PR Newswire | Jul 27, 2020 04:16PM EDT

07/27 15:15 CDT

SB Financial Group Announces Second Quarter 2020 Results DEFIANCE, Ohio, July 27, 2020

DEFIANCE, Ohio, July 27, 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 second quarter and six months ended June 30, 2020.

Second quarter 2020 highlights over prior-year second quarter include:

* Net income of $3.7 million; diluted earnings per share ("EPS") of $0.47 * Adjusted net income, excluding the impact of the Originated Mortgage Servicing Rights ("OMSR") impairment of $1.1 million and Edon merger costs of $1.2 million with a combined after-tax impact of $1.8 million, was $5.5 million, with EPS of $0.71 * Mortgage origination volume of $223.7 million, an increase of $125.2 million, or 127.2 percent

Six months ended June 30, 2020, highlights over prior-year six months include:

* Net income of $4.3 million; adjusted for OMSR and merger costs of $3.6 million after-tax net income rises to $7.9 million, which was up $2.0 million, or 33.0 percent * Diluted EPS of $0.56; adjusted EPS of $1.03 * Return on Average Assets ("ROA") of 0.78 percent; adjusted ROA of 1.42 percent

Second quarter 2020 trailing twelve-month highlights include:

* Loan growth of $87.0 million, or 10.7 percent, which includes Paycheck Protection Program ("PPP") loan balances of $82.9 million and loans acquired in the Edon acquisition of $16.3 million. * Deposit growth of $151.2 million, or 18.0 percent, driven by PPP balances and the Edon acquisition * Mortgage origination volume of $620.5 million; servicing portfolio of $1.26 billion, which is up $0.15 billion, or 13.4 percent

Highlights Three Months Ended Six Months Ended

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

Operating revenue $ 17,487 $ 12,523 39.6% $ 28,196 $ 23,863 18.2%

Interest income 10,595 11,151 -5.0% 21,239 21,649 -1.9%

Interest expense 1,723 2,319 -25.7% 3,819 4,477 -14.7%

Net interest income 8,872 8,832 0.5% 17,420 17,172 1.4%

Provision for loan losses 1,300 200 550.0% 1,900 200 850.0%

Noninterest income 8,615 3,691 133.4% 10,776 6,691 61.1%

Noninterest expense 11,662 9,108 28.0% 21,068 17,734 18.8%

Net income 3,655 2,627 39.1% 4,336 4,853 -10.7%

Earnings per diluted share 0.47 0.33 42.4% 0.56 0.61 -8.2%

Return on average assets 1.25% 1.03% 21.4% 0.78% 0.96% -18.8%

Return on average equity 10.31% 7.92% 30.2% 6.22% 7.36% -15.5%

Non-GAAP Measures

Adjusted net income $ 5,495 $ 3,172 73.2% $ 7,923 $ 5,958 33.0%

Adjusted diluted EPS 0.71 0.40 77.5% 1.03 0.75 37.3%

Adjusted return on average assets 1.88% 1.09% 72.5% 1.42% 1.18% 20.3%

Adjusted pre-tax, pre-provision income 8,154 4,105 98.6% 11,668 7,527 55.0%

"SB Financial's second quarter results reflect the efforts of our staff working at full capacity to best serve our residential mortgage and small business clients and to integrate the Edon acquisition. Despite an OMSR impairment of $1.1 million and merger costs of $1.2 million, our GAAP diluted EPS were up 42 percent from the prior year. Adjusting for those events, EPS of $0.71 were up 78 percent from $0.40 in the prior year, reflecting the success of our balance sheet growth and revenue diversity strategies" said Mark A. Klein, Chairman, President, and CEO of SB Financial. "Our offices are back open and we remain committed to serving all of our clients in a safe and productive manner as we monitor the COVID-19 situation."

RESULTS OF OPERATIONS

Consolidated Revenue

Total operating revenue, consisting of net interest income and noninterest income, was up 39.6 percent from the second quarter of 2019, and up 63.3 percent to the linked quarter.

* Net interest income was flat from the year-ago quarter, and up 3.8 percent from the linked quarter. * Net interest margin on a fully taxable equivalent basis (FTE) was down from both year-ago and linked quarters by 56 and 16 basis points, respectively as cash balances were higher and the PPP loans held down loan yields. * Noninterest income was up 133 and 299 percent from the year ago and linked quarters, respectively.

Mortgage Loan Business

Mortgage loan originations for the second quarter of 2020 were $223.7 million, up $125.2 million, or 127.2 percent, from the year-ago quarter. Total sales of originated loans were $204.6 million, up $133.6 million, or 188.2 percent, from the year-ago quarter. Refinance activity accelerated in the quarter, with total internal refinance volume of $88.4 million or 39 percent, compared to 19 percent for all of 2019. For the first six months, SB Financial had total volume of $325.0 million, of which $113.1 million (35 percent) was internal refinance, $100.7 million was external refinance (31 percent), and the remaining $111.2 million was new purchase/construction lending.

Net mortgage banking revenue, consisting of gains on the sale of mortgage loans and net loan servicing fees, was $6.2 million for the second quarter of 2020, compared to $1.2 million for the year-ago quarter. The mortgage servicing valuation adjustment for the second quarter of 2020 was a negative $1.1 million, compared to a negative adjustment of $0.7 million for the second quarter of 2019. For the first six months, the impairment on servicing rights was $3.3 million compared to $1.4 million for the prior year six months. The aggregate servicing valuation impairment ended the quarter at $4.6 million. The servicing portfolio at June 30, 2020, was $1.26 billion, up $0.15 billion, or 13.4 percent, from $1.11 billion at June 30, 2019. Normal amortization is up 242 percent from the prior year due to higher refinance activity.

Mr. Klein noted, "Mortgage volume accelerated again in the quarter as we originated over $223 million in volume. Given the volatility in the mortgage markets early in the quarter, our disciplined approach was critical in achieving the record number of originations and sales in the quarter. We remain very bullish on the mortgage business and our pipelines in all markets are near capacity."

Mortgage Banking

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

Mortgage originations $ 223,671 $ 101,365 $ 137,528 $ 157,947 $ 98,447

Mortgage sales 204,628 84,476 127,441 125,386 70,993

Mortgage servicing portfolio 1,261,746 1,216,292 1,199,107 1,153,020 1,112,857

Mortgage servicing rights 8,168 8,974 11,017 10,447 10,264

Mortgage servicing revenue

Loan servicing fees 782 757 740 709 691

OMSR amortization (1,574) (597) (709) (701) (460)

Net administrative fees (792) 160 31 8 231

OMSR valuation adjustment (1,088) (2,212) 303 - (690)

Net loan servicing fees (1,880) (2,052) 334 8 (459)

Gain on sale of mortgages 8,119 1,949 3,048 2,495 1,678

Mortgage banking revenue, net $ $ $ $ $ 6,239 (103) 3,382 2,503 1,219

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. SBA and USDA activity outside of the PPP program for the quarter consisted of total origination volume of $0.1 million, with sales volume of $0.4 million resulting in gains of $0.07 million. Wealth management assets under the Company's care rebounded to $495.0 million as of June 30, 2020. For the second quarter of 2020, noninterest income as a percentage of total operating revenue was 49.3 percent. Reflective of the robust mortgage market, SB Financial's Title Agency provided revenue in the quarter of $0.6 million, up 98 percent from the prior year.

For the second quarter of 2020, noninterest expense of $11.7 million was up $2.6 million compared to the prior year or 28.0 percent. Excluding the $1.2 million of legal, technology and processing costs incurred for the Edon merger, year-over-year growth was 15.4 percent, which is driven by higher mortgage commission and higher expenses in the Title Agency.

Mr. Klein stated, "We actively participated in the SBA's PPP program and helped nearly 650 small business clients with $83 million in loans on our way to help preserve over 9,000 jobs. Our efforts rested exclusively with the small business owner as our average loan size was $124 thousand and our median loan size was $42 thousand; just 15 clients borrowed in excess of $1.0 million. Interest and fees from these loans increased revenue in the quarter by $450,000; the remaining deferred fees associated with the PPP initiative now stands at $2.7 million. We were especially pleased with the nearly 200 new relationships we were able to garner by our participation in the program. In the aggregate, net non-interest expense was the lowest ever at -1.0 percent and led to a positive adjusted operating leverage for the first half of 2020."

Noninterest Income / Noninterest Expense

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

Noninterest Income (NII) $ 8,615 $ 2,161 $ 5,959 $ 5,366 $ 3,691

NII / Total Revenue 49.3% 20.2% 40.9% 37.2% 29.5%

NII / Average Assets 3.0% 0.8% 2.3% 2.1% 1.5%

Noninterest Expense (NIE) $ 11,662 $ 9,406 $ 10,176 $ 9,500 $ 9,108

Efficiency Ratio 66.7% 87.8% 69.9% 65.9% 72.7%

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

Net Noninterest Expense/Avg. Assets -1.0% -2.7% -1.6% -1.6% -2.1%

Balance Sheet

Total assets as of June 30, 2020, were $1.2 billion, up $173.8 million, or 16.9 percent, from the year ago quarter due to the impact of the Edon acquisition ($68.1 million) and the PPP activity. Total equity as of June 30, 2020, was $137.9 million, up 2.9 percent from a year ago, and comprised 11.5 percent of total assets.

Total loans held for investment were $901.5 million at June 30, 2020, up $87.0 million, or 10.7 percent, from June 30, 2019. Commercial loans were up $78.3 million, or 54.5 percent, commercial real estate up $15.0 million or 4.1 percent and agricultural loans increasing $4.5 million or 8.3 percent. The Edon acquisition added $16.3 million in loan balances. Absent the effects of the Edon acquisition and PPP loans, loan balances were down $12.0 million from the year ago quarter.

The investment portfolio of $109.1 million, including shares in the Federal Reserve Bank and Federal Home Loan Bank, represented 9.1 percent of assets at June 30, 2020, and was up 21.4 percent from the year-ago period. Deposit balances of $990.6 million at June 30, 2020, increased by $151.2 million, or 18.0 percent, since June 30, 2019. Growth from the prior year included $112.2 million in checking and $39.0 million in savings and time deposit balances. The Edon acquisition added $52.3 million in deposit balances and retention of PPP funding in the Bank increased checking deposits significantly.

Mr. Klein continued, "A large percentage of our PPP clients have retained their loan balances in their operating accounts and the successful integration of the Edon acquisition added to our deposit balances in the quarter. Like all banks we have seen some weakness in certain industries and our nonperforming assets to total assets increased to 64 basis points at quarter end, up 21 basis points from the prior year. We did set aside much higher reserves in the quarter, totaling $1.3 million."

Loan Balances

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

Commercial $ 222,108 $ 151,538 $ 151,018 $ 145,147 $ 143,798 $ 78,310

% of Total 24.6% 18.2% 18.3% 17.6% 17.7% 54.5%

Commercial RE 375,450 378,212 369,962 362,580 360,491 14,959

% of Total 41.6% 45.5% 44.8% 44.0% 44.2% 4.1%

Agriculture 58,817 47,660 50,994 51,946 54,317 4,500

% of Total 6.5% 5.7% 6.2% 6.3% 6.7% 8.3%

Residential RE 184,684 189,738 189,290 199,036 191,642 -6,958

% of Total 20.6% 22.9% 22.9% 24.2% 23.5% -3.6%

Consumer & Other 60,489 63,616 64,246 64,658 64,261 -3,772

% of Total 6.7% 7.7% 7.8% 7.9% 7.9% -5.9%

Total Loans $ 901,548 $ 830,764 $ 825,510 $ 823,367 $ 814,509 $ 87,039

Total Growth Percentage 10.7%

Deposit Balances

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

Non-Int DDA $ 229,042 $ 170,920 $ 158,357 $ 152,932 $ 141,216 $ 87,826

% of Total 23.1% 19.8% 18.8% 18.0% 16.8% 62.2%

Interest DDA 154,143 133,722 131,084 131,655 129,710 24,433

% of Total 15.6% 15.5% 15.6% 15.5% 15.5% 18.8%

Savings 161,182 138,863 119,359 121,991 118,931 42,251

% of Total 16.2% 16.0% 14.1% 14.3% 14.1% 35.5%

Money Market 189,380 169,209 173,666 173,237 175,455 13,925

% of Total 19.1% 19.6% 20.7% 20.4% 20.9% 7.9%

Time Deposits 256,840 251,177 257,753 268,139 274,062 (17,222)

% of Total 25.9% 29.1% 30.8% 31.8% 32.7% -6.3%

Total Deposits $ 990,587 $ 863,891 $ 840,219 $ 847,954 $ 839,374 $ 151,213

Total Growth Percentage 18.0%

Asset Quality

SB Financial reported nonperforming assets of $7.7 million as of June 30, 2020, up $3.3 million from the year-ago quarter. The Company took $0.2 million in charge-offs in the quarter and expects further pressure on the portfolio due to the COVID-19 impact. The coverage of problem loans by the loan loss allowance was at 136 percent at June 30, 2020, down from 212 percent at June 30, 2019. The Company continued to provide payment relief to clients as needed, with total forbearance as of June 30, 2020 of 510 loans at $195.1 million. The detail on these deferrals; 200 commercial at $142.7 million, 62 portfolio residential and consumer at $10.6 million and 248 sold residential real estate at $41.8 million.

Nonperforming Assets Annual

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

Commercial & Agriculture $ 1,204 $ 1,309 $ 1,772 $ 834 $ 674 $ 530

% of Total Com./Ag. loans 0.43% 0.66% 0.88% 0.42% 0.34% 78.6%

Commercial RE 2,484 1,816 1,826 262 208 2,276

% of Total CRE loans 0.66% 0.48% 0.49% 0.07% 0.06% 1094.2%

Residential RE 2,538 2,330 1,635 1,763 1,768 770

% of Total Res. RE loans 1.37% 1.23% 0.86% 0.89% 0.92% 43.6%

Consumer & Other 308 327 267 416 456 (148)

% of Total Con./Oth. loans 0.51% 0.51% 0.42% 0.64% 0.71% -32.5%

Total Nonaccruing Loans 6,534 5,782 5,500 3,275 3,106 3,428

% of Total loans 0.72% 0.70% 0.67% 0.40% 0.38% 110.4%

Accruing Restructured Loans 804 816 874 825 814 (10)

Total Change (%) -1.2%

Total Nonaccruing & Restructured Loans 7,338 6,598 6,374 4,100 3,920 3,418

% of Total loans 0.81% 0.79% 0.77% 0.50% 0.48% 87.2%

Foreclosed Assets 382 85 305 489 530 (148)

Total Change (%) -27.9%

Total Nonperforming Assets $ 7,720 $ 6,683 $ 6,679 $ 4,589 $ 4,450 $ 3,270

% of Total assets 0.64% 0.61% 0.64% 0.44% 0.43% 73.5%

Webcast and Conference Call

The Company will hold a related conference call and webcast on July 28, 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 21 offices; 20 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)

June March December September June

($ in thousands) 2020 2020 2019 2019 2019

ASSETS

Cash and due from banks $ 96,203 $ 56,393 $ 27,064 $ 49,824 $ 42,786

Available-for-sale securities 104,289 107,727 100,948 77,029 85,261

Loans held for sale 13,742 11,328 7,258 13,655 9,579

Loans, net of unearned income 901,548 830,764 825,510 823,367 814,509

Allowance for loan losses (10,013) (8,958) (8,755) (8,492) (8,306)

Premises and equipment, net 23,662 23,599 23,385 23,898 23,150

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

Foreclosed assets held for sale, net 382 85 305 489 530

Interest receivable 4,272 2,940 3,106 3,176 3,209

Goodwill and other intangibles 22,813 17,830 17,832 17,834 17,836

Cash value of life insurance 17,375 17,299 17,221 17,137 17,051

Mortgage servicing rights 8,168 8,974 11,017 10,447 10,264

Other assets 15,658 15,684 9,038 9,749 8,606

Total assets $ 1,202,936 $ 1,088,313 $ 1,038,577 $ 1,042,761 $ 1,029,123

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits

Non interest bearing demand $ 229,042 $ 170,920 $ 158,357 $ 152,932 $ 141,216

Interest bearing demand 154,143 133,722 131,084 131,655 129,710

Savings 161,182 138,863 119,359 121,991 118,931

Money market 189,380 169,209 173,666 173,237 175,455

Time deposits 256,840 251,177 257,753 268,139 274,062

Total deposits 990,587 863,891 840,219 847,954 839,374

Short-term borrowings 23,826 36,881 12,945 14,659 13,968

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

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

Interest payable 929 1,131 1,191 1,391 1,188

Other liabilities 26,403 24,195 21,818 18,201 14,346

Total liabilities 1,065,055 952,408 902,483 908,515 895,186

Shareholders' Equity

Preferred stock - - - 13,241 13,978

Common stock 54,463 54,463 54,463 41,223 40,486

Additional paid-in capital 14,780 14,655 15,023 15,219 15,259

Retained earnings 75,526 72,641 72,704 70,184 67,236

Accumulated other comprehensive income (loss) 2,320 2,049 659 900 801

Treasury stock (9,208) (7,903) (6,755) (6,521) (3,823)

Total shareholders' equity 137,881 135,905 136,094 134,246 133,937

Total liabilities and shareholders' equity $ 1,202,936 $ 1,088,313 $ 1,038,577 $ 1,042,761 $ 1,029,123

SB FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME - (Unaudited)

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

June March December September June June June

Interest income 2020 2020 2019 2019 2019 2020 2019

Loans

Taxable $ 9,945 $ 9,795 $ 10,313 $ 10,607 $ 10,182 $ 19,740 $ 19,609

Tax exempt 59 79 83 82 73 138 135

Securities

Taxable 510 692 737 776 802 1,202 1,713

Tax exempt 81 78 72 81 94 159 192

Total interest income 10,595 10,644 11,205 11,546 11,151 21,239 21,649

Interest expense

Deposits 1,549 1,880 2,392 2,258 2,092 3,429 4,010

Repurchase agreements & other 20 28 17 22 17 48 43

Federal Home Loan Bank advances 92 100 101 101 100 192 200

Trust preferred securities 62 88 99 107 110 150 224

Total interest expense 1,723 2,096 2,609 2,488 2,319 3,819 4,477

Net interest income 8,872 8,548 8,596 9,058 8,832 17,420 17,172

Provision for loan losses 1,300 600 300 300 200 1,900 200

Net interest income after provision

for loan losses 7,572 7,948 8,296 8,758 8,632 15,520 16,972

Noninterest income

Wealth management fees 775 768 801 775 783 1,543 1,517

Customer service fees 667 682 712 729 689 1,349 1,320

Gain on sale of mtg. loans & 8,119 1,949 3,048 2,495 1,678 10,068 2,870 OMSR

Mortgage loan servicing fees, (1,880) (2,052) 334 8 (459) (3,932) (739) net

Gain on sale of non-mortgage 107 104 250 462 216 211 543 loans

Title insurance revenue 609 265 393 400 308 874 327

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

Gain (loss) on sale of assets (80) (46) 1 1 (5) (126) (7)

Other 298 491 420 496 275 789 654

Total noninterest income 8,615 2,161 5,959 5,366 3,691 10,776 6,691

Noninterest expense

Salaries and employee benefits 6,419 5,427 6,142 5,715 5,305 11,846 10,207

Net occupancy expense 675 698 675 656 627 1,373 1,272

Equipment expense 780 700 764 688 665 1,480 1,376

Data processing fees 1,288 548 543 499 488 1,836 931

Professional fees 1,224 757 639 571 649 1,981 1,266

Marketing expense 141 208 171 239 246 349 485

Telephone and communication 122 115 121 118 112 237 227 expense

Postage and delivery expense 96 115 86 89 81 211 165

State, local and other taxes 262 254 347 243 247 516 502

Employee expense 93 184 207 199 236 277 389

Other expenses 562 400 481 483 452 962 914

Total noninterest expense 11,662 9,406 10,176 9,500 9,108 21,068 17,734

Income before income tax expense 4,525 703 4,079 4,624 3,215 5,228 5,929

Income tax expense 870 22 721 862 588 892 1,076

Net income $ 3,655 $ 681 $ $ $ $ $ 3,358 3,762 2,627 4,336 4,853

Preferred share dividends - - 230 233 243 - 487

Net income available to common shareholders 3,655 681 3,128 3,529 2,384 4,336 4,366

Common share data:

Basic earnings per common share $ 0.47 $ 0.09 $ $ $ $ $ 0.48 0.55 0.37 0.56 0.68

Diluted earnings per common $ 0.47 $ 0.09 $ $ $ $ $ share 0.42 0.48 0.33 0.56 0.61

Average shares outstanding (in thousands):

Basic: 7,708 7,756 6,445 6,397 6,454 7,750 6,469

Diluted: 7,708 7,756 7,799 7,876 7,967 7,750 7,982

SB FINANCIAL GROUP, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS - (Unaudited)

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

June March December September June June June

SUMMARY OF OPERATIONS 2020 2020 2019 2019 2019 2020 2019

Net interest income $ 8,872 $ 8,548 $ 8,596 $ 9,058 $ 8,832 $ 17,420 $ 17,172

Tax-equivalent adjustment 37 42 41 43 44 79 87

Tax-equivalent net interest income 8,909 8,590 8,637 9,101 8,876 17,499 17,259

Provision for loan loss 1,300 600 300 300 200 1,900 200

Noninterest income 8,615 2,161 5,959 5,366 3,691 10,776 6,691

Total operating revenue 17,487 10,709 14,555 14,424 12,523 28,196 23,863

Noninterest expense 11,662 9,406 10,176 9,500 9,108 21,068 17,734

Pre-tax pre-provision income 5,825 1,303 4,379 4,924 3,415 7,128 6,129

Pretax income 4,525 703 4,079 4,624 3,215 5,228 5,929

Net income 3,655 681 3,358 3,762 2,627 4,336 4,853

Net income available to common shareholders 3,655 681 3,128 3,529 2,384 4,336 4,366

PER SHARE INFORMATION:

Basic earnings per share (EPS) 0.47 0.09 0.48 0.55 0.37 0.56 0.68

Diluted earnings per share 0.47 0.09 0.42 0.48 0.33 0.56 0.61

Common dividends 0.100 0.095 0.095 0.090 0.090 0.195 0.175

Book value per common share 17.97 17.64 17.53 17.28 16.89 17.97 16.89

Tangible book value per common share (TBV) 15.00 15.32 15.23 16.23 15.83 15.00 15.83

Fully converted TBV per common share - - - 14.98 14.64 - 14.64

Market price per common share 16.62 11.12 19.69 16.72 16.46 16.62 16.46

Market price per preferred share - - - 16.50 16.10 - 16.10

Market price to TBV 110.8% 72.6% 129.2% 103.0% 104.0% 110.8% 104.0%

Market price to fully converted TBV - - - 111.6% 112.4% - 112.4%

Market price to trailing 12 month EPS 11.4 8.4 13.0 11.5 12.1 11.4 12.1

PERFORMANCE RATIOS:

Return on average assets (ROAA) 1.25% 0.26% 1.28% 1.44% 1.03% 0.78% 0.96%

Pre-tax pre-provision ROAA 1.99% 0.49% 1.67% 1.89% 1.34% 1.28% 1.22%

Return on average equity 10.31% 1.99% 9.93% 11.24% 7.92% 6.22% 7.36%

Return on average tangible equity 11.91% 2.29% 12.83% 14.67% 10.41% 7.17% 9.65%

Efficiency ratio 66.68% 87.81% 69.90% 65.85% 72.71% 74.71% 74.30%

Earning asset yield 3.95% 4.32% 4.80% 4.98% 4.88% 4.13% 4.82%

Cost of interest bearing liabilities 0.89% 1.12% 1.42% 1.33% 1.28% 1.00% 1.24%

Net interest margin 3.30% 3.47% 3.68% 3.91% 3.86% 3.39% 3.83%

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

Net interest margin, tax equivalent 3.32% 3.48% 3.70% 3.93% 3.88% 3.40% 3.84%

Non interest income/Average assets 2.95% 0.81% 2.27% 2.06% 1.45% 1.93% 1.33%

Non interest expense/Average assets 3.99% 3.54% 3.87% 3.64% 3.58% 3.78% 3.52%

Net noninterest expense/Average assets -1.04% -2.73% -1.60% -1.58% -2.13% -1.85% -2.19%

ASSET QUALITY RATIOS:

Gross charge-offs 254 400 51 128 20 654 80

Recoveries 10 3 14 15 5 13 18

Net charge-offs 244 397 37 113 15 641 62

Nonaccruing loans/Total loans 0.72% 0.70% 0.67% 0.40% 0.38% 0.72% 0.38%

Nonperforming loans/Total loans 0.81% 0.79% 0.77% 0.50% 0.48% 0.81% 0.48%

Nonperforming assets/Loans & OREO 0.86% 0.80% 0.81% 0.56% 0.55% 0.86% 0.55%

Nonperforming assets/Total assets 0.64% 0.61% 0.64% 0.44% 0.43% 0.64% 0.43%

Allowance for loan loss/Nonperforming loans 136.45% 135.77% 137.35% 207.12% 211.89% 136.45% 211.89%

Allowance for loan loss/Total loans 1.11% 1.08% 1.06% 1.03% 1.02% 1.11% 1.02%

Net loan charge-offs/Average loans (ann.) 0.11% 0.19% 0.02% 0.05% 0.01% 0.15% 0.02%

Loan loss provision/Net charge-offs 532.79% 151.13% 810.81% 265.49% 1333.33% 296.41% 322.58%

CAPITAL & LIQUIDITY RATIOS:

Loans/ Deposits 91.01% 96.17% 98.25% 97.10% 97.04% 91.01% 97.04%

Equity/ Assets 11.46% 12.49% 13.10% 12.87% 13.01% 11.46% 13.01%

Tangible equity/Tangible assets 9.75% 11.03% 11.59% 10.07% 10.10% 9.75% 10.10%

Tangible equity adjusted for conversion - - - 11.36% 11.48% - 11.48%

Common equity tier 1 ratio (Bank) 6/20 estimate 11.21% 12.17% 12.46% 12.07% 12.53% 11.21% 12.53%

END OF PERIOD BALANCES

Total assets 1,202,936 1,088,313 1,038,577 1,042,761 1,029,123 1,202,936 1,029,123

Total loans 901,548 830,764 825,510 823,367 814,509 901,548 814,509

Deposits 990,587 863,891 840,219 847,954 839,374 990,587 839,374

Stockholders equity 137,881 135,905 136,094 134,246 133,937 137,881 133,937

Goodwill and intangibles 22,813 17,830 17,832 17,834 17,836 22,813 17,836

Preferred equity - - - 13,241 13,978 - 13,978

Tangible equity 115,068 118,075 118,262 103,171 102,123 115,068 102,123

Mortgage servicing portfolio 1,261,746 1,216,292 1,199,107 1,153,020 1,112,857 1,261,746 1,112,857

Wealth/Brokerage assets under care 495,025 427,129 507,670 484,295 479,442 495,025 479,442

Total assets under care 2,959,707 2,731,734 2,745,354 2,680,076 2,621,422 2,959,707 2,621,422

Full-time equivalent employees 254 253 252 247 250 254 250

Period end common shares outstanding 7,672 7,705 7,763 6,357 6,451 7,672 6,451

Period end outstanding (Series A Converted) - - - 1,414 1,478 - 1,478

Market capitalization (all) 127,509 85,680 152,853 129,620 130,324 127,509 130,324

AVERAGE BALANCES

Total assets 1,169,030 1,061,365 1,051,071 1,043,791 1,016,493 1,115,527 1,008,559

Total earning assets 1,073,490 986,216 934,540 927,360 914,652 1,028,114 897,611

Total loans 898,216 832,975 828,108 829,699 804,716 865,595 790,080

Deposits 946,053 855,272 856,961 849,984 827,615 900,812 819,252

Stockholders equity 141,821 136,930 135,267 133,891 132,734 139,521 131,861

Goodwill and intangibles 19,066 17,831 17,833 17,835 17,837 18,537 17,359

Preferred equity - - 12,707 13,459 13,978 - 13,978

Tangible equity 122,755 119,099 104,727 102,597 100,919 120,984 100,524

Average basic shares outstanding 7,708 7,756 6,445 6,397 6,454 7,750 6,469

Average diluted shares outstanding 7,708 7,756 7,799 7,876 7,967 7,750 7,982

SB FINANCIAL GROUP, INC.

Rate Volume Analysis - (Unaudited)

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

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

Average Average Average Average

Assets Balance Interest Rate Balance Interest Rate

Taxable securities/Cash $ 168,373 $ 510 1.21% $ 100,768 $ 802 3.18%

Nontaxable securities 6,901 81 4.69% 9,168 94 4.10%

Loans, net 898,216 10,004 4.46% 804,716 10,255 5.10%

Total earning assets 1,073,490 10,595 3.95% 914,652 11,151 4.88%

Cash and due from banks 18,937 36,908

Allowance for loan losses (9,369) (8,232)

Premises and equipment 23,896 23,555

Other assets 62,076 49,610

Total assets $ 1,169,030 $ 1,016,493

Liabilities

Savings, MMDA and interest bearing demand $ 473,793 $ 1,220 1.03% $ 422,327 $ 740 0.70%

Time deposits 251,482 334 0.53% 261,746 1,352 2.07%

Repurchase agreements & other 19,200 20 0.42% 13,645 17 0.50%

Advances from Federal Home Loan Bank 24,472 92 1.50% 16,000 100 2.50%

Trust preferred securities 10,310 62 2.41% 10,310 110 4.27%

Total interest bearing liabilities 779,257 1,728 0.89% 724,028 2,319 1.28%

Non interest bearing demand 220,778 - 143,542 -

Total funding 1,000,035 0.69% 867,570 1.07%

Other liabilities 27,174 16,189

Total liabilities 1,027,209 883,759

Equity 141,821 132,734

Total liabilities and equity $ 1,169,030 $ 1,016,493

Net interest income $ 8,867 $ 8,832

Net interest income as a percent of average interest-earning assets - GAAP 3.30% 3.86% measure

Net interest income as a percent of average interest-earning assets - non GAAP 3.32% 3.88%

- Computed on a fully tax equivalent (FTE) basis

Six Months Ended Jun. 30, 2020 Six Months Ended Jun. 30, 2019

Average Average Average Average

Assets Balance Interest Rate Balance Interest Rate

Taxable securities $ 155,787 $ 1,202 1.54% $ 98,203 $ 1,713 3.49%

Nontaxable securities 6,732 159 4.72% 9,328 192 4.12%

Loans, net 865,595 19,878 4.59% 790,080 19,744 5.00%

Total earning assets 1,028,114 21,239 4.13% 897,611 21,649 4.82%

Cash and due from banks 12,693 41,724

Allowance for loan losses (9,118) (8,258)

Premises and equipment 23,797 23,536

Other assets 60,041 53,946

Total assets $ 1,115,527 $ 1,008,559

Liabilities

Savings, MMDA and interest bearing demand $ 458,116 $ 2,303 1.01% $ 422,494 $ 1,462 0.69%

Time deposits 252,912 1,131 0.89% 255,734 2,548 1.99%

Repurchase agreements & Other 20,868 48 0.46% 15,663 43 0.55%

Advances from Federal Home Loan Bank 20,302 192 1.89% 16,133 200 2.48%

Trust preferred securities 10,310 150 2.91% 10,310 224 4.35%

Total interest bearing liabilities 762,508 3,824 1.00% 720,334 4,477 1.24%

Non interest bearing demand 189,784 0.80% 141,024 1.04%

Total funding 952,292 861,358

Other liabilities 23,714 15,340

Total liabilities 976,006 876,698

Equity 139,521 131,861

Total liabilities and equity $ 1,115,527 $ 1,008,559

Net interest income $ 17,415 $ 17,172

Net interest income as a percent of average interest-earning assets - GAAP 3.39% 3.83% measure

Net interest income as a percent of average interest-earning assets - non GAAP 3.40% 3.84%

- Computed on a fully tax equivalent (FTE) basis

Non-GAAP reconciliation Three Months Ended Six Months Ended

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

Total Operating Revenue $ 17,487 $ 12,523 $ 28,196 $ 23,863

Adjustment to (deduct)/add OMSR impairment* 1,088 690 3,300 1,398

Adjusted Total Operating Revenue 18,575 13,213 31,496 25,261

Total Operating Expense $ 11,662 $ 9,108 $ 21,068 $ 17,734

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

Adjusted Total Operating Expense 10,421 9,108 19,827 17,734

Income before Income Taxes 4,525 3,215 5,228 5,929

Adjustment for OMSR & merger expense 2,329 690 4,541 1,398

Adjusted Income before Income Taxes 6,854 3,905 9,769 7,327

Provision for Income Taxes 870 588 892 1,076

Adjustment for OMSR & merger expense*** 489 145 954 294

Adjusted Provision for Income Taxes 1,359 733 1,846 1,371

Net Income 3,655 2,627 4,336 4,853

Adjustment for OMSR & merger expense 1,840 545 3,587 1,104

Adjusted Net Income 5,495 3,172 7,923 5,958

Diluted Earnings per Share 0.47 0.33 0.56 0.61

Adjustment for OMSR & merger expense 0.24 0.07 0.46 0.14

Adjusted Diluted Earnings per Share $ 0.71 $ 0.40 $ 1.02 $ 0.75

Return on Average Assets 1.25% 1.03% 0.78% 0.96%

Adjustment for OMSR & merger expense 0.63% 0.05% 0.64% 0.11%

Adjusted Return on Average Assets 1.88% 1.09% 1.42% 1.07%

*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 taxrate

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SOURCE SB Financial Group, Inc.