What changed in this filing

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Item 1. Financial Statements

2020-11-09 compared with 2020-08-10 · 633 added, 617 removed, 1332 unchanged (48% of the section changed)

Financial Statements

Financial Group, Inc.

Consolidated Balance Sheets

SB Financial Group, Inc.

Condensed Consolidated Balance Sheets

September 30,

($ in thousands)

34 unchanged sentences

Total liabilities and shareholders’

notes to condensed consolidated financial statements (unaudited)

The balance sheet at December 31, 2019 has been derived from the audited consolidated financial statements at that date.

Financial Group, Inc.

See notes to condensed consolidated financial statements

The balance sheet at December 31, 2019 has been

derived from the audited consolidated financial statements at that date.

SB Financial Group, Inc.

Consolidated Income Statement (unaudited )

Three Months Ended

Nine Months Ended

($ in thousands, except per share data)

September 30,

Interest Income

3 unchanged sentences

Federal Home Loan Bank advance expense

Trust preferred securities

Trust preferred securities expense

Total interest expense

Net Interest Income

Provision for loan

Net interest income after provision for

Provision for loan losses

Net interest income after provision for loan losses

Noninterest Income

20 unchanged sentences

Other expenses

Total noninterest

Total noninterest expense

Income before income tax

5 unchanged sentences

Average common shares outstanding (in thousands):

notes to condensed consolidated financial statements (unaudited)

See notes to condensed

consolidated financial statements (unaudited)

Financial Group, Inc.

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

($ in thousands)

Other comprehensive income:

Other comprehensive income (loss):

Available for sale investment securities:

Unrealized holding gain arising in the period

Related tax expense

Unrealized holding gain (loss) arising in the period

Related tax expense (benefit)

Reclassification for gain realized in income

2 unchanged sentences

Total comprehensive income

notes to condensed consolidated financial statements (unaudited)

See notes to condensed consolidated financial statements

Financial Group, Inc.

2 unchanged sentences

Comprehensive

in thousands, except per share data)

($ in thousands, except per

Balance, January 1, 2020

comprehensive income

on common, $0.095 per share

Other comprehensive income

Dividends on common, $0.095 per share

Restricted stock vesting

1 unchanged sentence

Repurchased stock

based compensation expense

Stock based compensation expense

Balance, March 31, 2020

comprehensive income

on common, $0.10 per share

Other comprehensive income

Dividends on common, $0.10 per share

Repurchased stock

based compensation expense

Stock based compensation expense

Balance, June 30, 2020

Other comprehensive loss

Dividends on common, $0.10 per share

Restricted stock vesting

Repurchased stock

Stock based compensation expense

Balance, September 30, 2020

Balance, January 1, 2019

comprehensive income

of preferred to common

reissue for purchase of Peak Title

on common, $0.085 per share

on preferred, $0.1625 per share

Other comprehensive income

Conversion of preferred to common

Stock reissue for purchase of Peak Title

Dividends on common, $0.085 per share

Dividends on preferred, $0.1625 per share

Restricted stock vesting

1 unchanged sentence

Repurchased stock

based compensation expense

Stock based compensation expense

Balance, March 31, 2019

comprehensive income

on common, $0.900 per share

on preferred, $0.1625 per share

Other comprehensive income

Dividends on common, $0.900 per share

Dividends on preferred, $0.1625 per share

Stock options exercised

Repurchased stock

based compensation expense

Stock based compensation expense

Balance, June 30, 2019

notes to condensed consolidated financial statements (unaudited)

Financial Group, Inc.

Consolidated Statements of Cash Flows (unaudited)

Other comprehensive income

Common stock issuance

Dividends on common, $0.900 per share

Dividends on preferred, $0.1625 per share

Restricted stock vesting

Stock options exercised

Repurchased stock

Stock based compensation expense

Balance, September 30, 2019

See notes to condensed consolidated financial statements

SB Financial Group, Inc.

Condensed Consolidated Statements

of Cash Flows (unaudited)

September 30,

($ in thousands)

Six Months Ended June 30,

Operating Activities

11 unchanged sentences

Loss (gain) on sales of assets

Net change in foreclosed assets

Net gains on sales of securities

1 unchanged sentence

Interest payable & other liabilities

Net cash provided (used) by operating activities

Net cash provided by operating activities

Investing Activities

12 unchanged sentences

Financing Activities

Net increase in demand deposits, money market, interest checking & savings accounts

Net increase in certificates of deposit

Net increase in demand deposits,

money market, interest checking & savings accounts

Net increase (decrease) in certificates of deposit

Net increase (decrease) in short term borrowings

21 unchanged sentences

Liabilities assumed

notes to condensed consolidated financial statements (unaudited)

See notes to condensed consolidated financial statements

SB FINANCIAL GROUP, INC.

6 unchanged sentences

dba RDSI Banking Systems (“RDSI”), and Rurban Statutory Trust II (“RST II”).

In addition, State Bank

owns all of the outstanding stock of Rurban Mortgage Company (“RMC”), which is inactive, and State Bank Insurance,

LLC (“SBI”).

RDSI is presently inactive

and has had no material operations or employees since January 1, 2018.

In addition, State Bank owns all of the outstanding stock

of Rurban Mortgage Company (“RMC”), which is inactive, and State Bank Insurance, LLC (“SBI”).

In June 2020, the Company acquired Edon

1 unchanged sentence

This acquisition was completed effective

June 5, 2020, and the acquisition resulted in an increase in goodwill, which is detailed in Note 8 and the business combination

summary is detailed in Note 3.

June 5, 2020, and the acquisition resulted in an increase in goodwill, which is detailed in Note 8.

The business combination summary

is detailed in Note 3.

In March 2019, the Company formed SBFG

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risk among a pool of similar sized banks.

The consolidated financial statements include

the accounts of the Company, State Bank, RFCBC, RDSI, RMC, Title, Captive and SBI.

All significant intercompany accounts and transactions

have been eliminated in consolidation.

The consolidated financial statements

include the accounts of the Company, State Bank, RFCBC, RDSI, RMC, Title, Captive and SBI.

All significant intercompany accounts

and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated

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Those adjustments consist only of normal recurring adjustments.

Results of operations for the three and six months ended June 30,

Results of operations for the three and nine months ended September

30, 2020, are not necessarily indicative of results for the complete year.

The condensed consolidated balance sheet

of the Company as of December 31, 2019 has been derived from the audited consolidated balance sheet of the Company as of that date.

For further information, refer to the consolidated

financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

of the Company as of December 31, 2019 has been derived from the audited consolidated balance sheet of the Company as of that

For further information, refer to the

consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended

December 31, 2019.

New and applicable accounting pronouncements:

Intangibles –

Goodwill and Other (Topic 350)

This ASU simplifies the test for

goodwill impairment.

Specifically, these amendments eliminate Step 2 from the goodwill impairment test, and also eliminate the

requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails

that qualitative test, to perform Step 2 of the goodwill impairment test.

The Company has decided to adopt this ASU immediately,

and management does not believe the changes will have a material effect on the Company’s accounting and disclosures.

Measurement - Disclosure Framework –

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the disclosure requirements for fair value measurements.

The ASU removes certain disclosures required by Topic 820 related to transfers

between Level 1 and Level 2 of the fair value hierarchy;

The ASU removes certain disclosures required by Topic 820 related to

transfers between Level 1 and Level 2 of the fair value hierarchy;

the policy for timing of transfers between levels;

and the valuation processes

for Level 3 fair value measurements.

The ASU modifies certain disclosures required by Topic 820 related to disclosure of transfers

into and out of Level 3 of the fair value hierarchy;

the requirement to disclose the timing of liquidation of an investee’s

assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity

or announced the timing publicly for investments in certain entities that calculate net asset value;

and clarification that the

measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date.

The ASU adds certain disclosure requirements related to changes in unrealized gains and losses for the period included in other

comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted-average

of significant unobservable inputs used to develop Level 3 fair value measurements.

For certain unobservable inputs, an entity

may disclose other quantitative information in lieu of the weighted- average if the entity determines that other quantitative information

would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair

value measurements.

The amendments in this update are effective for fiscal years, and interim periods within those fiscal years

beginning after December 15, 2019.

The impact of this new guidance did not have a material impact on the Company’s consolidated

financial statements.

valuation processes for Level 3 fair value measurements.

The ASU modifies certain disclosures required by Topic 820 related to

disclosure of transfers into and out of Level 3 of the fair value hierarchy;

the requirement to disclose the timing of liquidation

of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated

the timing to the entity or announced the timing publicly for investments in certain entities that calculate net asset value;

and clarification that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement

as of the reporting date.

The ASU adds certain disclosure requirements related to changes in unrealized gains and losses for the

period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period

and the range and weighted-average of significant unobservable inputs used to develop Level 3 fair value measurements.

unobservable inputs, an entity may disclose other quantitative information in lieu of the weighted- average if the entity determines

that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable

inputs used to develop Level 3 fair value measurements.

The amendments in this update are effective for fiscal years, and interim

periods within those fiscal years beginning after December 15, 2019.

The impact of this new guidance did not have a material impact

on the Company’s consolidated financial statements.

Accounting Standards not yet adopted:

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This guidance was issued in January 2020

to clarify that a company should consider observable transaction that require a company to either apply or discontinue the equity

to clarify that a company should consider observable transactions that require a company to either apply or discontinue the equity

method of accounting under Topic 323, Investments-Equity Method and Joint Ventures, for the purposes of applying the measurement

4 unchanged sentences

The guidance is effective beginning after December 15, 2020.

The Company is assessing the impact on its accounting and

Goodwill and Other (Topic 350)

This ASU simplifies the test

for goodwill impairment.

Specifically, these amendments eliminate Step 2 from the goodwill impairment test, and also eliminate

the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it

fails that qualitative test, to perform Step 2 of the goodwill impairment test.

The amendments in this ASU are effective for annual

goodwill impairment tests in fiscal years beginning after December 15, 2022, and management does not believe the changes will have

a material effect on the Company’s accounting and disclosures.

The Company is currently assessing the impact on its accounting

and disclosures.

Instruments –

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their duration, and how the entity applies current GAAP.

The adoption of ASU 2016-13 is likely to

result in an increase in the allowance for loan losses as a result of changing from an “incurred loss”

The adoption of ASU 2016-13 is likely

to result in an increase in the allowance for loan losses as a result of changing from an “incurred loss”

encompasses allowances for current known and inherent losses within the portfolio, to an “expected loss”

7 unchanged sentences

The final rule provides banking organizations the option to phase in over

a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard.

a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting

On November 15, 2019, the FASB

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reporting company, the amendment will delay the effective date of ASU No.

2016-13 to the fiscal year beginning after December 15,

2016-13 to the fiscal year beginning January 1, 2023.

While we are currently unable

17 unchanged sentences

in the tables below:

Three Months Ended

($ and outstanding shares in thousands - except per share data)

($ and outstanding shares in thousands - except

per share data)

Distributed earnings allocated to common shares

10 unchanged sentences

Diluted earnings per common share

Six Months Ended

($ and outstanding shares in thousands - except per share data)

16 unchanged sentences

Edon Bancorp was headquartered in Edon, Ohio and had

one retail office.

one retail banking office.

The Edon State Bank was merged with and into State Bank, with State Bank surviving.

Under the terms of the merger

agreement, shareholders of Edon received fixed consideration of $103.50 in cash for each share of Edon common stock for total consideration

of $15.5 million.

The Company accounted for the transaction under the acquisition method of accounting, which means that the acquired

assets and liabilities were recorded at fair value at the date of acquisition.

Under the terms

of the merger agreement, shareholders of Edon received fixed consideration of $103.50 in cash for each share of Edon common stock

for total consideration of $15.5 million.

The Company accounted for the transaction under the acquisition method of accounting,

which means that the acquired assets and liabilities were recorded at fair value at the date of acquisition.

In accordance with ASC 805, the Company

expensed approximately $1.2 million of direct acquisition costs during the three months ended June 30, 2020.

The $1.2 million in

merger expense is split between data processing and professional fees expense.

As a result of the acquisition, the Company recorded

$4.3 million of goodwill and $0.7 million of intangible assets in the second quarter of 2020.

The Company was able to increase

both its deposit and loan base and acquire new households in a new market.

It is expected that this transaction will result in

business synergies and economies of scale.

The acquisition was consistent with the Company’s strategy to expand its presence

in Northwest Ohio and to increase profitability by introducing existing products and services to the acquired customer base.

intangible assets are related to core deposits, which are being amortized over 10 years on a straight-line basis.

For tax purposes,

goodwill is non-deductible but will be evaluated annually for impairment.

expensed approximately $1.2 million of direct acquisition costs during the three months ended June 30, 2020, and no additional

merger expense was recorded in the three months ended September 30, 2020.

The $1.2 million in merger expense is split between

data processing and professional fees expense.

As a result of the acquisition, the Company recorded $4.3 million of goodwill and

$0.7 million of intangible assets in the second quarter of 2020.

The Company was able to increase both its deposit and loan base

and acquire new households in a new market.

It is expected that this transaction will result in business synergies and economies

The acquisition was consistent with the Company’s strategy to expand its presence in Northwest Ohio and to increase

profitability by introducing existing products and services to the acquired customer base.

The intangible assets are related to

core deposits, which are being amortized over 10 years on a straight-line basis.

For tax purposes, goodwill is non-deductible

but will be evaluated annually for impairment.

The following table summarizes the fair

1 unchanged sentence

assumed as of the effective date of the transaction based on assumptions that are subject to change as management continues to

evaluate as relevant information becomes available.

If, prior to the end of the one-year measurement period for finalizing the

purchase price allocation, relevant information becomes available which would indicate adjustments are required to the purchase

evaluate relevant information as it becomes available.

If, prior to the end of the one-year measurement period for finalizing

the purchase price allocation, relevant information becomes available which would indicate adjustments are required to the purchase

price allocation, such adjustments will be recorded in the reporting period in which the adjustment amounts are determined.

adjustments, if any, will be related to assets that have may have changes to valuation amounts that were not readily determinable

at acquisition date.

The contractual principal of loans at the

acquisition date was $16.3 million and the estimate of the contractual cash flows not expected to be collected is $0.4 million.

($ in thousands)

adjustments, if any, will be related to assets that may have changes to valuation amounts that were not readily determinable at

acquisition date.

The contractual principal of loans at

the acquisition date was $16.3 million and the estimate of the contractual cash flows not expected to be collected is $0.4 million.

Fair value of assets acquired

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Pro Forma Financial Information

The results of operations of Edon Bancorp have been included

in the Company’s consolidated financial statements since the acquisition date of June 5, 2020.

The following schedule includes

the pro forma results for the three and six months ended June 30, 2020 and 2019, as if the Edon acquisition had occurred as of

the beginning of the reporting periods presented.

The acquisition added less than $0.1 million in revenue and earnings to the Company

for the three months ended June 30, 2020.

The results of operations of Edon Bancorp

have been included in the Company’s consolidated financial statements since the acquisition date of June 5, 2020.

The following

schedule includes the pro forma results for the three and nine months ended September 30, 2020 and 2019, as if the Edon acquisition

had occurred as of the beginning of the reporting periods presented.

The acquisition added less than $0.1 million in revenue and

earnings to the Company for the three months and nine months ended September 30, 2020.

Three Months Ended

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Diluted earnngs per share

Income tax expense for Edon calculated using a 21% statutory rate

Six Months Ended

* Income tax expense for Edon calculated using a 21% statuatory

Nine Months Ended

Summary of Operations ($ in thousands)

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Diluted earnngs per share

Income tax expense for Edon calculated using a 21% statutory rate

* Income tax expense for Edon calculated using a 21% statuatory

Note 4 –

FOR SALE Securities

The amortized cost and appropriate fair values, together with

gross unrealized gains and losses, of securities at June 30, 2020 and December 31, 2019 were as follows:

The amortized cost and appropriate fair values,

together with gross unrealized gains and losses, of securities at September 30, 2020 and December 31, 2019 were as follows:

($ in thousands)

June 30, 2020

September 30, 2020

Treasury and Government agencies

1 unchanged sentence

State and political subdivisions

Other corporate securities

December 31, 2019

2 unchanged sentences

State and political subdivisions

Other corporate securities

The amortized cost and fair value of securities

available for sale at June 30, 2020, by contractual maturity, are shown below.

available for sale at September 30, 2020, by contractual maturity, are shown below.

Expected maturities will differ from contractual

6 unchanged sentences

Mortgage-backed securities

The fair value of securities pledged as

collateral, to secure public deposits and for other purposes, was $36.5 million at June 30, 2020 and $34.8 million at December

The fair value of securities delivered for repurchase agreements was $24.3 million at June 30, 2020 and $19.5 million

at December 31, 2019.

The fair value of securities pledged as collateral,

to secure public deposits and for other purposes, was $45.1 million at September 30, 2020 and $34.8 million at December 31, 2019.

The fair value of securities delivered for repurchase agreements was $24.9 million at September 30, 2020 and $19.5 million at December

There were no realized gains and losses

from sales of available-for-sale securities for the six months ended June 30, 2020, and $.2 million in realized gains for the

six months ended June 30, 2019.

Certain investments in debt securities

are reported in the financial statements at an amount less than their historical cost.

from sales of available-for-sale securities for the nine months ended September 30, 2020, and $0.2 million in realized gains

for the nine months ended September 30, 2019.

Certain investments in debt securities are

reported in the financial statements at an amount less than their historical cost.

Total fair value of these investments was $23.3

$1.6 million at June 30, 2020, and $38.8 million at December 31, 2019, which was approximately 2 and 38 percent, respectively,

million at September 30, 2020, and $38.8 million at December 31, 2019, which was approximately 18 and 38 percent, respectively,

of the Company’s available-for-sale investment portfolio at such dates.

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the other-than-temporary impairment is identified.

Securities with unrealized losses, aggregated by investment

class and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2020 and December

Securities with unrealized losses, aggregated by investment class

and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2020 and December

31, 2019 are as follows:

($ in thousands)

Less than 12 Months

12 Months or Longer

June 30, 2020

($ in thousands)

September 30, 2020

Unrealized Losses

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State and political subdivisions

Other corporate securities

Less than 12 Months

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State and political subdivisions

Other corporate securities

The total unrealized loss in the securities

portfolio was $0.01 million as of June 30, 2020 compared to a $0.2 million unrealized loss at December 31, 2019.

Management evaluates

securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concern

warrants such evaluation.

Consideration is given to (1) the length of time and the extent to which the fair value has been less

than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent of the Company to not sell the

investment and whether it is more likely than not that the Company will be required to sell the security before recovery of its

amortized cost.

Management has determined there is no other-than-temporary-impairment on its securities as of June 30, 2020.

portfolio was $0.06 million as of September 30, 2020 compared to a $0.2 million unrealized loss at December 31, 2019.

evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market

concern warrants such evaluation.

Consideration is given to (1) the length of time and the extent to which the fair value has been

less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent of the Company to not sell

the investment and whether it is more likely than not that the Company will be required to sell the security before recovery of

its amortized cost.

Management has determined there is no other-than-temporary-impairment on its securities as of September 30,

NOTE 5 –

LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans that management has the intent and

ability to hold for the foreseeable future, or until maturity or payoffs, are reported at their outstanding principal balances

Loans that management has the intent

and ability to hold for the foreseeable future, or until maturity or payoffs, are reported at their outstanding principal balances

adjusted for any charge-offs, the allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums

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may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are

not fully reflected on the historical loss or risk rating data.

not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based

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of the borrower.

Categories of loans at June 30, 2020 and December 31, 2019 include:

Nonaccrual Loans

Categories of loans at September 30, 2020 and December 31, 2019

($ in thousands)

7 unchanged sentences

Allowance for loan losses

The risk characteristics of each loan portfolio segment are

The risk characteristics of each loan portfolio segment are as follows:

Commercial & Industrial and Agricultural

10 unchanged sentences

Commercial Real Estate (Owner and Nonowner Occupied)

Commercial real estate loans are viewed

primarily as cash flow loans and secondarily as loans secured by real estate.

Commercial real estate lending typically involves

higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property

securing the loan or the business conducted on the property securing the loan.

Commercial real estate loans may be more adversely

affected by conditions in the real estate markets or in the general economy.

Commercial real estate loans are viewed primarily

as cash flow loans and secondarily as loans secured by real estate.

Commercial real estate lending typically involves higher loan

principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing

the loan or the business conducted on the property securing the loan.

Commercial real estate loans may be more adversely affected

by conditions in the real estate markets or in the general economy.

The characteristics of properties securing the Company’s

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Residential Real Estate, HELOC and Consumer

Residential and consumer loans consist

of two segments –

Residential and consumer loans consist of two

segments –

residential mortgage loans and personal loans.

11 unchanged sentences

these loans are of smaller individual amounts and spread over a large number of borrowers.

The following tables present the activity in the allowance for

loan losses and the recorded investment in loans based on portfolio segment and impairment method as of June 30, 2020, December

31, 2019 and June 30, 2019.

The following tables present the activity in

the allowance for loan losses for the three and nine months ended September 30, 2020 and September 30, 2019, and the recorded investment

in loans based on portfolio segment and impairment method as of September 30, 2020, December 31, 2019 and September 30, 2019.

($ in thousands)

For the Three Months Ended

June 30, 2020

Commercial real estate

Residential real estate

September 30, 2020

Beginning balance

Provision (credit)

Ending balance

For the Six Months Ended

June 30, 2020

Commercial real estate

Residential real estate

For the Nine Months Ended

Beginning balance

Provision (credit)

Ending balance

For the Three Months Ended

June 30, 2019

Commercial real estate

Residential real estate

Beginning balance

1 unchanged sentence

Ending balance

For the Six Months Ended

June 30, 2019

Commercial real estate

Residential real estate

For the Nine Months Ended

September 30, 2019

Beginning balance

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Loans Receivable at

June 30, 2020

Commercial real estate

Residential real estate

September 30, 2020

Ending balance:

individually evaluated

for impairment

evaluated for impairment

Ending balance:

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Ending balance:

collectively evaluated

for impairment

collectively evaluated for

Loans Receivable at

December 31, 2019

Commercial real estate

Residential real estate

Ending balance:

1 unchanged sentence

Ending balance:

collectively evaluated

for impairment

collectively evaluated for

Ending balance:

3 unchanged sentences

Credit Risk Profile

The Company categorizes loans into risk

categories based on relevant information about the ability of borrowers to service their debt such as:

current financial information,

historical payment experience, credit documentation, public information and current economic trends, among other factors.

analyzes loans individually by classifying the loans as to credit risk.

This analysis includes loans with an outstanding balance

greater than $100 thousand and non-homogeneous loans, such as commercial and commercial real estate loans.

This analysis is performed

on a quarterly basis.

The Company categorizes loans into risk categories

based on relevant information about the ability of borrowers to service their debt such as:

current financial information, historical

payment experience, credit documentation, public information and current economic trends, among other factors.

The Company analyzes

loans individually by classifying the loans as to credit risk.

This analysis includes loans with an outstanding balance greater

than $100 thousand and non-homogeneous loans, such as commercial and commercial real estate loans.

This analysis is performed on

a quarterly basis.

The Company uses the following definitions for risk ratings:

Pass (grades 1 –

Loans which management has determined to be performing as expected and in agreement with the terms established at the

time of loan origination.

Loans which management has determined to be performing as expected and in agreement with the terms established at the time of loan

Special Mention (5):

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Substandard (6):

Loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if

are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.

Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.

characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

They are characterized

by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful (7):

Loans classified as doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that

the weaknesses make collection or liquidation in full, on the basis of current known facts, conditions and values, highly questionable

classified as doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the

weaknesses make collection or liquidation in full, on the basis of current known facts, conditions and values, highly questionable

and improbable.

are considered uncollectable and of such little value that continuing to carry them as assets on the Company’s financial

statement is not warranted.

Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving

all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

The following tables present the credit risk profile of the

Company’s loan portfolio based on rating category as of June 30, 2020 and December 31, 2019.

considered uncollectable and of such little value that continuing to carry them as assets on the Company’s financial statement

is not warranted.

Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all

or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

The following tables present the credit risk

profile of the Company’s loan portfolio based on rating category as of September 30, 2020 and December 31, 2019.

($ in thousands)

Commercial real

estate - owner occupied

Commercial real

estate - nonowner occupied

Residential real

September 30, 2020

estate - owner

estate - nonowner

Special Mention (5)

Substandard (6)

Commercial real estate - owner occupied

Commercial real estate - nonowner occupied

Residential real estate

December 31, 2019

estate - owner

estate - nonowner

Special Mention (5)

2 unchanged sentences

system definitions and allowance for loan loss methodology on an ongoing basis.

The following tables present the Company’s loan portfolio

aging analysis as of June 30, 2020 and December 31, 2019.

The following tables present the Company’s

loan portfolio aging analysis as of September 30, 2020 and December 31, 2019.

in thousands)

June 30, 2020

Days Past Due

Commercial & industrial

Commercial real estate - owner occupied

Commercial real estate - nonowner occupied

Residential real estate

December 31, 2019

Days Past Due

Commercial & industrial

Commercial real estate - owner occupied

Commercial real estate - nonowner occupied

Days Past Due

Commercial real estate

- owner occupied

Commercial real estate

- nonowner occupied

Residential real estate

Commercial real estate

- owner occupied

Commercial real estate

- nonowner occupied

Residential real estate

All loans past due 90 days are systematically placed on nonaccrual

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rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

The following tables present impaired loan information as of

and for the six months ended June 30, 2020 and 2019, and for the twelve months ended December 31, 2019:

The following tables present impaired loan information as of and

for the nine months ended September 30, 2020 and 2019, and for the twelve months ended December 31, 2019:

in thousands)

Six Months Ended

Unpaid Principal

Average Recorded

Interest Income

June 30, 2020

With no related allowance recorded:

Commercial & industrial

Commercial real estate - owner occupied

Commercial real estate - nonowner occupied

Residential real estate

Commercial real estate

- owner occupied

Commercial real estate

- nonowner occupied

Residential real

With a specific allowance recorded:

Commercial & industrial

Commercial real estate - owner occupied

Commercial real estate - nonowner occupied

Residential real estate

Commercial & industrial

Commercial real estate - owner occupied

Commercial real estate - nonowner occupied

Residential real estate

Commercial real estate

- owner occupied

Commercial real estate

- nonowner occupied

Residential real

Commercial real estate

- owner occupied

Commercial real estate

- nonowner occupied

Residential real

Three Months Ended

September 30, 2020

Average Recorded

Interest Income

June 30, 2020

($ in thousands)

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Residential real estate

($ in thousands) Twelve Months Ended

($ in thousands)

Twelve Months Ended

Unpaid Principal

Average Recorded

Interest Income

December 31, 2019

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Residential real estate

Six Months Ended

Three Months Ended

June 30, 2019

September 30, 2019

Average Recorded

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Average Recorded

Interest Income

($ in thousands)

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Residential real estate

Impaired loans less than $100,000 are included in groups of

homogenous loans.

Impaired loans less than $100,000 are included

in groups of homogenous loans.

These loans are evaluated based on delinquency status.

Interest income recognized on a cash basis does not materially

differ from interest income recognized on an accrual basis.

Interest income recognized on a cash basis

does not materially differ from interest income recognized on an accrual basis.

Troubled Debt Restructured (TDR) Loans

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TDR Concession Types

The Company’s standards relating

to loan modifications consider, among other factors, minimum verified income requirements, cash flow analysis, and collateral valuations.

The Company’s standards relating to loan

modifications consider, among other factors, minimum verified income requirements, cash flow analysis, and collateral valuations.

Each potential loan modification is reviewed individually and the terms of the loan are modified to meet a borrower’s specific

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of any concession type.

During the six months ended June 30, 2020,

the Company had no new TDR activity.

The following table represents new TDR

activity for the six months ended June 30, 2019:

During the nine months

ended September 30, 2020, the Company had no new TDR activity.

The following table represents

new TDR activity for the nine months ended September 30, 2019:

($ in thousands)

Pre-Modification

Recorded Balance

Commercial & industrial

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have subsequently defaulted.

On March 27, 2020, President Trump signed

the CARES Act, which extends the duration of loan forbearance (deferral) agreements beyond the current three-month period before

a loan is considered to be a troubled debt restructure.

As of June 30, 2020 the Company had approved 262 loan deferral requests

for clients with a total dollar amount of $153.3 million.

On March 27, 2020, President Trump signed the

CARES Act, which extends the duration of loan forbearance (deferral) agreements beyond the current three-month period before a

loan is considered to be a troubled debt restructure.

As of September 30, 2020, the Company had approved 26 loan deferral requests

for clients with a total dollar amount of $38.4 million, which do not constitute TDR’s as a result of the CARES act.

NOTE 6 –

ACCOUNTING FOR CERTAIN

LOANS ACQUIRED IN A TRANSFER

FOR CERTAIN LOANS ACQUIRED IN A TRANSFER

The Company acquired loans in the acquisition

of The Edon State Bank Company of Edon, Ohio, effective June 5, 2020.

None of the transferred loans had evidence of deterioration

None of the acquired loans had evidence of deterioration

of credit quality since origination, and it was probable, at acquisition, that all contractually required payments would be collected.

The following table presents the carrying

amount of the acquired loans included in the balance sheet as of June 30, 2020:

The following table presents the carrying amount

of the acquired loans included in the balance sheet as of September 30, 2020:

($ in thousands)

September 30,

Commercial & industrial

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Home equity line of credit (HELOC)

Accretable yield, or income expected to be collected as of June

Accretable yield, or income expected to be collected as of September

30, 2020 is $0.4 million.

NOTE 7 –

MORTGAGE SERVICING RIGHTS

Mortgage loans serviced for others are

not included in the accompanying balance sheets.

The unpaid principal balance of mortgage loans serviced for others approximated

$1.3 billion at June 30, 2020 and $1.2 billion at December 31, 2019.

Contractually specified servicing fees of approximately $1.5

million and $1.4 million were included in mortgage loan servicing fees in the consolidated income statement for the six months

ended June 30, 2020 and 2019, respectively.

The following table summarizes mortgage

servicing rights capitalized and related amortization, along with activity in the related valuation allowance:

SERVICING RIGHTS

Mortgage loans serviced

for others are not included in the accompanying balance sheets.

The unpaid principal balance of mortgage loans serviced for others

approximated $1.3 billion at September 30, 2020 and $1.2 billion at December 31, 2019.

Contractually specified servicing fees of

approximately $2.4 million and $2.1 million were included in mortgage loan servicing fees in the consolidated income statement

for the nine months ended September 30, 2020 and 2019, respectively.

The following table summarizes

mortgage servicing rights capitalized and related amortization, along with activity in the related valuation allowance:

($ in thousands)

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Net change in valuation allowance

Carrying amount, June 30

Carrying amount, September 30

Valuation allowance:

NOTE 8 –

Goodwill is recorded on the acquisition

date of an entity.

During the measurement period, the Company may record subsequent adjustments to goodwill for provisional amounts

recorded at the acquisition date.

The acquisition of The Edon State Bank Company of Edon, Ohio, on June 5, 2020 and the purchase

of an Ohio- based Title agency through a newly-formed, wholly-owned subsidiary, SBFG Title, LLC, on March 15, 2019 resulted in

approximately $4.3 million and $1.4 million respectively, in goodwill.

Due to the impact of COVID-19 on the economy

and the banking industry, the Company evaluated goodwill as of June 30,2020.

This evaluation determined that no triggering event

had occurred since the last goodwill impairment test was conducted.

A summary of the activity in goodwill is

presented below:

Six Months Ended

Goodwill is recorded

on the acquisition date of an entity.

During the measurement period, the Company may record subsequent adjustments to goodwill

for provisional amounts recorded at the acquisition date.

The acquisition of The Edon State Bank Company of Edon, Ohio, on June

5, 2020, and the purchase of an Ohio- based title agency through a newly-formed, wholly-owned subsidiary, SBFG Title, LLC, on March

15, 2019 resulted in approximately $4.3 million and $1.4 million, respectively, in goodwill.

A summary of the activity

in goodwill is presented below:

September 30,

($ in thousands)

Carrying Amount

Beginning balance

Acquired goodwill

Measurement period adjustments

Ending balance

Goodwill is not amortized but is evaluated

for impairment annually, and on an interim basis if events or changes in circumstances indicate that goodwill might be impaired.

Impairment exists when the carrying value of goodwill exceeds its fair value.

Goodwill is not amortized but is

evaluated for impairment annually as of December 31, or more frequently if events or circumstances that indicate an

impairment may exist..

When assessing goodwill for impairment, first, a qualitative assessment can be made to determine

whether it is more likely than not that the estimated fair value of a reporting unit is less that its estimated carrying

If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed.

Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.

Goodwill was assessed for impairment using a quantitative test performed

as of September 30, 2020.

The estimated fair value of the reporting unit exceeded the net carrying value, and therefore no goodwill

impairment existed as of that date.

No events or circumstances since the September 30, 2020 impairment test were noted that would

indicate it was more likely than not a goodwill impairment exists.

NOTE 9 –

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The table below presents the notional amount

and fair value of the Company’s interest rate swaps, IRLCs and forward contracts utilized as of June 30, 2020 and December

June 30, 2020

December 31, 2019

and fair value of the Company’s interest rate swaps, IRLCs and forward contracts utilized as of September 30, 2020 and December

September 30,

($ in thousands)

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Total contracts

The fair value of interest rate swaps were estimated using a

discounted cash flow method that incorporates current market interest rates as of the balance sheet date.

Fair values of IRLCs

and forward contracts were estimated using changes in mortgage interest rates from the date the Company entered into the IRLC and

the balance sheet date.

The following table presents the amounts included in the consolidated

statements of income for non-hedging derivative financial instruments for the six months ended June 30, 2020 and 2019.

The fair value of interest rate swaps were

estimated using a discounted cash flow method that incorporates current market interest rates as of the balance sheet date.

values of IRLCs and forward contracts were estimated using changes in mortgage interest rates from the date the Company entered

into the IRLC and the balance sheet date.

The following table presents the amounts

included in the consolidated statements of income for non-hedging derivative financial instruments for the nine months ended September

30, 2020 and 2019.

Amount of gain (loss)

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The following table shows the offsetting of financial assets

and derivative assets at June 30, 2020 and December 31, 2019.

Gross amounts

offset in the

presented in the

Gross amounts not offset in the consolidated balance sheet

and derivative assets at September 30, 2020 and December 31, 2019.

Gross amounts offset in the

Net amounts of assets presented in the

Gross amounts not offset in the consolidated

balance sheet

($ in thousands)

recognized assets

Cash collateral received

June 30, 2020

Financial instruments

collateral received

September 30, 2020

Interest rate swaps

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The following table shows the offsetting of financial liabilities

and derivative liabilities at June 30, 2020 and December 31, 2019.

Gross amounts

offset in the

of liabilities

and derivative liabilities at September 30, 2020 and December 31, 2019.

amounts offset in

Net amounts of liabilities

presented in the

Gross amounts not offset in the consolidated balance sheet

Gross amounts not

offset in the consolidated balance sheet

($ in thousands)

recognized liabilities

consolidated balance

Financial instruments

Cash collateral pledged

June 30, 2020

collateral pledged

September 30, 2020

Interest rate swaps

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($ in thousands)

September 30,

Securities Sold Under Repurchase Agreements

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These securities have various maturity dates from 2022 through

As of June 30, 2020, these repurchase agreements were secured by agency securities and mortgage-backed securities with corresponding

liabilities of $8.9 million and $15.4 million, respectively.

As of September 30, 2020, these repurchase agreements were secured by agency securities and mortgage-backed securities with

corresponding liabilities of $10.8 million and $14.1 million, respectively.

The repurchase agreements mature within one month.

The Company has borrowing capabilities

at the Federal Reserve Discount Window by pledging either securities or loans as collateral, which as of June 30, 2020 had none

At June 30, 2020, the Company had $82.7 million in available collateral, of which none was pledged.

at the Federal Reserve Discount Window by pledging either securities or loans as collateral.

As of September 30, 2020, there was

no collateral pledged or borrowings drawn at the Discount Window.

The Company participated in the Paycheck

Protection Program (“PPP”) and has the ability to borrow from the Federal Reserve’s special purpose Paycheck

Protection Program (“PPP”) and also has the ability to borrow from the Federal Reserve’s special purpose Paycheck

Protection Program Liquidity Facility (“PPPLF”) for additional funding.

At June 30, 2020 there were no borrowings from

At June 30, 2020 and December 31, 2019,

the Company had $41.0 million in federal funds lines, of which none were drawn.

At September 30, 2020, there were no borrowings

from the PPLF.

At September 30, 2020 and December 31,

2019, the Company had $41.0 million in federal funds lines, of which none was drawn.

NOTE 11 –

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The FHLB advances were secured by $150.1

million in mortgage loans at June 30, 2020.

million in mortgage loans at September 30, 2020.

Advances, at interest rates from 2.77 to 2.93 percent, are subject to restrictions

or penalties in the event of prepayment.

Aggregate annual maturities of FHLB advances at June 30, 2020 were:

Aggregate annual maturities of FHLB advances at September 30, 2020 were:

($ in thousands)

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regulatory guidelines and interpretations.

The balance of the Capital Securities as of June 30, 2020 and December 31, 2019 was

$10.3 million, with a maturity date of September 15, 2035.

The balance of the Capital Securities as of September 30, 2020 and December 31, 2019

was $10.3 million, with a maturity date of September 15, 2035.

NOTE 13 –

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of three levels of inputs that may be used to measure fair value:

Quoted prices in active markets for identical assets or liabilities

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;

Level 1 Quoted prices in active markets for identical assets or

Level 2 Observable inputs other than Level 1 prices, such as quoted

prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis, recognized

in the accompanying balance sheets, as well as the general classifications of such assets pursuant to the valuation hierarchy.

or other inputs that are observable or

can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs that are supported by little or no

market activity and that are significant to the fair value of the assets or liabilities

Following is a description of the valuation

methodologies and inputs used for assets measured at fair value on a recurring basis, recognized in the accompanying balance sheets,

as well as the general classifications of such assets pursuant to the valuation hierarchy.

Available-for-Sale Securities

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measurements of assets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair

value measurements fall at June 30, 2020 and December 31, 2019.

value measurements fall at September 30, 2020 and December 31, 2019.

($ in thousands)

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State and political subdivisions

Other corporate securities

Interest rate contracts - assets

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value based on the Company’s loan review policy.

All impaired loans held by the Company were collateral dependent at June

All impaired loans held by the Company were collateral dependent at September

30, 2020 and December 31, 2019.

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($ in thousands)

Collateral-dependent

impaired loans

Valuation technique

Unobservable inputs

Collateral-dependent impaired loans

Market comparable properties

Comparability

adjustments (%)

Comparability adjustments (%)

0 - 30% (21%)

Mortgage servicing rights

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($ in thousands)

Valuation technique

Unobservable inputs

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Comparability adjustments (%)

2 - 62% (28%)

Mortgage servicing rights

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There were no changes in the inputs or

methodologies used to determine fair value at June 30, 2020 as compared to December 31, 2019.

methodologies used to determine fair value at September 30, 2020 as compared to December 31, 2019.

The following methods were used to estimate

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The estimated fair value of loans as of

March 31, 2020 follows the guidance in ASU 2016-01, which prescribes an “exit price”

approach in estimating and disclosing

fair value of financial instruments.

The fair value calculation at that date discounted estimated future cash flows using rates

that incorporated discounts for credit, liquidity, and marketability factors.

September 30, 2020 follows the guidance in ASU 2016-01, which prescribes an “exit price”

approach in estimating and

disclosing fair value of financial instruments.

The fair value calculation at that date discounted estimated future cash flows

using rates that incorporated discounts for credit, liquidity, and marketability factors.

Deposits, FHLB advances & Repurchase

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time deposits, as well as borrowings, is based on estimates of the rate State Bank could pay on similar instruments with similar

terms and maturities at June 30, 2020 and December 31, 2019.

terms and maturities at September 30, 2020 and December 31, 2019.

Loan Commitments

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The estimated fair values for other financial instruments and off-balance-sheet

loan commitments approximate cost at June 30, 2020 and December 31, 2019 and are not considered significant to this presentation.

loan commitments approximate cost at September 30, 2020 and December 31, 2019 and are not considered significant to this presentation.

Trust Preferred Securities

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Fair value measurements using

June 30, 2020

September 30, 2020

Financial assets

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A total of 500,000 common shares of the Company are available for grants or awards under the 2017 Plan, of which

57,219 shares had been granted under the plan as of June 30, 2020.

56,324 shares had been granted under the plan as of September 30, 2020.

The 2008 Plan, which was approved by the

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of grant using the Black-Scholes valuation model.

No options were granted in the first six months of 2020.

No options were granted in the first nine months of 2020.

A summary of stock option activity under

the Company’s plans as of June 30, 2020 and changes during the quarter then ended, is presented below:

the Company’s plans as of September 30, 2020 and changes during the quarter then ended, is presented below:

($ in thousands - except per share data)

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Outstanding, December 31, 2019

Outstanding, June 30, 2020

Exercisable, June 30, 2020

Outstanding, September 30, 2020

Exercisable, September 30, 2020

All stock options included in the table

1 unchanged sentence

These shares had an expiration date of February 17, 2020.

During the first six months,

During the first nine months,

the 26,950 option shares exercised had a total intrinsic value of $0.3 million and the cash received from these exercised options

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option shares expired.

As of June 30, 2020, there were no outstanding or exercisable options remaining, and no unrecognized compensation

cost related to stock option awards granted under the 2008 Plan.

As of September 30, 2020, there were no outstanding or exercisable options remaining, and no unrecognized

compensation cost related to stock option awards granted under the 2008 Plan.

On February 5, 2013, the Company adopted

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restricted stock awards vest over a four-year period and are intended to assist the Company in retention of key executives.

2019, the Company met certain performance targets and restricted stock awards were approved and issued in February of 2020.

compensation cost charged against income for the LTI Plan was $0.1 million, with a total income tax benefit recognized in the income

statement of $0.02 million.

As of June 30, 2020, there was $0.57 million

of total unrecognized compensation cost related to non-vested share-based compensation arrangements related to the restricted stock

awards under the Plans which were granted in accordance with the LTI plan.

That cost is expected to be recognized over a weighted-average

period of 2.6 years.

2019, the Company met certain performance targets under the LTI Plan and a total of 16,442 shares of restricted stock were approved

and issued in February of 2020.

The compensation cost charged against income for the LTI Plan was $0.3 million, with a total income

tax benefit recognized in the income statement of $0.07 million.

As of September 30, 2020, there was $0.47

million of total unrecognized compensation cost related to non-vested share-based compensation arrangements related to the restricted

stock awards under the Plans which were granted in accordance with the LTI plan.

That cost is expected to be recognized over a

weighted-average period of 2.3 years.

A summary of restricted stock activity

under the Company’s plans as of June 30, 2020 and changes during the quarter then ended, is presented below:

Average Value

under the Company’s plans as of September 30, 2020 and changes during the quarter then ended, is presented below:

Average Value per Share

Nonvested, December 31, 2019

Nonvested, June 30, 2020

Nonvested, September 30, 2020

NOTE 15 –

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It is the opinion of management that the disposition or ultimate resolution of any such claims, lawsuits and

examinations pending at June 30, 2020, will not have a material adverse effect on the consolidated financial position, results

examinations pending at September 30, 2020, will not have a material adverse effect on the consolidated financial position, results

of operations and cash flow of the Company.

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of Part II of the Company’s Quarterly

Report on Form 10-Q for the quarter ended March 31, 2020, as supplemented by “Item 1A.

Risk Factors”

of Part II of

this Quarterly Report on Form 10-Q.

Undue reliance should not be placed on the forward-looking statements, which speak only as

of the date hereof.

Except as may be required by law, the Company undertakes no obligation to update any forward-looking statement

to reflect unanticipated events or circumstances after the date on which the statement is made.

Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020.

Undue reliance should not be placed on the forward-looking

statements, which speak only as of the date hereof.

Except as may be required by law, the Company undertakes no obligation to update

any forward-looking statement to reflect unanticipated events or circumstances after the date on which the statement is made.

Overview of SB Financial

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or other factors could lead to an impairment of goodwill that could adversely impact earnings for future periods.

Three Months Ended June

30, 2020 compared to Three Months Ended June 30, 2019

income for the second quarter of 2020 was $3.7 million compared to net income of $2.6 million for the second quarter of 2019, an

Three Months Ended September

30, 2020 compared to Three Months Ended September 30, 2019

income for the third quarter of 2020 was $5.3 million compared to net income of $3.8 million for the third quarter of 2019, an

increase of 40 percent.

Earnings per diluted share (EPS) of $0.47 were up 42 percent from EPS of $0.33 for the second quarter of

During the quarter, the Company incurred a temporary impairment of $1.1 million to its mortgage servicing rights and expensed

$1.2 million for costs related to the Edon acquisition.

The quarterly results include 26 days of earnings from the Edon acquisition.

Earnings per diluted share (EPS) of $0.69 were up 45 percent from EPS of $0.48 for the third quarter of

During the quarter, the Company recaptured temporary impairment of $0.3 million on its mortgage servicing rights.

The quarterly

results include a full quarter of earnings from the Edon acquisition.

The impact of the COVID-19 pandemic

1 unchanged sentence

In response, we have

actively participated in the Paycheck Protection Program (“PPP”) and have disbursed nearly $83 million to small business

In addition, the Company has approved over $195 million in loan deferrals to clients.

Anticipated further government action

will impact our consolidated financial results during the remainder of 2020 although specific details cannot be determined at this

actively participated in the Paycheck Protection Program (“PPP”) and have disbursed nearly $83 million in PPP loans

to small business clients.

In addition, the Company has approved $38.4 million in loan deferrals to clients, with an additional

$42.3 million in deferrals for sold mortgages in connection with the impacts related to the COVID-19 pandemic.

Anticipated further

government action will impact our consolidated financial results during the remainder of 2020 although specific details cannot

be determined at this time.

Provision for Loan Losses:

The second quarter provision for loan losses was $1.3 million compared to $0.2 million for the year-ago quarter.

Net charge-offs

for the quarter were $0.24 million compared to $0.02 million for the year-ago quarter.

Total delinquent loans ended the quarter

at $5.4 million, or 0.60 percent of total loans, which is down $0.1 million from the prior year.

The Company set aside additional

loan loss reserves due to the unknown future impact of COVID-19 on our client base.

The third quarter provision for loan losses was $1.8 million, compared to $0.3 million for the year-ago quarter as the Company

set aside additional loan loss reserves due to the unknown future impact of COVID-19 on our client base.

Net charge-offs for the

quarter were $0.02 million compared to $0.11 million for the year-ago quarter.

Total delinquent loans ended the quarter at $5.9

million, or 0.66 percent of total loans, which is up $3.9 million from the prior year.

Asset Quality Review –

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Consolidated Revenue:

revenue, consisting of net interest income and noninterest income, was $17.5 million for the second quarter of 2020, an increase

of $5.0 million, or 40 percent, from the $12.5 million generated during the second quarter of 2019.

The Edon acquisition, which

closed June 5, 2020, added $0.1 million in revenue for the second quarter of 2020.

revenue, consisting of net interest income and noninterest income, was $19.7 million for the third quarter of 2020, an increase

of $5.3 million, or 36 percent, from the $14.4 million generated during the third quarter of 2019.

Net interest income was $9.3 million, which

is up $0.04 million from the prior year second quarter’s $8.8 million.

is up $0.2 million from the prior year third quarter’s $9.1 million.

The Company’s earning assets increased $163.0

million, coupled with a 102 basis point decrease in the yield on earning assets.

The net interest margin (FTE) for the second quarter

of 2020 was 3.32 percent compared to 3.88 percent for the second quarter of 2019.

The margin was impacted by the $82.7 million

in PPP loans outstanding at June 30, 2020, with a coupon rate of 1.0 percent.

The net interest margin (FTE) for the third quarter

of 2020 was 3.41 percent compared to 3.93 percent for the third quarter of 2019.

The margin was impacted by the $82.1 million in

PPP loans outstanding at September 30, 2020, with a coupon rate of 1.0 percent.

The Company booked $0.4 million in deferred fees

1 unchanged sentence

Funding costs for interest bearing liabilities for

the second quarter of 2020 were 0.89 percent compared to 1.28 percent for the prior year second quarter.

the third quarter of 2020 were 0.75 percent compared to 1.33 percent for the prior year third quarter.

Noninterest income was $10.4 million for

the second quarter of 2020, which was up $4.9 million from the prior year second quarter’s $3.7 million.

the third quarter of 2020, which was up $5.0 million from the prior year third quarter’s $5.4 million.

In addition to the

mortgage revenue detailed below, gains from the sale of non-mortgage loans was $0.1 million and wealth management revenue was $0.8

Impairment of our mortgage servicing rights reduced noninterest income by $1.1 million in the quarter.

Our title agency

contributed revenue of $0.6 million in the second quarter of 2020, up $0.3 million from the prior year.

Noninterest income as a

percentage of average assets for the second quarter of 2020 was 2.95 percent compared to 1.45 percent for the prior year second

Recapture of prior impairment to our mortgage servicing rights increased noninterest income by $0.3 million in the quarter.

Our title agency contributed revenue of $0.5 million in the third quarter of 2020, up $0.1 million from the prior year.

income as a percentage of average assets for the third quarter of 2020 was 3.42 percent compared to 2.06 percent for the prior

year third quarter.

State Bank originated $200.2 million of

mortgage loans for the second quarter of 2020, of which $204.6 million was sold with the remainder in loans held for investment.

This compares to $98.5 million for the second quarter of 2019, of which $71.0 million was sold with the remainder in loans held

mortgage loans for the third quarter of 2020, of which $166.2 million was sold with the remainder in loans held for investment.

This compares to $157.9 million for the third quarter of 2019, of which $125.4 million was sold with the remainder in loans held

for investment.

1 unchanged sentence

re-finance volume.

These second quarter 2020 originations and subsequent sales resulted in $8.1 million of gains, up $6.4 million

from the gains for the second quarter of 2019.

Net mortgage banking revenue was $6.2 million for the second quarter of 2020 compared

to $1.2 million for the second quarter of 2019.

The 2020 second quarter included a $1.1 million negative valuation impairment on

our mortgage servicing rights compared to a negative impairment of $0.7 million for the second quarter of 2019, due to increased

prepayment speeds and expected higher default rates due to COVID-19 concerns.

These third quarter 2020 originations and subsequent sales resulted in $8.1 million of gains, up $5.6 million

from the gains for the third quarter of 2019.

Net mortgage banking revenue was $7.9 million for the third quarter of 2020 compared

to $2.5 million for the third quarter of 2019.

The 2020 third quarter included a $0.3 million positive valuation recapture on our

mortgage servicing rights compared to no impairment for the third quarter of 2019, due to increased prepayment speeds and expected

higher default rates due to COVID-19 concerns.

Consolidated Noninterest Expense:

Noninterest expense for the second quarter of 2020 was $11.7 million, which was up $2.6 million compared to $9.1 million in the

prior-year second quarter.

The second quarter of 2020 included higher commission and incentives on mortgage sales of $0.8 million

Noninterest expense for the third quarter of 2020 was $11.3 million, which was up $1.8 million compared to $9.5 million in the

prior-year third quarter.

The third quarter of 2020 included higher commission and incentives on mortgage sales of $0.3 million

and the expenses from our title agency of $0.3 million, which was up $0.11 million from the prior year.

Included in the second

quarter 2020 expense total was $1.4 million in costs related to the acquisition of Edon.

The operational expenses

for the acquired Edon operations were also included in the quarter.

Income Taxes:

taxes for the second quarter of 2020 were $0.9 million (effective rate 19.2 percent) compared to $0.6 million (effective rate 18.3

percent) for the second quarter of 2019.

Income taxes for

the third quarter of 2020 were $1.3 million (effective rate 19.7 percent) compared to $0.9 million (effective rate 18.6 percent)

for the third quarter of 2019.

The higher tax expense was driven by higher earnings.

Six Months Ended June

30, 2020 compared to Six Months Ended June 30, 2019

Net income for the first six months of 2020 was $4.3 million compared to net income of $4.9 million for the first six months of

2019, a decrease of 10.7 percent.

Earnings per diluted share (EPS) for the period of $0.56 were down 8.2 percent from EPS of $0.61

for the prior year six-month period.

Nine Months Ended September 30, 2020

compared to Nine Months Ended September 30, 2019

for the first nine months of 2020 was $9.6 million compared to net income of $8.6 million for the first nine months of 2019, an

increase of $1.0 million or 11.3 percent.

Earnings per diluted share (EPS) for the period of $1.25 were up 15.3 percent from EPS

of $1.08 for the prior year nine-month period.

Provision for Loan Losses :

The provision for loan losses for the first six months of 2020 was $1.9 million compared to $0.2 million for the prior year first

Net charge offs for the period were $0.6 million compared to net charge offs of $0.06 million for the prior year six

month period.

The provision for loan losses for the first nine months of 2020 was $3.7 million compared to $0.5 million for the prior year first

Net charge offs for the period were $0.7 million compared to net charge offs of $0.2 million for the prior year nine-month

Consolidated Revenue :

revenue, consisting of net interest income and noninterest income, was $28.2 million for the first six months of 2020, an increase

of $4.3 million, or 18.2 percent, from the $23.9 million generated during the 2019 first six months.

Net interest income was $17.4 million,

which is up $0.2 million from net interest income of $17.2 million for the prior year first six months.

revenue, consisting of net interest income and noninterest income, was $47.9 million for the first nine months of 2020, an increase

of $9.6 million, or 25.0 percent, from the $38.3 million generated during the 2019 first nine months.

Net interest income was $26.7 million, which

is up $0.5 million from net interest income of $26.2 million for the prior year first nine months.

The Company’s earning

assets increased $158.8 million, and had a 93 basis point decrease in the yield on earning assets for the first six months of 2020.

The net interest margin (FTE) for the first six months of 2020 was 3.40 percent compared to 3.84 percent for the first six months

Funding cost for interest bearing liabilities for the first six months of 2020 were 1.00 percent compared to 1.24 percent

for the prior year first six months.

Noninterest income was $10.8 million for

the 2020 first six months, which is up $4.1 million from noninterest income of $6.7 million for the prior year first six months.

assets increased $139.6 million, and had a 80 basis point decrease in the yield on earning assets for the first nine months of

The net interest margin (FTE) for the first nine months of 2020 was 3.41 percent compared to 3.87 percent for the first nine

months of 2019.

Funding cost for interest bearing liabilities for the first nine months of 2020 were 0.91 percent compared to 1.27

percent for the prior year first nine months.

Noninterest income was $21.2 million for the

2020 first nine months, which is up $9.1 million from noninterest income of $12.1 million for the prior year first nine months.

In addition to the mortgage revenue detailed below, gains from the sale of non-mortgage loans was $0.3 million, compared to $1.0

million for the same period in 2019.

For the first six months, the Company had a mortgage servicing rights impairment of $3.3 million.

State Bank originated $325.0 million of

mortgage loans during the first six months of 2020, of which $289.1 million of loans were sold with the remainder of loans held

for investment.

These levels were up 117 percent and 153 percent, respectively, as compared to the prior year first six months.

For the first nine months, the Company had a mortgage servicing rights impairment of $3.0

State Bank originated $525.2 million of mortgage

loans during the first nine months of 2020, of which $455.3 million of loans were sold with the remainder of loans held for investment.

These levels were up 71 percent and 90 percent, respectively, as compared to the prior year first nine months.

Consolidated Noninterest Expense:

Noninterest expense for the first six months of 2020 was $21.1 million, which is up $3.3 million compared to $17.7 million in the

prior year first six months.

The increase in noninterest expenses compared to the prior year was due to increased mortgage commission,

expenses for SBFG Title and $1.2 million in Edon merger expenses.

Noninterest expense for the first nine months of 2020 was $32.4 million, which is up $5.2 million compared to $27.2 million in

the prior year first nine months.

The increase in noninterest expenses compared to the prior year was due to increased mortgage

commission, expenses for SBFG Title and $1.2 million in Edon merger expenses.

Income Taxes:

taxes for the first six months of 2020 were $0.9 million (effective rate 17.1 percent) compared to $1.1 million (effective rate

18.1 percent) for the first six months of 2019.

Income taxes for

the first nine months of 2020 were $2.2 million (effective rate 18.6 percent) compared to $1.9 million (effective rate 18.4 percent)

for the first nine months of 2019.

Changes in Financial Condition

Total assets at June 30, 2020 were $1,202.9

Total assets at September 30, 2020 were $1,218.1

million, an increase of $179.5 million or 17.3 percent since December 2019 year end.

Total loans, net of unearned income, were

$901.5 million as of June 30, 2020, up $76.0 million from year-end, an increase of 9.2 percent.

$885.9 million as of September 30, 2020, up $60.3 million from year-end, an increase of 7.3 percent.

Total PPP balances added $82.1

million to our total loans at June 30, 2020.

Total deposits at June 30, 2020 were $990.6

million to our total loans at September 30, 2020.

Total deposits at September 30, 2020 were $1,014.0

million, an increase of $173.8 million or 20.7 percent since 2019 year end.

Borrowed funds (consisting of FHLB advances, and REPOs)

totaled $36.8 million at June 30, 2020.

This is up from year-end when borrowed funds totaled $28.9 million due to an increase in

Total equity for the Company of $137.9 million now stands at 11.5 percent of total assets compared to the December 31, 2019

level of $136.1 million and 13.1 percent of total assets.

The reduction in equity is due to the acquisition of Edon partially offset

by net income.

totaled $28.7 million at September 30, 2020.

This is down from year-end when borrowed funds totaled $28.9 million due to an increase

in REPOs, offset by lower FHLB borrowings.

Total equity for the Company of $141.3 million now stands at 11.6 percent of total assets

compared to the December 31, 2019 level of $136.1 million and 13.1 percent of total assets.

The reduction in equity is due to the

acquisition of Edon partially offset by net income.

The allowance for loan loss of $11.8 million

is up $3.0 million from the December 2019 year end level.

The allowance to loan level is 1.11 percent, which is considered appropriate

by management given the risk profile of the portfolio.

The allowance to loan level is 1.33 percent (1.47 percent when adjusted

for PPP balances), which is considered appropriate by management given the risk profile of the portfolio.

Capital Resources

As of June 30, 2020, based on

the computations for the FFIEC 041 Consolidated Reports of Condition and Income filed by State Bank with the Federal Reserve, State

Bank was classified as well capitalized under the regulatory framework for prompt corrective action.

To be categorized as well

capitalized, State Bank must maintain capital ratios as set forth in the table below.

There are no conditions or events since June

30, 2020 that management believes have changed State Bank’s capital classification.

State Bank’s actual capital

levels and ratios as of June 30, 2020 and December 31, 2019 are presented in the following table.

Capital levels are presented

for State Bank only as the Company is exempt from quarterly reporting on capital levels at the holding company level:

Capitalized Under

Prompt Corrective

As of September 30, 2020, based on the computations

for the FFIEC 041 Consolidated Reports of Condition and Income filed by State Bank with the Federal Reserve, State Bank was classified

as well capitalized under the regulatory framework for prompt corrective action.

To be categorized as well capitalized, State Bank

must maintain capital ratios as set forth in the table below.

There are no conditions or events since September 30, 2020 that management

believes have changed State Bank’s capital classification.

State Bank’s actual capital levels and

ratios as of September 30, 2020 and December 31, 2019 are presented in the following table.

Capital levels are presented for State

Bank only as the Company is exempt from quarterly reporting on capital levels at the holding company level:

For Capital Adequacy

To Be Well Capitalized Under

Prompt Corrective Action

($ in thousands)

Action Procedures

As of June 30, 2020

As of September 30, 2020

Tier I Capital to average assets

7 unchanged sentences

Total Risk-based capital to risk-weighted assets

Effective January 1, 2015, new

regulatory capital requirements commonly referred to as “Basel III”

were implemented and are reflected in the June

30, 2020 capital table above.

Management opted out of the accumulated other comprehensive income treatment under the new requirements

and as such unrealized gains and losses from available-for-sale securities will continue to be excluded from State Bank’s

regulatory capital.

Liquidity relates primarily to

the Company’s ability to fund loan demand, meet deposit customers’

withdrawal requirements and provide for operating

Assets used to satisfy these needs consist of cash and due from banks, federal funds sold, interest-earning deposits

in other financial institutions, securities available-for-sale and loans held for sale.

These assets are commonly referred to as

liquid assets.

Liquid assets were $214.2 million at June 30, 2020, compared to $135.3 million at December 31, 2019.

Liquidity risk arises from the

possibility that the Company may not be able to meet the Company’s financial obligations and operating cash needs or may

become overly reliant upon external funding sources.

In order to manage this risk, the Board of Directors of the Company has established

a Liquidity Policy that identifies primary sources of liquidity, establishes procedures for monitoring and measuring liquidity

and quantifies minimum liquidity requirements.

This policy designates the Asset/Liability Committee (“ALCO”) as the

body responsible for meeting these objectives.

The ALCO reviews liquidity regularly and evaluates significant changes in strategies

that affect balance sheet or cash flow positions.

Liquidity is centrally managed on a daily basis by the Company’s Chief

Financial Officer and Asset Liability Manager.

The Company’s commercial

real estate, first mortgage residential, agricultural and multi-family mortgage portfolio of $619.0 million at June 30, 2020 and

Effective January 1, 2015, new regulatory capital

requirements commonly referred to as “Basel III”

were implemented and are reflected in the September 30, 2020 capital

Management opted out of the accumulated other comprehensive income treatment under the new requirements and as such

unrealized gains and losses from available-for-sale securities will continue to be excluded from State Bank’s regulatory

Liquidity relates primarily to the Company’s

ability to fund loan demand, meet deposit customers’

withdrawal requirements and provide for operating expenses.

to satisfy these needs consist of cash and due from banks, federal funds sold, interest-earning deposits in other financial institutions,

securities available-for-sale and loans held for sale.

These assets are commonly referred to as liquid assets.

Liquid assets were

$247.9 million at September 30, 2020, compared to $135.3 million at December 31, 2019.

Liquidity risk arises from the possibility

that the Company may not be able to meet the Company’s financial obligations and operating cash needs or may become overly

reliant upon external funding sources.

In order to manage this risk, the Board of Directors of the Company has established a Liquidity

Policy that identifies primary sources of liquidity, establishes procedures for monitoring and measuring liquidity and quantifies

minimum liquidity requirements.

This policy designates the Asset/Liability Committee (“ALCO”) as the body responsible

for meeting these objectives.

The ALCO reviews liquidity regularly and evaluates significant changes in strategies that affect

balance sheet or cash flow positions.

Liquidity is centrally managed on a daily basis by the Company’s Chief Financial Officer

and Asset Liability Manager.

The Company’s commercial real estate,

first mortgage residential, agricultural and multi-family mortgage portfolio of $606.1 million at September 30, 2020 and $610.9

million at December 31, 2019, which can and has been used to collateralize borrowings, is an additional source of liquidity.

Management believes the Company’s current liquidity level, without these borrowings, is sufficient to meet its liquidity

At June 30, 2020, all eligible commercial real estate, first mortgage residential and multi-family mortgage loans were pledged

under an FHLB blanket lien.

The cash flow statements for

the periods presented provide an indication of the Company’s sources and uses of cash, as well as an indication of the ability

of the Company to maintain an adequate level of liquidity.

A discussion of the cash flow statements for the six months ended June

believes the Company’s current liquidity level, without these borrowings, is sufficient to meet its liquidity needs.

30, 2020, all eligible commercial real estate, first mortgage residential and multi-family mortgage loans were pledged under an

FHLB blanket lien.

The cash flow statements for the periods presented

provide an indication of the Company’s sources and uses of cash, as well as an indication of the ability of the Company to

maintain an adequate level of liquidity.

A discussion of the cash flow statements for the nine months ended September 30, 2020

and 2019 follows.

The Company experienced negative

cash flows from operating activities for the six months ended June 30, 2020 and positive cash flows from operating activities for

the six months ended June 30, 2019.

Net cash used by operating activities was $.3 million for the six months ended June 30, 2020

and net cash provided by operating activities was $.8 million for the six months ended June 30, 2019.

Highlights for the current

year include $289.1 million in proceeds from the sale of loans, which is up $172.1 million from the prior year.

Originations of

loans held for sale was a use of cash of $287.9 million, which is up from the prior year by $168.3 million.

For the six months

ended June 30, 2020, there was a gain on sale of loans of $10.3 million, and depreciation and amortization of $0.9 million.

The Company experienced negative cash flows from investing activities

for the six months ended June 30, 2020 and June 30, 2019.

Net cash flows used in investing activities was $43.8 million for the

six months ended June 30, 2020 and $39.0 million for the six months ended June 30, 2019.

Highlights for the six months ended June

30, 2020 include net cash provided from the acquisition of Edon of $16.2 million.

Purchases of available-for-sale securities was

$61.9 million, which is up $53.1 million from the prior year.

These cash payments were offset by $61.8 million in proceeds from

maturities and sales of securities, which is up $52.8 million from the prior six-month period.

The Company experienced a $60.5

million increase in loans, which is up $17.9 million from the prior year six-month period.

The Company experienced positive

cash flows from financing activities for the six months ended June 30, 2020 and June 30, 2019.

The Company experienced positive cash flows

from operating activities for the nine months ended September 30, 2020 and September 30, 2019.

Net cash provided by operating activities

was $5.4 million for the nine months ended September 30, 2020 and $3.7 million for the nine months ended September 30, 2019.

for the current year include $455.3 million in proceeds from the sale of loans, which is up $210.6 million from the prior year.

Originations of loans held for sale was a use of cash of $447.6 million, which is up from the prior year by $198.5 million.

the nine months ended September 30, 2020, there was a gain on sale of loans of $18.4 million, and depreciation and amortization

of $1.4 million.

The Company experienced negative cash flows

from investing activities for the nine months ended September 30, 2020 and September 30, 2019.

Net cash flows used in investing

activities was $54.1 million for the nine months ended September 30, 2020 and $40.5 million for the nine months ended September

Highlights for the nine months ended September 30, 2020 include net cash provided from the acquisition of Edon of $16.3

Purchases of available-for-sale securities was $98.0 million, which is up $89.2 million from the prior year.

payments were offset by $71.6 million in proceeds from maturities and sales of securities, which is up $54.3 million from the prior

nine-month period.

The Company experienced a $44.8 million increase in loans, which is down $6.4 million from the prior year nine-month

The Company experienced positive cash flows

from financing activities for the nine months ended September 30, 2020 and September 30, 2019.

Net cash flow provided by financing

activities was $102.8 million for the six months ended June 30, 2020 and $32.6 million for the six months ended June 30, 2019.

Highlights for the current period include a $109.8 million increase in transaction deposits for the six months ended June 30, 2020,

which is up $105.6 from the prior year.

Certificates of deposit decreased by $10.5 million in the current year compared to an increase

of $32.6 million for the prior year.

ALCO uses an economic value of

equity (“EVE”) analysis to measure risk in the balance sheet incorporating all cash flows over the estimated remaining

life of all balance sheet positions.

The EVE analysis calculates the net present value of the Company’s assets and liabilities

in rate shock environments that range from -400 basis points to +400 basis points.

The likelihood of a significant decrease in

rates as of June 30, 2020 and December 31, 2019 was considered unlikely given the current interest rate environment and therefore,

only the minus 100 basis point rate change was included in this analysis as of June 30, 2020 and only the minus 100 and minus 200

basis point rate change was included in this analysis as of December 31, 2019.

The results of this analysis are reflected in the

following tables for June 30, 2020 and December 31, 2019.

activities was $116.3 million for the nine months ended September 30, 2020 and $38.3 million for the nine months ended September

Highlights for the current period include a $139.6 million increase in transaction deposits for the nine months ended

September 30, 2020, which is up $120.9 million from the prior year.

Certificates of deposit decreased by $16.9 million in the current

year compared to an increase of $26.7 million for the prior year.

ALCO uses an economic value of equity (“EVE”)

analysis to measure risk in the balance sheet incorporating all cash flows over the estimated remaining life of all balance sheet

The EVE analysis calculates the net present value of the Company’s assets and liabilities in rate shock environments

that range from -400 basis points to +400 basis points.

The likelihood of a significant decrease in rates as of September 30, 2020

and December 31, 2019 was considered unlikely given the current interest rate environment and therefore, only the minus 100 basis

point rate change was included in this analysis as of September 30, 2020 and only the minus 100 and minus 200 basis point rate

change was included in this analysis as of December 31, 2019.

The results of this analysis are reflected in the following tables

for September 30, 2020 and December 31, 2019.

Economic Value of Equity

June 30, 2020

September 30, 2020

($ in thousands)

16 unchanged sentences

Off-Balance-Sheet Borrowing Arrangements:

Significant additional off-balance-sheet

liquidity is available in the form of FHLB advances and unused federal funds lines from correspondent banks.

Management expects

the risk of changes in off-balance-sheet arrangements to be immaterial to earnings.

The Company’s

commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolios in the total amount of $619.0

million were pledged to meet FHLB collateralization requirements as of June 30, 2020.

Significant additional off-balance-sheet liquidity

is available in the form of FHLB advances and unused federal funds lines from correspondent banks.

Management expects the risk

of changes in off-balance-sheet arrangements to be immaterial to earnings.

The Company’s commercial

real estate, first mortgage residential, agricultural and multi-family mortgage portfolios in the total amount of $606.1 million

were pledged to meet FHLB collateralization requirements as of September 30, 2020.

Based on the current collateralization requirements

of the FHLB, the Company had approximately $116.5 million of additional borrowing capacity at June 30, 2020.

The Company also had

$39.7 million in unpledged securities available to pledge for additional borrowings.

of the FHLB, the Company had approximately $107.8 million of additional borrowing capacity at September 30, 2020.

The Company also

had $60.3 million in unpledged securities available to pledge for additional borrowings.

The Company’s contractual obligations

as of June 30, 2020 were comprised of long-term debt obligations, other debt obligations, operating lease obligations and other

long-term liabilities.

as of September 30, 2020 were comprised of long-term debt obligations, other debt obligations, operating lease obligations and

other long-term liabilities.

Long-term debt obligations were comprised of FHLB Advances of $8.0 million and Trust Preferred Securities

of $10.3 million.

Total time deposits at June 30, 2020 were $256.8 million, of which $70.2 million mature beyond one year.

In addition, as of June 30, 2020, the Company

had commitments to sell mortgage loans totaling $78.2 million.

The Company believes that it has adequate resources to fund commitments

as they arise and that it can adjust the rate on savings certificates to retain deposits in changing interest rate environments.

If the Company requires funds beyond its internal funding capabilities, advances from the FHLB of Cincinnati and other financial

institutions are available.

Total time deposits at September 30, 2020 were $250.4 million, of which $60.5 million mature beyond one year.

In addition, as of September 30, 2020, the

Company had commitments to sell mortgage loans totaling $76.8 million.

The Company believes that it has adequate resources to fund

commitments as they arise and that it can adjust the rate on savings certificates to retain deposits in changing interest rate

environments.

If the Company requires funds beyond its internal funding capabilities, advances from the FHLB of Cincinnati and

other financial institutions are available.

ASSET LIABILITY MANAGEMENT

17 unchanged sentences

to a lesser extent, liquidity risk also impacts market risk exposure.

Interest rate risk is the exposure

of a banking institution’s financial condition to adverse movements in interest rates.

Interest rate risk is the exposure of

a banking institution’s financial condition to adverse movements in interest rates.

Accepting this risk can be an important

13 unchanged sentences

consolidated financial condition, including capital adequacy, earnings, liquidity and asset quality (when appropriate).

The Federal Reserve Board together

with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Company adopted a Joint Agency Policy Statement

The Federal Reserve Board together with

the Office of the Comptroller of the Currency and the Federal Deposit Insurance Company adopted a Joint Agency Policy Statement

on interest rate risk effective June 26, 1996.

37 unchanged sentences

Quantitative and Qualitative Disclosures About Market Risk

Management believes there has

been no material change in the Company’s market risk from the information contained in the Company’s Annual Report

on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2019.

Management believes there has been no material

change in the Company’s market risk from the information contained in the Company’s Annual Report on Form 10-K filed

with the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2019.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements