What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-05 compared with 2022-05-06 · 315 added, 270 removed, 925 unchanged (39% of the section changed)

20 unchanged sentences

Total deposits

Repurchase agreements

Short-term borrowings

Federal Home Loan Bank advances

23 unchanged sentences

SB FINANCIAL GROUP, INC.

Consolidated Income Statement (unaudited)

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

in thousands, except per share data)

Three Months Ended

Interest Income

Total interest income

15 unchanged sentences

Title insurance income

Gain on sale/disposal of assets

Total noninterest income

10 unchanged sentences

Employee expense

Other expense

Other expenses

Total noninterest expense

3 unchanged sentences

Diluted earnings per common share

Average common shares outstanding (in thousands):

See notes to condensed consolidated

financial statements (unaudited)

Condensed Consolidated Statements of Comprehensive

Income (Loss) (unaudited)

Three Months Ended

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

in thousands)

Other comprehensive loss

Other comprehensive income (loss)

Available for sale investment securities:

Gross unrealized holding loss arising in the period

Related tax benefit

Net effect on other comprehensive loss

Gross unrealized holding income (loss) arising in the period

Related tax benefit (expense)

Net effect on other comprehensive income (loss)

Total comprehensive income (loss)

1 unchanged sentence

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

Accumulated Other Comprehensive

($ in thousands, except per share

Accumulated Other

($ in thousands, except per share data)

Comprehensive

Income (Loss)

January 1, 2022

6 unchanged sentences

March 31, 2022

Accumulated Other Comprehensive

Other comprehensive loss

Dividends on common, $ 0.12 per share

Repurchased stock ( 94,211 shares)

Stock based compensation expense

Balance, June 30, 2022

Accumulated Other

($ in thousands, except per share data)

Comprehensive

January 1, 2021

Other comprehensive loss

Cash dividends on common, $ 0.105 per share

Dividends on common, $ 0.105 per share

Restricted stock vesting

2 unchanged sentences

March 31, 2021

Other comprehensive income

Dividends on common, $ 0.11 per share

Repurchased stock ( 215,097 shares)

Stock based compensation expense

Balance, June 30, 2021

See notes to condensed consolidated financial statements (unaudited)

2 unchanged sentences

FLOWS (UNAUDITED)

($ in thousands)

Three Months Ended

Operating Activities

12 unchanged sentences

Interest payable & other liabilities

Net cash used in operating activities

Net cash provided by operating activities

Investing Activities

8 unchanged sentences

Financing Activities

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

Net increase (decrease) in demand deposits, money market, interest checking

& savings accounts

Net decrease in time deposits

Net increase in securities sold under agreements to repurchase

Net increase in short term borrowings

Proceeds from Federal Home Loan Bank advances

Repayment of Federal Home Loan Bank advances

Net proceeds from subordinated debt

Stock repurchase plan

Dividends on common shares

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Increase (decrease) in cash and cash equivalents

3 unchanged sentences

Interest paid

Income taxes paid

Supplemental non-cash disclosure

19 unchanged sentences

The accompanying unaudited condensed consolidated

financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information

and with the instructions for Form 10-Q.

Accordingly, they do not include all of the information and footnotes required by generally accepted

accounting principles for complete financial statements.

The financial statements reflect all adjustments that are, in the opinion of

management, necessary to fairly present the financial position, results of operations and cash flows of the Company.

Those adjustments

consist only of normal recurring adjustments.

Results of operations for the three months ended March 31, 2022, are not necessarily indicative

of results for the complete year.

financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial

information and with the instructions for Form 10-Q.

Accordingly, they do not include all of the information and footnotes required by

GAAP for complete financial statements.

The financial statements reflect all adjustments that are, in the opinion of management, necessary

to fairly present the financial position, results of operations and cash flows of the Company.

Those adjustments consist only of normal

recurring adjustments.

Results of operations for the three and six months ended June 30, 2022, are not necessarily indicative of results

for the complete year.

The condensed consolidated balance sheet of the

48 unchanged sentences

the impact of adopting ASU 2016-13 throughout 2022.

We expect the final adoption of the standard will not have a material impact on the

Company’s consolidated financial statements.

We expect to be fully prepared for implementation by January 1, 2023.

Financial Instruments

– Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures

The amendments to ASU 2016-13 (Financial

Instruments – Credit Losses) update the prior guidance on Troubled Debt Restructurings (“TDR”) by eliminating the TDR

recognition and measurement guidance and, instead, require that an entity evaluate whether the modification represents a new loan or a

continuation of an existing loan.

In addition, entities are required to disclose current-period gross writeoffs by year of origination

for financing receivables and net investment in leases.

The new accounting guidance is effective

for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2019.

FASB has deferred the effective date for this ASU for smaller reporting companies, such as the Company, to annual reporting periods and

interim reporting periods within those annual periods, beginning after December 15, 2022.

The Company will continue to estimate

the impact of adopting the amendments throughout 2022.

We expect to be fully prepared for implementation by January 1, 2023.

NOTE 2—EARNINGS PER SHARE

Earnings per share (EPS) have been computed based

on the weighted average number of common shares outstanding during the periods presented.

There were no anti-dilutive shares in 2022 or

Participating securities in the table reflect dividends on unvested restricted shares.

The average number of common shares used

in the computation of basic and diluted earnings per share are set forth in the tables below:

Earnings per share (“EPS”) have been

computed based on the weighted average number of common shares outstanding during the periods presented.

The average number of common

shares used in the computation of basic and diluted earnings per share are set forth in the tables below.

There were no anti-dilutive

shares in 2022 or 2021.

Participating securities in the tables reflect dividends on nonvested restricted shares.

Three Months Ended

10 unchanged sentences

Diluted earnings per common share

Six Months Ended

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

Distributed earnings allocated to common shares

Undistributed earnings allocated to common shares

Net earnings allocated to common shares

Net earnings allocated to participating securities

Net Income allocated to common shares and participating securities

Weighted average shares outstanding for basic earnings per share

Dilutive effect of stock compensation

Weighted average shares outstanding for diluted earnings per share

Basic earnings per common share

Diluted earnings per common share

On January 10, 2022, the Company announced that

4 unchanged sentences

the closing price of the Company’s common shares on the record date of $ 19.89 .

Had the 5 percent common stock dividend been included

in the Company’s 2021 financial statements, common shares outstanding would have increased by approximately 345,000 and diluted

earnings per share, assuming the shares were outstanding for the quarter ended March 31, 2021, would have decreased by $ 0.05 per share.

On January 25, 2022, the Company filed a Certificate

of Amendment with the Ohio Secretary of State to amend Article FIRST of its Amended Articles of Incorporation to increase the authorized

number of common shares, without par value, of the Company from 10,000,000 to 10,500,000 .

The addition of these authorized shares did

not have a material impact on the Company’s consolidated financial statements.

Had the 5 percent common stock dividend been included in the Company’s

2021 financial statements, common shares outstanding would have increased by approximately 345,000 and diluted earnings per share, assuming

the shares were outstanding for the three and six months ended June 30, 2021, would have decreased by $ 0.03 and $ 0.07 per share, respectively.

In connection with the 5 percent common stock

dividend, the Company filed a Certificate of Amendment with the Ohio Secretary of State on January 25, 2022 to amend Article FIRST of

its Amended Articles of Incorporation to proportionately increase the authorized number of common shares, without par value, of the Company

from 10,000,000 to 10,500,000 .

The addition of these authorized shares did not have a material impact on the Company’s consolidated

financial statements.

Note 3 – AVAILABLE

1 unchanged sentence

The amortized cost and appropriate fair values,

together with gross unrealized gains and losses, of securities at March 31, 2022 and December 31, 2021 were as follows:

together with gross unrealized gains and losses, of securities at June 30, 2022 and December 31, 2021 were as follows:

($ in thousands)

March 31, 2022

Government agencies

June 30, 2022

Treasury and Government agencies

Mortgage-backed securities

2 unchanged sentences

December 31, 2021

Government agencies

Treasury and Government agencies

Mortgage-backed securities

1 unchanged sentence

Other corporate securities

The amortized cost and fair value of securities

available for sale at March 31, 2022, by contractual maturity, are shown below.

The amortized cost and fair value of securities available

for sale at June 30, 2022, by contractual maturity, are

Expected maturities will differ from contractual maturities

7 unchanged sentences

The fair value of securities pledged as collateral,

to secure public deposits and for other purposes, was $ 65.4 million at March 31, 2022 and $ 54.2 million at December 31, 2021.

value of securities delivered for repurchase agreements was $ 25.3 million at March 31, 2022 and $ 23.6 million at December 31, 2021.

to secure public deposits and for other purposes, was $ 60.3 million at June 30, 2022 and $ 54.2 million at December 31, 2021.

value of securities delivered for repurchase agreements was $ 27.5 million at June 30, 2022 and $ 23.6 million at December 31, 2021.

There were no realized gains or losses from sales

of available-for-sale securities for the three months ended March 31, 2022 or March 31, 2021.

of available-for-sale securities for the six months ended June 30, 2022 or June 30, 2021.

Certain investments in debt securities are reported

1 unchanged sentence

Total fair value of these investments was $ 257.1

million at March 31, 2022, and $ 214.2 million at December 31, 2021, which consisted of 124 securities, or approximately 95 percent, and

million at June 30, 2022, and $ 214.2 million at December 31, 2021, which consisted of 139 securities, or approximately 97 percent, and

64 securities, or approximately 81 percent, respectively, of the Company’s available-for-sale investment portfolio at such dates.

5 unchanged sentences

Securities with unrealized losses, aggregated

by investment class and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2022

by investment class and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2022

and December 31, 2021, are as follows:

($ in thousands)

Less than 12 Months

12 Months or Longer

March 31, 2022

Government agencies

June 30, 2022

($ in thousands)

Treasury and Government agencies

Mortgage-backed securities

4 unchanged sentences

December 31, 2021

Government agencies

Treasury and Government agencies

Mortgage-backed securities

2 unchanged sentences

The total unrealized loss in the securities portfolio

was $ 17.5 million as of March 31, 2022 compared to a $ 3.6 million unrealized loss at December 31, 2021.

was $ 28.1 million as of June 30, 2022 compared to a $ 3.6 million unrealized loss at December 31, 2021.

Management evaluates securities

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

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 March 31, 2022.

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, 2022.

NOTE 4 – 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 adjusted for any

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

Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan

Generally, all loan classes are placed on nonaccrual status not later than 90 days past due, unless the loan is well-secured and

in the process of collection.

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 or discounts

on purchased loans.

Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over

the loan term.

Generally, all loan classes are placed on nonaccrual status not later than 90 days past due, unless the loan is well-secured

and in the process of collection.

All interest accrued, but not collected, for loans that are placed on nonaccrual or charged-off is reversed

4 unchanged sentences

and future payments are reasonably assured.

The allowance for loan losses is established as

losses are estimated to have occurred through a provision for loan losses charged to income.

The allowance for loan losses is established

as losses are estimated to have occurred through a provision for loan losses charged to income.

Loan losses are charged against the allowance

1 unchanged sentence

Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on

a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical

The allowance for loan losses is evaluated

on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical

experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated

2 unchanged sentences

that are susceptible to significant revision as new information becomes available.

The allowance consists of allocated and general

The allowance consists of allocated

and general components.

The allocated component relates to loans that are classified as impaired.

For those loans that are classified as impaired,

an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower

than the carrying value of that loan.

The general component covers nonclassified loans and is based on historical charge-off experience

and expected loss given default derived from the Company’s internal risk rating process.

Other adjustments 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 in the historical

loss or risk rating data.

A loan is considered impaired when, based on current

information and events, it is probable that State Bank will be unable to collect the scheduled payments of principal or interest when

due according to the contractual terms of the loan agreement.

Factors considered by management in determining impairment include payment

status, collateral value and the probability of collecting scheduled principal and interest payments when due.

Loans that experience insignificant

payment delays and payment shortfalls generally are not classified as impaired.

Management determines the significance of payment delays

and payment shortfalls on a case-by-case basis, taking into consideration each of the circumstances surrounding the loan and the borrower,

including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall

in relation to the principal and interest owed.

Impairment is measured on a loan-by-loan basis for commercial, agricultural, and construction

loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s

obtainable market price or the fair value of the collateral if the loan is collateral dependent.

When State Bank moves a loan to nonaccrual status,

total unpaid interest accrued to date is reversed from income.

Subsequent payments are applied to the outstanding principal balance with

the interest portion of the payment recorded on the balance sheet as a contra-loan.

For those loans that are classified

as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired

loan is lower than the carrying value of that loan.

The general component covers nonclassified loans and is based on historical charge-off

experience and expected loss given default derived from the Company’s internal risk rating process.

Other adjustments 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

in the historical loss or risk rating data.

A loan is considered impaired when,

based on current information and events, it is probable that State Bank will be unable to collect the scheduled payments of principal

or interest when due according to the contractual terms of the loan agreement.

Factors considered by management in determining impairment

include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.

experience insignificant payment delays and payment shortfalls generally are not classified as impaired.

Management determines the significance

of payment delays and payment shortfalls on a case-by-case basis, taking into consideration each of the circumstances surrounding the

loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the

amount of the shortfall in relation to the principal and interest owed.

Impairment is measured on a loan-by-loan basis for commercial,

agricultural, and construction loans by either the present value of expected future cash flows discounted at the loan’s effective

interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

When State Bank moves a loan to nonaccrual

status, total unpaid interest accrued to date is reversed from income.

Subsequent payments are applied to the outstanding principal balance

with the interest portion of the payment recorded on the balance sheet as a contra-loan.

Interest received on impaired loans may be realized

6 unchanged sentences

for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Categories of loans at March 31, 2022 and December 31, 2021 include:

Categories of loans at June 30, 2022 and December 31, 2021 include:

Nonaccrual Loans

($ in thousands)

December 2021

Commercial & industrial

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The following tables present the activity in the

allowance for loan losses for the three-month periods ended March 31, 2022 and March 31, 2021, and the recorded investment in loans based

on portfolio segment and impairment method as of March 31, 2022 and December 31, 2021.

allowance for loan losses for the three and six months ended June 30, 2022 and June 30, 2021, and the recorded investment in loans based

on portfolio segment and impairment method as of June 30, 2022 and December 31, 2021.

($ in thousands)

For the Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

Beginning balance

Ending balance

For the Three Months Ended March 31, 2021

For the Six Months Ended June 30, 2022

Beginning balance

Ending balance

Loans Receivable at March 31, 2022

For the Three Months Ended June 30, 2021

Beginning balance

Ending balance

For the Six Months Ended June 30, 2021

Beginning balance

Ending balance

Loans Receivable at June 30, 2022

Ending balance:

individually evaluated for impairment

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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.

The Company analyzes loans

individually by classifying the loans as to credit risk.

This analysis includes loans with an outstanding balance greater than $ 100,000

and non-homogeneous loans, such as commercial and commercial real estate loans.

This analysis is performed on a quarterly basis.

uses the following definitions for risk ratings:

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 $ 100,000 and non-homogeneous loans, such as commercial and commercial real estate loans.

This analysis is performed on a quarterly

The Company uses the following definitions for risk ratings:

Pass (grades 1 – 4):

1 unchanged sentence

Special Mention (5):

Assets have potential weaknesses that deserve management’s close attention.

If left uncorrected, these potential weaknesses may

result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

special mention credits have characteristics which corrective management action would remedy.

have potential weaknesses that deserve management’s close attention.

If left uncorrected, these potential weaknesses may result

in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

Special mention

assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Ordinarily, special

mention credits have characteristics which corrective management action would remedy.

Substandard (6):

5 unchanged sentences

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 and improbable.

as doubtful have all the weaknesses inherent in those classified as 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.

Loans 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

Loans will be classified as 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 March 31, 2022 and December 31, 2021.

of the Company’s loan portfolio based on rating category as of June 30, 2022 and December 31, 2021.

($ in thousands)

March 31, 2022

June 30, 2022

real estate -

1 unchanged sentence

real estate -

Residential real

Special Mention (5)

4 unchanged sentences

real estate -

Residential real

Special Mention (5)

Substandard (6)

The Company evaluates the loan risk grading 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 March 31, 2022 and December 31, 2021.

The Company evaluates the loan risk

grading 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, 2022 and December 31, 2021.

($ in thousands)

March 31, 2022

90 Days Past Due

June 30, 2022

Commercial & industrial

3 unchanged sentences

December 31, 2021

90 Days Past Due

Commercial & industrial

12 unchanged sentences

The following tables present impaired loan information as of and for

the three months ended March 31, 2022 and 2021, and for the twelve months ended December 31, 2021:

the three and six months ended June 30, 2022 and 2021, and for the twelve months ended December 31, 2021:

($ in thousands)

Three Months Ended

Unpaid Principal

Average Recorded

Interest Income

March 31, 2022

Six Months Ended June 30, 2022

With no related allowance recorded:

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($ in thousands)

Twelve Months Ended

Unpaid Principal

Average Recorded

Interest Income

December 31, 2021

Three Months Ended June 30, 2022

With no related allowance recorded:

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Residential real estate

($ in thousands)

Twelve Months Ended December 31, 2021

With no related allowance recorded:

Commercial & industrial

Commercial real estate - owner occupied

Commercial real estate - nonowner occupied

Residential real estate

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

Six Months Ended

Three Months Ended

March 31, 2021

Average Recorded

Interest Income

($ in thousands)

June 30, 2021

With no related allowance recorded:

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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

TDRs are modified loans where a concession was

provided to a borrower experiencing financial difficulties.

Loan modifications are considered TDRs when the concessions provided are not

available to the borrower through either normal channels or other sources.

TDRs are modified loans where a concession

was provided to a borrower experiencing financial difficulties.

Loan modifications are considered TDRs when the concessions provided are

not available to the borrower through either normal channels or other sources.

However, not all loan modifications are TDRs.

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.

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

at a point in time.

All loan modifications, including those cla ssified as TDRs,

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

circumstances at a point in time.

All loan modifications, including those classified as TDRs,

are reviewed and approved by management.

31 unchanged sentences

TDR modification of any concession type.

The Company had no new TDR activity in the three

months ended March 31, 2022, and March 31, 2021, respectively.

There were no TDRs modified during the past twelve months that have subsequently

On March 22, 2020, a statement was issued by the

Company’s bank regulators and titled the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions

Working with Customers Affected by the Coronavirus” (the “Interagency Statement”) that encouraged financial institutions

to work prudently with borrowers unable to meet the contractual payment obligations due to the effects of COVID-19.

Additionally, Section

4013 of the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”) further provided that

a qualified loan modification is exempt by law from classification as a troubled debt restructure as defined by GAAP, from the period

beginning March 1, 2020 until the earlier of December 31, 2021 or the date that is 60 days after the date on which the national emergency

concerning the COVID-19 outbreak under the National Emergencies Act (50 U.S.C.

Company had no new TDR activity in the three and six months ended June 30, 2022, and June 30, 2021, respectively.

The Company had one

TDR, a residential loan with a recorded balance of $ 62,000 ,that during the past twelve months defaulted on its modified contractual agreement.

March 22, 2020, a statement was issued by the Company’s bank regulators and titled the “Interagency Statement on Loan Modifications

and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” (the “Interagency Statement”)

that encouraged financial institutions to work prudently with borrowers unable to meet the contractual payment obligations due

to the effects of COVID-19.

Additionally, Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended

(the “CARES Act”) further provided that a qualified loan modification is exempt by law from classification as a troubled

debt restructure as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2021 or the date that

is 60 days after the date on which the national emergency concerning the COVID-19 outbreak under the National Emergencies Act (50 U.S.C.

1601 et seq.) terminates.

As of March 31, 2022, all loans

previously modified under Section 4013 of the CARES Act had returned to normal payment terms.

As of June 30, 2022, all loans previously modified under Section 4013 of the CARES Act had returned to normal

payment terms.

NOTE 5 – GOODWILL

1 unchanged sentence

Three Months Ended

Six Months Ended

($ in thousands)

4 unchanged sentences

impairment annually, and on an interim basis if events or circumstances change that indicate an impairment may exist.

As of March 31, 2022 and December 31, 2021 the

As of June 30, 2022 and December 31, 2021, the

carrying amount of goodwill was $ 23.2 million.

14 unchanged sentences

The unpaid principal balance of mortgage loans serviced for others approximated $ 1.37

billion at March 31, 2022 and $ 1.36 billion at December 31, 2021.

billion at June 30, 2022 and $ 1.36 billion at December 31, 2021.

Contractually specified servicing fees of $ 0.9 million and $ 1.7 million

were included in mortgage loan servicing fees in the consolidated income statement for the three months ended March 31, 2022 and 2021,

were included in mortgage loan servicing fees in the consolidated income statement for the three months and six months ended June 30,

2022, respectively.

Servicing fees of $ 0.8 million and $ 1.7 million were included for the three and six months ended June 30, 2021, respectively.

The following table summarizes mortgage servicing

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

Three Months Ended March 31,

Three Months Ended

Six Months Ended

($ in thousands)

44 unchanged sentences

The table below presents the notional amount and

fair value of the Company’s interest rate swaps, IRLCs and forward contracts utilized as of March 31, 2022 and December 31, 2021.

March 31, 2022

fair value of the Company’s interest rate swaps, IRLCs and forward contracts utilized as of June 30, 2022 and December 31, 2021.

June 30, 2022

December 31, 2021

16 unchanged sentences

The following table presents the amounts included

in the consolidated statements of income for non-hedging derivative financial instruments for the three months ended March 31, 2022 and

Amount of gain (loss)

in the consolidated statements of income for non-hedging derivative financial instruments for the three and six months ended June 30,

2022 and 2021.

Three Months Ended

Six Months Ended

($ in thousands)

5 unchanged sentences

The following table shows the offsetting of financial assets and derivative

assets at March 31, 2022 and December 31, 2021.

Gross amounts

offset in the

Gross amounts not offset in the consolidated balance sheet

assets at June 30, 2022 and December 31, 2021.

amounts not offset in the

consolidated balance sheet

($ in thousands)

of recognized

balance sheet

Cash collateral

March 31, 2022

Interest rate swaps

balance sheet

June 30, 2022

December 31, 2021

Interest rate swaps

The following table shows the offsetting of financial liabilities and

derivative liabilities at March 31, 2022 and December 31, 2021.

Gross amounts

offset in the

Net amounts of liabilities

derivative liabilities at June 30, 2022 and December 31, 2021.

of liabilities

Gross amounts not offset in the

2 unchanged sentences

of recognized

offset in the

balance sheet

1 unchanged sentence

Cash collateral

March 31, 2022

June 30, 2022

Interest rate swaps

2 unchanged sentences

NOTE 8 – DEPOSITS

Major classification of deposits at March 31,

Major classification of deposits at June 30, 2022

and at December 31, 2021 were as follows:

5 unchanged sentences

Total Deposits

Included in time deposits at March 31, 2022 and

Included in time deposits at June 30, 2022 and

December 31, 2021 were $ 45.0 million and $ 55.6 million, respectively, of deposits which were obtained through the Certificate of Deposit

2 unchanged sentences

($ in thousands)

Fed funds borrowed

Securities sold under repurchase agreements

The Company has retail repurchase agreements to

facilitate cash management transactions with commercial customers.

The Company has retail repurchase agreements (“REPO”)

to facilitate cash management transactions with commercial customers.

These obligations are secured by agency and mortgage-backed securities

2 unchanged sentences

through 2061.

As of March 31, 2022, these repurchase agreements were secured by securities totaling $ 25.3 million.

The repurchase agreements

mature within one month.

As of June 30, 2022, these REPO agreements were secured by securities totaling $ 27.5 million.

The REPO agreements mature

within one month.

The Company has borrowing capabilities at the

Federal Reserve Discount Window (“Discount Window”) by pledging either securities or loans as collateral.

As of March 31,

As of June 30, 2022,

there was no collateral pledged or borrowings drawn at the Discount Window.

At March 31, 2022 and December 31, 2021, the Company

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

At June 30, 2022 and December 31, 2021, the Company

had $ 41.0 million in federal funds lines, of which $ 5.0 million was drawn.

NOTE 10 – FEDERAL HOME LOAN BANK ADVANCES

The Company’s FHLB advances were secured

by $ 163.7 million in mortgage loans at March 31, 2022.

Advances, at interest rates from 2.88 to 2.93 percent, are subject to restrictions

or penalties in the event of prepayment.

Aggregate annual maturities of FHLB advances at March 31, 2022 were:

by $ 174.2 million in mortgage loans at June 30, 2022.

All advances at June 30, 2022 had a 90 day maturity and a variable interest rate.

Aggregate annual maturities of FHLB advances at June 30, 2022 were:

($ in thousands)

10 unchanged sentences

The balance of the Capital Securities

as of March 31, 2022 and December 31, 2021 was $ 10.3 million, with a maturity date of September 15, 2035 .

as of June 30, 2022 and December 31, 2021 was $ 10.3 million, with a maturity date of September 15, 2035 .

NOTE 12 – SUBORDINATED DEBT

25 unchanged sentences

or liabilities

Level 2 Observable inputs other than Level 1 prices, such

as quoted prices for similar assets or liabilities;

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

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

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

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

29 unchanged sentences

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

fell at March 31, 2022 and December 31, 2021.

fell at June 30, 2022 and December 31, 2021.

($ in thousands)

Fair value at

March 31, 2022

Treasury and Government Agencies

7 unchanged sentences

Fair value at

December 31, 2021

Treasury and Government Agencies

5 unchanged sentences

Forward contracts

Level 1 - quoted prices in active markets for identical assets

Level 2 - significant other observable inputs

Level 3 - significant unobservable

- quoted prices in active markets for identical assets

- significant other observable inputs

- significant unobservable inputs

The following table reconciles the beginning and

ending balances of recurring fair value measurements recognized in the accompanying consolidated balance sheets using significant unobservable

(Level 3) inputs for the three months ended March 31, 2022 and 2021.

Three Months Ended

(Level 3) inputs for the three and six months ended June 30, 2022 and 2021.

for the Three Months Ended

for the Six Months Ended

($ in thousands)

1 unchanged sentence

Balance at beginning of period

Total realized gains (losses)

Change in fair value

16 unchanged sentences

review policy.

All impaired loans held by the Company were collateral dependent at March 31, 2022 and December 31, 2021.

All impaired loans held by the Company were collateral dependent at June 30, 2022 and December 31, 2021.

Mortgage Servicing Rights

15 unchanged sentences

Fair value at

March 31, 2022

Impaired loans

2 unchanged sentences

Fair value at

December 31, 2021

Impaired loans

Mortgage servicing rights

Level 1 - quoted prices in active markets for identical assets

Level 2 - significant other observable inputs

Level 3 - significant unobservable inputs

- quoted prices in active markets for identical assets

- significant other observable inputs

- significant unobservable inputs

Unobservable (Level 3) Inputs

4 unchanged sentences

Unobservable inputs

Range (weighted-

Range (weighted-average)

Collateral-dependent impaired loans

14 unchanged sentences

Unobservable inputs

Range (weighted-

Range (weighted-average)

Collateral-dependent impaired loans

12 unchanged sentences

There were no changes in the inputs or methodologies

used to determine fair value at March 31, 2022 as compared to December 31, 2021.

used to determine fair value at June 30, 2022 as compared to December 31, 2021.

The following methods were used to estimate the

11 unchanged sentences

and marketability factors.

Deposits, FHLB Advances & Repurchase Agreements

Deposits, Short-Term Borrowings, and FHLB Advances

Deposits include demand deposits, savings accounts,

and certain money market deposits.

The carrying amount approximates the fair value.

The estimated fair value for fixed-maturity 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 March 31, 2022 and December 31, 2021.

Short-term borrowings include federal funds borrowed and REPO agreements.

The carrying amount of these

instruments approximates the fair value.

The estimated fair value for fixed-maturity time deposits and FHLB advances are based on estimates

of the rate State Bank could pay on similar instruments with similar terms and maturities at June 30, 2022 and December 31, 2021.

Loan Commitments

3 unchanged sentences

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

approximate cost at March 31, 2022 and December 31, 2021 and are not considered significant to this presentation.

approximate cost at June 30, 2022 and December 31, 2021 and are not considered significant to this presentation.

Trust Preferred Securities

16 unchanged sentences

Fair value measurements using

March 31, 2022

June 30, 2022

Financial assets

38 unchanged sentences

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

under the 2017 Plan, of which 122,198 shares had been granted under the plan as of March 31, 2022.

under the 2017 Plan, of which 121,823 shares had been granted under the plan as of June 30, 2022.

The 2017 Plan is intended to advance the interests

9 unchanged sentences

valuation model.

As of March 31, 2022, there were no stock options outstanding, and no unrecognized compensation cost related to stock

As of June 30, 2022, there were no stock options outstanding, and no unrecognized compensation cost related to stock

option awards.

No stock options were granted in the first three months of 2022.

On February 5, 2013, the Company adopted a Long

Term Incentive (LTI) Plan, which provides for awards of restricted stock in the Company to certain key executives.

These restricted stock

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

During 2021, the Company met

certain performance targets under the LTI Plan and restricted stock awards were approved and issued in February 2022.

The compensation

cost charged against income for awards under the LTI Plan for the three months ended March 31, 2022 and March 31, 2021, was $ 0.2 million

and $ 0.1 million, respectively, with a total income tax benefit recognized in the income statement of $ 0.03 million and $ 0.03 million,

respectively.

As of March 31, 2022, there was $ 1.1 million of

No stock options were granted in the first six months of 2022.

On February 5, 2013, the Company adopted a Long Term Incentive (LTI) Plan,

which provides for awards of restricted stock in the Company to certain key executives.

These restricted stock awards vest over a four-year

period and are intended to assist the Company in retention of key executives.

The compensation cost charged against income for awards

under the LTI Plan for the three and six months ended June 30, 2022, was $ 0.2 million and $ 0.4 million, respectively, and for the three

and six months ended June 30, 2021, was $ 0.1 million and $ 0.2 million, respectively.

As of June 30, 2022, there was $ 0.9 million of

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

3 unchanged sentences

The table below is a summary of restricted stock

activity under the Company’s 2017 Plan for the three months ended March 31, 2022.

activity under the Company’s 2017 Plan for the six months ended June 30, 2022.

Weighted- Average

Nonvested, January 1, 2022

Nonvested, March 31, 2022

Nonvested, June 30, 2022

NOTE 15 – GENERAL LITIGATION

3 unchanged sentences

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

at March 31, 2022, will not have a material adverse effect on the consolidated financial position, results of operations and cash flow

at June 30, 2022, will not have a material adverse effect on the consolidated financial position, results of operations and cash flow

of the Company.

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