SB Financial Group Inc.

08/02/2021 | Press release | Distributed by Public on 08/02/2021 11:59

SB Financial Group Announces Second Quarter 2021 Results (Form 8-K)

SB Financial Group Announces Second Quarter 2021 Results

DEFIANCE, OH, July 26, 2021 -- 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, 2021.

Second quarter 2021 highlights over prior-year second quarter include:

● Net income of $3.8 million; diluted earnings per share ('EPS') of $0.52 or a 10.6 percent increase
● Adjusted net income, excluding the impact of the Originated Mortgage Servicing Rights ('OMSR') impairment of $0.1 million was $3.84 million, with EPS of $0.53
● Mortgage origination volume of $164.9 million, reflects a decrease of $58.8 million, or 26.3 percent

Six months ended June 30, 2021, highlights over prior-year six months include:

● Net income of $10.8 million and diluted EPS of $1.49, compared to $4.3 million, or $0.56 per share or a 166.1 percent increase
● Adjusted net income, excluding the impact of OMSR activity and merger costs of $8.8 million, up $0.9 million or 10.9 percent
● Adjusted diluted EPS of $1.21, up $0.18 per share or 17.5 percent

Second quarter 2021 trailing twelve-month highlights include:

● Loans excluding Paycheck Protection Program ('PPP') loan balances of $34.8 million, decreased $3.0 million, or 0.4 percent from the prior year
● Deposits grew by $100.4 million, or 10.1 percent to $1.09 billion at quarter end
● Mortgage origination volume of $689.9 million; servicing portfolio of $1.32 billion, which is up $1.2 million, or 4.9 percent
Highlights
($ in thousands, except per 		Three Months Ended Six Months Ended
share & ratios) Jun. 2021 Jun. 2020 % Change Jun. 2021 Jun. 2020 % Change
Operating revenue $ 15,694 $ 17,487 -10.3 % $ 36,241 $ 28,196 28.5 %
Interest income 10,163 10,595 -4.1 % 20,868 21,239 -1.7 %
Interest expense 1,006 1,723 -41.6 % 2,086 3,819 -45.4 %
Net interest income 9,157 8,872 3.2 % 18,782 17,420 7.8 %
Provision for loan losses - 1,300 -100.0 % 750 1,900 -60.5 %
Noninterest income 6,537 8,615 -24.1 % 17,459 10,776 62.0 %
Noninterest expense 11,076 11,662 -5.0 % 21,985 21,068 4.4 %
Net income 3,761 3,655 2.9 % 10,842 4,336 150.0 %
Earnings per diluted share 0.52 0.47 10.6 % 1.49 0.56 166.1 %
Return on average assets 1.13 % 1.25 % -9.6 % 1.66 % 0.78 % 112.8 %
Return on average equity 10.42 % 10.31 % 1.1 % 15.09 % 6.22 % 142.6 %
Non-GAAP Measures
Adjusted net income $ 3,840 $ 5,495 -30.1 % $ 8,783 $ 7,923 10.9 %
Adjusted diluted EPS 0.53 0.71 -25.4 % 1.21 1.03 17.5 %
Adjusted return on average assets 1.16 % 1.88 % -38.3 % 1.50 % 1.42 % 5.6 %
Adjusted pre-tax, pre-provision income 4,717 8,154 -42.2 % 10,900 11,669 -6.6 %

'We began to see some return to normalcy in our second quarter results' said Mark A. Klein, Chairman, President, and CEO of SB Financial. 'We achieved month over month loan growth in May and June and despite market headwinds, our mortgage team originated nearly $165 million in volume this quarter. We also successfully completed a debt raise in the quarter, which will serve us well as we look to grow our Company in the coming years.'

RESULTS OF OPERATIONS

Consolidated Revenue

Total operating revenue, consisting of net interest income and noninterest income, was down 10.3 percent from the second quarter of 2020, and down 23.6 percent from the linked quarter.

● Net interest income was up from the year-ago quarter by 3.2 percent, but down 4.9 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 38 and 27 basis points, respectively, as cash balances continued to be higher than normal and PPP forgiveness slowed.
● Noninterest income was down 24 and 40 percent from the year ago and linked quarters, respectively, due to lower mortgage volume and no OMSR recapture.

Mortgage Loan Business

Mortgage loan originations for the second quarter of 2021 were $164.9 million, down $58.8 million, or 26.3 percent, from the year-ago quarter. Total sales of originated loans were $119.1 million, down $85.6 million, or 41.8 percent, from the year-ago quarter. For the first six months of 2021, SB Financial had total volume of $320.7 million, of which $143.1 million (44 percent) was new purchase/construction lending, $92.3 million was external refinance (29 percent), and the remaining $85.3 million (27 percent) was internal refinance.

Net mortgage banking revenue, consisting of gains on the sale of mortgage loans and net loan servicing fees, was $4.0 million for the second quarter of 2021, compared to $6.2 million for the year-ago quarter. The mortgage servicing valuation adjustment for the second quarter of 2021 was a negative $0.1 million, compared to a negative adjustment of $1.1 million for the second quarter of 2020. For the first six months of 2021, the recapture of servicing rights was $2.6 million compared to impairment of $3.3 million for the prior year six months. The aggregate servicing valuation impairment ended the quarter at $2.3 million. The servicing portfolio at June 30, 2021, was $1.32 billion, up $0.06 billion, or 4.9 percent, from $1.26 billion at June 30, 2020.

Mr. Klein noted, 'The slowdown in refinance transactions and the lower levels of housing inventory were headwinds in the quarter, but we are pleased with the relationships we have built that allow us to continue to increase the number of households serviced. We continue to expand and add resources to this business line and it continues to provide great revenue diversity.'

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Mortgage Banking
($ in thousands) Jun. 2021 Mar. 2021 Dec. 2020 Sep. 2020 Jun. 2020
Mortgage originations $ 164,883 $ 155,836 $ 168,997 $ 200,158 $ 223,671
Mortgage sales 119,064 136,708 143,151 166,201 204,628
Mortgage servicing portfolio 1,323,804 1,304,097 1,299,698 1,293,037 1,261,746
Mortgage servicing rights 10,678 10,490 7,759 8,535 8,168
Mortgage servicing revenue
Loan servicing fees 830 859 857 813 782
OMSR amortization (948 ) (1,187 ) (1,283 ) (1,308 ) (1,574 )
Net administrative fees (118 ) (328 ) (426 ) (495 ) (792 )
OMSR valuation adjustment (99 ) 2,706 (611 ) 326 (1,088 )
Net loan servicing fees (217 ) 2,378 (1,037 ) (169 ) (1,880 )
Gain on sale of mortgages 4,255 5,859 7,197 8,085 8,119
Mortgage banking revenue, net $ 4,038 $ 8,237 $ 6,160 $ 7,916 $ 6,239

Noninterest Income and Noninterest Expense

SB Financial's noninterest income for the quarter was down from the prior year and the linked quarter by 24 and 40 percent, respectively. Gain on sale yields on mortgage loan sales were down 40 basis points from the prior year and the total dollars of sales were down nearly $86 million. Wealth management revenue was up over 23 percent from the prior year due to higher retention levels and growth in the equity sector. Reflective of the continued strength in the mortgage market, SB Financial's Title Agency provided revenue in the quarter of $0.5 million.

For the second quarter of 2021, noninterest expense of $11.1 million was down $0.6 million compared to the prior year or 5.0 percent. Lower mortgage volume and timing of technology initiatives have resulted in lower operating expenses.

Mr. Klein stated, 'The wealth management business line has grown nicely year over year and it demonstrates the full slate of products we can provide to both our retail and business clients. The Peak Title partnership is growing each quarter and will continue to provide additional points of entry to new markets.'

Noninterest Income / Noninterest Expense
($ in thousands, except ratios) Jun. 2021 Mar. 2021 Dec. 2020 Sep. 2020 Jun. 2020
Noninterest Income (NII) $ 6,537 $ 10,922 $ 8,902 $ 10,418 $ 8,615
NII / Total Revenue 41.7 % 53.2 % 49.0 % 52.9 % 49.3 %
NII / Average Assets 2.0 % 3.4 % 2.9 % 3.4 % 3.0 %
Total Revenue Growth -10.3 % 91.9 % 24.7 % 36.4 % 39.6 %
Noninterest Expense (NIE) $ 11,076 $ 10,909 $ 10,684 $ 11,335 $ 11,662
Efficiency Ratio 70.5 % 53.0 % 58.8 % 57.5 % 66.7 %
NIE / Average Assets 3.3 % 3.4 % 3.5 % 3.7 % 4.0 %
Net Noninterest Expense/Avg. Assets -1.4 % 0.0 % -0.6 % -0.3 % -1.0 %
Total Expense Growth -5.0 % 16.0 % 5.0 % 19.3 % 28.0 %
Operating Leverage -2.1 5.7 4.9 1.9 1.4

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Balance Sheet

Total assets as of June 30, 2021, were $1.3 billion, up $0.1 billion, or 9.1 percent, from the year ago quarter due to higher liquidity levels and PPP activity. Total shareholders' equity as of June 30, 2021, was $144.0 million, up 4.4 percent from a year ago, and comprised 11.0 percent of total assets.

Total loans held for investment were $850.5 million at June 30, 2021, down $51.0 million, or 5.7 percent, from June 30, 2020. Excluding PPP activity from both years, loan balances were down just $3.0 million, or 0.4 percent.

The investment portfolio of $217.1 million, including shares in the Federal Reserve Bank and Federal Home Loan Bank, represented 16.5 percent of assets at June 30, 2021, and was up 99.0 percent from the year-ago period. Deposit balances of $1.09 billion at June 30, 2021, increased by $0.1 billion, or 10.1 percent, since June 30, 2020. Growth from the prior year included $44.4 million in checking and $56.0 million in savings and time deposit balances.

Mr. Klein continued, 'Positive loan growth from the linked quarter was welcomed and we feel good about the loan pipelines in all of our markets. Our focus on Private Client residential real estate has provided a good lift in not only balances but has allowed us to expand our relationships with high end clients that have high potential to utilize multiple services. Asset quality metrics have continued to improve and we are pleased that all COVID deferrals are now back to full paying status.'

Loan Balances

($ in thousands, except ratios) Jun. 2021 Mar. 2021 Dec. 2020 Sep. 2020 Jun. 2020 Annual Growth
Commercial $ 149,998 $ 179,157 $ 203,256 $ 216,667 $ 222,108 $ (72,110 )
% of Total 17.6 % 21.1 % 23.3 % 24.5 % 24.6 % -32.5 %
Commercial RE 389,287 385,403 370,984 371,947 375,450 13,837
% of Total 45.8 % 45.4 % 42.5 % 42.0 % 41.6 % 3.7 %
Agriculture 50,895 48,405 55,251 57,420 58,817 (7,922 )
% of Total 6.0 % 5.7 % 6.3 % 6.5 % 6.5 % -13.5 %
Residential RE 203,294 176,998 182,076 178,393 184,684 18,610
% of Total 23.9 % 20.9 % 20.9 % 20.1 % 20.6 % 10.1 %
Consumer & Other 57,039 58,213 61,156 61,423 60,489 (3,450 )
% of Total 6.7 % 6.9 % 7.0 % 6.9 % 6.7 % -5.7 %
Total Loans $ 850,513 $ 848,176 $ 872,723 $ 885,850 $ 901,548 $ (51,035 )
Total Growth Percentage -5.7 %

Deposit Balances

($ in thousands, except ratios) Jun. 2021 Mar. 2021 Dec. 2020 Sep. 2020 Jun. 2020 Annual Growth
Non-Int DDA $ 240,572 $ 273,026 $ 251,649 $ 225,003 $ 229,042 $ 11,530
% of Total 22.0 % 24.4 % 24.0 % 22.2 % 23.1 % 5.0 %
Interest DDA 187,023 191,593 176,785 164,248 154,143 32,880
% of Total 17.1 % 17.1 % 16.9 % 16.2 % 15.6 % 21.3 %
Savings 235,231 218,260 174,864 169,474 161,182 74,049
% of Total 21.6 % 19.5 % 16.7 % 16.7 % 16.2 % 45.9 %
Money Market 255,512 249,088 216,164 204,862 189,380 66,132
% of Total 23.4 % 22.2 % 20.6 % 20.2 % 19.1 % 34.9 %
Time Deposits 172,696 188,229 229,549 250,428 256,840 (84,144 )
% of Total 15.8 % 16.8 % 21.9 % 24.7 % 25.9 % -32.8 %
Total Deposits $ 1,091,034 $ 1,120,196 $ 1,049,011 $ 1,014,015 $ 990,587 $ 100,447
Total Growth Percentage 10.1 %

4

Asset Quality

SB Financial reported nonperforming assets of $6.0 million as of June 30, 2021, down $1.7 million or 22.6 percent from the year-ago quarter. The Company took $0.02 million in charge-offs in the quarter and believes that further pressure on the portfolio due to the COVID-19 impact is unknown, but impact is currently minimal. The coverage of problem loans by the loan loss allowance was at 304 percent at June 30, 2021, up from 136 percent at June 30, 2020. As of June 30, 2021, the Company had no remaining COVID related forbearances in place.

Nonperforming Assets

($ in thousands, except ratios) Jun. 2021 Mar. 2021 Dec. 2020 Sep. 2020 Jun. 2020 Annual Change
Commercial & Agriculture $ 375 $ 615 $ 902 $ 1,140 $ 1,204 $ (829 )
% of Total Com./Ag. loans 0.19 % 0.27 % 0.35 % 0.42 % 0.43 % -68.9 %
Commercial RE 1,026 2,402 2,412 2,475 2,484 (1,458 )
% of Total CRE loans 0.26 % 0.62 % 0.65 % 0.67 % 0.66 % -58.7 %
Residential RE 1,751 2,138 2,704 2,481 2,538 (787 )
% of Total Res. RE loans 0.86 % 1.21 % 1.49 % 1.39 % 1.37 % -31.0 %
Consumer & Other 463 480 408 313 308 155
% of Total Con./Oth. loans 0.81 % 0.82 % 0.67 % 0.51 % 0.51 % 50.3 %
Total Nonaccruing Loans 3,615 5,635 6,426 6,409 6,534 (2,919 )
% of Total loans 0.43 % 0.66 % 0.74 % 0.72 % 0.72 % -44.7 %
Accruing Restructured Loans 758 794 810 789 804 (46 )
Total Change (%) -5.7 %
Total Nonaccruing & Restructured Loans 4,373 6,429 7,236 7,198 7,338 (2,965 )
% of Total loans 0.51 % 0.76 % 0.83 % 0.81 % 0.81 % -40.4 %
Foreclosed Assets 1,603 43 23 76 382 1,221
Total Change (%) 319.6 %
Total Nonperforming Assets $ 5,976 $ 6,472 $ 7,259 $ 7,274 $ 7,720 $ (1,744 )
% of Total assets 0.46 % 0.49 % 0.58 % 0.60 % 0.64 % -22.6 %

Webcast and Conference Call

The Company will hold a related conference call and webcast on July 27, 2021, 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 23 offices; 22 in nine Ohio counties and one in Fort Wayne, Indiana, and 24 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'.

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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
[email protected]
Anthony V. Cosentino
Executive Vice President and
Chief Financial Officer
[email protected]

###

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SB FINANCIAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS - (Unaudited)

June March December September June
($ in thousands) 2021 2021 2020 2020 2020
ASSETS
Cash and due from banks $ 154,993 $ 206,036 $ 140,690 $ 94,641 $ 85,661
Interest bearing time deposits 2,906 3,562 5,823 8,956 10,542
Available-for-sale securities 211,756 177,918 149,406 130,315 104,289
Loans held for sale 8,731 8,689 7,234 13,943 13,742
Loans, net of unearned income 850,513 848,176 872,723 885,850 901,548
Allowance for loan losses (13,306 ) (13,326 ) (12,574 ) (11,793 ) (10,013 )
Premises and equipment, net 24,343 23,233 23,557 23,785 23,662
Federal Reserve and FHLB Stock, at cost 5,303 5,303 5,303 5,303 4,837
Foreclosed assets held for sale, net 1,603 43 23 76 382
Interest receivable 3,000 3,371 3,799 4,159 4,272
Goodwill 22,091 22,091 22,091 22,091 22,117
Cash value of life insurance 17,721 17,651 17,530 17,453 17,375
Mortgage servicing rights 10,678 10,490 7,759 8,535 8,168
Other assets 12,175 12,630 14,475 14,927 16,354
Total assets $ 1,312,507 $ 1,325,867 $ 1,257,839 $ 1,218,241 $ 1,202,936
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Non interest bearing demand $ 240,572 $ 273,026 $ 251,649 $ 225,003 $ 229,042
Interest bearing demand 187,023 191,593 176,785 164,248 154,143
Savings 235,231 218,260 174,864 169,474 161,182
Money market 255,512 249,088 216,164 204,862 189,380
Time deposits 172,696 188,229 229,549 250,428 256,840
Total deposits 1,091,034 1,120,196 1,049,011 1,014,015 990,587
Short-term borrowings 25,096 24,321 20,189 20,710 23,826
Federal Home Loan Bank advances 5,500 8,000 8,000 8,000 13,000
Trust preferred securities 10,310 10,310 10,310 10,310 10,310
Subordinated debt net of issuance costs 19,522 - - - -
Interest payable 417 489 616 946 929
Other liabilities 16,611 18,585 26,790 22,913 26,403
Total liabilities 1,168,490 1,181,901 1,114,916 1,076,894 1,065,055
Shareholders' Equity
Common stock 54,463 54,463 54,463 54,463 54,463
Additional paid-in capital 14,906 14,755 14,845 14,782 14,780
Retained earnings 93,851 90,883 84,578 80,012 75,526
Accumulated other comprehensive income (loss) 499 (457 ) 2,210 2,221 2,320
Treasury stock (19,702 ) (15,678 ) (13,173 ) (10,131 ) (9,208 )
Total shareholders' equity 144,017 143,966 142,923 141,347 137,881
Total liabilities and shareholders' equity $ 1,312,507 $ 1,325,867 $ 1,257,839 $ 1,218,241 $ 1,202,936

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SB FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME - (Unaudited)

At and for the Three Months Ended Six Months Ended
($ in thousands, except per June March December September June June June
share & ratios) 2021 2021 2020 2020 2020 2021 2020
Interest income
Loans
Taxable $ 9,196 $ 9,926 $ 9,816 $ 10,179 $ 9,945 $ 19,122 $ 19,740
Tax exempt 47 48 54 47 59 95 138
Securities
Taxable 835 643 632 494 510 1,478 1,202
Tax exempt 85 88 87 87 81 173 159
Total interest income 10,163 10,705 10,589 10,807 10,595 20,868 21,239
Interest expense
Deposits 818 962 1,218 1,423 1,549 1,780 3,429
Repurchase agreements & other 12 11 10 12 20 23 48
Federal Home Loan Bank advances 51 56 58 59 92 107 192
Trust preferred securities 50 51 52 54 62 101 150
Subordinated debt 75 - - - - 75 -
Total interest expense 1,006 1,080 1,338 1,548 1,723 2,086 3,819
Net interest income 9,157 9,625 9,251 9,259 8,872 18,782 17,420
Provision for loan losses - 750 800 1,800 1,300 750 1,900
Net interest income after provision for loan losses 9,157 8,875 8,451 7,459 7,572 18,032 15,520
Noninterest income
Wealth management fees 955 912 863 839 775 1,867 1,543
Customer service fees 820 758 728 730 667 1,578 1,349
Gain on sale of mtg. loans & OMSR 4,255 5,859 7,197 8,085 8,119 10,114 10,068
Mortgage loan servicing fees, net (217 ) 2,378 (1,037 ) (169 ) (1,880 ) 2,161 (3,932 )
Gain on sale of non-mortgage loans 45 17 123 119 107 62 211
Title insurance revenue 532 521 522 517 609 1,053 874
Gain (loss) on sale of assets 2 (2 ) 181 (52 ) (80 ) - (126 )
Other 145 479 325 349 298 624 789
Total noninterest income 6,537 10,922 8,902 10,418 8,615 17,459 10,776
Noninterest expense
Salaries and employee benefits 6,881 6,620 6,556 6,995 6,419 13,501 11,846
Net occupancy expense 748 740 782 736 675 1,488 1,373
Equipment expense 778 732 818 888 780 1,510 1,480
Data processing fees 653 534 633 586 1,288 1,187 1,836
Professional fees 574 764 631 695 1,224 1,338 1,981
Marketing expense 220 135 172 137 141 355 349
Telephone and communication expense 139 154 156 142 122 293 237
Postage and delivery expense 97 111 108 96 96 208 211
State, local and other taxes 278 323 299 331 262 601 516
Employee expense 161 153 103 155 93 314 277
Other expenses 547 643 426 574 562 1,190 962
Total noninterest expense 11,076 10,909 10,684 11,335 11,662 21,985 21,068
Income before income tax expense 4,618 8,888 6,669 6,542 4,525 13,506 5,228
Income tax expense 857 1,807 1,311 1,292 870 2,664 892
Net income available to common shareholders $ 3,761 $ 7,081 $ 5,358 $ 5,250 $ 3,655 $ 10,842 $ 4,336
Common share data:
Basic earnings per common share $ 0.53 $ 0.97 $ 0.71 $ 0.69 $ 0.47 $ 1.50 $ 0.56
Diluted earnings per common share $ 0.52 $ 0.97 $ 0.71 $ 0.69 $ 0.47 $ 1.49 $ 0.56
Average shares outstanding (in thousands):
Basic: 7,148 7,317 7,487 7,607 7,708 7,232 7,750
Diluted: 7,200 7,335 7,487 7,607 7,708 7,256 7,750

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SB FINANCIAL GROUP, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS - (Unaudited)

($ in thousands, At and for the Three Months Ended Six Months Ended
except per share & ratios) June March December September June June June
SUMMARY OF OPERATIONS 2021 2021 2020 2020 2020 2021 2020
Net interest income $ 9,157 $ 9,625 $ 9,251 $ 9,259 $ 8,872 $ 18,782 $ 17,420
Tax-equivalent adjustment 35 36 37 36 37 71 79
Tax-equivalent net interest income 9,192 9,661 9,288 9,295 8,909 18,853 17,499
Provision for loan loss - 750 800 1,800 1,300 750 1,900
Noninterest income 6,537 10,922 8,902 10,418 8,615 17,459 10,776
Total operating revenue 15,694 20,547 18,153 19,677 17,487 36,241 28,196
Noninterest expense 11,076 10,909 10,684 11,335 11,662 21,985 21,068
Pre-tax pre-provision income 4,618 9,638 7,469 8,342 5,825 14,256 7,128
Pretax income 4,618 8,888 6,669 6,542 4,525 13,506 5,228
Net income 3,761 7,081 5,358 5,250 3,655 10,842 4,336
PER SHARE INFORMATION:
Basic earnings per share (EPS) 0.53 0.97 0.71 0.69 0.47 1.50 0.56
Diluted earnings per share 0.52 0.97 0.71 0.69 0.47 1.49 0.56
Common dividends 0.110 0.105 0.105 0.100 0.100 0.215 0.195
Book value per common share 20.50 19.88 19.39 18.73 17.98 20.50 17.98
Tangible book value per common share (TBV) 17.26 16.74 16.30 15.72 15.01 17.26 15.01
Market price per common share 18.50 18.26 18.28 13.49 16.62 18.50 16.62
Market price to TBV 107.2 % 109.1 % 112.1 % 85.8 % 110.8 % 107.2 % 110.8 %
Market price to trailing 12 month EPS 6.4 6.4 9.3 8.0 11.4 6.4 11.4
PERFORMANCE RATIOS:
Return on average assets (ROAA) 1.13 % 2.21 % 1.73 % 1.73 % 1.25 % 1.66 % 0.78 %
Pre-tax pre-provision ROAA 1.39 % 3.01 % 2.41 % 2.74 % 1.99 % 2.32 % 1.28 %
Return on average equity 10.42 % 19.78 % 15.05 % 15.01 % 10.31 % 15.09 % 6.22 %
Return on average tangible equity 12.37 % 23.52 % 17.91 % 17.93 % 11.91 % 17.92 % 7.17 %
Efficiency ratio 70.46 % 53.01 % 58.76 % 57.48 % 66.68 % 60.56 % 74.70 %
Earning asset yield 3.25 % 3.56 % 3.66 % 3.96 % 3.95 % 3.40 % 4.13 %
Cost of interest bearing liabilities 0.44 % 0.50 % 0.64 % 0.75 % 0.89 % 0.47 % 1.00 %
Net interest margin 2.93 % 3.20 % 3.20 % 3.39 % 3.31 % 3.06 % 3.39 %
Tax equivalent effect 0.01 % 0.01 % 0.01 % 0.02 % 0.01 % 0.01 % 0.01 %
Net interest margin, tax equivalent 2.94 % 3.21 % 3.21 % 3.41 % 3.32 % 3.07 % 3.40 %
Non interest income/Average assets 1.97 % 3.41 % 2.87 % 3.42 % 2.95 % 2.67 % 1.93 %
Non interest expense/Average assets 3.33 % 3.40 % 3.45 % 3.73 % 3.99 % 3.37 % 3.78 %
Net noninterest expense/Average assets -1.37 % 0.00 % -0.58 % -0.30 % -1.04 % -0.69 % -1.85 %
ASSET QUALITY RATIOS:
Gross charge-offs 26 52 57 32 254 78 654
Recoveries 6 54 39 11 10 60 13
Net charge-offs 20 (2 ) 18 21 244 18 641
Nonaccruing loans/Total loans 0.43 % 0.66 % 0.74 % 0.72 % 0.72 % 0.43 % 0.72 %
Nonperforming loans/Total loans 0.51 % 0.76 % 0.83 % 0.81 % 0.81 % 0.51 % 0.81 %
Nonperforming assets/Loans & OREO 0.70 % 0.76 % 0.83 % 0.82 % 0.86 % 0.70 % 0.86 %
Nonperforming assets/Total assets 0.46 % 0.49 % 0.58 % 0.60 % 0.64 % 0.46 % 0.64 %
Allowance for loan loss/Nonperforming loans 304.28 % 207.28 % 173.77 % 163.84 % 136.45 % 304.28 % 136.45 %
Allowance for loan loss/Total loans 1.56 % 1.57 % 1.44 % 1.33 % 1.11 % 1.56 % 1.11 %
Net loan charge-offs/Average loans (ann.) 0.01 % (0.00 %) 0.01 % 0.01 % 0.11 % 0.00 % 0.15 %
Loan loss provision/Net charge-offs 0.00 % (37500.00 %) 4444.44 % 8571.43 % 532.79 % 4166.67 % 296.41 %
CAPITAL & LIQUIDITY RATIOS:
Loans/ Deposits 77.95 % 75.72 % 83.19 % 87.36 % 91.01 % 77.95 % 91.01 %
Equity/ Assets 10.97 % 10.86 % 11.36 % 11.60 % 11.46 % 10.97 % 11.46 %
Tangible equity/Tangible assets 9.41 % 9.30 % 9.73 % 9.92 % 9.75 % 9.41 % 9.75 %
Common equity tier 1 ratio (Bank) 13.11 % 13.08 % 12.91 % 12.71 % 11.97 % 13.11 % 11.97 %
END OF PERIOD BALANCES
Total assets 1,312,507 1,325,867 1,257,839 1,218,241 1,202,936 1,312,507 1,202,936
Total loans 850,513 848,176 872,723 885,850 901,548 850,513 901,548
Deposits 1,091,034 1,120,196 1,049,011 1,014,015 990,587 1,091,034 990,587
Stockholders equity 144,017 143,966 142,923 141,347 137,881 144,017 137,881
Goodwill and intangibles 22,710 22,728 22,745 22,763 22,813 22,710 22,813
Tangible equity 121,307 121,238 120,178 118,584 115,068 121,307 115,068
Mortgage servicing portfolio 1,323,804 1,304,097 1,299,698 1,293,037 1,261,746 1,323,804 1,261,746
Wealth/Brokerage assets under care 600,904 576,503 558,409 522,360 495,025 600,904 495,025
Total assets under care 3,237,215 3,206,467 3,115,946 3,033,638 2,959,707 3,237,215 2,959,707
Full-time equivalent employees 256 246 244 251 254 256 254
Period end common shares outstanding 7,027 7,242 7,372 7,545 7,668 7,027 7,668
Market capitalization (all) 129,998 132,239 134,760 101,782 127,442 129,998 127,442
AVERAGE BALANCES
Total assets 1,329,348 1,281,635 1,238,790 1,216,843 1,169,030 1,306,355 1,115,527
Total earning assets 1,251,213 1,203,284 1,156,718 1,090,386 1,073,490 1,227,359 1,028,114
Total loans 853,794 862,898 893,244 907,483 898,216 858,321 865,595
Deposits 1,115,186 1,073,641 1,031,649 1,007,679 946,053 1,094,269 900,812
Stockholders equity 144,315 143,167 142,418 139,908 141,821 143,709 139,521
Goodwill and intangibles 22,718 22,736 22,754 22,787 19,066 22,727 18,537
Tangible equity 121,597 120,431 119,664 117,121 122,755 120,982 120,984
Average basic shares outstanding 7,148 7,317 7,487 7,607 7,708 7,232 7,750
Average diluted shares outstanding 7,200 7,335 7,487 7,607 7,708 7,256 7,750

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SB FINANCIAL GROUP, INC.

Rate Volume Analysis - (Unaudited)

At and for the Three and Six Months Ended June 30, 2021 and 2020

($ in thousands) Three Months Ended Jun. 30, 2021 Three Months Ended Jun. 30, 2020
Average Average Average Average
Balance Interest Rate Balance Interest Rate
Assets
Taxable securities/cash $ 390,036 $ 835 0.86 % $ 168,373 $ 510 1.21 %
Nontaxable securities 7,383 85 4.61 % 6,901 81 4.69 %
Loans, net 853,794 9,243 4.33 % 898,216 10,004 4.46 %
Total earning assets 1,251,213 10,163 3.25 % 1,073,490 10,595 3.95 %
Cash and due from banks 6,992 18,937
Allowance for loan losses (13,565 ) (9,369 )
Premises and equipment 23,988 23,896
Other assets 60,720 62,076
Total assets $ 1,329,348 $ 1,169,030
Liabilities
Savings, MMDA and interest bearing demand $ 672,803 $ 464 0.28 % $ 473,793 $ 1,215 1.03 %
Time deposits 183,138 354 0.77 % 251,482 334 0.53 %
Repurchase agreements & other 23,607 12 0.20 % 19,200 20 0.42 %
Advances from Federal Home Loan Bank 7,066 51 2.89 % 24,472 92 1.50 %
Trust preferred securities 10,310 50 1.94 % 10,310 62 2.41 %
Subordinated debt 9,880 75 3.04 % - - 0.00 %
Total interest bearing liabilities 906,804 1,006 0.44 % 779,257 1,723 0.88 %
Non interest bearing demand 259,245 - 220,778 -
Total funding 1,166,049 0.35 % 1,000,035 0.69 %
Other liabilities 18,984 27,174
Total liabilities 1,185,033 1,027,209
Equity 144,315 141,821
Total liabilities and equity $ 1,329,348 $ 1,169,030
Net interest income $ 9,157 $ 8,872
Net interest income as a percent of average interest-earning assets - GAAP measure 2.93 % 3.31 %
Net interest income as a percent of average interest-earning assets - non GAAP 2.94 % 3.32 %
- Computed on a fully tax equivalent (FTE) basis
Six Months Ended Jun. 30, 2021 Six Months Ended Jun. 30, 2020
Average Average Average Average
Balance Interest Rate Balance Interest Rate
Assets
Taxable securities/cash $ 361,566 $ 1,478 0.82 % $ 155,787 $ 1,202 1.54 %
Nontaxable securities 7,472 173 4.63 % 6,732 159 4.72 %
Loans, net 858,321 19,217 4.48 % 865,595 19,878 4.59 %
Total earning assets 1,227,359 20,868 3.40 % 1,028,114 21,239 4.13 %
Cash and due from banks 7,769 12,693
Allowance for loan losses (13,206 ) (9,118 )
Premises and equipment 23,743 23,797
Other assets 60,690 60,041
Total assets $ 1,306,355 $ 1,115,527
Liabilities
Savings, MMDA and interest bearing demand $ 643,962 $ 972 0.30 % $ 458,116 $ 2,298 1.00 %
Time deposits 194,955 808 0.83 % 252,912 1,131 0.89 %
Repurchase agreements & Other 23,869 23 0.19 % 20,868 48 0.46 %
Advances from Federal Home Loan Bank 7,530 107 2.84 % 20,302 192 1.89 %
Trust preferred securities 10,310 101 1.96 % 10,310 150 2.91 %
Subordinated debt 5,646 75 2.66 % - - 0.00 %
Total interest bearing liabilities 886,272 2,086 0.47 % 762,508 3,819 1.00 %
Non interest bearing demand 255,352 0.37 % 189,784 0.80 %
Total funding 1,141,624 952,292
Other liabilities 21,022 23,714
Total liabilities 1,162,646 976,006
Equity 143,709 139,521
Total liabilities and equity $ 1,306,355 $ 1,115,527
Net interest income $ 18,782 $ 17,420
Net interest income as a percent of average interest-earning assets - GAAP measure 3.06 % 3.39 %
Net interest income as a percent of average interest-earning assets - non GAAP 3.07 % 3.40 %
- Computed on a fully tax equivalent (FTE) basis

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Three Months Ended Six Months Ended
Non-GAAP reconciliation
($ in thousands, except per share & ratios) 		Jun. 30,
2021 		Jun. 30,
2020 		Jun. 30,
2021 		Jun. 30,
2020
Total Operating Revenue $ 15,694 $ 17,487 $ 36,241 $ 28,196
Adjustment to (deduct)/add OMSR impairment* 99 1,088 (2,606 ) 3,300
Adjusted Total Operating Revenue 15,793 18,575 33,635 31,496
Total Operating Expense $ 11,076 $ 11,662 $ 21,985 $ 21,068
Adjustment for merger expenses** - (1,241 ) - (1,241 )
Adjusted Total Operating Expense 11,076 10,421 21,985 19,827
Income before Income Taxes 4,618 4,525 13,506 5,228
Adjustment for OMSR & merger expenses 99 2,329 (2,606 ) 4,541
Adjusted Income before Income Taxes 4,717 6,854 10,900 9,769
Provision for Income Taxes 857 870 2,664 892
Adjustment for OMSR & merger expenses*** 21 489 (547 ) 954
Adjusted Provision for Income Taxes 878 1,359 2,117 1,847
Net Income 3,761 3,655 10,842 4,336
Adjustment for OMSR & merger expenses 79 1,840 (2,059 ) 3,587
Adjusted Net Income 3,840 5,495 8,783 7,924
Diluted Earnings per Share 0.52 0.47 1.49 0.56
Adjustment for OMSR & merger expenses 0.01 0.24 (0.28 ) 0.46
Adjusted Diluted Earnings per Share $ 0.53 $ 0.71 $ 1.21 $ 1.03
Return on Average Assets 1.13 % 1.25 % 1.66 % 0.78 %
Adjustment for OMSR & merger expenses 0.02 % 0.63 % -0.16 % 0.64 %
Adjusted Return on Average Assets 1.16 % 1.88 % 1.50 % 1.42 %

*valuation adjustment to the Company's mortgage servicing rights

**transaction costs related to the Edon acquisition

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

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