SB Financial (SBFG) 8-K SB Financial Group, Inc. Announces Second-Quarter and Six-Month 2014 Results

Exhibit 99.1

 

Investor Contact Information:

Anthony V. Cosentino

Executive Vice President and

Chief Financial Officer

Tony.Cosentino@YourStateBank.com

SB Financial Group, Inc. Announces Second-Quarter and Six-Month 2014 Results

Near double-digit loan growth and 27 percent linked-quarter earnings growth

DEFIANCE, Ohio, July 28, 2014 -- SB Financial Group, Inc. (NASDAQ: SBFG), a diversified financial services company providing full-service community banking, mortgage banking, wealth management and item processing services, today reported earnings for the second quarter and six months ended June 30, 2014.

● Second-quarter earnings of $1.2 million, a 27 percent increase over the linked quarter

● Loan growth of 9.1 percent, up $42.1 million from the prior year, up $24.2 million from the linked quarter

● Nonperforming assets at 0.93 percent of total assets

● Operating expenses declined 6.4 percent from the prior year

Highlights*	Three Months Ended						Six Months Ended
(in $000’s except ratios and per share data)	Jun. 2014			Jun. 2013			Jun. 2014			Jun. 2013
Net interest income (FTE)	$	5,347		$	5,448		$	10,270		$	10,840
Noninterest income		3,295			3,820			5,854			7,387
Noninterest expense		6,627			7,080			12,705			13,750
Net income		1,245			1,319			2,225			2,637
Earnings per diluted share		0.25			0.27			0.46			0.54
Net interest margin (FTE)		3.60	%		3.86	%		3.51	%		3.86	%
Return on assets		0.76	%		0.82	%		0.67	%		0.82	%
Return on equity		8.55	%		9.70	%		7.72	%		9.76	%

 * Consolidated earnings for SB Financial include the results of the Company’s Banking Group, consisting primarily of The State Bank and Trust Company (“State Bank” or the “Bank”), and the Company’s data services subsidiary, Rurbanc Data Services, Inc. (dba “RDSI Banking Systems” or “RDSI”).

 “This was a very encouraging quarter for our Company. Improved economic conditions led to a more stable housing environment and lower unemployment. We saw increased loan demand in our traditional markets, as well as our low-share markets of Toledo and Columbus. Our growth this quarter reflects the improved market conditions and optimism of our customers,” said Mark Klein, President and Chief Executive Officer of SB Financial Group.

1

RESULTS OF OPERATIONS

Consolidated Revenue

Total revenue, consisting of net interest income on a fully tax equivalent (FTE) basis and noninterest income, was down 6.8 percent from the second quarter of 2013, but up 15.5 percent from the linked quarter.

● Net interest income (FTE) was down 1.9 percent for the second quarter, but up 8.6 percent compared to the linked quarter

● Net interest margin (FTE) was down 26 basis points for the second quarter, but up 14 basis points to the linked quarter

● Noninterest income was down $0.5 million, or 13.7 percent, for the second quarter, but up $0.7 million, or 28.8 percent, for the linked quarter

● Total revenue, consisting of net interest income on a fully tax equivalent basis and noninterest income, for the first six months of 2014 was $16.1 million, compared to $18.2 million for the first six months of 2013. The change was due primarily to lower mortgage volume and continued compression of net interest margin.

Mortgage Loan Business

For the second quarter of 2014, mortgage loan originations were $66.6 million, down $15.4 million, or 18.8 percent, from the year-ago second quarter, but up $33.0 million, or 98.1 percent, from the linked quarter. For the first six months of 2014, mortgage loan originations were $100.2 million, from $153.9 million in the first six-months of 2013.

Net mortgage banking income, consisting of gains on the sale of mortgage loans and net loan servicing fees, was $1.4 million for the second quarter of 2014, compared to $1.9 million for the year-ago quarter. The mortgage servicing valuation adjustment for the second-quarter 2014 was a negative $0.08 million, slightly worse than the linked quarter.The mortgage servicing portfolio at June 30, 2014, was $627.2 million, up $52.1 million, or 9.1 percent, from June 30, 2013.

Mr. Klein noted, “Mortgage volume returned to more normalized levels for our bank this quarter. The purchase market continued to dominate our production, contributing 96 percent of our $67 million in new originations in the quarter. We continue to add originators and take market share in all of our markets.”

Mortgage Banking ($000’s)	Three Months Ended
	Jun. 2014			Mar. 2014			Dec. 2013			Sep. 2013			Jun. 2013
Mortgage originations	$	66,563		$	33,602		$	39,679		$	55,192		$	81,945
Mortgage sales		49,091			27,961			33,921			58,101			67,050
Mortgage servicing portfolio		627,215			609,419			605,993			597,030			575,091
Mortgage servicing rights		5,375			5,228			5,180			5,076			4,613
Mortgage servicing revenue:
Loan servicing fees		387			380			388			367			350
OMSR amortization		(147	)		(117	)		(126	)		(164	)		(205	)
Net administrative fees		240			263			262			203			145
OMSR valuation adjustment		(83	)		(18	)		(21	)		205			273
Net loan servicing fees		156			245			241			408			418
Gain on sale of mortgages		1,211			572			776			1,356			1,450
Mortgage banking revenue, net	$	1,368		$	817		$	1,017		$	1,764		$	1,868

2

Fee Income and Noninterest Expense

SB Financial’s fee income includes revenue from a diverse group of services, such as wealth management, deposit fees and income from bank-owned life insurance. Wealth management assets under management stood at $332.3 million as of the second quarter of 2014. For the quarter, fee income as a percent of total revenue was 38.6 percent, down slightly from the prior year. For the first six months, fee income as a percentage of total revenue was 36.8 percent.

For thesecondquarter of 2014, noninterest expense (NIE) was down $0.5 million, or 6.4 percent, compared to the second quarter of 2013. For the first six months of 2014, operating expenses are down $1.0 million, or 7.6 percent, compared to the prior year first six months. While volume related costs were up slightly this quarter, we continue to see reductions in credit costs, employee benefits, and the reduction in state tax due to Ohio’s new financial institution tax.

“Our fee income continues to be a competitive strength, particularly in the current interest-rate environment.” Mr. Klein noted. “We are especially pleased that our fee income as a percentage of total revenue for the second-quarter 2014 was 38.6 percent, which is approaching the 40 percent level we target to achieve. We continue to manage our operating expenses, down over $1.0 million from the prior year.”

Fee Income / Noninterest Expense (000’s)
		Jun. 2014			Mar. 2014			Dec. 2013			Sep. 2013			Jun. 2013
Fee Income	$	3,295		$	2,559		$	2,949		$	3,710		$	3,820
Fee Income / Total Revenue		38.6	%		34.7	%		37.1	%		41.8	%		41.7	%
Fee Income / Average Assets		2.0	%		1.6	%		1.8	%		2.3	%		2.4	%
Noninterest Expense	$	6,627		$	6,079		$	6,199		$	6,562		$	7,080
Efficiency Ratio		76.0	%		80.6	%		76.4	%		72.4	%		75.5	%
NIE / Average Assets		4.0	%		3.8	%		3.8	%		4.1	%		4.4	%

Balance Sheet

Total assets as of June 30, 2014, were $662.5 million, up 4.9 percent from the year-ago quarter. Total equity as of June 30, 2014, was $59.0 million, up 8.5 percent from the year-ago quarter.

Total loans held for investment (HFI) were $506.1 million at June 30, 2014, up $42.1 million, or 9.1 percent, from the year-ago quarter. Commercial real estate loans accounted for the majority of growth, up $16.0 million, or 8.0 percent. Commercial and residential real estate loans rose $7.7 million and $11.8 million, respectively. Consumer loans included the growth in our branded credit card portfolio, with $1.0 million in balances and $6.4 million in available credit lines.

The investment portfolio of $89.3 million represented 13.5 percent of assets at June 30, 2014, which was down slightly from the prior year. Deposit balances of $524.1 million at June 30, 2014, increased by $12.7 million since June 30, 2013. Growth from the prior year included $9.2 million in checking and $3.5 million in time deposit balances.

3

Mr. Klein stated, “We saw broad and diverse growth in our loan portfolio this quarter compared to the year-ago quarter. All of our markets contributed to the higher loan volume, especially our lower market-share regions of Columbus and Toledo.”

Loan Portfolio ($000’s)	Jun. 2014			Mar. 2014			Dec. 2013			Sep. 2013			Jun. 2013			Variance YOY
Commercial	$	92,424		$	85,701		$	85,368		$	81,571		$	84,766		$	7,658
% of Total		18.3	%		17.8	%		17.9	%		17.2	%		18.3	%		9.0	%
Commercial RE		215,824			212,502			205,301			209,739			199,795			16,029
% of Total		42.6	%		44.1	%		43.0	%		44.1	%		43.1	%		8.0	%
Agriculture		43,475			39,028			39,210			39,636			38,552			4,923
% of Total		8.6	%		8.1	%		8.2	%		8.3	%		8.3	%		12.8	%
Residential RE		105,054			97,857			99,620			96,477			93,292			11,762
% of Total		20.8	%		20.3	%		20.9	%		20.3	%		20.1	%		12.6	%
Consumer & Other		49,350			46,836			47,804			47,810			47,630			1,720
% of Total		9.7	%		9.7	%		10.0	%		10.1	%		10.3	%		3.6	%
Total Loans	$	506,127		$	481,924		$	477,303		$	475,233		$	464,035		$	42,092
Total Growth Percentage																	9.1	%

Asset Quality

SB Financial continues to improve its asset quality, reporting nonperforming assets of $6.2 million as of June 30, 2014, down $1.4 million, or 18.6 percent, from the year-ago quarter. Our 0.93 percent level of nonperforming to total assets was the lowest since the first quarter of 2007. Coverage of problem loans by the loan loss allowance was 116 percent at June 30, 2014.

“Our total past due loans declined to 58 basis points at quarter end, and our nonperforming asset percentage reached a seven-year low. The wide diversity in our markets provides a unique balance, which drives growth in higher quality assets,” stated Mr. Klein. “Achieving and maintaining top-quartile asset quality continues to be a primary focus for us.”

Summary of Nonperforming Assets ($000’s)
Nonperforming Loan Category		Jun. 2014			Mar. 2014			Dec. 2013			Sep. 2013			Jun. 2013
Commercial	$	1,485		$	1,818		$	2,316		$	2,738		$	982
% of Total Commercial loans		1.6	%		2.1	%		2.7	%		3.4	%		1.2	%
Commercial RE loans		699			753			532			642			519
% of Total CRE loans		0.3	%		0.4	%		0.3	%		0.3	%		0.3	%
Residential RE		1,534			1,555			1,651			1,837			2,285
% of Total Res. RE loans		1.5	%		1.6	%		1.7	%		1.9	%		2.5	%
Consumer & Other		288			280			345			363			600
% of Consumer & Other loans		0.6	%		0.6	%		0.7	%		0.8	%		1.3	%
Total Nonaccruing Loans		4,006			4,406			4,844			5,580			4,386
% of Total Loans		0.8	%		0.9	%		1.0	%		1.2	%		1.0	%
Accruing Restructured Loans		1,665			1,793			1,739			1,756			1,262
Total Nonaccruing & Restructured	$	5,671		$	6,199		$	6,583		$	7,336		$	5,648
% of Total Loans		1.1	%		1.3	%		1.4	%		1.5	%		1.2	%
OREO & Repossessed Vehicles		516			615			651			1,430			1,955
Total Nonperforming Assets	$	6,187		$	6,814		$	7,233		$	8,766		$	7,603
% of Total Assets		0.9	%		1.1	%		1.1	%		1.4	%		1.2	%

4

Capitalization

Improving capital ratios remains an important focus of management. The tangible equity ratio improved by 50 basis points over the past year and stood at 6.5 percent as of June 30, 2014. All bank regulatory ratios remain in excess of "well-capitalized" levels. At June 30, 2014, State Bank's Total Risk-Based Capital was estimated to be $61.6 million, $21.9 million above the “well-capitalized” level. The Total Risk-Based Capital Ratio is estimated at 12.4 percent.

The company will hold a related conference call and webcast today at 3:00 p.m. EDT. Interested parties may access the conference call by dialing 1-888-317-6016. The webcast can be accessed athttp://www.yoursbfinancial.com/investorrelations.html. An audio replay of the call will be available on the SB Financial Group website.

About SB Financial Group

Headquartered in Defiance, Ohio, SB Financial Group, Inc. is a diversified financial services holding company with two wholly-owned operating subsidiaries: State Bank and RDSI Banking Systems (RDSI). State Bank provides a full range of financial services for consumers and small businesses, including wealth management, mortgage banking and commercial and agricultural lending, operating through 17 banking centers in seven northwestern Ohio counties and one center in Fort Wayne, Indiana, as well as three loan production offices located in Columbus, Ohio, and Angola, Indiana. RDSI provides item processing services to community banks located primarily in the Midwest. SB Financial Group, Inc.’s common stock is listed on the NASDAQ Global Market under the symbol SBFG.

Forward-Looking Statements

Certain statements within this document, which are not statements of historical fact, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties and actual results may differ materially from those predicted by the forward-looking statements. These risks and uncertainties include, but are not limited to, risks and uncertainties inherent in the national and regional banking, insurance and mortgage industries, competitive factors specific to markets in which SB Financial Group and its subsidiaries operate, future interest rate levels, legislative and regulatory actions, capital market conditions, general economic conditions, geopolitical events, the loss of key personnel and other factors. Additional factors that could cause results to differ from those described above can be found in the Company’s Annual Report on Form 10-K and documents subsequently filed by SB Financial Group with the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made, and SB Financial Group undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made, except as required by law. All subsequent written and oral forward-looking statements attributable to SB Financial Group or any person acting on its behalf are qualified by these cautionary statements.

Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this release contains certain non-GAAP financial measures. Management believes that providing certain non-GAAP financial measures provides investors with information useful in understanding the Company’s financial performance, its performance trends and financial position. Specifically, SB Financial Group provides measures based on “core operating earnings,” which excludes merger, integration and restructuring expenses that are not reflective of on-going operations or not expected to recur. These non-GAAP measures should not be considered a substitute for GAAP basis measures and results.

###

5

SB FINANCIAL GROUP, INC. & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - (Unaudited)

	June			March			December			September			June
($ in Thousands)	2014			2014			2013			2013			2013
ASSETS
Cash and due from banks	$	13,778		$	14,860		$	13,137		$	19,016		$	10,750
Securities available for sale, at fair value		85,586			93,305			89,793			86,620			95,379
Other securities - FRB and FHLB Stock		3,748			3,748			3,748			3,748			3,748
Total investment securities		89,334			97,053			93,541			90,368			99,127
Loans held for sale		8,290			7,165			3,366			2,407			10,715
Loans, net of unearned income		506,127			481,924			477,303			475,233			464,035
Allowance for loan losses		(6,568	)		(6,726	)		(6,964	)		(7,120	)		(7,013	)
Net loans		499,559			475,198			470,339			468,113			457,022
Premises and equipment, net		13,281			13,414			12,607			12,719			12,772
Cash surrender value of life insurance		13,059			12,982			12,906			12,826			12,742
Goodwill		16,353			16,353			16,353			16,353			16,353
Core deposits and other intangibles		393			524			655			784			913
Foreclosed assets held for sale, net		516			615			651			1,430			1,955
Mortgage servicing rights		5,375			5,228			5,180			5,076			4,613
Accrued interest receivable		1,456			1,423			1,281			1,694			1,575
Other assets		1,106			1,487			1,738			2,626			2,955
Total assets	$	662,500		$	646,302		$	631,754		$	633,412		$	631,492
LIABILITIES AND EQUITY
Deposits
Non interest bearing demand	$	87,706		$	84,265		$	81,570		$	78,217		$	76,355
Interest bearing demand		116,765			126,520			119,551			124,860			118,957
Savings		63,199			64,306			61,652			61,899			61,513
Money market		80,288			85,731			79,902			78,406			78,487
Time deposits		176,109			171,897			175,559			178,161			176,066
Total deposits		524,067			532,719			518,234			521,543			511,378
Notes payable		-			-			589			680			1,148
Advances from Federal Home Loan Bank		37,000			14,000			16,000			16,000			30,000
Repurchase agreements		17,246			16,905			14,696			14,836			9,314
Trust preferred securities		20,620			20,620			20,620			20,620			20,620
Accrued interest payable		655			425			639			448			715
Other liabilities		3,902			4,198			4,707			3,748			3,930
Total liabilities		603,490			588,867			575,485			577,875			577,105
Equity
Preferred stock		-			-			-			-			-
Common stock		12,569			12,569			12,569			12,569			12,569
Additional paid-in capital		15,403			15,391			15,412			15,399			15,392
Retained earnings		31,757			30,708			29,899			28,846			27,648
Accumulated other comprehensive income		908			407			74			415			496
Treasury stock		(1,627	)		(1,640	)		(1,685	)		(1,692	)		(1,718	)
Total equity		59,010			57,435			56,269			55,537			54,387
Total liabilities and equity	$	662,500		$	646,302		$	631,754		$	633,412		$	631,492

6

SB FINANCIAL GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME - (Unaudited)

($ in thousands, except share data)	Three Months Ended														Six Months Ended
		June			March			December			September		June			June			June
Interest income		2014			2014			2013			2013		2013			2014			2013
Loans
Taxable	$	5,654		$	5,241		$	5,428		$	5,649	$	5,874		$	10,895		$	11,757
Nontaxable		13			16			13			14		16			29			40
Securities
Taxable		310			309			313			305		296			619			626
Nontaxable		179			175			181			178		174			354			344
Total interest income		6,156			5,741			5,935			6,146		6,360			11,897			12,767
Interest expense
Deposits		503			498			513			539		573			1,001			1,179
Repurchase Agreements & Other		4			11			14			13		15			15			31	��
Federal Home Loan Bank advances		71			74			82			83		84			145			174
Trust preferred securities		330			333			330			336		338			663			741
Total interest expense		908			916			939			971		1,010			1,824			2,125
Net interest income		5,248			4,825			4,996			5,175		5,350			10,073			10,642
Provision for loan losses		150			-			-			401		200			150			499
Net interest income after provision for loan losses		5,098			4,825			4,996			4,774		5,150			9,923			10,143
Noninterest income
Wealth Management Fees		649			632			689			669		652			1,281			1,295
Customer service fees		665			610			673			659		639			1,275			1,255
Gain on sale of mtg. loans & OMSR's		1,211			572			776			1,356		1,450			1,783			2,934
Mortgage loan servicing fees, net		156			245			241			408		418			401			597
Gain on sale of non-mortgage loans		84			23			303			44		82			107			238
Data service fees		322			306			295			333		458			628			872
Net gain on sales of securities		56			-			-			28		-			56			20
Gain/(loss) on sale/disposal of assets		(15	)		(34	)		(265	)		15		(129	)		(49	)		(234	)
Other income		167			205			237			198		250			372			410
Total non-interest income		3,295			2,559			2,949			3,710		3,820			5,854			7,387
Noninterest expense
Salaries and employee benefits		3,451			3,120			3,027			3,343		3,688			6,571			7,127
Net occupancy expense		485			573			494			507		513			1,058			1,054
Equipment expense		645			639			651			701		703			1,284			1,458
Data processing fees		249			211			254			189		194			460			271
Professional fees		465			338			443			456		499			803			928
Marketing expense		170			123			136			135		92			293			200
Telephone and communication		107			112			110			156		158			219			316
Postage and delivery expense		187			204			173			199		209			391			424
State, local and other taxes		95			92			138			140		138			187			272
Employee expense		140			115			154			125		126			255			278
Intangible amortization expense		131			131			129			129		153			262			306
OREO Impairment		-			-			-			-		-			-			33
Other expenses		502			421			490			482		607			922			1,083
Total non-interest expense		6,627			6,079			6,199			6,562		7,080			12,705			13,750
Income before income tax expense		1,766			1,306			1,746			1,922		1,890			3,072			3,780
Income tax expense		521			326			522			578		571			847			1,143
Net income	$	1,245		$	980		$	1,224		$	1,344	$	1,319		$	2,225		$	2,637
Common share data:
Basic earnings per common share	$	0.26		$	0.20		$	0.25		$	0.28	$	0.27		$	0.46		$	0.54
Diluted earnings per common share	$	0.25		$	0.20		$	0.25		$	0.28	$	0.27		$	0.46		$	0.54
Average shares outstanding ($ in thousands):
Basic:		4,875			4,871			4,870			4,867		4,866			4,873			4,863
Diluted:		4,893			4,894			4,882			4,881		4,870			4,894			4,870

7

SB FINANCIAL GROUP, INC.

CONSOLIDATED FINANCIAL HIGHLIGHTS - (Unaudited)

($ in thousands, except per share data)	Three Months Ended											Six Months Ended
SUMMARY OF		June		March		December		September		June			June		June
OPERATIONS		2014		2014		2013		2013		2013			2014		2013
Net interest income	$	5,248		4,825		4,996		5,175		5,350			10,073		10,642
Tax-equivalent adjustment	$	99		98		100		99		98			197		198
Tax-equivalent net interest income	$	5,347		4,923		5,096		5,274		5,448			10,270		10,840
Provision for loan loss	$	150		-		-		401		200			150		499
Noninterest income	$	3,295		2,559		2,949		3,710		3,820			5,854		7,387
Total revenue, tax-equivalent	$	8,642		7,482		8,045		8,984		9,268			16,124		18,227
Noninterest expense	$	6,627		6,079		6,199		6,562		7,080			12,705		13,750
Pre provision pretax income	$	1,917		1,306		1,746		2,323		2,090			3,222		4,279
Pretax income	$	1,767		1,306		1,746		1,922		1,890			3,072		3,780
Net income	$	1,245		980		1,224		1,344		1,319			2,225		2,637
PER SHARE INFORMATION:
Basic earnings per share	$	0.26		0.20		0.25		0.28		0.27			0.46		0.54
Diluted earnings per share	$	0.25		0.20		0.25		0.28		0.27			0.45		0.54
Common dividends	$	0.040		0.035		0.035		0.03		0.055			0.075		0.055
Book value per common share	$	12.10		11.78		11.55		11.42		11.17			12.10		11.17
Tangible book value per common share	$	8.67		144.34		8.06		7.89		7.63			8.67		7.63
PERFORMANCE RATIOS:
Return on average assets		0.76	%	0.61	%	0.76	%	0.84	%	0.82	%		0.67	%	0.82	%
Return on average common equity		8.55	%	6.88	%	8.75	%	9.82	%	9.70	%		7.72	%	9.76	%
Return on avg. tangible common equity		12.01	%	7.52	%	12.71	%	14.43	%	14.35	%		10.91	%	14.42	%
Efficiency ratio		76.03	%	80.55	%	76.40	%	72.40	%	75.54	%		78.13	%	74.57	%
Earning asset yield		4.16	%	4.10	%	4.31	%	4.40	%	4.58	%		4.07	%	4.62	%
Cost of interest bearing liabilities		0.72	%	0.74	%	0.76	%	0.79	%	0.81	%		0.73	%	0.85	%
Net interest margin		3.53	%	3.39	%	3.50	%	3.65	%	3.79	%		3.45	%	3.79	%
Tax equivalent effect		0.07	%	0.07	%	0.07	%	0.07	%	0.07	%		0.06	%	0.07	%
Net interest margin - fully tax equivalent basis		3.60	%	3.46	%	3.57	%	3.72	%	3.86	%		3.51	%	3.86	%
ASSET QUALITY RATIOS:
Gross charge-offs	$	330		323		163		307		213			653		349
Recoveries	$	21		85		7		13		34			106		52
Net charge-offs	$	309		238		156		294		179			547		297
Nonaccruing loans/ Total loans		0.79	%	0.91	%	1.01	%	1.14	%	0.95	%		0.79	%	0.95	%
Nonperforming loans/ Total loans		1.12	%	1.29	%	1.38	%	1.51	%	1.22	%		1.12	%	1.22	%
Nonperforming assets/ Loans & OREO		1.22	%	1.41	%	1.51	%	1.80	%	1.63	%		1.22	%	1.63	%
Nonperforming assets/ Total assets		0.93	%	1.05	%	1.14	%	1.36	%	1.20	%		0.93	%	1.20	%
Allowance for loan loss/ Nonperforming loans		115.8	%	108.5	%	105.8	%	99.4	%	124.2	%		115.82	%	124.2	%
Allowance for loan loss/ Total loans		1.30	%	1.40	%	1.46	%	1.50	%	1.51	%		1.30	%	1.51	%
Net loan charge-offs/ Average loans (ann.)		0.25	%	0.20	%	0.13	%	0.25	%	0.15	%		0.22	%	0.13	%
Loan loss provision/ Net charge-offs		48.54	%	0.00	%	0.00	%	136.39	%	111.73	%		27.42	%	168.01	%
CAPITAL & LIQUIDITY RATIOS:
Loans/ Deposits		96.58	%	90.46	%	92.10	%	91.12	%	90.74	%		96.58	%	90.74	%
Equity/ Assets		8.91	%	8.89	%	8.91	%	8.77	%	8.61	%		8.91	%	8.61	%
Tangible equity/ Tangible assets		6.54	%	54.43	%	6.39	%	6.23	%	6.04	%		6.54	%	6.04	%
END OF PERIOD BALANCES
Total loans	$	506,127		481,924		477,303		475,233		464,035			506,127		464,035
Total assets	$	662,500		646,302		631,754		633,412		631,492			662,500		631,492
Deposits	$	524,067		532,719		518,234		521,543		511,378			524,067		511,378
Stockholders equity	$	59,010		57,435		56,269		55,537		54,387			59,010		54,387
Intangibles	$	16,746		(646,064	)	17,008		17,137		17,266			16,746		17,266
Tangible equity	$	42,264		703,499		39,261		38,400		37,121			42,264		37,121
Full-time equivalent employees		193		647		200		196		198			193		198
Period end basic shares outstanding		4,875		4,874		4,870		4,864		4,867			4,875		4,867
AVERAGE BALANCES
Total loans	$	500,167		476,553		479,701		474,349		464,105			488,425		462,058
Total earning assets	$	594,256		569,524		571,332		567,787		564,050			584,632		561,665
Total assets	$	658,108		646,864		645,148		636,437		640,382			659,187		639,698
Deposits	$	531,786		524,145		525,334		516,669		520,259			527,956		522,585
Stockholders equity	$	58,276		56,977		55,925		54,758		54,398			57,654		54,020
Intangibles	$	16,811		4,875		17,404		17,504		17,633			16,877		17,437
Tangible equity	$	41,465		52,102		38,521		37,254		36,765			40,777		36,583

8

SB FINANCIAL GROUP, INC.

Rate Volume Analysis - (Unaudited)

For the Three & Six Months Ended June 30, 2014 and 2013

($ in Thousands)	Three Months Ended June 30, 2014								Three Months Ended June 30, 2013
	Average					Average			Average					Average
Assets		Balance			Interest		Rate			Balance			Interest		Rate
Taxable securities	$	76,271			310		1.63	%	$	83,152			296		1.43	%
Nontaxable securities		17,818			271		6.09	%		16,793			264		6.28	%
Federal funds sold		-			-		N/A			-			-		N/A
Loans, net		500,167			5,674		4.54	%		464,105			5,898		5.08	%
Total earning assets		594,256			6,255		4.21	%		564,050			6,458		4.58	%
Cash and due from banks		12,767								21,248
Allowance for loan losses		(6,780	)							(6,960	)
Premises and equipment		13,872								15,162
Other assets		43,993								46,882
Total assets	$	658,108							$	640,382
Liabilities
Savings and interest bearing demand	$	272,189			19		0.03	%	$	264,530			18		0.03	%
Time deposits		173,809			484		1.11	%		178,162			555		1.25	%
Repurchase agreements & Other		15,594			4		0.10	%		11,774			15		0.51	%
Advances from Federal Home Loan Bank		21,663			71		1.31	%		21,571			84		1.56	%
Trust preferred securities		20,620			330		6.40	%		20,620			338		6.56	%
Total interest bearing liabilities		503,875			908		0.72	%		496,657			1,010		0.81	%
Non interest bearing demand		85,788								77,567
Other liabilities		10,169								11,760
Total liabilities		599,832								585,984
Equity		58,276								54,398
Total liabilities and equity	$	658,108							$	640,382
Net interest income (tax equivalent basis)				$	5,347							$	5,448
Net interest income as a percent of average interest-earning assets							3.60	%							3.86	%

9

	Six Months Ended June 30, 2014									Six Months Ended June 30, 2013
	Average						Average			Average					Average
Assets		Balance			Interest			Rate			Balance			Interest		Rate
Taxable securities	$	76,883			619			1.61	%	$	83,336			626		1.50	%
Nontaxable securities		19,324			536			5.55	%		16,271			521		6.40	%
Federal funds sold		-			-			N/A			-			-		N/A
Loans, net		488,425			10,939			4.48	%		462,058			11,818		5.12	%
Total earning assets		584,632			12,094			4.14	%		561,665			12,965		4.62	%
Cash and due from banks		19,784									22,867
Allowance for loan losses		(6,881	)								(6,912	)
Premises and equipment		13,711									15,142
Other assets		47,941									46,936
Total assets	$	659,187								$	639,698
Liabilities
Savings and interest bearing demand	$	269,190			136			0.10	%	$	262,183			39		0.03	%
Time deposits		173,781			(1	)		0.00	%		183,151			1,140		1.24	%
Repurchase agreements & Other		17,009			15			0.18	%		11,625			31		0.53	%
Advances from Federal Home Loan Bank		18,493			847			9.16	%		19,599			174		1.78	%
Trust preferred securities		20,620			663			6.43	%		20,620			741		7.19	%
Total interest bearing liabilities		499,093			1,661			0.67	%		497,178			2,125		0.85	%
Non interest bearing demand		84,985									77,251
Other liabilities		17,455									11,249
Total liabilities		601,533									585,678
Equity		57,654			4,875						54,020
Total liabilities and equity	$	659,187								$	639,698
Net interest income (tax equivalent basis)				$	10,434								$	10,840
Net interest income as a percent of average interest-earning assets								3.57	%							3.86	%

10