What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2021-03-08 compared with 2020-03-06 · 393 added, 330 removed, 147 unchanged (83% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities .

common shares are traded on the NASDAQ Capital Market under the symbol “SBFG”.

There were 7,806,668 common shares

outstanding as of December 31, 2019, which were held by approximately 1,257 record holders.

Company paid quarterly dividends on its common shares in the aggregate amounts of $0.36 per share and $0.32 per share in 2019

and 2018, respectively.

The Company presently anticipates continuing to pay quarterly dividends in the future at similar levels.

However, there is no guarantee that dividends on our common shares will continue in the future.

of dividends by State Bank may be restricted at any time at the discretion of the regulatory authorities, if they deem such dividends

to constitute an unsafe and/or unsound banking practice.

These provisions could have the effect of limiting the Company’s

ability to pay dividends on its outstanding shares.

Moreover, the Federal Reserve Board expects the Company to serve as a source

of strength to its subsidiary banks, which may require it to retain capital for further investment in State Bank, rather than

for dividends to shareholders of the Company.

Market Information

Our common shares are traded on the NASDAQ

Capital Market under the symbol “SBFG”.

There were 7,407,034 common shares outstanding as of December 31, 2020, which

were held by approximately 1,236 record holders.

The Company paid quarterly dividends on

its common shares in the aggregate amounts of $0.40 per share and $0.36 per share in 2020 and 2019, respectively.

The Company presently

anticipates continuing to pay quarterly dividends in the future at similar levels.

However, there is no guarantee that dividends

on our common shares will continue in the future.

Payment of dividends by State Bank may

be restricted at any time at the discretion of the regulatory authorities, if they deem such dividends to constitute an unsafe

and/or unsound banking practice.

These provisions could have the effect of limiting the Company’s ability to pay dividends

on its outstanding shares.

Moreover, the Federal Reserve Board expects the Company to serve as a source of strength to its subsidiary

banks, which may require it to retain capital for further investment in State Bank, rather than for dividends to shareholders of

Period Ending

5 unchanged sentences

repurchased by the Company during the three months ended December 31, 2020.

The Company has no shares remaining under the existing

approved share repurchase program, which expired on December 31, 2019.

Number of Shares Purchased

Average Price Paid per Share

Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Number of Shares that May Yet be Purchased Under the Plans or Programs

The Company has 253,360 shares remaining of the 500,000

approved under the existing share repurchase program which was authorized on July 21, 2020 and expires December 31, 2021.

Total Number of Shares Purchased

Weighted Average Price Paid per Share

Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs

10/01/20 - 10/31/20

11/01/20 - 11/30/20

12/01/20 - 12/31/20

Selected Financial Data.

27 unchanged sentences

fed funds sold

Total loans & leases

Loans held for sale

Total loans & leases

Allowance for loan losses

4 unchanged sentences

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Financial Group, Inc.

(“SB Financial”), is a financial holding company registered with the Federal Reserve Board and

subject to regulation under the Bank Holding Company Act of 1956, as amended.

Through its direct and indirect subsidiaries, SB

Financial is engaged in commercial and retail banking, wealth management and private client financial services.

following discussion provides a review of the consolidated financial condition and results of operations of SB Financial and its

subsidiaries (collectively, the “Company”).

This discussion should be read in conjunction with the Company’s

consolidated financial statements and related footnotes as of and for the years ended December 31, 2019 and 2018.

focus and strategic goal of the Company is to grow into and remain a top decile (>90 th percentile) independent financial

services company.

The Company intends to achieve and maintain that goal by executing our five key initiatives.

profitability through ongoing diversification of revenue streams:

For the twelve months ended December 31, 2019, the Company

generated $18.0 million in noninterest income, or 34.1 percent of total operating revenue from fee-based products.

These revenue

sources include fees generated from saleable residential mortgage loans, retail deposit products, wealth management services,

saleable business-based loans (small business and farm service) and title agency revenue.

For the twelve months ended December

31, 2018, the Company generated $16.6 million in revenue from fee-based products, or 33.3 percent of total operating revenue.

our penetration in all markets served:

Over our 117-year history of continuous operation in Northwest Ohio, we have established

a significant presence in our traditional markets in Defiance, Fulton, Paulding and Williams counties in Ohio.

In our newer markets

of Bowling Green, Columbus, Findlay, Toledo (Ohio) and Ft.

Wayne (Indiana), our current market penetration is minimal but we believe

our potential for growth is significant.

We continue to seek to expand this presence and penetration in all of our markets.

product utilization by new and existing customers:

As of December 31, 2019, we served 30,377 households and provided 91,154

products and services (3.00 products & services per household) to these households.

Our strategy is to continue to expand

the scope of our relationship with each household via our dynamic “on-boarding”

Proactively identifying client

needs is a key ingredient of our value proposition.

As of December 31, 2018, we served 29,562 households and provided 87,202 products

and services (2.95 products & services per household) to these households.

gains in operational excellence:

Our management team believes that becoming and remaining a high-performance financial services

company will depend upon seamlessly and consistently delivering operational excellence, as demonstrated by the Company’s

leadership in the origination and servicing of residential mortgage loans.

As of December 31, 2019, the Company serviced 8,155

residential mortgage loans with a principal balance of $1.2 billion.

As of December 31, 2018, the Company serviced 7,586 loans

with a principal balance of $1.1 billion.

asset quality:

As of December 31, 2019, the Company’s asset quality metrics remained strong.

Specifically, total nonperforming

assets were $5.3 million, or 0.51 percent of total assets.

Total delinquent loans at December 31, 2019 were 0.28 percent of total

As of December 31, 2018, the Company had total nonperforming assets of $4.0 million, or 0.40 percent of total assets.

delinquent loans at December 31, 2018 were 0.65 percent of total loans.

Accounting Policies

accounting and reporting policies of the Company are in accordance with generally accepted accounting principles in the United

States and conform to general practices within the banking industry.

The Company’s significant accounting policies are described

in detail in the notes to the Company’s consolidated financial statements for the years ended December 31, 2019 and 2018.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make

estimates and assumptions.

The Company’s financial position and results of operations can be affected by these estimates

and assumptions and are integral to the understanding of reported results.

Critical accounting policies are those policies that

management believes are the most important to the portrayal of the Company’s financial condition and results, and they require

management to make estimates that are difficult, subjective or complex.

for Loan Losses:

The allowance for loan losses provides coverage for probable losses inherent in the Company’s loan

Management evaluates the adequacy of the allowance for loan losses each quarter based on changes, if any, in the nature

and amount of problem assets and associated collateral, underwriting activities, loan portfolio composition (including product

mix and geographic, industry or customer-specific concentrations), trends in loan performance, regulatory guidance and economic

This evaluation is inherently subjective, as it requires the use of significant management estimates.

Many factors can

affect management’s estimates of specific and expected losses, including volatility of default probabilities, rating migrations,

loss severity and economic and political conditions.

The allowance is increased through provisions charged to operating earnings

and reduced by net charge offs.

Company determines the amount of the allowance based on relative risk characteristics of the loan portfolio.

The allowance recorded

for commercial loans is based on reviews of individual credit relationships and an analysis of the migration of commercial loans

and actual loss experience.

The allowance recorded for homogeneous consumer loans is based on an analysis of loan mix, risk characteristics

of the portfolio, fraud loss and bankruptcy experiences, and historical losses, adjusted for current trends, for each homogeneous

category or group of loans.

The allowance for credit losses relating to impaired loans is based on each impaired loan’s

observable market price, the collateral for certain collateral-dependent loans, or the discounted cash flows using the loan’s

effective interest rate.

of the extent of the Company’s analysis of customer performance, portfolio trends or risk management processes, certain

inherent, but undetected, losses are probable within the loan portfolio.

This is due to several factors including inherent delays

in obtaining information regarding a customer’s financial condition or changes in their unique business conditions, the

subjective nature of individual loan valuations, collateral assessments and the interpretation of economic trends.

of economic or customer-specific conditions affecting the identification and estimation of losses for larger non-homogeneous credits

and the sensitivity of assumptions utilized to establish allowances for homogenous groups of loans are also factors.

estimates a range of inherent losses related to the existence of these exposures.

The estimates are based upon the Company’s

evaluation of imprecise risk associated with the commercial and consumer allowance levels and the estimated impact of the current

economic environment.

and Other Intangibles:

The Company records all assets and liabilities acquired in purchase acquisitions, including goodwill

and other intangibles, at fair value as required.

SB Financial Group, Inc.

(“SB Financial”),

is a financial holding company registered with the Federal Reserve Board and subject to regulation under the Bank Holding Company

Act of 1956, as amended.

Through its direct and indirect subsidiaries, SB Financial is engaged in commercial and retail banking,

wealth management and private client financial services.

The following discussion provides a review

of the consolidated financial condition and results of operations of SB Financial and its subsidiaries (collectively, the “Company”).

This discussion should be read in conjunction with the Company’s consolidated financial statements and related footnotes

as of and for the years ended December 31, 2020 and 2019.

Strategic Discussion

The focus and strategic goal of the Company

is to grow into and remain a top decile (>90 th percentile) independent financial services company.

The Company intends

to achieve and maintain that goal by executing our five key initiatives.

Increase profitability through ongoing

diversification of revenue streams:

For the twelve months ended December 31, 2020, the Company generated $30.1 million in noninterest

income, or 45.6 percent of total operating revenue from fee-based products.

These revenue sources include fees generated from saleable

residential mortgage loans, retail deposit products, wealth management services, saleable business-based loans (small business

and farm service) and title agency revenue.

For the twelve months ended December 31, 2019, the Company generated $18.0 million

in revenue from fee-based products, or 34.1 percent of total operating revenue.

Strengthen our penetration in all markets

Over our 118-year history of continuous operation in Northwest Ohio, we have established a significant presence in

our traditional markets in Defiance, Fulton, Paulding and Williams counties in Ohio.

In our newer markets of Bowling Green, Columbus,

Findlay, Toledo (Ohio) and Ft.

Wayne (Indiana), our current market penetration is minimal but we believe our potential for growth

is significant.

We have expanded and committed additional resources to our presence in the Findlay and Wauseon markets.

to seek to expand the presence and penetration in all of our markets.

Expand product utilization by new and

existing customers:

As of December 31, 2020, we served 32,519 households and provided 95,210 products and services (2.93 products

& services per household) to these households.

Our strategy is to continue to expand the scope of our relationship with each

household via our dynamic “on-boarding”

Proactively identifying client needs is a key ingredient of our value

As of December 31, 2019, we served 30,377 households and provided 91,154 products and services (3.00 products &

services per household) to these households.

Deliver gains in operational excellence:

Our management team believes that becoming and remaining a high-performance financial services company will depend upon seamlessly

and consistently delivering operational excellence, as demonstrated by the Company’s leadership in the origination and servicing

of residential mortgage loans.

As of December 31, 2020, the Company serviced 8,543 residential mortgage loans with a principal

balance of $1.3 billion.

As of December 31, 2019, the Company serviced 8,155 loans with a principal balance of $1.2 billion.

Sustain asset quality:

As of December

31, 2020, the Company’s asset quality metrics remained strong.

Specifically, total nonperforming assets were $7.3 million,

or 0.58 percent of total assets.

Total delinquent loans at December 31, 2020 were 0.75 percent of total loans.

As of December 31,

2019, the Company had total nonperforming assets of $5.3 million, or 0.51 percent of total assets.

Total delinquent loans at December

31, 2019 were 0.28 percent of total loans.

Critical Accounting Policies

The accounting and reporting policies of

the Company are in accordance with generally accepted accounting principles in the United States and conform to general practices

within the banking industry.

The Company’s significant accounting policies are described in detail in the notes to the Company’s

Consolidated Financial Statements for the years ended December 31, 2020 and 2019.

The preparation of financial statements in conformity

with generally accepted accounting principles requires management to make estimates and assumptions.

The Company’s financial

position and results of operations can be affected by these estimates and assumptions and are integral to the understanding of

reported results.

Critical accounting policies are those policies that management believes are the most important to the portrayal

of the Company’s financial condition and results, and they require management to make estimates that are difficult, subjective

Allowance for Loan Losses:

The allowance

for loan losses provides coverage for probable losses inherent in the Company’s loan portfolio.

Management evaluates the

adequacy of the allowance for loan losses each quarter based on changes, if any, in the nature and amount of problem assets and

associated collateral, underwriting activities, loan portfolio composition (including product mix and geographic, industry or customer-specific

concentrations), trends in loan performance, regulatory guidance and economic factors.

This evaluation is inherently subjective,

as it requires the use of significant management estimates.

Many factors can affect management’s estimates of specific and

expected losses, including volatility of default probabilities, rating migrations, loss severity and economic and political conditions.

The allowance is increased through provisions charged to operating earnings and reduced by net charge offs.

The Company determines the amount of the

allowance based on relative risk characteristics of the loan portfolio.

The allowance recorded for commercial loans is based on

reviews of individual credit relationships and an analysis of the migration of commercial loans and actual loss experience.

allowance recorded for homogeneous consumer loans is based on an analysis of loan mix, risk characteristics of the portfolio, fraud

loss and bankruptcy experiences, and historical losses, adjusted for current trends, for each homogeneous category or group of

The allowance for credit losses relating to impaired loans is based on each impaired loan’s observable market price,

the collateral for certain collateral-dependent loans, or the discounted cash flows using the loan’s effective interest rate.

Regardless of the extent of the Company’s

analysis of customer performance, portfolio trends or risk management processes, certain inherent, but undetected, losses are probable

within the loan portfolio.

This is due to several factors including inherent delays in obtaining information regarding a customer’s

financial condition or changes in their unique business conditions, the subjective nature of individual loan valuations, collateral

assessments and the interpretation of economic trends.

Volatility of economic or customer-specific conditions affecting the identification

and estimation of losses for larger non-homogeneous credits and the sensitivity of assumptions utilized to establish allowances

for homogenous groups of loans are also factors.

The Company estimates a range of inherent losses related to the existence of these

The estimates are based upon the Company’s evaluation of imprecise risk associated with the commercial and consumer

allowance levels and the estimated impact of the current economic environment.

Goodwill and Other Intangibles:

Company records all assets and liabilities acquired in purchase acquisitions, including goodwill and other intangibles, at fair

value as required.

Goodwill is subject, at a minimum, to annual tests for impairment.

Other intangible

assets are amortized over their estimated useful lives using straight-line and accelerated methods, and are subject to impairment

if events or circumstances indicate a possible inability to realize the carrying amount.

The initial goodwill and other intangibles

recorded and subsequent impairment analysis requires management to make subjective judgments concerning estimates of how the acquired

asset will perform in the future.

Events and factors that may significantly affect the estimates include, among others, customer

attrition, changes in revenue growth trends, specific industry conditions and changes in competition.

Tax Liability:

The Company has evaluated its deferred tax liability to determine if it is more likely than not that the liability

will be realized in the future.

The Company’s most recent evaluation has determined that the Company will more likely than

not be able to realize the remaining deferred tax liability.

Tax Accounting:

The Company files a consolidated federal income tax return.

The provision for income taxes is based upon income

in the consolidated financial statements, rather than amounts reported on our income tax return.

Deferred tax assets and liabilities

are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing

assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates

expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect of a change in rates on the deferred tax assets and liabilities is recognized as income or expense in the period that

includes the enactment date.

in Financial Condition

assets at December 31, 2019, were $1.04 billion, compared to $986.8 million at December 31, 2018.

Loans (excluding loans held

for sale) were $825.5 million at December 31, 2019, compared to $771.9 million at December 31, 2018.

Total deposits were $840.2

million at December 31, 2019, compared to $802.6 million at December 31, 2018.

equity was $136.1 million at December 31, 2019, up 4.4 percent from $130.4 million at December 31, 2018.

Net income less dividends

increase retained earnings by $8.7 million for 2019.

Years Ended December 31,

Other intangible assets are amortized over

their estimated useful lives using straight-line and accelerated methods, and are subject to impairment if events or circumstances

indicate a possible inability to realize the carrying amount.

The initial goodwill and other intangibles recorded and subsequent

impairment analysis requires management to make subjective judgments concerning estimates of how the acquired asset will perform

in the future.

Events and factors that may significantly affect the estimates include, among others, customer attrition, changes

in revenue growth trends, specific industry conditions and changes in competition.

Deferred Tax Liability:

has evaluated its deferred tax liability to determine if it is more likely than not that the liability will be realized in the

The Company’s most recent evaluation has determined that the Company will more likely than not be able to realize

the remaining deferred tax liability.

Income Tax Accounting:

files a consolidated federal income tax return.

The provision for income taxes is based upon income in the consolidated financial

statements, rather than amounts reported on our income tax return.

Deferred tax assets and liabilities are recognized for future

tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities

and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable

income in the years in which those temporary differences are expected to be recovered or settled.

The effect of a change in rates

on the deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment date.

Changes in Financial Condition

Total assets at December 31, 2020, were

$1.26 billion, compared to $1.04 billion at December 31, 2019.

Loans (excluding loans held for sale) were $872.7 million at December

31, 2020, compared to $825.5 million at December 31, 2019.

Total deposits were $1.05 billion at December 31, 2020, compared to

$840.2 million at December 31, 2019.

Deposit and loan balances were elevated due to the PPP initiative and the acquisition of the

Edon State Bank.

Total equity was $142.9 million at December

31, 2020, up 5.0 percent from $136.1 million at December 31, 2019.

Net income less dividends increase retained earnings by $11.8

million for 2020.

($ in thousands)

Years Ended December 31,

Commercial business & agriculture

11 unchanged sentences

Total shareholders’

held for investment increased $53.6 million, or 7.0 percent, to $825.5 million at December 31, 2019.

The largest component of

this increase was in commercial real estate loans, which rose $26.0 million, followed by commercial business and agriculture loans,

which rose $23.1 million.

increased $37.7 million, or 4.7 percent, to $840.2 million at December 31, 2019.

Deposit growth for the year included $13.8 million

in noninterest demand deposits and $16.3 million in time deposits.

Loans held for investment increased $47.2

million, or 5.7 percent, to $872.7 million at December 31, 2020.

The largest component of this increase was in commercial business

loans, which rose $55.7 million.

The 2020 results were impacted by the Company’s participation in the PPP, which increased

commercial balances by approximately $70.5 million.

In addition, the Company acquired the Edon State Bank in June of 2020 that

increased loan balances by $16.4 million.

Deposits increased $208.8 million, or 24.9

percent, to $1.05 billion at December 31, 2020.

Deposit growth for the year included $139.0 million in demand deposits and $98.0

million in savings and money market deposits.

The Company added approximately $51.0 million in deposit balances from the Edon State

Bank acquisition in 2020.

Stockholders’

equity at December 31, 2019, was $136.1 million or 13.1 percent of total assets compared to $130.4 million or 13.2 percent of

total assets at December 31, 2018.

equity at December

31, 2020, was $142.9 million or 11.4 percent of total assets compared to $136.1 million or 13.1 percent of total assets at December

Asset Quality

12 unchanged sentences

Allowance/nonperforming loans

Nonperforming

assets consisting of loans, Other Real Estate Owned (“OREO”) and accruing TDRs totaled $6.7 million, or 0.64 percent

of total assets at December 31, 2019, an increase of $2.7 million or 68.4 percent from 2018.

Net charge offs were down during

2019, at $0.21 million, which was a $0.15 million decrease compared to 2018.

The Company’s loan loss allowance at December

31, 2019, now covers nonperforming loans at 137 percent, down from 213 percent at December 31, 2018.

capital reporting is required for State Bank only, as the Company is now exempt from quarterly regulatory capital level measurement

pursuant to the Small Bank Holding Company Policy Statement.

As of December 31, 2019, State Bank met all regulatory capital levels

required to be considered well-capitalized (See Note 15 to the Consolidated Financial Statements).

Summary –

income for 2019 was $12.0 million, and net income available to common shareholders was $11.0 million, or $1.51 per diluted share,

compared with net income of $11.6 million and net income available to common of $10.7 million, or $1.51 per diluted share, for

State Bank reported net income for 2019 of $12.5 million, which was down from the $12.9 million in net income in 2018.

Title reported net income for 2019 of $0.3 million.

results for 2019 included loan growth of $53.6 million, and deposit growth of $37.7 million.

The mortgage banking business line

continues to contribute significant revenues, with residential real estate loan production of $445.3 million for the year, resulting

in $8.4 million of revenue from gains on sale.

Nonperforming assets consisting of loans,

Other Real Estate Owned (“OREO”) and accruing TDRs totaled $7.3 million, or 0.58 percent of total assets at December

31, 2020, an increase of $0.6 million or 8.7 percent from 2019.

Net charge offs were up during 2020, at $0.68 million, which was

a $0.47 million increase compared to 2019.

The Company’s loan loss allowance at December 31, 2020, now covers nonperforming

loans at 174 percent, up from 137 percent at December 31, 2019.

As detailed in the risk factors, the CARES

Act provided for significant consumer and small business relief due to the impact of the COVID-19 pandemic.

The Company provided

payment relief to a number of consumer and small business customers throughout 2020.

As detailed in the table below, loans in forbearance/deferral

status as of December 31, 2020 were $23.2 million.

An additional $11.7 million of sold mortgage relationships were also in deferral

Loans in Deferral Status

($ in thousands, except ratios)

Total Commercial

Total Consumer

Total Portfolio Mortgage

Total Balance Sheet Deferrals

% of Total loans

Total Sold Mortgage

Regulatory capital reporting is required

for State Bank only, as the Company is now exempt from quarterly regulatory capital level measurement pursuant to the Small Bank

Holding Company Policy Statement.

As of December 31, 2020, State Bank met all regulatory capital levels required to be considered

well-capitalized (See Note 17 to the Consolidated Financial Statements).

Earnings Summary –

Net income for 2020 was $14.9 million,

or $1.96 per diluted share, compared with net income of $12.0 million and net income available to common of $11.0 million, or $1.51

per diluted share, for 2019.

State Bank reported net income for 2020 of $16.0 million, which was up from the $12.5 million in net

income in 2019.

SBFG Title reported net income for 2020 of $0.6 million, which was up from the $0.3 million in 2019.

Positive results for 2020 included loan

growth of $47.2 million, and deposit growth of $208.8 million.

The mortgage banking business line continues to contribute significant

revenues, with residential real estate loan production of $694.2 million for the year, resulting in $25.4 million of revenue from

gains on sale.

The level of mortgage origination was up from the $445.3 million in 2019.

The Company’s

loans serviced for others ended the year at $1.2 billion, up from $1.1 billion at December 31, 2018.

revenue was up compared to the prior year by $3.0 million, or 5.9 percent, which is impacted by a $1.1 million temporary OMSR

Our 2019 results include the impact from our two new subsidiaries:

SBFG Title with net income of $0.3 million and

SB Captive with net income of $0.9 million.

Net interest margin on a fully tax equivalent basis (“FTE”) for 2019 was

3.82 percent, down 13 basis points from 2018.

expense was up compared to the prior year by $2.6 million, or 7.4 percent, due to compensation and fringe benefit cost increases

as a result of higher mortgage commission levels.

charge offs for 2019 of $0.21 million resulted in a loan loss provision of $0.8 million, compared to net charge offs of $0.36

million and a $0.6 million loan loss provision in 2018.

of Operations

The Company’s loans serviced for

others ended the year at $1.3 billion, up from $1.2 billion at December 31, 2019.

The Company realized over $1.4 million in revenue

from the PPP initiative.

Operating revenue was up compared to the

prior year by $13.2 million, or 25.0 percent, which was impacted by a $3.6 million temporary OMSR impairment.

Our 2020 results

include the full year impact from SBFG Title with net income of $0.6 million, and SB Captive, with net income of $0.9 million.

Net interest margin on a fully tax equivalent basis (“FTE”) for 2020 was 3.36 percent, down 46 basis points from 2019.

Operating expense was up compared to the

prior year by $5.7 million, or 15.2 percent, due to compensation and fringe benefit cost increases as a result of higher mortgage

commission levels.

Operating leverage (growth in revenue divided by growth in operating expense) for the year was a positive 1.6

Net charge offs for 2020 of $0.68 million

resulted in a loan loss provision of $4.5 million, compared to net charge offs of $0.21 million and a $0.8 million loan loss provision

Results of Operations

Years Ended December 31,

17 unchanged sentences

Total net interest income

interest income was $34.8 million for 2019 compared to $33.3 million for 2018, an increase of $1.6 million or 4.7 percent.

earning assets increased to $915.0 million in 2019, compared to $845.7 million in 2018, an increase of $69.3 million or 8.2 percent

due to higher loan volume.

The consolidated 2019 full year net interest margin on an FTE basis decreased 12 basis points to 3.83

percent compared to 3.95 percent for the full year of 2018.

for loan losses of $0.8 million was taken in 2019 compared to $0.6 million taken for 2018.

For 2019, net charge offs totaled $0.21

million, or 0.03 percent of average loans.

This charge off level was lower than 2018, in which net charge offs were $0.36 million

or 0.06 percent of average loans.

Net interest income was $35.9 million for

2020 compared to $34.8 million for 2019, an increase of $1.1 million or 3.2 percent.

Average earning assets increased to $1.07

billion in 2020, compared to $915.0 million in 2019, an increase of $157.4 million or 17.2 percent due to higher loan volume.

consolidated 2020 full year net interest margin on an FTE basis decreased 46 basis points to 3.36 percent compared to 3.82 percent

for the full year of 2019.

PPP activity during 2020 increased margin revenue by $2.0 million for the full year of 2020.

continue to realize fee income from the forgiveness of these Phase I PPP loans throughout 2021 and we are beginning Phase II of

the program in early 2021.

Provision for loan losses of $4.5 million

was taken in 2020 compared to $0.8 million taken for 2019.

For 2020, net charge offs totaled $0.68 million, or 0.08 percent of

average loans.

This charge off level was higher than 2019, in which net charge offs were $0.21 million or 0.03 percent of average

Noninterest Income

10 unchanged sentences

Total noninterest income

noninterest income was $18.0 million for 2019 compared to $16.6 million for 2018, representing an increase of $1.4 million, or

8.4 percent, year-over-year.

This increase was driven by a 22.5 percent increase in gains on sale of residential real estate loans

and the addition of our title agency.

The Company sold $367.3 million of originated mortgages into the secondary market, which

allowed our serviced loan portfolio to grow to $1.2 billion at December 31, 2019 from $1.1 billion at December 31, 2018.

servicing balance of the portfolio led to the 9.1 percent increase in mortgage loan servicing income.

The sale of non-mortgage

loans (small business and farm credits) was flat to the prior year.

The Company continued to expand its Wealth management assets

under care, which resulted in a 7.7 percent increase in wealth fee income.

Total noninterest income was $30.1 million

for 2020 compared to $18.0 million for 2019, representing an increase of $12.1 million, or 67.0 percent, year-over-year.

This increase

was driven by a 201.3 percent increase in gains on sale of residential real estate loans and the addition of our title agency.

The Company sold $598.5 million of originated mortgages into the secondary market in 2020, which allowed our serviced loan portfolio

to grow to $1.3 billion at December 31, 2020 from $1.2 billion at December 31, 2019.

The higher servicing balance of the portfolio

led to the 13.7 percent increase in mortgage loan servicing income.

Sales of non-mortgage loans (small business and farm credits)

decreased in 2020 as compared to 2019, as SBA activity was focused on the PPP initiative.

The Company continued to expand its wealth

management assets under care, which resulted in a 4.9 percent increase in wealth fee income.

Noninterest Expense

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Total noninterest expense

noninterest expense was $37.4 million for 2019 compared to $34.8 million for 2018, representing a $2.6 million, or 7.4 percent,

increase year-over-year.

Total full-time equivalent employees ended 2019 at 252, which was up 2 from year end 2018.

and benefits were driven by higher compensation costs in the mortgage division.

Professional fees were higher due to higher spending

on legal in connection with acquisition activities.

The addition of our title agency added $0.9 million in operating expense for

The addition of capital from our common raise drove the higher level of franchise taxes in 2019.

Summary –

income for 2018 was $11.6 million, and net income available to common shareholders was $10.7 million, or $1.51 per diluted share,

compared with net income of $11.1 million and net income available to common of $10.1 million, or $1.74 per diluted share, for

The Company’s 2018 results reflect the issuance of 1.66 million new common shares in the first quarter.

The Company’s

2017 results included a $1.7 million one-time reduction in tax expense due to the enactment in December 2017 of the “Tax

Cuts and Jobs Act”

(“TCJA”).

State Bank reported net income for 2018 of $12.9 million, which was up from the

$12.3 million in net income in 2017.

RDSI reported net income for 2018 of $0.1 million, compared to a net loss of $0.2 million

reported for 2017 due to the sale of the RDSI assets in January 2018.

results for 2018 included loan growth of $75.3 million, and deposit growth of $73.0 million.

The mortgage banking business line

continues to contribute significant revenues, with residential real estate loan production of $342.1 million for the year, resulting

in $6.9 million of revenue from gains on sale.

Total noninterest expense was $43.1 million

for 2020 compared to $37.4 million for 2019, representing a $5.7 million, or 15.2 percent, increase year-over-year.

Total full-time

equivalent employees ended 2020 at 244, which was down 8 from year end 2019.

Salaries and benefits were driven by higher

compensation costs in the mortgage division.

Professional fees were higher due to higher spending on legal in connection with acquisition

The addition of our title agency added $0.5 million in operating expense for the year.

Our acquisition of The Edon

State Bank Company of Edon, Ohio in June 2020 added $1.2 million in merger related non-recurring expense and a minimal amount of

ongoing operating expense.

(See Notes 3 and 8 to the Consolidated Financial Statements for additional information)

Earnings Summary –

Net income for 2019 was $12.0 million,

and net income available to common shareholders was $11.0 million, or $1.51 per diluted share, compared with net income of $11.6

million and net income available to common of $10.7 million, or $1.51 per diluted share, for 2018.

State Bank reported net income

for 2019 of $12.5 million, which was down from the $12.9 million in net income in 2018.

SBFG Title reported net income for 2019

of $0.3 million.

Positive results for 2019 included loan

growth of $53.6 million, and deposit growth of $37.7 million.

The mortgage banking business line continues to contribute significant

revenues, with residential real estate loan production of $445.3 million for the year, resulting in $8.4 million of revenue from

gains on sale.

The level of mortgage origination was up from the $342.1 million in 2018.

The Company’s

loans serviced for others ended the year at $1.1 billion, up from $994.9 million at December 31, 2017.

revenue in 2018 was up compared to the prior year by $4.3 million, or 9.4 percent, due to higher margin income due to $75.3 million

in balance sheet loan growth, in addition to the sale of our item processing business, which netted $0.4 million in revenue.

interest margin on an FTE basis for 2018 was 3.95 percent, up 17 basis points from 2017.

expense was up compared to the prior year by $3.3 million, or 10.4 percent, due to compensation and fringe benefit cost increases

as a result of higher staffing levels.

Net charge offs for 2018 of $0.4 million resulted in a loan loss provision of $0.6 million,

which was up from the $0.2 million of charge offs and $0.4 million of loan loss provision in 2017.

Intangibles and Capital Purchases

Company completed its most recent annual goodwill impairment test as of December 31, 2019.

At December 31, 2019, the Company’s

reporting unit had positive equity and the Company elected to perform a qualitative assessment to determine if it was more likely

than not that the fair value of the reporting unit exceeded its carrying value, including goodwill.

The qualitative assessment

indicated that it was more likely than not that the fair value of the reporting unit exceeded its carrying value, resulting in

no impairment.

plans to continue from time to time to purchase additional premises and equipment and improve current facilities to meet the current

and future needs of the Company’s customers.

These purchases will include buildings, leasehold improvements, furniture and

Management expects that cash on hand and cash generated from current operations will fund these capital expenditures

and purchases.

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

withdrawal requirements and

provide for operating expenses.

Sources used to satisfy these needs consist of cash and due from banks, interest-bearing deposits

in other financial institutions, securities available-for-sale, loans held for sale and borrowings from various sources.

assets, excluding the borrowings, are commonly referred to as liquid assets.

Liquid assets were $135.3 million at December 31,

2019, compared to $143.8 million at December 31, 2018.

Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolio of $610.9

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

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

anticipated liquidity needs.

At December 31, 2019, all eligible commercial real estate, residential first, multi-family mortgage

and agricultural loans were pledged under a Federal Home Loan Bank (“FHLB”) blanket lien.

additional off-balance-sheet liquidity is available in the form of FHLB advances, unused federal funds lines from correspondent

banks and the national certificate of deposit market.

Management expects the risk of changes in off-balance-sheet arrangements

to be immaterial to earnings.

Based on the current collateralization requirements of the FHLB, approximately $117.4 million of

additional borrowing capacity existed at December 31, 2019.

December 31, 2019 and 2018, the Company had $41.0 million in federal funds lines available.

The Company also had $45.6 million

in unpledged securities at December 31, 2019 available for additional borrowings.

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 2019 and 2018 follows:

Company experienced positive cash flows from operating activities in 2019 and 2018.

Net cash from operating activities was $18.8

and $13.9 million for the years ended December 31, 2019 and 2018, respectively.

Significant operating items for 2019 included

gain on sale of loans of $9.7 million and net income of $12.0 million.

Cash provided by the sale of loans held for sale were $368.2

Cash used in the origination of loans held for sale were $364.5 million.

Company experienced negative cash flows from investing activities in 2019 and 2018.

Net cash used in investing activities was

$67.6 and $87.6 million for the years ended December 31, 2019 and 2018, respectively.

The changes for 2019 include the purchase

of available-for-sale securities of $38.5 million, and net increase in loans of $65.5 million.

The changes for 2018 include the

purchase of available-for-sale securities of $29.3 million and net increase in loans of $76.5 million.

The Company had proceeds

from repayments, maturities, sales and calls of securities of $29.9 and $20.2 million in 2019 and 2018, respectively.

Company experienced positive cash flows from financing activities in 2019 and 2018.

Net cash from financing activities was $27.5

and $95.5 million for the years ended December 31, 2019 and 2018, respectively.

Positive cash flows of $37.7 and $72.9 million

is attributable to the change in deposits for 2019 and 2018, respectively.

Company 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.

likelihood of a decrease in rates is remote given the current interest rate environment and therefore, only the -100 basis points

and -200 basis points rate changes were included in the EVE analysis for 2019 and 2018.

The results of this analysis are reflected

in the following table.

The Company’s loans serviced for

others ended the year at $1.2 billion, up from $1.1 billion at December 31, 2018.

Operating revenue was up compared to the

prior year by $3.0 million, or 5.9 percent, which was impacted by a $1.1 million temporary OMSR impairment.

Our 2019 results include

the impact from our two new subsidiaries:

SBFG Title with net income of $0.3 million and SB Captive with net income of $0.9 million.

Net interest margin on a fully tax equivalent basis (“FTE”) for 2019 was 3.82 percent, down 13 basis points from 2018.

Operating expense was up compared to the

prior year by $2.6 million, or 7.4 percent, due to compensation and fringe benefit cost increases as a result of higher mortgage

commission levels.

Net charge offs for 2019 of $0.21 million

resulted in a loan loss provision of $0.8 million, compared to net charge offs of $0.36 million and a $0.6 million loan loss provision

Goodwill, Intangibles and Capital

The Company completed its most recent annual

goodwill impairment test as of December 31, 2020.

At December 31, 2020, the Company’s reporting unit was more likely than

not that the fair value of the reporting unit exceeded its carrying value, including goodwill.

The qualitative assessment indicated

that it was more likely than not that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment.

The main changes to goodwill for the year included the purchase of the Edon State Bank.

The Company’s goodwill is further

reviewed in Note 8 to the Consolidated Financial Statements.

Management plans to continue from time

to time to purchase additional premises and equipment and improve current facilities to meet the current and future needs of the

Company’s customers.

These purchases will include buildings, leasehold improvements, furniture and equipment.

expects that cash on hand and cash generated from current operations will fund these capital expenditures and purchases.

Liquidity relates primarily to the Company’s

ability to fund loan demand, meet deposit customers’

withdrawal requirements and provide for operating expenses.

used to satisfy these needs consist of cash and due from banks, interest-bearing deposits in other financial institutions, securities

available-for-sale, loans held for sale and borrowings from various sources.

These assets, excluding the borrowings, are commonly

referred to as liquid assets.

Liquid assets were $303.2 million at December 31, 2020, compared to $135.3 million at December 31,

The Company’s commercial real estate,

first mortgage residential, agricultural and multi-family mortgage portfolio of $608.4 million at December 31, 2020, can and is

readily used to collateralize borrowings, which is an additional source of liquidity.

Management believes the Company’s current

liquidity level, without these borrowings, is sufficient to meet its current and anticipated liquidity needs.

At December 31, 2020,

all eligible commercial real estate, residential first, multi-family mortgage and agricultural loans were pledged under a Federal

Home Loan Bank (“FHLB”) blanket lien.

Significant additional off-balance-sheet

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

of deposit market.

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

on the current collateralization requirements of the FHLB, approximately $103.5 million of additional borrowing capacity existed

at December 31, 2020.

At December 31, 2020 and 2019, the Company

had $41.0 million in federal funds lines available.

The Company also had $67.5 million in unpledged securities at December 31,

2020 available for additional borrowings.

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 2020 and 2019 follows:

The Company experienced positive cash flows

from operating activities in 2020 and 2019.

Net cash from operating activities was $23.9 million and $18.8 million for the years

ended December 31, 2020 and 2019, respectively.

Significant operating items for 2020 included gain on sale of loans of $25.8 million

and net income of $14.9 million.

Cash provided by the sale of loans held for sale were $603.2 million.

Cash used in the origination

of loans held for sale were $582.5 million.

The Company experienced negative cash flows

from investing activities in 2020 and 2019.

Net cash used in investing activities was $57.2 million and $67.6 million for the years

ended December 31, 2020 and 2019, respectively.

The changes for 2020 include the purchase of available-for-sale securities of $129.8

million, and net increase in loans of $31.7 million.

The changes for 2019 include the purchase of available-for-sale securities

of $22.5 million and net increase in loans of $65.5 million.

The Company had proceeds from repayments, maturities, sales and calls

of securities of $84.0 million and $22.5 million in 2020 and 2019, respectively.

The Company experienced positive cash flows

from financing activities in 2020 and 2019.

Net cash from financing activities was $146.9 million and $27.5 million for the years

ended December 31, 2020 and 2019, respectively.

Positive cash flows of $157.7 million and $37.7 million is attributable to the

change in deposits for 2020 and 2019, respectively.

The Company 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 results of this analysis

are reflected in the following table.

Economic Value of Equity

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-100 basis points

-200 basis points

Economic Value of Equity

8 unchanged sentences

-200 basis points

Disclosure of Contractual Obligations

following table details the Company’s contractual obligations as of December 31, 2019, which were comprised of long-term

debt obligations, other debt obligations, operating lease obligations and other long-term liabilities.

Long-term debt obligations

are comprised of FHLB Advances of $16.0 million.

Other debt obligations are comprised of Trust Preferred securities of $10.3 million

and operating leases of $0.3 million.

The other long-term liabilities include time deposits of $257.8 million.

Tabular Disclosure of Contractual Obligations

The following table details the Company’s

contractual obligations as of December 31, 2020, which were comprised of long-term debt obligations, other debt obligations, operating

lease obligations and other long-term liabilities.

Long-term debt obligations are comprised of FHLB Advances of $8.0 million.

debt obligations are comprised of Trust Preferred securities of $10.3 million and operating leases of $1.6 million.

The other long-term

liabilities include time deposits of $229.5 million.

Payment due by period

4 unchanged sentences

Operating lease obligations

Other long-term liabilities

Reflected on the registrant’s balance sheet under GAAP

Other long-term liabilities Reflected on the registrant’s balance sheet under GAAP

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-K

Item 5. Market for Registrant’s Common Equity