PR Newswire | Oct 29, 2020 04:16PM EDT

10/29 15:15 CDT

SB Financial Group Announces Third Quarter 2020 Results DEFIANCE, Ohio, Oct. 29, 2020

DEFIANCE, Ohio, Oct. 29, 2020 /PRNewswire/ -- SB Financial Group, Inc. (NASDAQ: SBFG) ("SB Financial" or the "Company"), a diversified financial services company providing full-service community banking, mortgage banking, wealth management, private client and title insurance services today reported earnings for the third quarter and nine months ended September 30, 2020.

Third quarter 2020 highlights over prior-year third quarter include:

* Net income of $5.3 million up $1.5 million or 39.6 percent; diluted earnings per share ("EPS") of $0.69 up $0.21 per share or 43.8 percent * Adjusted net income, excluding for the impact of the Originated Mortgage Servicing Rights ("OMSR") recapture of $0.3 million, of $5.0 million, with adjusted EPS of $0.65 * Mortgage origination volume of $200.2 million, an increase of $42.2 million, or 26.7 percent * Pre-tax, pre-provision income of $8.3 million up $2.5 million or 43.2 percent

The nine months ended September 30, 2020, highlights over the prior-year nine months include:

* Net income of $9.6 million; diluted EPS of $1.25 * Adjusted net income, excluding the impact of OMSR and merger costs of $3.3 million after- tax, rose to $12.9 million, up $3.2 million or 32.9 percent, with adjusted EPS of $1.67 * Return on Average Assets ("ROA") of 1.12 percent; adjusted ROA of 1.41 percent

Third quarter 2020 trailing twelve-month highlights include:

* Loan growth of $62.5 million, or 7.6 percent, which includes Paycheck Protection Program ("PPP") loan balances of $82.1 million and loans acquired in the Edon acquisition of $15.7 million. * Deposit growth of $166.1 million, or 19.6 percent, driven by PPP balances and the Edon acquisition * Mortgage origination volume of $662.7 million; servicing portfolio of $1.29 billion, which is up $140.0 million, or 12.1 percent

Highlights Three Months Ended Nine Months Ended

($ in thousands, except per share & ratios) Sep. 2020 Sep. 2019 % Change Sep. 2020 Sep. 2019 % Change

Operating revenue $ 19,677 $ 14,424 36.4% $ 47,873 $ 38,287 25.0%

Interest income 10,807 11,546 -6.4% 32,046 33,195 -3.5%

Interest expense 1,548 2,488 -37.8% 5,367 6,965 -22.9%

Net interest income 9,259 9,058 2.2% 26,679 26,230 1.7%

Provision for loan losses 1,800 300 500.0% 3,700 500 640.0%

Noninterest income 10,418 5,366 94.1% 21,194 12,057 75.8%

Noninterest expense 11,335 9,500 19.3% 32,403 27,234 19.0%

Net income 5,250 3,762 39.6% 9,586 8,615 11.3%

Earnings per diluted share 0.69 0.48 43.8% 1.25 1.08 15.7%

Return on average assets 1.73% 1.44% 20.1% 1.12% 1.13% -0.9%

Return on average equity 15.01% 11.24% 33.5% 9.74% 8.67% 12.3%

Non-GAAP Measures

Adjusted net income $ 4,992 $ 3,762 32.7% $ 12,916 $ 9,720 32.9%

Adjusted diluted EPS 0.65 0.48 35.4% 1.67 1.22 36.9%

Adjusted return on average assets 1.64% 1.44% 13.9% 1.41% 1.23% 14.6%

Adjusted pre-tax, pre-provision income 8,016 4,924 62.8% 19,685 12,451 58.1%

"Mortgage volume continued its strong growth in the third quarter, which resulted in our net income rising from the prior year by over 40 percent." said Mark A. Klein, Chairman, President, and CEO of SB Financial. "Our revenue diversification strategy continues to drive EPS and tangible book value growth despite the headwinds that the economy is facing in all of our markets. We continued to return capital to our shareholders in the quarter through stock buybacks and a cash dividend of nearly 15 percent of earnings."

RESULTS OF OPERATIONS

Consolidated Revenue

Total operating revenue, consisting of net interest income and noninterest income, was up 36.4 percent from the third quarter of 2019, and up 12.5 percent to the linked quarter.

* Net interest income was up 2.2 percent from the year-ago quarter, and up 4.4 percent from the linked quarter. * Net interest margin on a fully taxable equivalent basis (FTE) was down from the year-ago quarter by 52 basis points but up 9 basis points from the linked quarter as transactional cash balances were higher and PPP loans made marginal contribution. * Noninterest income was up 94 percent year over year and 21 percent from the linked quarter.

Mortgage Loan Business

Mortgage loan originations for the third quarter of 2020 were $200.2 million, up $42.2 million, or 26.7 percent, from the year-ago quarter. Total sales of originated loans were $166.2 million, up $40.8 million, or 32.6 percent. For the first nine months, SB Financial had total volume of $525.2 million, of which $210.2 million (40 percent) was new purchase/construction lending, $169.2 million (32 percent) was internal refinance, and the remaining $145.8 million (28 percent) was new customer refinance volume.

Net mortgage banking revenue, consisting of gains on the sale of mortgage loans and net loan servicing fees, was $7.9 million for the third quarter of 2020, compared to $2.5 million for the year-ago quarter. The mortgage servicing valuation adjustment for the third quarter of 2020 was a positive $0.3 million, compared to no adjustment for the third quarter of 2019. For the first nine months, the impairment on servicing rights was $3.0 million, compared to $1.4 million for the prior year nine months. The aggregate servicing valuation impairment ended the quarter at $4.3 million. The servicing portfolio at September 30, 2020, was $1.29 billion up $140.0 million or 12.1 percent, from $1.15 billion at September 30, 2019. Normal amortization is up 87 percent from the prior year due to higher refinance activity.

Mr. Klein noted, "Mortgage volume was steady in the quarter as we originated over $200 million in volume. In addition to strong origination levels, our pricing and hedging strategies enabled us to deliver additional mortgage banking revenue of $5.4 million or a year over year increase of over 200 percent. We were also pleased to recapture a small amount of our prior quarter's impairment on our servicing rights."

MortgageBanking

($ in Sep. 2020 Jun. 2020 Mar. 2020 Dec. 2019 Sep. 2019thousands)

Mortgage $ 200,158 $ 223,671 $ 101,365 $ 137,528 $ 157,947originations

Mortgage sales 166,201 204,628 84,476 127,441 125,386

Mortgageservicing 1,293,037 1,261,746 1,216,292 1,199,107 1,153,020portfolio

Mortgageservicing 8,535 8,168 8,974 11,017 10,447rights

Mortgageservicingrevenue

Loan servicing 813 782 757 740 709fees

OMSR (1,308) (1,574) (597) (709) (701)amortization

Netadministrative (495) (792) 160 31 8fees

OMSR valuation 326 (1,088) (2,212) 303 -adjustment

Net loan (169) (1,880) (2,052) 334 8servicing fees

Gain on sale 8,085 8,119 1,949 3,048 2,495of mortgages

Mortgagebanking $ 7,916 $ 6,239 $ (103) $ 3,382 $ 2,503revenue, net

Noninterest Income and Noninterest Expense

SB Financial's noninterest income includes revenue from a diverse group of services, such as wealth management, deposit fees, residential loan sales and the sale of Small Business Administration (SBA) and U.S. Department of Agriculture (USDA) loans. Wealth management assets under the Company's care were $522.4 million as of September 30, 2020, up $38.1 million or 7.9 percent compared to the prior year. For the third quarter of 2020, noninterest income as a percentage of total operating revenue was 52.9 percent. Reflective of the robust mortgage market, SB Financial's Title Agency provided revenue in the quarter of $0.5 million, up 29 percent from the prior year.

For the third quarter of 2020, noninterest expense of $11.3 million was up $1.8 million year over year or 19.3 percent reflecting a 1.9 times positive operating leverage. On a year-to-date basis, when adjusted for the Edon merger costs, noninterest expense is up 14.4 percent compared to the prior year nine-month period. Operating leverage for the year is a positive 1.3 times, which will improve to 1.7 times when the merger costs are removed.

Mr. Klein stated, "Revenue growth was up over 36 percent from the prior year compared to operating expense growing 19 percent. We had the lowest net, noninterest expense to average assets in our history this quarter and the significant positive operating leverage was key to our earnings growth. We remain optimistic that the consumer and business momentum from this quarter will continue into the fourth quarter and translate into improved loan pipelines."

Noninterest Income / Noninterest Expense

($ in thousands, except ratios) Sep. 2020 Jun. 2020 Mar. 2020 Dec. 2019 Sep. 2019

Noninterest Income (NII) $ 10,418 $ 8,615 $ 2,161 $ 5,959 $ 5,366

NII / Total Revenue 52.9% 49.3% 20.2% 40.9% 37.2%

NII / Average Assets 3.4% 3.0% 0.8% 2.3% 2.1%

Total Revenue Growth 36.4% 39.6% -5.6% 16.0% -1.2%

Noninterest Expense (NIE) $ 11,335 $ 11,662 $ 9,406 $ 10,176 $ 9,500

Efficiency Ratio 57.5% 66.7% 87.8% 69.9% 65.9%

NIE / Average Assets 3.7% 4.0% 3.5% 3.9% 3.6%

Net Noninterest Expense/Avg. -0.3 -1.0% -2.7% -1.6% -1.6%Assets

Total Expense Growth 19.3% 28.0% 9.0% 15.0% 6.2%

Operating Leverage 1.9 1.4 -0.6 1.1 -0.2

Balance Sheet

Total assets as of September 30, 2020, were $1.22 billion, up $175.5 million, or 16.8 percent, from the year ago quarter due to the impact of the Edon acquisition and the PPP activity. Total equity as of September 30, 2020, was $141.3 million, up 5.3 percent from a year ago, and comprised 11.6 percent of total assets.

Total loans held for investment were $885.9 million at September 30, 2020, up $62.5 million, or 7.6 percent, from September 30, 2019. Commercial loans were up $71.5 million, or 49.3 percent, commercial real estate up $9.4 million or 2.6 percent and agricultural loans increasing $5.5 million or 10.5 percent. Absent the effects of the Edon acquisition and PPP loans, loan balances were down $35.4 million from the year ago quarter.

The investment portfolio of $135.6 million, including shares in the Federal Reserve Bank and Federal Home Loan Bank, represented 11.1 percent of assets at September 30, 2020, and was up 66.0 percent from the year-ago period. Deposit balances of $1.01 billion at September 30, 2020, increased by $166.1 million, or 19.6 percent, since September 30, 2019. Growth from the prior year included $104.7 million in checking and $61.4 million in savings and time deposit balances.

Mr. Klein continued, "Asset quality was largely stable in the quarter. Our number and dollar of loans on forbearance were down 60 and 75 percent respectively from the linked quarter. We are encouraged by these trends but we also understand that further weakness is possible. To prepare for these unknowns, we decided to allocate some of our higher than expected mortgage revenue into provision this quarter. We expect to begin the PPP forgiveness process in the fourth quarter, which will help all of our 700 PPP clients who were impacted by the pandemic."

Loan Balances

($ in thousands, except ratios) Sep. 2020 Jun. 2020 Mar. 2020 Dec. 2019 Sep. 2019 Annual Growth

Commercial $ 216,667 $ 222,108 $ 151,538 $ 151,018 $ 145,147 $ 71,520

% of Total 24.5% 24.6% 18.2% 18.3% 17.6% 49.3%

Commercial RE 371,947 375,450 378,212 369,962 362,580 9,367

% of Total 42.0% 41.6% 45.5% 44.8% 44.0% 2.6%

Agriculture 57,420 58,817 47,660 50,994 51,946 5,474

% of Total 6.5% 6.5% 5.7% 6.2% 6.3% 10.5%

Residential RE 178,393 184,684 189,738 189,290 199,036 -20,643

% of Total 20.1% 20.6% 22.9% 22.9% 24.2% -10.4%

Consumer & Other 61,423 60,489 63,616 64,246 64,658 -3,235

% of Total 6.9% 6.7% 7.7% 7.8% 7.9% -5.0%

Total Loans $ 885,850 $ 901,548 $ 830,764 $ 825,510 $ 823,367 $ 62,483

Total Growth Percentage 7.6%

Deposit Balances

($ in thousands, except ratios) Sep. 2020 Jun. 2020 Mar. 2020 Dec. 2019 Sep. 2019 Annual Growth

Non-Int DDA $ 225,003 $ 229,042 $ 170,920 $ 158,357 $ 152,932 $ 72,071

% of Total 22.2% 23.1% 19.8% 18.8% 18.0% 47.1%

Interest DDA 164,248 154,143 133,722 131,084 131,655 32,593

% of Total 16.2% 15.6% 15.5% 15.6% 15.5% 24.8%

Savings 169,474 161,182 138,863 119,359 121,991 47,483

% of Total 16.7% 16.3% 16.0% 14.1% 14.3% 38.9%

Money Market 204,862 189,380 169,209 173,666 173,237 31,625

% of Total 20.2% 19.1% 19.6% 20.7% 20.4% 18.3%

Time Deposits 250,428 256,840 251,177 257,753 268,139 (17,711)

% of Total 24.7% 25.9% 29.1% 30.8% 31.8% -6.6%

Total Deposits $ 1,014,015 $ 990,587 $ 863,891 $ 840,219 $ 847,954 $ 166,061

Total Growth Percentage 19.6%

Asset Quality

SB Financial reported nonperforming assets of $7.3 million as of September 30, 2020, up $2.7 million from the year-ago quarter. The coverage of nonperforming loans by the loan loss allowance was at 164 percent at September 30, 2020, down from 207 percent at September 30, 2019.

Nonperforming Assets Annual Change($ in thousands, except ratios) Sep. 2020 Jun. 2020 Mar. 2020 Dec. 2019 Sep. 2019

Commercial & Agriculture $ 1,140 $ 1,204 $ 1,309 $ 1,772 $ 834 $ 306

% of Total Com./Ag. loans 0.42% 0.43% 0.66% 0.88% 0.42% 36.7%

Commercial RE 2,475 2,484 1,816 1,826 262 2,213

% of Total CRE loans 0.67% 0.66% 0.48% 0.49% 0.07% 844.7%

Residential RE 2,481 2,538 2,330 1,635 1,763 718

% of Total Res. RE loans 1.39% 1.37% 1.23% 0.86% 0.89% 40.7%

Consumer & Other 313 308 327 267 416 (103)

% of Total Con./Oth. loans 0.51% 0.51% 0.51% 0.42% 0.64% -24.8%

Total Nonaccruing Loans 6,409 6,534 5,782 5,500 3,275 3,134

% of Total loans 0.72% 0.72% 0.70% 0.67% 0.40% 95.7%

Accruing Restructured Loans 789 804 816 874 825 (36)

Total Change (%) -4.4%

Total Nonaccruing & 7,198 7,338 6,598 6,374 4,100 3,098Restructured Loans

% of Total loans 0.81% 0.81% 0.79% 0.77% 0.50% 75.6%

Foreclosed Assets 76 382 85 305 489 (413)

Total Change (%) -84.5%

Total Nonperforming Assets $ 7,274 $ 7,720 $ 6,683 $ 6,679 $ 4,589 $ 2,685

% of Total assets 0.60% 0.64% 0.61% 0.64% 0.44% 58.5%

The Company continued to provide payment relief to clients as needed, with total forbearance as of September 30, 2020 of 204 loans at $80.7 million. The detail on these deferrals; 19 commercial at $36.4 million down $106.3 million or 74.5%, 7 portfolio residential and consumer at $2.0 million down $8.6 million or 81.3 percent and 178 sold residential real estate at $42.3 million up $0.6 million or 1.4 percent.

Loans inDeferralStatus Linked Qtr.($ in Changethousands, Sep. 2020 Jun. 2020exceptratios)

Total $ 36,366 $ 142,682 $ (106,316)Commercial

Total 28 350 (322)Consumer

TotalPortfolio 1,959 10,274 (8,315)Mortgage

Total BalanceSheet $ 38,353 $ 153,306 $ (114,953)Deferrals

% of Total 4.33% 17.00% -12.68%loans

Total Sold $ 42,317 $ 41,751 $ 566Mortgage

CommercialHighSensitivity

PortfolioUpdate Linked Qtr.($ in Changethousands, Sep. 2020 Jun. 2020exceptratios)

Hotel/Travel $ 32,475 $ 32,758 $ (283)Accomodation

Food Service/ 9,698 10,480 (782)Restaurant

Elder/Child 7,188 7,302 (114)Care

Arts/Entertainment 6,614 5,698 916/Recreation

Education/ 13,412 15,083 (1,671)Religious

Energy - - -

Total $ 69,387 $ 71,321 $ (1,934)

% of Total 7.83% 7.91% -0.08%loans

Webcast and Conference Call

The Company will hold a related conference call and webcast on October 30, 2020, at 11:00 a.m. EDT. Interested parties may access the conference call by dialing 1-888-338-9469. The webcast can be accessed at ir.yourstatebank.com. An audio replay of the call will be available on the Company's website.

About SB Financial Group

Headquartered in Defiance, Ohio, SB Financial is a diversified financial services holding company for the State Bank & Trust Company (State Bank) and SBFG Title, LLC dba Peak Title (Peak Title). State Bank provides a full range of financial services for consumers and small businesses, including wealth management, private client services, mortgage banking and commercial and agricultural lending, operating through a total of 22 offices; 21 in nine Ohio counties and one in Fort Wayne, Indiana, and 23 full-service ATMs. State Bank has five loan production offices located throughout the Tri-State region of Ohio, Indiana and Michigan. Peak Title provides title insurance and opinions throughout the Tri-State region. SB Financial's common stock is listed on the NASDAQ Capital Market under the symbol "SBFG".

In May 2020, SB Financial was ranked #125 on the American Banker Magazine's list of Top 200 Publicly Traded Community Banks and Thrifts based on three-year average return on equity ("ROE").

Forward-Looking Statements

Certain statements within this document, which are not statements of historical fact, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties and actual results may differ materially from those predicted by the forward-looking statements. These risks and uncertainties include, but are not limited to, the duration and scope of the COVID-19 outbreak in the United States and the market areas in which SB Financial and its subsidiaries operate, including the impact to the state and local economies of prolonged shelter in place orders and the pandemic generally, risks and uncertainties inherent in the national and regional banking industry, changes in economic conditions in the market areas in which SB Financial and its subsidiaries operate, changes in policies by regulatory agencies, changes in accounting standards and policies, changes in tax laws, fluctuations in interest rates, demand for loans in the market areas in SB Financial and its subsidiaries operate, increases in FDIC insurance premiums, changes in the competitive environment, losses of significant customers, geopolitical events, the loss of key personnel and other risks identified in SB Financial's Annual Report on Form 10-K and documents subsequently filed by SB Financial with the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made, and SB Financial undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made, except as required by law. All subsequent written and oral forward-looking statements attributable to SB Financial or any person acting on its behalf are qualified by these cautionary statements.

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles ("GAAP"). Non-GAAP financial measures, specifically pre-tax, pre-provision income, tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, return on average tangible common equity, total interest income - FTE, net interest income - FTE and net interest margin - FTE are used by the Company's management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. In addition, the Company excludes the non-GAAP items of OMSR impairment and merger related costs from net income to report an adjusted net income level. Although management believes these non-GAAP measures are useful to investors by providing a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Investor Contact Information:Mark A. KleinChairman, President and Chief Executive OfficerMark.Klein@YourStateBank.com

Anthony V. CosentinoExecutive Vice President and Chief Financial OfficerTony.Cosentino@YourStateBank.com

SB FINANCIAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS - (Unaudited)

September June March December September

($ in thousands) 2020 2020 2020 2019 2019

ASSETS

Cash and due from banks $ 94,641 $ 85,661 $ 56,393 $ 27,064 $ 49,824

Interest bearing time deposits 8,956 10,542 - - -

Available-for-sale securities 130,315 104,289 107,727 100,948 77,029

Loans held for sale 13,943 13,742 11,328 7,258 13,655

Loans, net of unearned income 885,850 901,548 830,764 825,510 823,367

Allowance for loan losses (11,793) (10,013) (8,958) (8,755) (8,492)

Premises and equipment, net 23,785 23,662 23,599 23,385 23,898

Federal Reserve and FHLB Stock, at cost 5,303 4,837 4,648 4,648 4,648

Foreclosed assets held for sale, net 76 382 85 305 489

Interest receivable 4,159 4,272 2,940 3,106 3,176

Goodwill and other intangibles 22,763 22,813 17,830 17,832 17,834

Cash value of life insurance 17,453 17,375 17,299 17,221 17,137

Mortgage servicing rights 8,535 8,168 8,974 11,017 10,447

Other assets 14,255 15,658 15,684 9,038 9,749

Total assets $ 1,218,241 $ 1,202,936 $ 1,088,313 $ 1,038,577 $ 1,042,761

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits

Non interest bearing demand $ 225,003 $ 229,042 $ 170,920 $ 158,357 $ 152,932

Interest bearing demand 164,248 154,143 133,722 131,084 131,655

Savings 169,474 161,182 138,863 119,359 121,991

Money market 204,862 189,380 169,209 173,666 173,237

Time deposits 250,428 256,840 251,177 257,753 268,139

Total deposits 1,014,015 990,587 863,891 840,219 847,954

Short-term borrowings 20,710 23,826 36,881 12,945 14,659

Federal Home Loan Bank advances 8,000 13,000 16,000 16,000 16,000

Trust preferred securities 10,310 10,310 10,310 10,310 10,310

Interest payable 946 929 1,131 1,191 1,391

Other liabilities 22,913 26,403 24,195 21,818 18,201

Total liabilities 1,076,894 1,065,055 952,408 902,483 908,515

Shareholders' Equity

Preferred stock - - - - 13,241

Common stock 54,463 54,463 54,463 54,463 41,223

Additional paid-in capital 14,782 14,780 14,655 15,023 15,219

Retained earnings 80,012 75,526 72,641 72,704 70,184

Accumulated other comprehensive income (loss) 2,221 2,320 2,049 659 900

Treasury stock (10,131) (9,208) (7,903) (6,755) (6,521)

Total shareholders' equity 141,347 137,881 135,905 136,094 134,246

Total liabilities and shareholders' equity $ 1,218,241 $ 1,202,936 $ 1,088,313 $ 1,038,577 $ 1,042,761

SB FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME - (Unaudited)

($ in thousands, except per share & ratios) At and for the Three Months Ended Nine Months Ended

September June March December September September September

Interest income 2020 2020 2020 2019 2019 2020 2019

Loans

Taxable $ 10,179 $ 9,945 $ 9,795 $ 10,313 $ 10,607 $ 29,919 $ 30,216

Tax exempt 47 59 79 83 82 185 217

Securities

Taxable 494 510 692 737 776 1,696 2,489

Tax exempt 87 81 78 72 81 246 273

Total interest income 10,807 10,595 10,644 11,205 11,546 32,046 33,195

Interest expense

Deposits 1,423 1,549 1,880 2,392 2,258 4,852 6,268

Repurchase agreements & other 12 20 28 17 22 60 65

Federal Home Loan Bank advances 59 92 100 101 101 251 301

Trust preferred securities 54 62 88 99 107 204 331

Total interest expense 1,548 1,723 2,096 2,609 2,488 5,367 6,965

Net interest income 9,259 8,872 8,548 8,596 9,058 26,679 26,230

Provision for loan losses 1,800 1,300 600 300 300 3,700 500

Net interest income after provision

for loan losses 7,459 7,572 7,948 8,296 8,758 22,979 25,730

Noninterest income

Wealth management fees 839 775 768 801 775 2,382 2,292

Customer service fees 730 667 682 712 729 2,079 2,049

Gain on sale of mtg. loans & OMSR 8,085 8,119 1,949 3,048 2,495 18,153 5,365

Mortgage loan servicing fees, net (169) (1,880) (2,052) 334 8 (4,101) (731)

Gain on sale of non-mortgage loans 119 107 104 250 462 330 1,005

Title insurance revenue 517 609 265 393 400 1,391 727

Net gain on sales of securities - - - - - - 206

Gain (loss) on sale of assets (52) (80) (46) 1 1 (178) (6)

Other 349 298 491 420 496 1,138 1,150

Total noninterest income 10,418 8,615 2,161 5,959 5,366 21,194 12,057

Noninterest expense

Salaries and employee benefits 6,995 6,419 5,427 6,142 5,715 18,841 15,922

Net occupancy expense 736 675 698 675 656 2,109 1,928

Equipment expense 888 780 700 764 688 2,368 2,064

Data processing fees 586 1,288 548 543 499 2,422 1,430

Professional fees 695 1,224 757 639 571 2,676 1,837

Marketing expense 137 141 208 171 239 486 724

Telephone and communication expense 142 122 115 121 118 379 345

Postage and delivery expense 96 96 115 86 89 307 254

State, local and other taxes 331 262 254 347 243 847 745

Employee expense 155 93 184 207 199 432 588

Other expenses 574 562 400 481 483 1,536 1,397

Total noninterest expense 11,335 11,662 9,406 10,176 9,500 32,403 27,234

Income before income tax expense 6,542 4,525 703 4,079 4,624 11,770 10,553

Income tax expense 1,292 870 22 721 862 2,184 1,938

Net income $ 5,250 $ 3,655 $ $ 3,358 $ 3,762 $ 9,586 $ 8,615 681

Preferred share dividends - - - 230 233 - 720

Net income available to common shareholders 5,250 3,655 681 3,128 3,529 9,586 7,895

Common share data:

Basic earnings per common share $ 0.69 $ $ $ 0.48 $ 0.55 $ 1.25 $ 1.22 0.47 0.09

Diluted earnings per common share $ 0.69 $ $ $ 0.42 $ 0.48 $ 1.25 $ 1.08 0.47 0.09

Average shares outstanding (in thousands):

Basic: 7,607 7,708 7,756 6,445 6,397 7,700 6,459

Diluted: 7,607 7,708 7,756 7,799 7,876 7,700 7,955

SB FINANCIAL GROUP, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS - (Unaudited)

($ in thousands, except per share & ratios) At and for the Three Months Ended Nine Months Ended

September June March December September September September

SUMMARY OF OPERATIONS 2020 2020 2020 2019 2019 2020 2019

Net interest income $ 9,259 $ 8,872 $ 8,548 $ 8,596 $ 9,058 $ 26,679 $ 26,230

Tax-equivalent adjustment 36 37 42 41 43 115 130

Tax-equivalent net interest income 9,295 8,909 8,590 8,637 9,101 26,794 26,360

Provision for loan loss 1,800 1,300 600 300 300 3,700 500

Noninterest income 10,418 8,615 2,161 5,959 5,366 21,194 12,057

Total operating revenue 19,677 17,487 10,709 14,555 14,424 47,873 38,287

Noninterest expense 11,335 11,662 9,406 10,176 9,500 32,403 27,234

Pre-tax pre-provision income 8,342 5,825 1,303 4,379 4,924 15,470 11,053

Pretax income 6,542 4,525 703 4,079 4,624 11,770 10,553

Net income 5,250 3,655 681 3,358 3,762 9,586 8,615

Net income available to common shareholders 5,250 3,655 681 3,128 3,529 9,586 7,895

PER SHARE INFORMATION:

Basic earnings per share (EPS) 0.69 0.47 0.09 0.48 0.55 1.24 1.22

Diluted earnings per share 0.69 0.47 0.09 0.42 0.48 1.24 1.08

Common dividends 0.100 0.100 0.095 0.095 0.090 0.295 0.265

Book value per common share 18.73 17.97 17.64 17.53 17.28 18.73 17.3

Tangible book value per common share (TBV) 15.72 15.00 15.32 15.23 16.23 15.72 16.2

Fully converted TBV per common share - - - - 14.98 - 15.0

Market price per common share 13.49 16.62 11.12 19.69 16.72 13.49 16.7

Market price per preferred share - - - - 16.50 - 16.5

Market price to TBV 85.8% 110.8% 72.6% 129.2% 103.0% 85.8% 103.0%

Market price to fully converted TBV - - - - 111.6% - 111.6%

Market price to trailing 12 month EPS 8.0 11.4 8.4 13.0 11.5 8.0 11.5

PERFORMANCE RATIOS:

Return on average assets (ROAA) 1.73% 1.25% 0.26% 1.28% 1.44% 1.12% 1.13%

Pre-tax pre-provision ROAA 2.74% 1.99% 0.49% 1.67% 1.89% 1.81% 1.44%

Return on average equity 15.01% 10.31% 1.99% 9.93% 11.24% 9.74% 8.67%

Return on average tangible equity 17.93% 11.91% 2.29% 12.83% 14.67% 11.48% 11.35%

Efficiency ratio 57.48% 66.68% 87.81% 69.90% 65.85% 67.68% 71.12%

Earning asset yield 3.96% 3.95% 4.32% 4.80% 4.98% 4.08% 4.87%

Cost of interest bearing liabilities 0.75% 0.89% 1.12% 1.42% 1.33% 0.91% 1.27%

Net interest margin 3.39% 3.30% 3.47% 3.68% 3.91% 3.39% 3.85%

Tax equivalent effect 0.02% 0.02% 0.01% 0.02% 0.02% 0.02% 0.02%

Net interest margin, tax equivalent 3.41% 3.32% 3.48% 3.70% 3.93% 3.41% 3.87%

Non interest income/Average assets 3.42% 2.95% 0.81% 2.27% 2.06% 2.48% 1.58%

Non interest expense/Average assets 3.73% 3.99% 3.54% 3.87% 3.64% 3.79% 3.56%

Net noninterest expense/Average assets -0.30% -1.04% -2.73% -1.60% -1.58% -1.31% -1.98%

ASSET QUALITY RATIOS:

Gross charge-offs 32 254 400 51 128 686 208

Recoveries 11 10 3 14 15 24 33

Net charge-offs 21 244 397 37 113 662 175

Nonaccruing loans/Total loans 0.72% 0.72% 0.70% 0.67% 0.40% 0.72% 0.40%

Nonperforming loans/Total loans 0.81% 0.81% 0.79% 0.77% 0.50% 0.81% 0.50%

Nonperforming assets/Loans & OREO 0.82% 0.86% 0.80% 0.81% 0.56% 0.82% 0.56%

Nonperforming assets/Total assets 0.60% 0.64% 0.61% 0.64% 0.44% 0.60% 0.44%

Allowance for loan loss/Nonperforming loans 163.84% 136.45% 135.77% 137.35% 207.12% 163.84% 207.12%

Allowance for loan loss/Total loans 1.33% 1.11% 1.08% 1.06% 1.03% 1.33% 1.03%

Allowance for loan loss/Total loans less 1.47% 1.22% 1.08% 1.06% 1.03% 1.47% 1.03%PPP

Net loan charge-offs/Average loans (ann.) 0.01% 0.11% 0.19% 0.02% 0.05% 0.10% 0.03%

Loan loss provision/Net charge-offs 8571.43% 532.79% 151.13% 810.81% 265.49% 558.91% 285.71%

CAPITAL & LIQUIDITY RATIOS:

Loans/ Deposits 87.36% 91.01% 96.17% 98.25% 97.10% 87.36% 97.10%

Equity/ Assets 11.60% 11.46% 12.49% 13.10% 12.87% 11.60% 12.87%

Tangible equity/Tangible assets 9.92% 9.75% 11.03% 11.59% 10.07% 9.92% 10.07%

Tangible equity adjusted for conversion - - - - 11.36% - 11.36%

Common equity tier 1 ratio (Bank) 13.20% 11.97% 12.17% 12.46% 12.07% 13.20% 12.07%

END OF PERIOD BALANCES

Total assets 1,218,241 1,202,936 1,088,313 1,038,577 1,042,761 1,218,241 1,042,761

Total loans 885,850 901,548 830,764 825,510 823,367 885,850 823,367

Deposits 1,014,015 990,587 863,891 840,219 847,954 1,014,015 847,954

Stockholders equity 141,347 137,881 135,905 136,094 134,246 141,347 134,246

Goodwill and intangibles 22,763 22,813 17,830 17,832 17,834 22,763 17,834

Preferred equity - - - - 13,241 - 13,241

Tangible equity 118,584 115,068 118,075 118,262 103,171 118,584 103,171

Mortgage servicing portfolio 1,293,037 1,261,746 1,216,292 1,199,107 1,153,020 1,293,037 1,153,020

Wealth/Brokerage assets under care 522,360 495,025 427,129 507,670 484,295 522,360 484,295

Total assets under care 3,033,638 2,959,707 2,731,734 2,745,354 2,680,076 3,033,638 2,680,076

Full-time equivalent employees 251 254 253 252 247 251 247

Period end common shares outstanding 7,545 7,672 7,705 7,763 6,357 7,545 6,357

Period end outstanding (Series A Converted) - - - - 1,414 - 1,414

Market capitalization (all) 101,782 127,509 85,680 152,853 129,620 101,782 129,620

AVERAGE BALANCES

Total assets 1,216,843 1,169,030 1,061,365 1,051,071 1,043,791 1,141,008 1,020,074

Total earning assets 1,090,386 1,073,490 986,216 934,540 927,360 1,047,846 908,284

Total loans 907,483 898,216 832,975 828,108 829,699 879,536 803,431

Deposits 1,007,679 946,053 855,272 856,961 849,984 936,805 829,335

Stockholders equity 139,908 141,821 136,930 135,267 133,891 131,156 132,465

Goodwill and intangibles 22,787 19,066 17,831 17,833 17,835 19,813 17,518

Preferred equity - - - 12,707 13,459 - 13,771

Tangible equity 117,121 122,755 119,099 104,727 102,597 111,343 101,176

Average basic shares outstanding 7,607 7,708 7,756 6,445 6,397 7,700 6,459

Average diluted shares outstanding 7,607 7,708 7,756 7,799 7,876 7,700 7,955

SB FINANCIAL GROUP, INC.

Rate Volume Analysis - (Unaudited)

At and for the Three Months Ended September 30, 2020 and 2019

($ in thousands) Three Months Ended Sep. 30, 2020 Three Months Ended Sep. 30, 2019

Average Average Average Average

Assets Balance Interest Rate Balance Interest Rate

Taxable securities/Cash $ 176,821 $ 494 1.12% $ 89,782 $ 776 3.46%

Nontaxable securities 6,082 87 5.72% 7,879 81 4.11%

Loans, net 907,483 10,226 4.51% 829,699 10,689 5.15%

Total earning assets 1,090,386 10,807 3.96% 927,360 11,546 4.98%

Cash and due from banks 53,532 55,039

Allowance for loan losses (10,448) (8,392)

Premises and equipment 23,968 23,855

Other assets 59,405 45,929

Total assets $ 1,216,843 $ 1,043,791

Liabilities

Savings, MMDA and interest bearing demand $ 531,913 $ 690 0.52% $ 434,190 $ 769 0.71%

Time deposits 254,381 746 1.17% 272,433 1,489 2.19%

Repurchase agreements & other 23,811 12 0.20% 15,948 22 0.55%

Advances from Federal Home Loan Bank 8,272 59 2.85% 16,000 101 2.53%

Trust preferred securities 10,310 54 2.10% 10,310 107 4.15%

Total interest bearing liabilities 828,687 1,561 0.75% 748,881 2,488 1.33%

Non interest bearing demand 221,385 - 143,361 -

Total funding 1,050,072 0.59% 892,242 1.12%

Other liabilities 26,863 17,658

Total liabilities 1,076,935 909,900

Equity 139,908 133,891

Total liabilities and equity $ 1,216,843 $ 1,043,791

Net interest income $ 9,246 $ 9,058

Net interest income as a percent of average interest-earning assets - GAAP 3.39% 3.91% measure

Net interest income as a percent of average interest-earning assets - non GAAP 3.41% 3.93%

- Computed on a fully tax equivalent (FTE) basis

Nine Months Ended Sep. 30, 2020 Nine Months Ended Sep. 30, 2019

Average Average Average Average

Assets Balance Interest Rate Balance Interest Rate

Taxable securities $ 161,947 $ 1,696 1.40% $ 96,013 $ 2,489 3.46%

Nontaxable securities 6,363 246 5.15% 8,840 273 4.12%

Loans, net 879,536 30,104 4.56% 803,431 30,433 5.05%

Total earning assets 1,047,846 32,046 4.08% 908,284 33,195 4.87%

Cash and due from banks 28,040 46,797

Allowance for loan losses (9,560) (8,303)

Premises and equipment 23,855 23,643

Other assets 50,827 49,653

Total assets $ 1,141,008 $ 1,020,074

Liabilities

Savings, MMDA and interest bearing demand $ 483,156 $ 2,550 0.70% $ 426,436 $ 2,232 0.70%

Time deposits 253,398 2,315 1.22% 261,362 4,036 2.06%

Repurchase agreements & Other 21,856 60 0.37% 15,760 65 0.55%

Advances from Federal Home Loan Bank 16,263 251 2.06% 16,088 301 2.49%

Trust preferred securities 10,310 204 2.64% 10,310 331 4.28%

Total interest bearing liabilities 784,983 5,380 0.91% 729,956 6,965 1.27%

Non interest bearing demand 200,251 0.73% 141,537 1.07%

Total funding 985,234 871,493

Other liabilities 24,618 16,116

Total liabilities 1,009,852 887,609

Equity 131,156 132,465

Total liabilities and equity $ 1,141,008 $ 1,020,074

Net interest income $ 26,666 $ 26,230

Net interest income as a percent of average interest-earning assets - GAAP 3.39% 3.85% measure

Net interest income as a percent of average interest-earning assets - non GAAP 3.41% 3.87%

- Computed on a fully tax equivalent (FTE) basis

Non-GAAP reconciliation Three Months Ended Nine Months Ended

($ in thousands, except per share & ratios) Sep. 30, 2020 Sep. 30, 2019 Sep. 30, 2020 Sep. 30, 2019

Total operating revenue $ 19,677 $ 14,424 $ 47,873 $ 38,287

Adjustment to (deduct)/add OMSR impairment* (326) - 2,974 1,398

Adjusted total operating revenue 19,351 14,424 50,847 39,685

Total operating expense 11,335 9,500 32,403 27,234

Adjustment for merger expenses** - - (1,241) -

Adjusted total operating expense 11,335 9,500 31,162 27,234

Income before income taxes 6,542 4,624 11,770 10,553

Adjustment for OMSR & merger expense (326) - 4,215 1,398

Adjusted income before income taxes 6,216 4,624 15,985 11,951

Provision for income taxes 1,292 862 2,184 1,938

Adjustment for OMSR & merger expense*** (68) - 885 294

Adjusted provision for income taxes 1,224 862 3,069 2,233

Net income 5,250 3,762 9,586 8,615

Adjustment for OMSR & merger expense (258) - 3,330 1,104

Adjusted net income 4,992 3,762 12,916 9,720

Diluted earnings per share 0.69 0.48 1.25 1.08

Adjustment for OMSR & merger expense (0.04) - 0.42 0.14

Adjusted diluted earnings per share $ 0.65 $ 0.48 $ 1.67 $ 1.22

Return on average assets 1.73% 1.44% 1.12% 1.13%

Adjustment for OMSR & merger expense -0.08% 0.00% 0.29% 0.11%

Adjusted return on average assets 1.64% 1.44% 1.41% 1.23%

Pretax, preprovision income 8,342 4,924 15,470 11,053

Adjustment for OMSR & merger expense (326) - 4,215 1,398

Adjusted pretax, preprovision income 8,016 4,924 19,685 12,451

*valuation adjustment to the Company's mortgage servicing rights

**transactions costs related to the Edon acquisition

***tax effect is calculated using a 21% statutory federal corporate income tax rate

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SOURCE SB Financial Group, Inc.