SB Financial : Audit and Risk Management Charter

SB FINANCIAL GROUP, INC.

Audit and Risk Management Committee Charter

This Charter identifies and delegates the purpose, composition, duties and responsibilities of the Audit and Risk Management Committee of the Board of Directors of SB Financial Group, Inc. (the "Committee").

Purpose:

The purpose of the Committee is to assist the Board of Directors:

• 1. In its oversight of the accounting and financial reporting principles and policies and the internal accounting and disclosure controls and procedures of SB Financial Group, Inc. and its subsidiaries (collectively, the "Corporation");

• 2. In its oversight and supervision of the Corporation's internal audit function;

• 3. In its oversight of the certification of the Corporation's quarterly and annual financial statements and disclosures and assessment of internal disclosure controls by the Corporation's Chief Executive Officer and Chief Financial Officer;

• 4. In its oversight of the Corporation's consolidated financial statements and the independent external audit thereof;

• 5. In evaluating the independence of the internal and independent auditors; and

• 6. In its oversight of the Corporation's enterprise-wide risk management function, including assisting the Board of Directors in its oversight of the guidelines, policies and processes for monitoring and mitigating risks.

Membership:

The members of the Committee shall be appointed by the Board of Directors, on the recommendation of the Governance and Nominating Committee, and shall serve at the pleasure of the Board of Directors. The Committee shall be comprised of at least three members of the Board of Directors. Each member of the Committee shall be free of any relationship that, in the opinion of the Board of Directors, may interfere with the exercise of his or her independent judgment in carrying out his or her responsibilities as a director of the Corporation. All Committee members must satisfy the independence requirements prescribed by applicable rules of NASDAQ as well as Section 10A of the Securities Exchange Act of 1934 and the rules promulgated by the Securities and Exchange Commission ("SEC") thereunder.

Each member of the Committee must be able to read and understand financial statements, including the Corporation's balance sheet, income statement and cash flow statement. Additionally, at least one member of the Committee must be an "audit committee financial expert" as defined in the applicable rules or criteria established by the SEC and NASDAQ and as determined by the Committee.

The Board of Directors shall designate a Chair for the Committee, on the recommendation of the Governance and Nominating Committee, who shall serve at the discretion of the Board. In theabsence of the Chair at any meeting of the Committee, the members of the Committee may designate a Chair of the meeting by majority vote.

Meetings of the Committee:

The Committee shall meet at least four times annually and may convene more frequently if the Committee determines that circumstances dictate additional meetings. All Committee members are expected to attend each meeting in person or via conference call or other means of appropriate electronic communication.

At all meetings of the Committee, a majority of the members of the Committee shall constitute a quorum for the transaction of business. The action of the Committee by a majority of its members at a meeting at which a quorum is present shall be the act of the Committee. The Committee may also act without a meeting if all members of the Committee consent to the action in writing or by means of an electronic or other transmission permitted under applicable law and the Corporation's governing documents, and the same is filed with the minutes of the proceedings of the Committee.

The Committee shall meet with management, the Corporation's Chief Risk Officer ("CRO") and the independent auditor in separate executive sessions to discuss any matters that the Committee or any one of these persons or groups believes should be discussed privately.

The Committee may request any officer or employee of the Corporation, or the Corporation's independent counsel, or independent auditors to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee, as the Committee deems necessary or desirable to provide the information the Committee needs to carry out its duties and responsibilities.

Members of the Committee may participate in a meeting of the Committee by means of conference call or similar communications equipment by means of which all persons participating in the meeting can hear each other.

Duties and Responsibilities - Audit:

The Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of any independent auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for the Corporation, and the independent auditor must report directly to the Committee.

The management of the Corporation is responsible for the preparation, presentation and integrity of the Corporation's consolidated financial statements. Management is responsible for maintaining appropriate accounting and financial reporting principles and policies and internal accounting standards in accordance with applicable laws and regulations.

The independent auditors are responsible for planning and carrying out a proper audit of the Corporation's annual consolidated financial statements, reviews of the Corporation's quarterlyconsolidated financial statements prior to the filing of each quarterly report on Form 10-Q, and other procedures.

The Committee shall pre-approve all audit and permitted non-audit services proposed to be provided by the Corporation's independent auditors in compliance with Section 202 of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder. The independent auditors shall submit to the Committee annually a formal written statement delineating all relationships between the independent auditors and the Corporation ("Statement as to Independence"), addressing each non-audit service provided to the Corporation. The Committee shall be responsible for considering whether any services provided by the independent auditor would cause the independent auditor to not be independent of the Corporation.

The Committee shall carry out the following duties and responsibilities: ♦ General Responsibilities

1.

To provide avenues of communication among the CRO, the firms engaged to provide internal audit services, the independent auditor and the Board of Directors.

• 2. To report Committee actions to the full Board of Directors and make appropriate recommendations.

• 3. The Committee shall have the authority to engage independent legal counsel, auditors and other advisors for special audits, reviews and other procedures as it deems necessary to carry out its duties.

• 4. The Committee may take any other action as may be required from time to time by applicable laws and regulations, the Corporation's Articles and Code of Regulations or the Board of Directors.

• 5. The Internal Audit Plan (schedule) will be presented to the Committee for review and approval on an annual basis. Subsequent Internal Audit Plan revisions will also be brought to the Committee for review and approval and documented in the minutes as such.

♦ Responsibilities for Engaging Independent Auditors and the Firm Performing the Internal Audit Services

1.

The Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor (including the resolution of disagreements between management and the independent auditors), and the independent auditor must report directly to the Committee.

2. The Committee shall pre-approve the audit engagement, including fees and terms, and all other audit or permitted non-audit services performed by the Corporation's independent auditor. The Committee shall also evaluate the independent auditor's independence. The pre-approval of audit and non-audit services and fees of the independent auditor may be documented by a member of the Committee signing annual or periodic engagement letters that define in general terms the type of services to be provided and the range offees that are considered acceptable for such services, or as otherwise documented in the minutes of the Committee meetings. The actual compensation paid to the independent auditor, for all such pre-approved services and fees, is to be reported to the Committee by management on at least a quarterly basis.

• 3. Ascertain that the lead (or concurring) audit partner from the independent audit firm performing audit services, serves in that capacity for no more than five fiscal years. In addition, ascertain that any partner other than the lead or concurring partner serves no more than seven years at the partner level on the company's audit.

• 4. To review and approve the appointment, replacement, reassignment or dismissal of the firm performing the internal audit services. To review and approve audit related fees paid to the firm performing the internal audit services.

• 5. The Committee will assess and assure the independence of the firm engaged to provide the internal audit services, including a review of management consulting services provided to the Corporation by the independent auditor and the fees paid for them.

• 6. The Committee will consider, in consultation with the independent auditor, the CRO and the firm performing the internal audit services, the audit scope and procedural plans made by the firms providing audit services and the independent auditor.

• 7. The Committee will listen to management and the independent auditor if either thinks there might be a need to engage additional auditors. The Committee will decide whether to engage an additional firm and, if so which one.

• 8. The Committee will make sure that the CRO, the firm performing the internal audit services and the independent auditor coordinate the internal and external audits. The purpose of coordinating these efforts is to assure completeness of coverage, reduce redundancy and use audit resources effectively.

♦ Responsibilities for Reviewing Internal Audits, the Annual External Audit and the Review of Quarterly and Annual Financial Statements

• 1. The Committee will take measures to assure that the independent auditor (a) views the Board of Directors as its client, (b) will be available to the full Board of Directors and (c) will provide the Committee with a timely analysis of significant financial reporting issues.

• 2. The Committee will question management, the CRO, the firm performing the internal audit services and the independent auditor about significant risks and exposures and assess management's steps to minimize them. The Committee may request detailed reports from management, the independent auditor, the firm performing the internal audit services or the CRO related to significant matters affecting the financial reporting process, internal controls or other areas of special interest or concern.

• 3. The Committee will review the following with the independent auditor and the firm performing the internal audit services:

a. The adequacy of the Corporation's internal controls, including computerized information system controls and security.