. Loan growth for the full quarter was $46,500,000 up 4.7% and this quarter marked the 3rd consecutive quarter of sequential loan growth. Our Columbus (WA:CLC) region led by our newer regional President Adam Gressel delivered the bulk of that growth or $57,000,000 and ironically 113% of our net growth. Deposits were stable to the linked quarter and were up over $82,000,000 to $1,150,000,000 Growth in our deposit base was consistent with 80% of our offices reporting higher deposit levels as compared to the prior year.
This growth demonstrates the benefit of our relationship driven approach and our ability to attract and retain clients in a highly competitive rate environment. Mortgage originations for the quarter were $73,000,000 and for the year we originated $261,000,000 Northwest Ohio area $74,000,000 our Indiana market $70,000,000 Columbus $114,000,000 and our new Cincinnati market $3,000,000 a $261,000,000 growth, while still arguably well below our capacity, was an increase over 2023 by $45,000,000 or 21%, as the second half of twenty twenty four delivered over 55% of our total 2024 volume. The servicing portfolio improved to $1,430,000,000 which was up from both the prior year by 4.4% and the linked quarter by 6%. Operating expenses were flat to the linked quarter and up 6.1% compared to the Q4 of 2023. And finally, while charge offs levels were slightly elevated in the quarter of 7 basis points, our remaining asset quality metrics were consistent with prior quarter.
Our strategic path forward remains hinged on those 5 key strategic initiatives we mentioned in prior quarters. That's growing and diversifying revenue, more scale for efficiency, more scope for more households, more services in those households, certainly operational activity and finally asset quality. Looking closer at revenue diversity, the mortgage business line ended 2024 on a relatively high note delivering volume as I mentioned to $73,000,000 higher than the linked quarter and up substantially from the prior year. Most importantly, as I mentioned, we were able to deliver 21% higher volume than 2023 in what was still a fairly tough year for this business line. Strategically in 2024, we achieved several milestones with our Indiana team nearly becoming our 2nd highest volume region in just 5 years and are well on their way to delivering a $100,000,000 year in 2025.
And our newest region of Cincinnati was able to generate 12 loans or $2,600,000 in volume in just a very few short months. We expect to add originators in that market and generate substantial volume in 2025. Non interest income was up slightly from the linked quarter at $4,600,000 and when we adjust the prior year for the sale of our vis a vis shares, year over year increase was $479,000 or 11.8%. The wealth and title businesses have improved throughout 2024 as they've been the beneficiary of our internal referral process. We've seen commercial title revenues supplant the reduced residential volume and allow peak title to remain flat to the prior year as residential volume reflected stress.
Likewise, positive results from our brokerage business, which relies a great deal on client and internal referrals, delivered an increase in brokerage revenue of over 73% compared to the prior year. Let's go to scale. A key highlight for the year was the successful acquisition as I mentioned the Marblehead Bancorp that we completed January 17. This all cash acquisition expands our presence into Ottawa County, Ohio, strengthening our market positioning in a higher growth area while creating new opportunities to deepen Marblehead's existing client relationships and deliver a more diverse palette of tailored financial solutions for their existing and new clients. This milestone reflects our deep commitment to serving our growing customer base and driving long term shareholder value.
I'm proud of our team as we were able to close in this transaction very quickly given the execution of the merger agreement in just August. Again, as I indicated earlier, deposits from the linked quarter were stable and were up substantially from the prior year by over $82,000,000 Our ability this past year to quickly pivot and expand our client deposit relationships via the State of Ohio Homebuyer Plus program was certainly meaningful to our results. We anticipate 2025 to be another solid year of deposit growth as we add the $50 plus 1,000,000 from Marblehead and return to more intentional C and I base growth in both our legacy markets as well as our new growth markets. Overall, loan growth for 2024 was below our pre COVID traditional levels of approximately 8%, but we saw the second half of the year improve dramatically, especially in our newer Columbus market. Since June of 2024, total loans have improved by 41,000,000 dollars or an 8.2 percent on an annualized basis.
Also to note, we have consciously placed less emphasis on growing residential real estate portfolio loans instead concentrating on a higher salable strategy and allow portfolio amortization to better mature. In fact, for the year, the residential portfolio was down nearly $10,000,000 Normalizing our portfolio to exclude residential real estate would result in our loan growth rising from $47,000,000 to over $57,000,000 again an adjusted 8.3% growth rate. We continue to balance capital needs for growth and the return of capital via dividends and share buybacks to our stockholders. This quarter, we were fairly aggressive on our buyback with over 130,000 shares being repurchased. For all of 2024, we returned nearly $8,500,000 to our shareholders via buyback and dividends or approximately 74% of our net income.
In terms of deeper relationships, more scope. As we have discussed in our prior quarters, our expanded contact center is up and fully operational. For all of 2024, we had more than 105,000 client interactions. Long term, we think this strategy will build both brand awareness and greater brand loyalty. Organic expansion was a key part of the conversation for us in 2024.
We added MLOs in several of our legacy markets to take advantage of competitors leaving the business line. And we also added 6 MLOs in our growth regions of Indianapolis and Cincinnati. We expect that the addition of the 2 offices at Marblehead this year will provide additional opportunities to deliver even greater organic balance sheet growth and salable mortgage originations. Operational excellence. As we discussed, total mortgage volume was 21% higher compared to $2023,000,000 and important to the success of our business model, we sold 83 percent of the volume in the secondary market.
The purchase market was the dominant player again this year like 2023 as we saw purchase and construction volume encompass 88% of our total, down slightly from 92% in 2023. In addition, our internal refinance volume was just 3.4% of our 2024 production. Finally, asset quality. Charge off spiked a bit in the quarter to 7 basis points, but were still quite low for the year at just 2 basis points overall. We also expect that the 3 commercial credits that increased our non performing loan levels beginning in the Q3 will resolve themselves in the first half of twenty twenty five.
Brian Martin, Analyst, Janney Montgomery: Our
Mark Klein, Chairman, President and CEO, SB Financial: current expectations are for those credits to be unwound with minimal financial impact. We continued also to see significant improvement in our criticized and classified loans, which were down to $6,400,000 from $9,000,000 in the prior year or a reduction of $2,600,000 or 29 percent. I'll now ask Tony Constantino, our CFO to give us a little more information on our quarterly performance and annual performance. Tony?
Tony Cosentino, Chief Financial Officer, SB Financial: Thanks, Mark. And again, good morning, everyone. Let me outline some additional highlights of our Q4 and full year results. First, let's take a look at the income statement and net interest income. In the Q4, net interest income was $10,900,000 up 1 point $3,000,000 or 13.7 percent compared to the same quarter last year.
This growth reflects the higher loan balances and improved asset yields even as funding costs rose slightly. For the full year, net interest income totaled $39,900,000 a 1.7% increase over 2023. The stabilization of funding costs and to a lesser extent loan growth has driven that margin improvement. For the quarter, cost of interest bearing liabilities was 2.36%, up just 3 basis points from the prior year and from the linked quarter was down 17 basis points. And our deposit cost of funds has likewise improved to 1.78 percent, down 16 basis points from the linked quarter, however, up 16 basis points from the prior year.
As we look at non interest income, for the quarter it was $4,600,000 down from $5,500,000 in the prior year, but up 10.5% from the linked quarter. I would note that results for the Q4 last year included $1,500,000 in gains on the sale of securities, which did not occur in the Q4 of 2024. Gains on mortgage loan servicing rights and wealth management fees contributed to the sequential improvement, reinforcing the value of our diversified revenue streams. For the full year, non interest income declined by 4% compared to the prior year, but still accounted for 29.5% of total revenue. This performance was supported by wealth management and other fee based business lines despite challenges in the mortgage, SBA (LON:SBA) and title insurance sectors.
As we look at the provision for credit losses, we reported an actual credit of $76,000 in the 4th quarter due to the reduction in our unfunded commitments. Our CECL model is reflective of the improvement in the economic factors, which drove no increase in our allowance level this quarter. And our non performing levels continue to include no OREO or OAO. And as Mark indicated, we believe this level is the high watermark we will experience for the coming 3 to 6 quarters. On efficiency, efficiency ratio for the quarter was 71.1 percent slightly up from 68.4% last year due to the rising funding costs.
However, operating expenses remain well controlled totaling $42,900,000 for the year, just slightly higher than the 23 levels. This reflects our commitment to balancing growth investments with disciplined expense management. As we turn to the balance sheet, on loans as Mark mentioned, total loans ended the year at $1,050,000,000 and with 20% of our portfolio set to reprice over the next 12 months, we anticipate that our yield earned earning assets will improve along with the higher anticipated new loan volume and pricing. Deposits. Deposit growth followed suit and grew to $1,150,000,000 On a granular basis, low cost transactional deposits accounted for 100% of this growth, as higher cost time deposits were level to the prior year.
Even with that deposit growth, we managed to increase our loan to deposit ratio to nearly 91%. And as a result of our growth, our overall cost of deposits of 1.86 percent was well maintained. Going forward, I would expect that the liquidity coming from the Marblehead acquisition and the scheduled amortization of our bond portfolio will fund the majority of our 2025 loan growth. On capital management during the quarter, as Mark indicated, we repurchased 130,000 shares at an average price of $0.21 just slightly above the adjusted tangible book value. For the full year, we repurchased over 250,000 shares, which was on par with what we have done over the last 3 years.
Tangible book value per share increased to $16 up 6.8% year over year, reflecting the strength of our capital position and our strategic capital deployment. On asset quality and taking a little future look, non performing loans remained low at 53 basis points of total loans with net charge offs at just 7 basis points for the quarter. The allowance for credit losses provided coverage of 2 74 percent of non performing loans underscoring the robustness of our risk management framework. And as we look forward, net interest margin improved in the 4th quarter to 3.35%, up 18 basis points from the linked quarter. With a substantial portion of loans repricing in 2025 and funding costs continuing to moderate, we anticipate gradual margin expansion throughout the year even with some anticipated Fed rate decreases at the short end of the curve.
I'll now turn the call back over to Mark.
Mark Klein, Chairman, President and CEO, SB Financial: Thank you, Tony. This has been a bit of a challenging year, but in many ways very satisfying as we've expanded our asset and client base in a number of our regions leading to organic balance sheet growth, made the acquisition we discussed with significant liquidity, increased book value and delivered market appreciation to our shareholders. We announced a dividend this past week of $0.145 per share equating to a 2.83 percent approximate yield. Our total shareholder dividend in 2024 was $0.56 or 33 percent of our earnings. In closing, I want to again welcome the Marblehead clients, community stockholders and staff to our company.
We remain quite pleased with the potential to grow our new region and a largely untapped market. We intend to leverage our higher performance business model into organic balance sheet growth for Marblehead in 2025 and beyond. And now we'll open the call up for investor questions. Sarah?
Sarah Mekas, Investor Relations, SB Financial: Thank you. We are now ready for questions.
Conference Operator: We will now begin the question and answer session. The first question comes from Brian Martin with Janney Montgomery. Please go ahead.
Brian Martin, Analyst, Janney Montgomery: Hey, good morning guys.
Mark Klein, Chairman, President and CEO, SB Financial: Hey, Brian. Hey, just
Brian Martin, Analyst, Janney Montgomery: thanks for the commentary. Just a couple of areas just to touch on, just get some clarification on the Mark, it sounds like just higher level or Tony on the mortgage, the investments in both Indiana and Cincinnati sound like they pay some pretty nice dividends here as you look into 2025 with new talent and obviously the new markets. But just if we don't see any change in rates, can you just kind of talk about what you think you can add in terms of production just with bringing on new talent in these markets just to kind of get a floor of what we think is potential on the mortgage this year? And then if we do get some benefit elsewhere, even better performance. But just kind of how you're thinking about a floor in terms of originations for 2025?
Mark Klein, Chairman, President and CEO, SB Financial: Yes. Thanks, Brian. As you know, we've grounded out in 2024 with $260,000,000 $70,000,000 which really again we think is at the trough of the conversation. Certainly, as I'm sure we've indicated somewhere, we're looking for something near the $400,000,000 mark in 2020 5. So we have 2 producers in Cincinnati and we're looking to build that team down there with 2 to 4 additional.
We now have 9 in Cincinnati. And if each of those individuals do $10,000,000 to 11 $1,000,000 on average which is kind of about the watermark today for MLOs given our traditional portfolio products as well as saleable products. So I would say Brian that $400,000,000 mark is kind of what we're shooting for. We certainly know and we all know about how tied that is to the 10 year treasury and where rates are. But we've been able to compete.
We've been nicely competitive in the construction phase and those roll into potentially portfolio deals and sold deals. But we're trying to make sure that now that are we competitive on putting loans on our books, but more importantly to move those out of construction and the like and move to a saleable product. So that is the emphasis for 2025, but the 400 number would be a nice place for us to be in 2025.
Brian Martin, Analyst, Janney Montgomery: Got you. And the people you're going to hire Mark, what you said primarily that's going to be in the Cincinnati market, that's where you're adding staff or is there any other markets you're adding folks in?
Mark Klein, Chairman, President and CEO, SB Financial: Well, we're adding some up in Northwest Ohio here some high producers that we're very familiar with. So right on the cusp of that. But going from 2 to 6 or so in Cincinnati certainly is plausible. And as I mentioned, we've gone from like 56 to 9 in that Indy market. And they're high producers and they got a great team.
And we're expecting that as I mentioned that $100,000,000 kind of thing out of Indy. They almost ramped up the number 2 behind Columbus this year. And we're pretty optimistic about where they're at and we're pretty optimistic about the 2 individuals that we have as the nucleus for Cincinnati.
Brian Martin, Analyst, Janney Montgomery: Got you. Okay. That's helpful. And then just in terms of loan growth, it sounds as though your the shift maybe a little bit that continues in terms of if we think about 2025, the residential portfolio likely continues to still come down a bit. And the commercial traditional organic commercial growth is going to be what drives growth.
So just kind of how we're thinking about pipelines today and then just organic growth throughout 2025. Does that seem right, the still a little bit more reduction in mortgage and then growth elsewhere and kind of where that nets out to as you think about big picture for the year?
Mark Klein, Chairman, President and CEO, SB Financial: Yes. The residential real estate arena on PCG still exists and survives knowingly that when we do those there's a high probability that they may get refinanced or something else happens to them. We are getting some amortization in that portfolio as we speak. But clearly, what I'm optimistic about Brian is our current run rate and trajectory, the second half of twenty twenty four. If you look at what we've done in Columbus, the second half twenty twenty four, virtually all of our growth came in the second half of twenty twenty four.
And as I mentioned, nearly net all from the Columbus market. And right now, Steve can give us some numbers, but we booked a fair amount of volume of which has been drawn, but yet we're probably talking half of it remains yet to be drawn, which would give us really quite honestly a full half of year of growth just what's already been closing on the books. And Steve's probably got some additional data for us. Sure.
Steve Wall, Chief Lending Officer, SB Financial: Yes, Brian, to piggyback on what Mark's saying there, we are certainly encouraged on in what we see in the Central Ohio region. To Mark's point, we have a bit of a tailwind on approved and closed loans with about $30,000,000 yet to draw that we obviously expect to see in the first half to three quarters of the year. That doesn't include some loans we have already approved here in January that will add to that. So certainly Central Ohio, we remained very bullish on our prospects there and we're seeing we'd like to see broader participation out of all our markets. We have seen a couple participating already in January.
So we are certainly encouraged by the momentum we're seeing to this early start to the year.
Mark Klein, Chairman, President and CEO, SB Financial: Yeah. I would like to think Brian we're going to get back to that high single digit 8%. As Steve mentioned, we've got 4% or 5% currently in the bag absent to others paying off which always happens. But certainly, the run rate gives us pause for optimism in the first half of twenty twenty five and beyond.
Brian Martin, Analyst, Janney Montgomery: Got you. And I guess in terms of Tony, just on the margin and kind of layering in Marblehead, I think you talked about the combination of this loan growth, some stability or further reduction in funding. Maybe we're kind of at a floor at the margin here and it's upward from here. And then maybe just remind us the benefit from Marblehead here and how to think about that as we go into 2025 now that the deal is closed?
Tony Cosentino, Chief Financial Officer, SB Financial: Right. Yes, I think $335,000,000 was our margin number here in the Q4. And I think I would say that was more positive than I had anticipated. Our ability to reduce funding costs was a little bit better than I anticipated. We really didn't lose clients when we were pretty aggressive on moving down rates when the Fed moved.
So I thought that was a positive. I concur with you, I think the $335,000,000 is probably our baseline and it's certainly not going to go up kind of double digit percentage per quarter. I would suspect it's going to go up a few basis points here in Q1 and then kind of move up a little bit more through that. So I would anticipate by the time we finish 25, we're probably at a $350,000,000 to $355,000,000 range in Q4 of 20 25. On Marblehead, they're going to bring $22,000,000 of loans at loan pricing higher than what we have on our books today, probably in the high 6s, low 7s on average of their portfolio which is a pretty strong portfolio.
We've successfully executed on liquidating their bond portfolio. Their average cost of funds on the deposit side is call it 185, 190, 190. And so we're going to immediately move that into overnight at a minimum. And as Steve said, we have a pretty strong loan pipeline that we think is going to drive, call it, 35,000,000 to 400 basis points. We're still extremely confident in the model and the metrics that we put forward that we're going to be able to have pretty strong EPS accretion from the transaction, dollars 0.15 to $0.20 a share here in $0.25 especially since we were able to close it, call it, 2 months earlier than we originally anticipated.
So hope that kind of cleans up some data.
Brian Martin, Analyst, Janney Montgomery: Yes. And how much liquidity, Tony? I mean what's the size of that bond portfolio that you redeployed is kind of what's the size of that today?
Tony Cosentino, Chief Financial Officer, SB Financial: Yes. So total assets for them $60,000,000 but net net their deposit base is call it $52,000,000 So after we kind of clean up everything that's really going to be the liquidity that comes over. And they got $22,000,000 of loans on the books that are going to come over. We don't anticipate doing anything with them, no liquidation or movement of those. So we're going to have, call it,
Mark Klein, Chairman, President and CEO, SB Financial: dollars
Tony Cosentino, Chief Financial Officer, SB Financial: 30,000,000 to 32,000,000 dollars of fresh liquidity to redeploy. I think we'll be patient here given our loan pipeline and just anticipate that because as Steve said, most of these have been booked and are going to fund. And fed funds of $4.60 to $5.5 on the short end, we're going to be just fine on at least being above our current $3.35 margin at a minimum out of the gate. But we want to accelerate that EPS recapture as quickly as we can.
Brian Martin, Analyst, Janney Montgomery: Yes. Got you. Okay. And then in terms of credit quality, I think I heard the comment that the I guess there's some potential resolution here of the credit. So I guess was the commentary on the call, maybe I missed it, that this was a high watermark kind of on that front and we have to see a little movement down the next couple of quarters, is that with pretty minimal, I guess, loss content?
Steve Wall, Chief Lending Officer, SB Financial: Yes, Brian. I think the credits that's referenced earlier that increased that non performing number in 24, they weren't a surprise to us necessarily. These are credits we've been monitoring. We have a very robust internal loan review process. So not particularly surprised.
We do expect, as noted, resolution of at least a couple of those, certainly by mid year had been hopeful, frankly, of resolution of at least one prior to year end, but the court dockets didn't precisely play along. But that said, we expect absent again unforeseen shocks improvement in those numbers going forward. We think we've got a pretty good handle on what's out there and where we are.
Tony Cosentino, Chief Financial Officer, SB Financial: And as we said, to add on, we feel our collateral is very strong and we don't think we're going to have any further deterioration. We took some charge offs here in Q4 as we talked about, but two basis points for the entire year is kind of the high watermark we've had for the last 3 or 4 years. So we don't anticipate any further declination out of those couple of credits.
Brian Martin, Analyst, Janney Montgomery: Got you. I got you. And then in terms of, I guess, the funding of the loan growth, Tony, it sounds like not much in the way of deposit growth to expect this year, I guess, given the liquidity and some potential cash flow from the bond portfolio. Is that fair how to think about the balance sheet on this?
Tony Cosentino, Chief Financial Officer, SB Financial: Yes. I mean, I think we have call it $55,000,000 of funding kind of locked in between the bond amortization and the Marblehead net liquidity. I think I'd be disappointed if we don't grow loans, call it, dollars 80,000,000 to $85,000,000 to $90,000,000 this year on a year over year basis. That includes the $22,000,000 of Marblehead, so call it $70,000,000 or so from where we are. So that means we're still going to have to come up with, call it, a $30,000,000 deposit raise throughout our network, which I think is eminently doable.
And we do have a we're a little cautious on the homebuyer in year 2 that some of that is going to kind of matriculate its way out of us, not the full pool, but a portion of that $50,000,000 will decline by the time we sit here a year from now. And Brian
Mark Klein, Chairman, President and CEO, SB Financial: just to tag on to that. Obviously, we don't want to go generate deposits above the current margin. But if we can do C and I loans that we have now a greater emphasis on across the board including incentive plan, we need to generate more of those lower cost transactional accounts as we all know. We'll take all those we can get. Certainly, Marblehead gives us some greater opportunity because we've been in the defensive mode as we speak.
But we're going to go on offense there just like the other markets. But clearly, if the deposits are below the margin, we're going to go find it. But I agree with Tony. If we don't need it, we're certainly not going to pay 4.5% 5% for it.
Brian Martin, Analyst, Janney Montgomery: Got you. Okay. And then just the last one for me was just on the expense outlook. Just kind of if we layer in Marblehead, can you just talk about kind of the run rate in expenses kind of starting 1Q and then just how that the expenses when you guys have had it's been great. So just trying to understand kind of how that run rate may trend as you kind of go through 2025?
Tony Cosentino, Chief Financial Officer, SB Financial: Yes. So we did $43,000,000 for the full year. And if we extrapolate Q4, we're kind of on a $44,000,000 run rate. I think we've spent a fair amount on resources, technology and those kinds of things. I think a lot of that is in our rearview mirror.
We do have some projects we're still contemplating. Obviously, Marblehead is going to bring on an expense base, but it's relatively inexpensive for the size of their structure. They don't have a great amount of expenses that's going to cause us outside of our conversions and all those kinds of things, which we'll take care of. But I would think we're kind of on that 2.5% to 3.5% growth rate over kind of where we were here in Q4. But we have made it extremely plain to all of our teams that the growth and revenue part of the equation is the first thing we're going to talk about in 2025.
We kind of got behind the 8 ball in the 1st part of 2024. Expenses rose faster than revenue and we have got to get back to operating leverage of 1.2 percent to 1.5 percent 1.5 times, sorry, because I think that clearly is the structure we should be in, given our past reliance on revenue growth.
Brian Martin, Analyst, Janney Montgomery: Got you. Okay, perfect. That's helpful. And congrats on a nice quarter here, nice end of the year and the Marblehead deal closing.
Mark Klein, Chairman, President and CEO, SB Financial: Thanks, Brian. We're looking forward to a really good 2025 on a number of fronts, not the least of which is a more positive sloping yield curve which should drive margins a little bit wider than what we have now all things being equal. So thanks for joining.
Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. Klein for any closing remarks.
Mark Klein, Chairman, President and CEO, SB Financial: Once again, thanks for joining us. We certainly look forward to chatting with you again in April and delivering results for Q1 2025. Optimism remains high and looking forward to reporting results in April. Thanks for joining and goodbye.
Conference Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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