UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 29, 2020 (July 27, 2020)

SB FINANCIAL GROUP, INC

(Exact name of registrant as specified in its charter)

Ohio

0-13507

34-1395608

(State or other jurisdiction
of incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

401 Clinton Street, Defiance, OH		43512
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (419) 783-8950

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registererd

Common Shares, No Par Value

7,655,878 Outstanding at July 29, 2020

SBFG

The NASDAQ Stock Market, LLC

(NASDAQ Capital Market)

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition.

On July 27, 2020, SB Financial Group, Inc. (the “Company”) issued a news release reporting financial results for the second quarter 2020. A copy of the July 27, 2020 news release is furnished as Exhibit 99.1 and is incorporated herein by reference.

The information in this Item 2.02, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that Section, nor shall such information be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in such filing.

Item 9.01. Financial Statements and Exhibits.

(a) Not Applicable

(b) Not Applicable

(d) Exhibits

Exhibit No.		Description
99.1		News release issued by SB Financial Group, Inc. on July 27, 2020, reporting financial results for the second quarter 2020.

-1-

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SB FINANCIAL GROUP, INC.

Dated: July 29, 2020	By:	/s/ Anthony V. Cosentino
		Anthony V. Cosentino
		Chief Financial Officer

-2-

INDEX TO EXHIBITS

Current Report on Form 8-K

Dated July 29, 2020

SB Financial Group, Inc.

Exhibit No.		Description
99.1		News release issued by SB Financial Group, Inc. on July 27, 2020, reporting financial results for the second quarter 2020.

-3-

Exhibit 99.1

SB Financial Group Announces Second Quarter 2020 Results

DEFIANCE, OH, July 27, 2020 -- 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 over 670 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 ($ in thousands, except ratios)	Jun. 2020			Mar. 2020			Dec. 2019			Sep. 2019			Jun. 2019			Annual 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. Klein

Chairman, President and

Chief Executive Officer

Mark.Klein@YourStateBank.com

Anthony V. Cosentino

Executive Vice President and

Chief Financial Officer

Tony.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)

	At and for the Three Months Ended													Six Months Ended
	June			March			December		September		June			June			June
($ in thousands, except per share & ratios)	2020			2020			2019		2019		2019			2020			2019
Interest income
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 & OMSR		8,119			1,949			3,048		2,495		1,678			10,068			2,870
Mortgage loan servicing fees, net		(1,880	)		(2,052	)		334		8		(459	)		(3,932	)		(739	)
Gain on sale of non-mortgage loans		107			104			250		462		216			211			543
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 expense		122			115			121		118		112			237			227
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 share	$	0.47		$	0.09		$	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)

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

	Three Months Ended Jun. 30, 2020								Three Months Ended Jun. 30, 2019
	Average					Average			Average					Average
($ in thousands)	Balance			Interest		Rate			Balance			Interest		Rate

Assets
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 measure							3.30	%							3.86	%

Net interest income as a percent of average interest-earning assets - non GAAP - Computed on a fully tax equivalent (FTE) basis							3.32	%							3.88	%

	Six Months Ended Jun. 30, 2020								Six Months Ended Jun. 30, 2019
	Average					Average			Average					Average
	Balance			Interest		Rate			Balance			Interest		Rate
Assets
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 measure							3.39	%							3.83	%

Net interest income as a percent of average interest-earning assets - non GAAP - Computed on a fully tax equivalent (FTE) basis							3.40	%							3.84	%

	Three Months Ended						Six Months Ended
Non-GAAP reconciliation ($ 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 tax rate