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~~2024~~ 2025 SB Financial Group, Inc. 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2024~~2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________

Commission File Number 001-36785

SB FINANCIAL GROUP, INC.

(Exact name of Registrant as specified in its charter)

Ohio		34-1395608
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
401 Clinton Street, Defiance, Ohio		43512
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code:		(419) 783-8950
Securities registered pursuant to Section 12(b) of the Act:

Registrant’s telephone number, including area code: (419) 783-8950

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which

Common Shares, No Par Value

SBFG

The NASDAQ Stock Market LLC

(NASDAQ Capital Market)

Securities registered pursuant to Section 12(g) of the Act: Not Applicable

Not Applicable

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. Non-Accelerated Filer ☒ Smaller Reporting Company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the common shares of the registrant held by non-affiliates computed by reference to the closing price of the common shares as reported on the NASDAQ Capital Market as of June 30, ~~2024~~2025 (the last business day of the registrant’s most recently completed second fiscal quarter) was $93121.5 million. For this purpose, executive officers and directors of the registrant are considered affiliates.

The number of common shares of the registrant outstanding at February 2123, ~~2025~~2026, was 6,~~534~~302,~~918~~455.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement for its Annual Meeting of Shareholders to be held on April 1622, ~~2025~~2026, are incorporated by reference into Part III of this Annual Report on Form 10-K.

SB FINANCIAL GROUP, INC.

~~2024~~ 2025 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I		1
Item 1.	Business	1
Item 1A.	Risk Factors	1312
Item 1B.	Unresolved Staff Comments	2625
Item 1C.	Cybersecurity	2625
Item 2.	Properties	2726
Item 3.	Legal Proceedings	2928
Item 4.	Mine Safety Disclosures	2928
Supplemental Item: Information about our Executive Officers		2928
PART II		3029
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3029
Item 6.	[Reserved]	31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 8.	Financial Statements and Supplementary Data	F-1
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	4645
Item 9A.	Controls and Procedures	4645
Item 9B.	Other Information	46
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	46
PART III		47
Item 10.	Directors, Executive Officers and Corporate Governance	47
Item 11.	Executive Compensation	4748
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48
Item 13.	Certain Relationships and Related Transactions, and Director Independence	48
Item 14.	Principal Accountant Fees and Services	48
PART IV		49
Item 15.	Exhibits and Financial Statement Schedules	49
Item 16.	Form 10-K Summary	49
Signatures		5453

PART I

Item 1. Business.

Certain statements contained in this Annual Report on Form 10-K which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. See “Cautionary Statement Regarding Forward-Looking Information” under Item 1A. Risk Factors on page 1312 of this Annual Report on Form 10-K.

General

SB Financial Group, Inc., an Ohio corporation (the “SB Financial”), is a financial holding company subject to regulation under the Bank Holding Company Act of 1956, as amended, and to inspection, examination and supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board” or the “FRB”). SB Financial was organized in 1983. The executive offices of ~~the~~ SB Financial are located at 401 Clinton Street, Defiance, Ohio 43512.

Through its direct and indirect subsidiaries, SB Financial is engaged in a variety of financial activities, including commercial banking, trust and wealth management services, and title insurance, as explained in more detail below.

As used in this Annual Report on Form 10-K, the “Company” refers to SB Financial and its consolidated subsidiaries collectively, except where the context indicates the reference relates solely to the registrant, SB Financial.

The State Bank and Trust Company

The State Bank and Trust Company (“State Bank”) is an Ohio state-chartered bank and wholly owned subsidiary of SB Financial. State Bank offers a full range of commercial banking services, including checking accounts, savings accounts, money market accounts and time certificates of deposit; automatic teller machines (“ATMs”); commercial, consumer, agricultural and residential mortgage loans; personal and corporate trust services; commercial leasing; bank credit card services; safe deposit box rentals; internet banking; private client group services; and other personalized banking services. The trust and financial services division of State Bank offers various trust and financial services, including asset management services for individuals and corporate employee benefit plans, as well as brokerage services through Cetera Investment Services, an unaffiliated company. State Bank presently operates 2527 banking centers, located within the Ohio counties of Allen, Defiance, Franklin, Fulton, Hancock, ~~Lucas~~Henry, ~~Paulding~~Lucas, Ottawa, Paulding, Williams and Wood, ~~and~~ with one banking center located in Allen County, Indiana and one located in Steuben County, Indiana. State Bank also presently operates ~~seven~~ four loan production offices, located in Franklin, Lucas and ~~Lucas~~Warren Counties, Ohio, ~~Boone,~~and Hamilton ~~and Steuben Counties, Indiana, and Monroe~~ County, ~~Michigan~~Indiana. At December 31, ~~2024~~2025, State Bank had ~~244~~246 full-time equivalent employees.

SBFG Title, LLC

SBFG Title, LLC dba Peak Title Agency (“SBFG Title”) was formed as an Ohio limited liability company in January 2019 and purchased all of the assets and real estate of an Ohio-based title agency effective March 15, 2019. SBFG Title is a wholly owned subsidiary of SB Financial. SBFG Title provides title insurance and operates two locations within the Ohio Counties of Franklin and Williams. At December 31, ~~2024~~2025, SBFG Title had 8 full-time equivalent employees.

SBT Insurance

SBT Insurance, LLC (“SBI”) is an Ohio corporation and wholly owned subsidiary of State Bank. SBI is an insurance company that engages in the sale of insurance products to retail and commercial customers of State Bank. At December 31, ~~2024~~2025, SBI had no employees.

SB Captive

SB Captive, Inc. (“SB Captive”) is a Nevada corporation and wholly owned subsidiary of SB Financial. SB Captive is a self-insurance company that provides coverage to State Bank and SB Financial . The purpose of ~~the~~ SB Captive is to mitigate insurance risk by participating in a pool with other banks. At December 31, ~~2024~~2025, SB Captive had no employees.

Rurban Statutory Trust II

Rurban Statutory Trust II (“RST II”) is a trust that was organized in August 2005. In September 2005, RST II closed a pooled private offering of 10,000 Capital Securities with a liquidation amount of $1,000 per security. The proceeds of the offering were loaned to the Company in exchange for junior subordinated debentures with terms similar to the Capital Securities. The sole assets of RST II are the junior subordinated debentures and the back-up obligations, which in the aggregate, constitute a full and unconditional guarantee by the Company of the obligations of RST II under the Capital Securities.

Dissolved Subsidiaries

In December 2024, the Company completed the dissolution of four of its inactive subsidiaries: RFCBC, Inc., Rurbanc Data Services Inc., Rurban Mortgage Company, and SBFG Mortgage, LLC.

Competition

The Company experiences significant competition in attracting depositors and borrowers. Competition in lending activities comes principally from other commercial banks in the lending areas of State Bank, and to a lesser extent, from savings associations, insurance companies, governmental agencies, credit unions, securities brokerage firms, finance companies, financial technology companies (“fintechs”) and pension funds. The primary factors in competing for loans are interest rates and overall banking services.

State Bank’s competition for deposits comes from other commercial banks, savings associations, money market funds and credit unions as well as from insurance companies, securities brokerage firms, and fintechs. The primary factors in competing for deposits are interest rates paid on deposits and convenience of office location. State Bank operates in the highly competitive wealth management services field and its competition consists primarily of other bank wealth management departments.

Supervision and Regulation

The following is a summary discussion of the significant statutes and regulations applicable to the Company. This discussion is qualified in its entirety by reference to the full text of the statutes, regulations and policies that are described. Also, such statutes, regulations and policies are continually under review by the U.S. Congress and state legislatures and federal and state regulatory agencies. A change in statutes, regulations or regulatory policies applicable to the Company could have a material effect on our business.

Regulation of Bank Holding Companies and Their Subsidiaries in General

SB Financial is a financial holding company and, as such, is subject to regulation under the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”). SB Financial is subject to the reporting requirements of, and examination and regulation by, the FRB. The FRB has extensive enforcement authority over bank holding companies, including, without limitation, the ability to assess civil money penalties, issue cease and desist or removal orders, and require that a bank holding company divest subsidiaries, including its subsidiary banks. In general, the FRB may initiate enforcement actions for violations of laws and regulations and for unsafe or unsound practices. A bank holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with extensions of credit and/or the provision of other property or services to a customer by the bank holding company or its subsidiaries.

The Bank Holding Company Act requires the prior approval of the FRB before a financial or bank holding company may acquire direct or indirect ownership or control of more than 5 percent of the voting shares of any bank (unless the bank is already majority owned by the bank holding company), acquire all or substantially all of the assets of another bank or another financial or bank holding company, or merge or consolidate with any other bank holding company. Subject to certain exceptions, the Bank Holding Company Act also prohibits a financial or bank holding company from acquiring 5 percent or more of the voting shares of any company that is not a bank and from engaging in any business other than banking or managing or controlling banks. The primary exception to this prohibition allows a bank holding company to own shares in any company the activities of which the FRB had determined, as of November 19, 1999, to be so closely related to banking as to be a proper incident thereto.

In April 2020, the FRB adopted a final rule to revise its regulations related to determinations of whether a company has the ability to exercise a controlling influence over another company for purposes of the Bank Holding Company Act. The final rule expands and codifies the presumptions for use in such determinations. By codifying the presumptions, the final rule provides greater transparency on the types of relationships that the FRB generally views as supporting a facts-and-circumstances determination that one company controls another company. The FRB’s final rule applies to questions of control under the Bank Holding Company Act but does not extend to the Change in Bank Control Act.

As a result of the Gramm-Leach-Bliley Act of 1999, also known as the Financial Services Modernization Act of 1999, which amended the Bank Holding Company Act, bank holding companies that are financial holding companies may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is either (1) financial in nature or incidental to such financial activity (as determined by the FRB in consultation with the Secretary of the Treasury), or (2) complementary to a financial activity, and that does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. Activities that are financial in nature include securities underwriting dealing and market-making, insurance underwriting and agency, and merchant banking activities. On January 2, 2019, SB Financial elected, and received approval from the FRB, to become a financial holding company.

Various requirements and restrictions under the laws of the United States and the State of Ohio affect the operations of State Bank, including requirements to maintain reserves against deposits, restrictions on the nature and amount of loans that may be made and the interest that may be charged thereon, restrictions relating to investments and other activities, limitations on credit exposure to correspondent banks, limitations on activities based on capital and surplus, limitations on payment of dividends, and limitations on branching.

Various consumer laws and regulations also affect the operations of State Bank. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) established the Consumer Financial Protection Bureau (the “CFPB”), which regulates consumer financial products and services and certain financial services providers. The CFPB is authorized to prevent unfair, deceptive or abusive acts or practices and ensures consistent enforcement of laws so that consumers have access to fair, transparent and competitive markets for consumer financial products and services. Since it was established, the CFPB has exercised extensively its rulemaking and interpretative authority.

The Federal Home Loan ~~Bank~~Banks (~~the~~ “~~FHLB~~FHLBs”) provide credit to their members in the form of advances. As a member of the FHLB of Cincinnati, State Bank must maintain certain minimum investments in the capital stock of the FHLB of Cincinnati. State Bank was in compliance with these requirements at December 31, ~~2024~~2025.

Federal Reserve System

The FRB requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts. In response to the COVID-19 pandemic, the FRB reduced reserve requirement ratios to 0 percent effective on March 26, 2020, to support lending to households and businesses. The reserve requirement ratio remained at 0 percent as of December 31, ~~2024~~2025.

Economic Growth, Regulatory Relief and Consumer Protection Act

~~On May 25, 2018, the~~ The Economic Growth, Regulatory Relief and Consumer Protection Act (the “Regulatory Relief Act”) ~~was enacted, which~~ repealed or modified certain provisions of the Dodd-Frank Act and eased restrictions on all but the largest banks (those with consolidated assets in excess of $250 billion). Bank holding companies with consolidated assets of less than $100 billion, including the Company, are no longer subject to enhanced prudential standards. The Regulatory Relief Act also relieves bank holding companies and banks with consolidated assets of less than $100 billion, including the Company, from certain record-keeping, reporting and disclosure requirements. Certain other regulatory requirements applied only to banks with consolidated assets in excess of $50 billion and so did not apply to the Company even before the enactment of the ~~Regulatory~~ Regulatory Relief Act.

Restrictions on Dividends

There can be no assurance as to the amount of dividends which may be declared in future periods with respect to the common shares of the Company, since such dividends are subject to the discretion of the Company’s Board of Directors, cash needs, and general business conditions, dividends from the Company’s subsidiaries and applicable governmental regulations and policies.

The ability of the Company to obtain funds for the payment of dividends and for other cash requirements is largely dependent on the amount of dividends that may be declared by State Bank and the Company’s other subsidiaries. State Bank may not pay dividends to the Company if, after paying such dividends, it would fail to meet the required minimum levels under the risk-based capital guidelines and the minimum leverage ratio requirements. In addition, State Bank must obtain the approval of the FRB and the Ohio Division of Financial Institutions (the “ODFI”) if a dividend in any year would cause the total dividends for that year to exceed the sum of the current year’s net profits and the retained net profits for the preceding two years, less required transfers to surplus. At December 31, ~~2024~~2025, State Bank had $2412.71 million of excess earnings ~~over~~that would be available for dividends without approval of the ~~preceding~~FRB ~~three~~and ~~years~~the ODFI.

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. Moreover, the FRB expects the Company to serve as a source of strength to its subsidiary bank, which may require it to retain capital for further investment in the subsidiary, rather than for dividends to shareholders of the Company.

The Company’s ability to pay dividends on its shares is also conditioned upon the payment, on a current basis, of quarterly interest payments on the subordinated debentures underlying the Company’s trust preferred securities. In addition, under the terms of the Company’s fixed-to-floating rate subordinated debt, the Company’s ability to pay dividends on its shares is conditioned upon the Company continuing to make required principal and interest payments, and not incurring an event of default, with respect to the subordinated debt.

Transactions with Affiliates and Insiders

The Company and State Bank are separate and distinct legal entities. The FRB’s Regulation W and various other legal limitations restrict State Bank from lending funds to, or engaging in other “covered transactions” with, the Company (or any other affiliate), generally limiting such covered transactions with any one affiliate to 10 percent of State Bank’s capital and surplus and limiting all such covered transactions with all affiliates to 20 percent of State Bank’s capital and surplus. Covered transactions, including extensions of credit, sales of securities or assets and provision of services, also must be on terms and conditions consistent with safe and sound banking practices, including credit standards, that are substantially the same or at least as favorable to State Bank as those prevailing at the time for transactions with unaffiliated companies.

A bank’s authority to extend credit to executive officers, directors and greater than 10 percent shareholders, as well as entities such persons control, is subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated thereunder by the FRB. Among other things, these loans must be made on terms (including interest rates charged and collateral required) that are substantially the same as those offered to unaffiliated individuals or be made as part of a benefit or compensation program and on terms widely available to employees, and must not involve a greater than normal risk of repayment. In addition, the amount of loans a bank may make to these persons is based, in part, on the bank’s capital position, and certain approval procedures must be followed in making loans which exceed specified amounts.

Federally insured banks are subject, with certain exceptions, to certain additional restrictions (including collateralization) on extensions of credit to their parent holding companies or other affiliates, on investments in the stock or other securities of affiliates and on the taking of such stock or securities as collateral from any borrower. In addition, such banks are prohibited from engaging in certain tying arrangements in connection with any extension of credit or the providing of any property or service.

Regulatory Capital

The risk-based capital guidelines adopted by the federal banking agencies are based on the “International Convergence of Capital Measurement and Capital Standard” (Basel I), published by the Basel Committee on Banking Supervision (the “Basel Committee”). In July 2013, the United States banking regulators issued new capital rules applicable to smaller banking organizations which also implement certain of the provisions of the Dodd-Frank Act (the “Basel III Capital Rules”). Community banking organizations, including the Company and State Bank, began transitioning to the new rules on January 1, 2015. The new minimum capital requirements became effective on January 1, 2015, whereas a new capital conservation buffer and deductions from common equity capital phased in from January 1, 2016 through January 1, 2019, and most deductions from common equity tier 1 capital phased in from January 1, 2015 through January 1, 2019.

The Basel III Capital Rules include (a) a minimum common equity tier 1 capital ratio of 4.5%, (b) a minimum Tier 1 capital ratio of 6.0%, (c) a minimum total capital ratio of 8.0%, and (d) a minimum leverage ratio of 4.0%.

Common equity for the common equity tier 1 capital ratio generally includes common stock (plus related surplus), retained earnings, accumulated other comprehensive income (unless an institution elects to exclude such income from regulatory capital), and limited amounts of minority interests in the form of common stock, subject to applicable regulatory adjustments and deductions.

Tier 1 capital generally includes common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred stock and related surplus, cumulative preferred stock and related surplus, trust preferred securities that have been grandfathered (but which are not permitted going forward), and limited amounts of minority interests in the form of additional Tier 1 capital instruments, less certain deductions.

Tier 2 capital, which can be included in the total capital ratio, generally consists of other preferred stock and subordinated debt meeting certain conditions plus limited amounts of the allowance for credit losses (“ACL”), subject to specified eligibility criteria, less applicable deductions.

The deductions from common equity tier 1 capital include goodwill and other intangibles, certain deferred tax assets, mortgage-servicing assets above certain levels, gains on sale in connection with a securitization, investments in a banking organization’s own capital instruments and investments in the capital of unconsolidated financial institutions (above certain levels).

Under the guidelines, capital is compared to the relative risk related to the balance sheet. To derive the risk included in the balance sheet, one of several risk weights is applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The Basel III Capital Rules also place restrictions on the payment of capital distributions, including dividends, and certain discretionary bonus payments to executive officers if the banking organization does not hold a capital conservation buffer of greater than 2.5 percent composed of common equity tier 1 capital above its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5 percent at the beginning of the quarter.

In September 2019, the FRB, along with other federal bank regulatory agencies, issued a final rule, effective January 1, 2020, that gave community banks, including State Bank, the option to calculate a simple leverage ratio to measure capital adequacy if the community banks met certain requirements. Under the rule, a community bank was eligible to elect the Community Bank Leverage Ratio (“CBLR”) framework if it had less than $10 billion in total consolidated assets, limited amounts of certain assets and off-balance sheet exposures, and a leverage ratio greater than 9.0%. Qualifying institutions that elected to use the CBLR framework (each, a “CBLR Bank”) and that maintain a leverage ratio of greater than 9.0% will be considered to have satisfied the risk-based and leverage capital requirements in the regulatory agencies’ generally applicable capital rules and to have met the well-capitalized ratio requirements. No CBLR Bank was required to calculate or report risk-based capital, and each CBLR Bank could opt out of the framework at any time, without restriction, by reverting to the generally applicable risk-based capital rule. Pursuant to the CARES Act, on August 26, 2020, the federal banking agencies adopted a final rule that temporarily lowered the CBLR threshold and provided a gradual transition back to the prior level. Specifically, the CBLR threshold was reduced to 8.0% for the remainder of 2020, increased to 8.5% for 2021, and returned to 9.0% on January 1, 2022. This final rule became effective on October 1, 2020. The Company did not utilize the CBLR in assessing capital adequacy and continued to follow existing capital rules.

In December 2018, the federal banking agencies issued a final rule to address regulatory capital treatment of credit loss allowances under the current expected credit loss (“CECL”) model (accounting standard). The rule revised the federal banking agencies’ regulatory capital rules to identify which credit loss allowances under the CECL model are eligible for inclusion in regulatory capital and to provide banking organizations the option to phase in over three years the day-one adverse effects on regulatory capital that may result from the adoption of the CECL model. Upon the Company’s adoption of CECL effective January 1, 2023, the Company recognized a one-time cumulative effect adjustment (increase) to the ACL of $1.4 million and did not elect to utilize the three-year phase in. The Company’s risk-based capital ratios remained in excess of “well-capitalized” levels after the impact of the one-time cumulative effect adjustment.

At December 31, ~~2024~~2025, State Bank was in compliance with all of the regulatory capital requirements to which it was subject. For State Bank’s capital ratios, see Note 16 to the Consolidated Financial Statements under Item 8 of this Report on Form 10-K (the “Consolidated Financial Statements”).

The FRB has adopted regulations governing prompt corrective action to resolve the problems of capital deficient and otherwise troubled state-chartered member banks. At each successively lower defined capital category, a bank is subject to more restrictive and numerous mandatory or discretionary regulatory actions or limits, and the FRB has less flexibility in determining how to resolve the problems of the institution. In addition, the FRB generally can downgrade a bank’s capital category, notwithstanding its capital level, if, after notice and opportunity for hearings, the bank is deemed to be engaged in an unsafe or unsound practice, because it has not corrected deficiencies that resulted in it receiving a less than satisfactory examination rating on matters other than capital or it is deemed to be in an unsafe or unsound condition. State Bank’s capital at December 31, ~~2024~~2025, met the standards for the highest capital category, a “well-capitalized” bank.

In April 2015, the FRB issued a final rule which increased the size limitation for qualifying bank holding companies under the FRB’s Small Bank Holding Company Policy Statement from $500 million to $1 billion of total consolidated assets. In August 2018, the FRB issued an interim final rule, as required by the Regulatory Relief Act, to further increase size limitations under the Small Bank Holding Company Policy Statement to $3 billion of total consolidated assets. The Company continues to qualify under the Small Bank Holding Company Policy Statement for exemption from the FRB’s consolidated risk-based capital and leverage rules at the holding company level.

Federal Deposit Insurance Corporation

The Federal Deposit Insurance Corporation (the “FDIC”) is an independent federal agency, which insures the deposits of federally insured banks and savings associations up to certain prescribed limits and safeguards the safety and soundness of financial institutions. The general insurance limit is $250,000 per separately insured depositor. This insurance is backed by the full faith and credit of the United States government.

As insurer, the FDIC is authorized to conduct examinations of and to require reporting by insured institutions, including State Bank, to prohibit any insured institution from engaging in any activity the FDIC determines to pose a threat to the Deposit Insurance Fund (the “DIF”), and to take enforcement actions against insured institutions. The FDIC may terminate insurance of deposits of any institution if the FDIC finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or other regulatory agency.

The FDIC assesses a quarterly deposit insurance premium on each insured institution based on risk characteristics of the insured institution to the DIF, with institutions deemed less risky paying lower rates. Currently, assessments for institutions with less than $10 billion of total assets are based on financial measures and supervisory ratings derived from statistical models that estimate the probability of failure within three years. The FDIC may increase or decrease the range of assessments uniformly, except that no adjustments can deviate more than two basis points from the base assessment without notice and comment rule making. The FDIC may also impose special assessments in emergency situations, which fund the DIF. The FDIC has established 2 percent as the Designated Reserve Ratio (“DRR”), which is the amount in the DIF as a percentage of all DIF insured deposits. In March 2016, the FDIC adopted final rules designed to meet the statutory minimum DRR of 1.35 percent ~~by September 30, 2020, the deadline imposed by the Dodd-Frank Act~~. The Dodd-Frank Act required the FDIC to offset the effect on insured institutions with assets of less than $10 billion of the increase in the statutory minimum DRR to 1.35% from the former statutory minimum of 1.15%. Although the FDIC’s rules reduced assessment rates on all banks, they imposed a surcharge on banks with assets of $10 billion or more to be paid until the DRR reached 1.35%. The DRR met the statutory minimum of 1.35% on September 30, 2018. As a result, the previous surcharge imposed on banks with assets of $10 billion or more was lifted. In addition, preliminary assessment credits have been determined by the FDIC for banks with assets of less than $10 billion, which had previously contributed to the increase of the DRR to 1.35%.

On June 30, 2019, the DRR reached 1.40%, and the FDIC applied credits for banks with assets of less than $10 billion (“small bank credits”) beginning September 30, 2019. As of June 30, 2020, the DRR fell below the minimum DRR to 1.30%. As a result, the FDIC adopted a restoration plan requiring the restoration of the DRR to 1.35% within eight years (September 30, 2028). The FDIC rules further changed the method of determining risk-based assessment rates for established banks with less than $10 billion in assets to better ensure that banks taking on greater risks pay more for deposit insurance than banks that take on less risk. As of September 30, 2022, the DRR was 1.26%. Because the DRR remained below the statutory minimum, the FDIC adopted a final rule in October 2022 increasing the assessment rate from three basis points to five basis points beginning with the first quarterly assessment period of 2023. In the FDIC’s most recent semiannual update for the Amended Restoration Plan in October 2024, the FDIC noted a 6 basis point increase in the reserve ratio, from 1.15% as of December 31, 2023 to 1.21% as of June 30, 2024. The FDIC staff projected that the reserve ratio remains on track to reach the statutory minimum of 1.35% ahead of the deadline of September 30, 2028. As a result, the FDIC staff recommended no changes to the Amended Restoration Plan and all scheduled assessment rates were maintained.

OnBecause the ~~November~~DRR ~~16,~~fell ~~2023~~below the minimum DRR, the FDIC adopted a ~~final rule~~restoration ~~implementing~~plan arequiring ~~special~~the ~~assessment~~restoration toof ~~recover~~ the ~~loss~~DRR to ~~the~~1.35% ~~DIF~~within ~~arising~~eight ~~from~~years (September ~~the~~30, ~~protection~~2028). ofThe ~~uninsured~~FDIC ~~depositors~~rules ~~following~~further changed the ~~failures~~ method of ~~Silicon~~determining ~~Valley~~risk-based ~~Bank and Signature Bank. The~~ assessment ~~base~~rates for ~~the~~established ~~special~~banks ~~assessment~~with less isthan ~~equal~~$10 tobillion anin ~~insured~~assets ~~depository institution’s~~to ~~estimated~~better ~~uninsured~~ensure ~~deposits~~that ~~reported~~banks ~~for~~taking ~~the~~on ~~quarter~~greater ~~ended~~risks ~~December~~pay ~~31,~~more ~~2022,~~for ~~adjusted~~deposit toinsurance ~~exclude~~than ~~the~~banks ~~first~~that ~~$5 billion~~take inon ~~estimated~~less ~~uninsured deposits~~risk. The FDIC ~~began~~then ~~collecting~~adopted ~~the~~a ~~special~~final ~~assessment~~rule atin anOctober ~~annual~~2022 ~~rate~~increasing ofthe ~~approximately~~assessment ~~13.4~~rate from three basis points~~, over~~ ~~eight~~to ~~quarterly~~five ~~assessment~~basis points ~~periods,~~ beginning with the first ~~quarter~~quarterly assessment period of ~~2024~~2023. ~~Because~~As ~~State~~of ~~Bank’s uninsured deposits were less than $5 billion for the quarter ended~~ December 31, ~~2022~~2025, ~~State~~the ~~Bank~~DRR iswas ~~not~~above ~~subject~~the tostatutory ~~this~~minimum of ~~special assessment~~1.35%.

The FDIC is authorized to prohibit any insured institution from engaging in any activity that poses a serious threat to the insurance fund and may initiate enforcement actions against a bank, after first giving the institution’s primary regulatory authority an opportunity to take such action. The FDIC may also terminate the deposit insurance of any institution that has engaged in or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, order or condition imposed by the FDIC.

Community Reinvestment Act

The Community Reinvestment Act (the “CRA”) requires State Bank’s primary federal regulatory agency, the FRB, to assess State Bank’s record in meeting the credit needs of the communities served by State Bank. The FRB assigns one of four ratings: outstanding, satisfactory; needs to improve or substantial noncompliance. The rating assigned to a financial institution is considered in connection with various applications submitted by the financial institution or its holding company to its banking regulators, including applications to acquire another financial institution or to open or close a branch office. In addition, all subsidiary banks of a financial holding company must maintain a satisfactory or outstanding rating in order for the financial holding company to avoid limitations on its activities. State Bank received a satisfactory rating in its most recent CRA examination.

On October 24, 2023, the federal banking agencies, including the FRB, issued a final rule designed to strengthen and modernize the regulations implementing the CRA. The changes are designed to encourage banks to expand access to credit, investment and banking services in low- and moderate-income communities, adapt to changes in the banking industry, including mobile and internet banking, provide greater clarity and consistency in the application of the CRA regulations, and tailor CRA evaluations and data collection to bank size and type. The applicability date for the majority of the changes to the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027. The Company is still evaluating and cannot predict the impact the changes to the CRA may have on its operations at this time.

SEC and NASDAQ Regulation

The Company is subject to the jurisdiction of the Securities and Exchange Commission (the “SEC”) and certain state securities authorities relating to the offering and sale of its securities. The Company is subject to the registration, reporting and other regulatory requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules adopted by the SEC under those acts. The Company’s common shares are listed on The NASDAQ Capital Market (“NASDAQ”) under the symbol “SBFG”. As a result, the Company is subject to NASDAQ rules and regulations applicable to listed companies.

The SEC has adopted rules and regulations governing, among other matters, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. The SEC has also approved corporate governance rules promulgated by NASDAQ. The Company has adopted and implemented a Code of Conduct and Ethics and a copy of that policy can be found on the Company’s website at www.YourSBFinancial.com by first clicking “Corporate Overview” and then “Governance Documents”. The Company has also adopted charters of the Audit Committee, the Compensation Committee and the Governance and Nominating Committee, which charters are available on the Company’s website at www.YourSBFinancial.com by first clicking “Corporate Overview” and then “Governance Documents”.

USA Patriot Act and Anti-Money Laundering Act

The Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”) gives the United States government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. Title III of the Patriot Act encourages information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions. Among other requirements, Title III and related regulations require regulated financial institutions to establish a program specifying procedures for obtaining identifying information from customers seeking to open new accounts and establish enhanced due diligence policies, procedures and controls designed to detect and report suspicious activity. State Bank has established policies and procedures that State Bank believes comply with the requirements of the Patriot Act.

The Anti-Money Laundering Act of 2020 (the “AMLA”), which amends the Bank Secrecy Act of 1970 (the “BSA”), was enacted in January 2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws. Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal processes for BSA compliance; expands enforcement-related and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower initiatives and protections.

Office of Foreign Assets Control Regulation

The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) administers and enforces economic and trade sanctions against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and others. OFAC publishes lists of specially designated targets and countries. State Bank is responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence. Failure to comply with these sanctions could have serious financial, legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required. Regulatory authorities have imposed cease and desist orders and civil money penalties against institutions found to be violating these obligations.

Executive and Incentive Compensation

The Dodd-Frank Act requires that the federal banking agencies, including the FRB and the FDIC, issue a rule related to incentive-based compensation. No final rule implementing this provision of the Dodd-Frank Act has, as of the date of the filing of this Annual Report on Form 10-K, been adopted~~, but a proposed rule was published in 2016, and again in 2024, that expanded upon a prior proposed rule published in 2011~~. The proposed rule is intended to: (i) prohibit incentive-based payment arrangements that the banking agencies determine could encourage certain financial institutions to take inappropriate risks by providing excessive compensation or that could lead to material financial loss; (ii) require the board of directors of those financial institutions to take certain oversight actions related to incentive-based compensation; and (iii) require those financial institutions to disclose information concerning incentive-based compensation arrangements to the appropriate federal regulator. Although a final rule has not been issued, the Company has undertaken efforts to ensure that the Company’s incentive compensation plans do not encourage inappropriate risks~~, consistent with the principles identified above~~.

In June 2010, the FRB, the Office of the Comptroller of the Currency (the “OCC”) and the FDIC issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors. These three principles are incorporated into the proposed joint compensation regulations under the Dodd-Frank Act, described above.

The FRB and the OCC review, as part of their respective regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Company and State Bank, that are not “large, complex banking organizations.” These reviews are tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. Deficiencies will be incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions. Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

Public company compensation committee members must meet heightened independence requirements and consider the independence of compensation consultants, legal counsel and other advisors to the compensation committee. A compensation committee must have the authority to hire advisors and to have the public company fund reasonable compensation of such advisors.

SEC regulations require public companies to provide various disclosures about executive compensation in annual reports and proxy statements and to present to their shareholders a non-binding vote on the approval of executive compensation.

Following the adoption of additional listing requirements in 2023 to comply with the Dodd-Frank Act and rules adopted by the SEC in October 2022, public companies are now required to adopt and implement “clawback” policies for incentive compensation payments and to disclose the details of the procedures which allow recovery of incentive compensation that was paid on the basis of erroneous financial information necessitating a restatement due to material noncompliance with financial reporting requirements. This clawback policy is intended to apply to compensation paid within the three completed fiscal years immediately preceding the date the issuer is required to prepare a restatement and would cover all executives who received incentive awards. The Company’s clawback policy adopted in accordance with these listing standards is included as Exhibit 97 to this Annual Report on Form 10-K.

Consumer Protection Laws and Regulations

Banks are subject to regular ~~examination~~examinations to ensure compliance with federal consumer protection statutes and regulations, including, but not limited to, the following:

●

The Equal Credit Opportunity Act (prohibiting discrimination in any credit transaction on the basis of any of various criteria);

●

The Truth in Lending Act (requiring that credit terms are disclosed in a manner that permits a consumer to understand and compare credit terms more readily and knowledgeably);

●

The Fair Housing Act (making it unlawful for a lender to discriminate in housing-related lending activities against any person on the basis of certain criteria);

●

The Home Mortgage Disclosure Act (requiring financial institutions to collect data that enables regulatory agencies to determine whether financial institutions are serving the housing credit needs of the communities in which they are located);

●

The Real Estate Settlement Procedures Act (requiring that lenders provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits abusive practices that increase borrowers’ costs); and

●

Privacy provisions of the Gramm-Leach-Bliley Act (requiring financial institutions to establish policies and procedures to restrict the sharing of non-public customer data with non-affiliated parties and to protect customer information from unauthorized access).

The banking regulators also use their authority under the Federal Trade Commission Act to take supervisory or enforcement action with respect to unfair or deceptive acts or practices by banks that may not necessarily fall within the scope of a specific banking or consumer finance law.

Financial Privacy Provisions

Federal and state regulations limit the ability of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a non-affiliated third party. These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.

State Bank is also subject to regulatory guidelines establishing standards for safeguarding customer information. These guidelines describe the federal bank regulatory agencies’ expectations for the creation, implementation and maintenance of an information security program, which would include administrative, technical and physical safeguards appropriate to the size and complexity of the institution and the nature and scope of its activities. The standards set forth in the guidelines are intended to ensure the security and confidentiality of customer records and information, protect against any anticipated threats or hazards to the security or integrity of such records and protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer.

Cybersecurity

In March 2015, federal regulators issued two related statements regarding cybersecurity. One statement indicates that financial institutions should design multiple layers of security controls to establish several lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing Internet-based services of the financial institution. The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the financial institution’s operations after a cyber-attack involving destructive malware. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the financial institution or its critical service providers fall victim to this type of cyber-attack. If State Bank fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.

In November 2021, the OCC, the FRB and the FDIC issued a final rule, which became effective in May 2022, requiring banking organizations that experience a computer-security incident to notify certain entities. A computer-security incident occurs when actual or potential harm to the confidentiality, integrity, or availability of an information system or the information occurs, or there is a violation or imminent threat of a violation to banking security policies and procedures. The affected bank must notify its respective federal regulator of the computer-security incident as soon as possible and no later than 36 hours after the bank determines a computer-security incident that rises to the level of a notification incident has occurred. These notifications are intended to promote early awareness of threats to banking organizations and will help banks react to those threats before they manifest into larger incidents. This rule also requires bank service providers to notify their bank organization customers of a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption or degradation for four or more hours.

Furthermore, the Cyber Incident Reporting for Critical Infrastructure Act, enacted in March 2022, will require, once administrative rules are adopted, certain covered entities, including those in the financial services industry, to report a covered cyber incident to the U.S. Department of Homeland Security’s Cybersecurity & Infrastructure Security Agency (“CISA”) within 72 hours after a covered entity reasonably believes an incident has occurred. Separate reporting to CISA will also be required within 24 hours if a ransom payment is made as a result of a ransomware attack.

State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements. The Company expects this trend of state-level activity in those areas to continue and is continually monitoring developments in the states in which our customers are located.

On July 26, 2023, the SEC adopted final rules that require public companies to promptly disclose material cybersecurity incidents in Current Reports on Form 8-K and detailed information regarding their cybersecurity risk management, strategy, and governance on an annual basis in their Annual Reports on Form 10-K. See ITEM 1C. CYBERSECURITY. Public companies are now required to report on Form 8-K any cybersecurity incident they determine to be material within four business days of making that determination. These SEC rules, and related regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking laws and regulations.

1110

In the ordinary course of business, the Company relies on electronic communications and information systems to conduct its operations and to store sensitive data. The Company employs an in-depth, layered, defensive approach that leverages people, processes and technology to manage and maintain cybersecurity controls. The Company employs a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats. The Company also regularly invests in new products and technology to further enhance these tools and mechanisms. Notwithstanding the strength of the Company’s defensive measures, the threat from cyber-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures. While to date, the Company has not detected a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, the Company’s systems and those of its customers and third-party service providers are under constant threat and it is possible that the Company could experience a significant event in the future. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.

Effect of Environmental Regulation

Compliance with federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material effect upon the capital expenditures, earnings or competitive position of the Company. The Company believes that the nature of its operations has little, if any, environmental impact. The Company, therefore, anticipates no material capital expenditures for environmental control facilities for its current fiscal year or for the near future. The Company may be required to make capital expenditures for environmental control facilities related to properties which they may acquire through foreclosure proceedings in the future; however, the amount of such capital expenditures, if any, is not currently determinable.

Effects of Government Monetary Policy

The earnings of the Company are affected by general and local economic conditions and by the policies of various governmental regulatory authorities. In particular, the FRB regulates money and credit conditions and interest rates to influence general economic conditions, primarily through open market acquisitions or dispositions of United States Government securities, varying the discount rate on member bank borrowings and setting reserve requirements against member and nonmember bank deposits. FRB monetary policies have had a significant effect on the interest income and interest expense of commercial banks, including State Bank, and are expected to continue to do so in the future.

Human Capital Resources

Our employees are vital to our success in the financial services industry. As a human-capital intensive business, the long-term success of our company depends on our people. Our goal is to ensure that we have the right talent, in the right place, at the right time. We do that through our commitment to attracting, developing and retaining our employees.

We strive to attract individuals who are people-focused and share our values. We have a comprehensive program dedicated to selecting new talent and enhancing the skills of our employees. In our recruiting efforts, we strive to have a diverse group of candidates to consider for our roles.

We have designed a compensation structure that we believe is attractive to our current and prospective employees. We also offer our employees the opportunity to participate in a variety of professional and leadership development programs. Our programs include a variety of industry, product, technical, professional, business development, leadership and regulatory topics. These programs are available online and in-person. In addition, we encourage all employees to be involved in the communities we serve through various volunteer activities.

We seek to retain our employees by using their feedback to create and continually enhance programs that support their needs. We use company-wide surveys to solicit feedback from our employees. We have a formal annual goal setting and performance review process for our employees. We promote a values-based culture, an important factor in retaining our employees. Our training, to share and communicate our culture to all employees, plays an important part in this process. We are committed to having a diverse workforce, and an inclusive work environment is a natural extension of our culture. We are committed to ensuring that all our employees feel welcomed, valued, respected and heard so that they can fully contribute their unique talents for the benefit of our customers, their careers, our company and our communities.

We monitor and evaluate various turnover and attrition metrics throughout our organization. Our annualized voluntary turnover is relatively low, as is the case for turnover of our top performers, a record which we attribute to our strong values-based culture, commitment to career development, and attractive compensation and benefit programs.

At December 31, ~~2024~~2025, the Company employed approximately ~~252~~ 254 full-time equivalent employees to whom a variety of benefits are provided. Management considers its relationship with its employees to be good.

Item 1A. Risk Factors.

Cautionary Statement Regarding Forward-Looking Information

Certain statements contained in this Annual Report on Form 10-K, and in other statements that we make from time to time in filings by the Company with the SEC, in press releases, and in oral and written statements made by or with the approval of the Company which are not statements of historical fact constitute forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include: (a) projections of income or expense, earnings per share, the payment or non-payment of dividends, capital structure and other financial items; (b) statements of plans and objectives of the Company or our Board of Directors or management, including those relating to products and services; (c) statements of future economic performance; (d) statements of future customer attraction or retention; and (e) statements of assumptions underlying these statements. Forward-looking statements reflect our expectations, estimates or projections concerning future results or events. These statements are generally identified by the use of forward-looking words or phrases such as “anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”, “plans”, “projects”, “should”, “will allow”, “will continue”, “will likely result”, “will remain”, “would be”, or similar expressions.

The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the forward-looking statements. We desire to take advantage of the “safe harbor” provisions of the Reform Act.

Forward-looking statements involve risks and uncertainties. Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events, including those factors discussed in the Risk Factors below. There is also the risk that the Company’s management or Board of Directors incorrectly analyzes these risks and forces, or that the strategies the Company develops to address them are unsuccessful.

Forward-looking statements speak only as of that date on which they are made. Except as may be required by law, the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made. All forward-looking statements attributable to the Company or any person acting on our behalf are qualified in their entirety by the following cautionary statements.

Risk Factors

The following sets forth certain risk factors that we ~~are~~ believe are relevant to the Company and its business. These risk factors are not presented in any particular order and do not constitute all of the risks that may affect our business. Additional risks that are not presently known or that we currently deem to be immaterial could also have a material adverse impact on our business, financial condition, or results of operations.

Economic, Market and Political Risks:

Changes in economic and political conditions could adversely affect our earnings through declines in deposits, loan demand, the ability of our customers to repay loans and the value of collateral securing our loans.

Our success depends to a large extent upon local and national economic conditions, as well as governmental fiscal and monetary policies. Conditions such as inflation, recession, unemployment, changes in interest rates, fiscal and monetary policy, an increasing federal government budget deficit, the failure of the federal government to raise the federal debt ceiling and/or possible future U.S. government shutdowns over budget disagreements, slowing gross domestic product, potential or imposed tariffs, a U.S. withdrawal from or significant renegotiation of trade agreements and other changes in the relationship of the U.S. and U.S. global partners, trade wars, and other factors beyond our control may adversely affect our deposit levels and composition, the quality of investment securities available for purchase, demand for loans, the ability of our borrowers to repay their loans, and the value of the collateral securing loans made by us. Disruptions in U.S. and global financial markets, and changes in oil production in the Middle East also affect the economy and stock prices in the U.S., which can affect our earnings capital, as well as the ability of our customers to repay loans. Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral and our ability to sell the collateral upon foreclosure. Adverse changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings and cash flows. In addition, our lending and deposit gathering activities are concentrated primarily in Northwest and Central Ohio. As a result, our success depends in large part on the general economic conditions of these areas, particularly given that a significant portion of our lending relates to real estate located in this region. Therefore, adverse changes in the economic conditions in these areas could adversely impact our earnings and cash flows.

Instability in global economic conditions and geopolitical matters, as well as volatility in financial markets, could have a material adverse effect on our results of operations and financial condition.

The macroeconomic environment in the U.S. is susceptible to global events and volatility in financial markets. In addition, trade negotiations between the U.S. and other nations, including negotiations related to recent tariffs and threats of tariffs by the U.S., remain uncertain and could adversely impact economic and market conditions for the Company and our clients and counterparties. Instability in global economic conditions and geopolitical matters, such as military conflicts in Ukraine and the Middle East, as well as volatility in financial markets, could have a material adverse effect on our results of operations and financial condition. For example, on February 24, 2022, Russian military forces invaded Ukraine, and sustained conflict and disruption in the region have occurred and remains likely to continue. In addition, the October 7, 2023, attack by Hamas in Israel has resulted in prolonged conflict and disruption in the Middle East. ~~Although~~Further, there ~~the~~has ~~length,~~been ~~impact~~increased ~~and~~tension ~~outcome~~with ofVenezuela ~~the~~in ~~ongoing~~recent ~~war~~months inas ~~Ukraine and~~well ~~the~~as ~~conflict~~increased intrade competition with China. Although the ~~Middle~~length, impact ~~East~~and outcome of global conflicts are highly unpredictable, these conflicts have resulted, and could continue to result, in significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in consumer or purchaser preferences, as well as increases in cyberattacks and espionage. The extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and the Company’s business for an unknown period of time. Any of the above-mentioned events or disruptions could affect our business, financial condition and operating results, and may also magnify the impact of other risks described in this Form 10-K.

We may be unable to manage interest rate risks, which could reduce our net interest income.

Our results of operations are affected principally by net interest income, which is the difference between interest earned on loans and investments and interest expense paid on deposits and other borrowings. The spread between the yield on our interest-earning assets and our overall cost of funds may be compressed, and our net interest income may continue to be adversely impacted by changing rates. We cannot predict or control changes in interest rates. National, regional and local economic conditions and the policies of regulatory authorities, including monetary policies of the FRB, affect the movement of interest rates and our interest income and interest expense. If the interest rates paid on deposits and other borrowed funds increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected in a declining rate environment if the interest paid for deposits decrease more slowly than the interest rates received on loans and other investments.

In addition, certain assets and liabilities may react in different degrees to changes in market interest rates. For example, interest rates on some types of assets and liabilities may fluctuate prior to changes in broader market interest rates, while interest rates on other types may lag behind. While the bulk of our variable rate commercial assets have interest rate floors, some of our assets, such as adjustable rate mortgages, have features that restrict changes in their interest rates, including rate caps.

We believe that the impact on our cost of funds will depend on a number of factors, including but not limited to, the competitive environment in the banking sector for deposit pricing, opportunities for clients to invest in other markets such as fixed income and equity markets, and the propensity of customers to invest in their businesses. The effect on our net interest income from a change in interest rates will ultimately depend on the extent to which the aggregate impact of loan re-pricings exceeds the impact of increases in our cost of funds.

Changes in interest rates may affect the level of voluntary prepayments on our loans and may also affect the level of financing or refinancing by customers. Changes in interest rates may also negatively affect the ability of the Company’s borrowers to repay their loans, particularly as interest rates rise and adjustable rate loans become more expensive.

Interest rates are highly sensitive to many factors that are beyond our control. Some of these factors include: inflation, recession, unemployment, money supply, international disorders, and instability in domestic and foreign financial markets. The Company’s management uses various measures to monitor interest rate risk and believes it has implemented effective asset and liability management strategies to reduce the potential adverse effects of changes in interest rates on the Company’s financial condition and results of operations. Management also periodically adjusts the mix of assets and liabilities to manage interest rate risk. However, any significant, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations.

Risks Related to Our Business Operations:

If our actual credit losses exceed our allowance for credit losses, our net income will decrease.

Our loan customers may not repay their loans according to their terms, and the collateral securing the payment of these loans may be insufficient to pay any remaining loan balance. We may experience significant credit losses, which could have a material adverse effect on our operating results. In accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), we maintain an ACL to provide for loan defaults and non-performance, which when combined, we refer to as the ACL. Our ACL may not be adequate to cover actual credit losses, and future provisions for credit losses could have a material adverse effect on our operating results. Our ACL is based on prior experience, as well as an evaluation of the risks in the current portfolio. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates that may be beyond our control, and these losses may exceed current estimates. Federal regulatory agencies, as an integral part of their examination process, review our loans and ACL. We cannot guarantee that we will not further increase the ACL or that regulators will not require us to increase this allowance. Either of these occurrences could have a material adverse effect on our financial condition and results of operations.

Moreover, the Financial Accounting Standards Board (the “FASB”) has changed its requirements for establishing the ACL. On June 16, 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-13 “Financial Instruments - Credit Losses”, which replaced the incurred loss model with an expected loss model ~~and~~that is referred to as the CECL model. Under the incurred loss model, loans were recognized as impaired when there was no longer an assumption that future cash flows would be collected in full under the originally contracted terms. Under the CECL model, financial institutions are required to use historical information, current conditions and reasonable forecasts to estimate the expected loss over the life of the loan. The ~~transition to the~~ CECL model requires significantly greater data requirements and changes to methodologies to accurately account for expected losses under the new parameters. If the methodologies and assumptions that we use in the CECL model are proven to be incorrect or inadequate, the ACL may not be sufficient, resulting in the need for additional ACL to be established, which could have a material adverse impact on our financial condition and results of operations.

The Company adopted the new CECL ~~accounting~~ guidance is effective ~~for~~ annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2019. However, the FASB deferred the effective date for this ASU for smaller reporting companies, such as ~~the~~of ~~Company,~~January ~~to annual reporting periods and interim reporting periods within those annual periods~~1, ~~beginning after December 15, 2022~~2023. The Company recognized a one-time cumulative effect ~~adjustment~~ adjustment (increase) to the ACL of $1.4 million upon adoption as of January 1, 2023. In addition, the Company established a related reserve for unfunded commitments of $1.1 million as of January 1, 2023.

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If real estate markets or the economy in general deteriorate, State Bank may experience increased delinquencies and credit losses. The ACL may not be sufficient to cover actual loan-related losses. Additionally, banking regulators may require State Bank to increase its ACL in the future, which could have a negative effect on the Company’s financial condition and results of operations. Additions to the ACL will result in a decrease in net earnings and capital and could hinder our ability to grow our assets.

Any significant increase in our ACL or loan charge offs, including increases required by applicable regulatory authorities, might have a material adverse effect on the Company’s financial condition and results of operations.

Our success depends upon our ability to attract and retain key personnel.

Our success depends upon the continued service of our senior management team and upon our ability to attract and retain qualified financial services personnel. Competition for qualified employees is intense. We cannot guarantee that we will be able to retain our existing key personnel or attract additional qualified personnel. If we lose the services of our key personnel, or are unable to attract additional qualified personnel, our business, financial condition and results of operations could be adversely affected.

We depend upon the accuracy and completeness of information about customers.

In deciding whether to extend credit or enter into other transactions with customers, we may rely on information provided to us by customers, including financial statements and other financial information. We may also rely on representations of customers as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to a business, we may assume that the customer’s audited financial statements conform to ~~generally~~U.S. ~~accepted~~GAAP ~~accounting principles~~ and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer, and we may also rely on the audit report covering those financial statements. Our financial condition and results of operations could be negatively impacted to the extent we rely on financial statements that do not comply with ~~generally~~U.S. ~~accepted~~GAAP ~~accounting principles~~ or that are materially misleading.

We may not be able to grow, and if we do, we may have difficulty managing that growth.

Our business strategy is to continue to grow our assets and expand our operations, including through potential strategic acquisitions. Our ability to grow depends, in part, upon our ability to expand our market share, successfully attract core deposits, and to identify loan and investment opportunities as well as opportunities to generate fee-based income. We can provide no assurance that we will be successful in increasing the volume of our loans and deposits at acceptable levels and upon terms acceptable to us. We also can provide no assurance that we will be successful in expanding our operations organically or through strategic acquisitions while managing the costs and implementation risks associated with this growth strategy.

We expect to continue to experience growth in the number of our employees and customers and the scope of our operations, but we may not be able to sustain our historical rate of growth or continue to grow our business at all. Our success will depend upon the ability of our officers and key employees to continue to implement and improve our operational and other systems, to manage multiple, concurrent customer relationships, and to hire, train and manage our employees. In the event that we are unable to perform all these tasks and meet these challenges effectively, including continuing to attract core deposits, our operations, and consequently our earnings, could be adversely impacted.

Acquisitions or other expansion may adversely impact our financial condition and results of operations.

We have completed various acquisitions of other financial institutions and branches and assets of other financial institutions in the past, including our recent acquisition of Marblehead Bancorp, Inc. and its banking subsidiary, The Marblehead Bank, on January 17, 2025. In the future, we may acquire other financial institutions or branches or assets of other financial institutions. We may also open new branches, enter into new lines of business, or offer new products or services. Any such acquisition or expansion of our business will involve a number of expenses and risks, which may include some or all of the following:

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the time and expense associated with identifying and evaluating potential acquisitions or expansions;

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the potential inaccuracy of estimates and judgments used to evaluate credit, operations, management and market risk with respect to target institutions;

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the time and costs of evaluating new markets, hiring local management and opening new offices, and the delay between commencing these activities and the generation of profits from the expansion;

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any financing required in connection with an acquisition or expansion;

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the diversion of management’s attention to the negotiation of a transaction and the integration of the operations and personnel of the combining businesses;

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entry into unfamiliar markets and the introduction of new products and services into our existing business;

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the possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations; and

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the risk of loss of key employees and customers.

We may incur substantial costs to expand, and we can give no assurance that such expansion will result in the levels of profits we expect. Neither can we assure that integration efforts for any future acquisitions will be successful. We may also issue equity securities in connection with acquisitions, which could dilute the economic and voting interests of our existing shareholders.

We are exposed to a number of operational risks.

We are exposed to many types of operational risk, including reputational risk, legal and compliance risk, cybersecurity risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees or operational errors, including clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems.

Given the volume of transactions we process, certain errors may be repeated or compounded before they are discovered and successfully rectified. Our necessary dependence upon automated systems to record and process our transaction volume may further increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. We may also be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control (for example, cyberattacks or electrical or telecommunications outages), which may give rise to disruption of service to customers and to financial loss or liability. We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as we are) and to the risk that our (or our vendors’) consumer compliance, business continuity and data security systems prove to be inadequate.

Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance, acquisitions, social media and other marketing activities, and from actions taken by governmental regulators and community organizations in response to any of the foregoing activities. Negative public opinion could adversely affect our ability to attract and keep customers, could expose us to potential litigation and regulatory action, and could have a material adverse effect on the price of our common shares or result in heightened volatility of our stock price.

Recent and future bank failures may adversely affect the Company’s business, earnings and financial condition.

The failure of other banks can have significant impacts on the national, regional and local banking industry and the business environment in which the Company operates. The bank failures of Silicon Valley Bank in California, Signature Bank in New York, and First Republic Bank in California during 2023 caused a degree of panic and uncertainty in the investor community and among bank customers generally. Similar bank failures may occur in the future, which could reduce customer confidence, affect sources of funding and liquidity (for example, by increasing the withdrawal or transfer of deposits by customers), increase regulatory requirements and costs, adversely affect financial markets and/or have a negative reputational ramification for the banking industry as a whole. The Company will continue to monitor future potential bank failures and/or volatility within the banking industry in general, along with any responsive measures taken by the banking regulators to mitigate or manage potential turmoil in the banking industry.

We could experience an unexpected inability to obtain needed liquidity which could adversely affect our business, profitability, and viability a going concern.

Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits, and to take advantage of interest rate market opportunities and is essential to a financial institution’s business. The ability of a financial institution to meet its current financial obligations is a function of its balance sheet structure, its ability to liquidate assets, and its access to alternative sources of funds. The bank failures in 2023 exemplify the potential serious results of the unexpected inability of insured depository institutions to obtain needed liquidity to satisfy deposit withdrawal requests, including how quickly such requests can accelerate once uninsured depositors lose confidence in an institution’s ability to satisfy its obligations to depositors. We seek to ensure our funding needs are met by maintaining a level of liquidity through asset and liability management. If we become unable to obtain funds when needed, it could have a material adverse effect on our business, financial condition, and results of operations.

Our information systems may experience an interruption or security breach.

We rely heavily on communications and information systems to conduct our business. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan and other systems. While we have policies and procedures designed to prevent or limit the effect of the possible failure, interruption or security breach of our information systems, there can be no assurance that any such failure, interruption or security breach will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failure, interruption or security breach of our information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability.

Unauthorized disclosure of sensitive or confidential client information, or breaches in security of our systems, could severely harm our business.

We collect, process and store sensitive consumer data by utilizing computer systems and telecommunications networks operated by both third-party service providers and us. State Bank’s necessary dependence upon automated systems to record and process State Bank’s transactions poses the risk that technical system flaws, employee errors, tampering or manipulation of those systems, or attacks by third parties will result in losses and may be difficult to detect. We have security and backup and recovery systems in place, as well as a business continuity plan, to ensure the computer systems will not be inoperable, to the extent possible. We also routinely review documentation of such controls and backups related to third party service providers. Our inability to use or access these information systems at critical points in time could unfavorably impact the timeliness and efficiency of our business operations. In recent years, some banks have experienced cyberattacks with the goal and effect of disrupting the ability of the bank to process transactions. Other businesses and organizations have been victims of ransomware attacks in which the business becomes unable to access its own information and is presented with a demand to pay a ransom in order to once again have access to its information.

We could be adversely affected if one of our employees or a third-party service provider causes a significant operational breakdown or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our operations or systems. State Bank is further exposed to the risk that the third-party service providers may be unable to fulfill their contractual obligations (or will be subject to the same risks as we are). These disruptions may interfere with service to our customers, cause additional regulatory scrutiny and result in a financial loss or liability. We are also at risk of the impact of natural disasters, terrorism and international hostilities on our systems or for the effects of outages or other failures involving power or communications systems operated by others.

Misconduct by employees could include fraudulent, improper or unauthorized activities on behalf of clients or improper use of confidential information. We may not be able to prevent employee errors or misconduct, and the precautions we take to detect this type of activity might not be effective in all cases. Employee errors or misconduct could subject us to civil claims for negligence or regulatory enforcement actions, including fines and restrictions on our business.

In addition, there have been instances where financial institutions have been victims of fraudulent activity in which criminals pose as customers to initiate wire and automated clearinghouse transactions out of customer accounts. Although we have policies and procedures in place to verify the authenticity of our customers, we cannot assure that such policies and procedures will prevent all fraudulent transfers.

We have implemented security controls to prevent unauthorized access to our computer systems, and we require that our third-party service providers maintain similar controls. However, the Company’s management cannot be certain that these measures will be successful. A security breach of the computer systems and loss of confidential information, such as customer account numbers and related information, could result in a loss of customers’ confidence and, thus, loss of business. We could also lose revenue if competitors gain access to confidential information about our business operations and use it to compete with us. While we maintain specific “cyber” insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under our cyber insurance ~~coverage~~policies.

Further, we may be affected by data breaches at retailers and other third parties who participate in data interchanges with us and our customers that involve the theft of customer credit and debit card data, which may include the theft of our debit card PIN numbers and commercial card information used to make purchases at such retailers and other third parties. Such data breaches could result in us incurring significant expenses to reissue debit cards and cover losses, which could result in a material adverse effect on our results of operations.

There can be no assurance that we will not suffer such cyber-attacks or other information security breaches (or attempted breaches) or incur resulting losses in the future. Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, and our plans to continue to implement internet and mobile banking capabilities to meet customer demand. As cyber and other data security threats continue to evolve, we may be required to expend significant additional resources to continue to modify and enhance protective measures or to investigate and remediate any security vulnerabilities.

All of the types of cybersecurity incidents discussed above could result in damage to the Company’s reputation, loss of customer business, litigation, increased regulatory scrutiny and potential enforcement actions, repairs of system damage, increased investments in cybersecurity (such as obtaining additional technology, making organizational changes, deploying additional personnel, training personnel and engaging consultants), increased insurance premiums, and loss of investor confidence and a reduction in the price of our common shares, all of which could result in financial loss and material adverse effects on the Company’s results of operations and financial condition.

Our business could be adversely affected through third parties who perform significant operational services on our behalf.

The third parties performing operational services for the Company are subject to risks similar to those faced by the Company relating to cybersecurity, breakdowns or failures of their own systems, or misconduct of their employees. Like many other community banks, State Bank also relies, in significant part, on a single vendor for the systems which allow State Bank to provide banking services to State Bank’s customers.

One or more of the third parties utilized by us may experience a cybersecurity event or operational disruption and, if any such event does occur, it may not be adequately addressed, either operationally or financially, by such third party. Certain of these third parties may have limited indemnification obligations to us in the event of a cybersecurity event or operational disruption or may not have the financial capacity to satisfy their indemnification obligations.

Financial or operational difficulties of a third-party provider could also impair our operations if those difficulties interfere with such third party’s ability to serve the Company. If a critical third-party provider is unable to meet the needs of the Company in a timely manner, or if the services or products provided by such third party are terminated or otherwise delayed and if the Company is not able to develop alternative sources for these services and products quickly and cost-effectively, our business could be materially adversely affected.

Additionally, regulatory guidance adopted by federal banking regulators addressing how banks select, engage and manage their third-party relationships, affects the circumstances and conditions under which we work with third parties and the cost of managing such relationships.

Strong competition within our market area may reduce our ability to attract and retain deposits and originate loans.

We face competition both in originating loans and in attracting deposits within our market area. We compete for clients by offering personal service and competitive rates on our loans and deposit products. The type of institutions we compete with include large regional financial institutions, community banks, thrifts and credit unions operating within our market areas. Nontraditional sources of competition for loan and deposit dollars come from captive auto finance companies, mortgage banking companies, internet banks, brokerage companies, insurance companies, fintechs and direct mutual funds. As a result of their size and ability to achieve economies of scale, certain of our competitors offer a broader range of products and services than we offer. We expect competition to remain intense in the future due to legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. In addition, to stay competitive in our markets we may need to adjust the interest rates on our products to match the rates offered by our competitors, which could adversely affect our net interest margin. As a result, our profitability depends upon our continued ability to successfully compete in our market areas while achieving our investment objectives.

We may be required to repurchase loans we have sold or indemnify loan purchasers under the terms of the sale agreements, which could adversely affect our liquidity, results of operations and financial statements.

When State Bank sells a mortgage loan, it agrees to repurchase or substitute a mortgage loan if it is later found to have breached any representation or warranty State Bank made about the loan or if the borrower is later found to have committed fraud in connection with the origination of the loan. While we have underwriting policies and procedures designed to avoid breaches of representations and warranties as well as borrower fraud, there can be no assurance that no breach or fraud will ever occur. Required repurchases, substitutions or indemnifications could have an adverse impact on our liquidity, results of operations and financial statements.

We are subject to environmental liability risk associated with lending activities.

A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws and evolving regulation may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws and regulations or more stringent interpretations or enforcement policies with respect to existing laws or regulations may increase our exposure to environmental liability. Environmental reviews of real property before initiating foreclosure actions may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, financial condition and results of operations.

Legislative, Legal and Regulatory Risks:

FDIC insurance premiums may increase materially, which could negatively affect our profitability.

The FDIC insures deposits at FDIC insured financial institutions, including State Bank. The FDIC charges the insured financial institutions premiums to maintain the DIF at a certain level. During 2008 and 2009, there were higher levels of bank failures which dramatically increased resolution costs of the FDIC and depleted the deposit insurance fund. The FDIC collected a special assessment in 2009 to replenish the DIF and also required a prepayment of an estimated amount of future deposit insurance premiums. In October 2022, the FDIC adopted a final rule increasing the assessment rate from three basis points to five basis points beginning with the first quarterly assessment period of 2023. The FDIC recently adopted rules revising the assessments in a manner benefiting banks with assets totaling less than $10 billion. There can be no assurance, however, that assessments will not be changed in the future.

We operate in a highly regulated industry, and the laws and regulations that govern our operations, corporate governance, executive compensation and financial accounting, or reporting, including changes in, or failure to comply with the same, may adversely affect the Company.

The banking industry is highly regulated. We are subject to supervision, regulation and examination by various federal and state regulators, including the FRB, the ODFI, the SEC, the CFPB, the FDIC, Financial Industry Regulatory Authority, Inc. (“FINRA”), and various state regulatory agencies. The statutory and regulatory framework that governs the Company is generally designed to protect depositors and customers, the DIF, the U.S. banking and financial system, and financial markets as a whole and not to protect shareholders. These laws and regulations, among other matters, prescribe minimum capital requirements, impose limitations on our business activities (including foreclosure and collection practices), limit the dividends or distributions that we can pay, and impose certain specific accounting requirements that may be more restrictive and may result in greater or earlier charges to earnings or reductions in capital than would otherwise be required under ~~generally~~U.S. ~~accepted accounting principles in the United States of America~~GAAP. Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose additional compliance costs. Both the scope of the laws and regulations and the intensity of the supervision to which we are subject have increased in recent years in response to the perceived state of the financial services industry, as well as other factors such as technological and market changes. Such regulation and supervision may increase our costs and limit our ability to pursue business opportunities. Further, our failure to comply with these laws and regulations, even if the failure was inadvertent or reflects a difference in interpretation, could subject the Company to restrictions on business activities, fines, and other penalties, any of which could adversely affect results of operations, the capital base, and the price of our common shares. Further, any new laws, rules, or regulations could make compliance more difficult or expensive or otherwise adversely affect our business and financial condition.

Legislative or regulatory changes or actions could adversely impact our business.

The financial services industry is extensively regulated. We are subject to extensive state and federal regulation, supervision and legislation that govern almost all aspects of our operations. Laws and regulations may change from time to time and are primarily intended for the protection of consumers, depositors, borrowers, the DIF and the banking system as a whole, and not to benefit our shareholders.

Regulations affecting banks and financial services businesses are undergoing continuous change, and management cannot predict the effect of these changes. The impact of any changes to laws and regulations or other actions by regulatory agencies may negatively impact us or our ability to increase the value of our business. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a financial institution, the classification of assets held by a financial institution, the adequacy of a financial institution’s ACL and the ability to complete acquisitions. Additionally, actions by regulatory agencies against us could cause us to devote significant time and resources to defending our business and may lead to penalties that materially affect us and our shareholders. Even the reduction of regulatory restrictions could have an adverse effect on us and our shareholders if such lessening of restrictions increases competition within our industry or our market area.

Changes in accounting standards could influence our results of operations.

The accounting standard setters, including the FASB, the SEC and other regulatory bodies, periodically change the financial accounting and reporting standards that govern the preparation of our consolidated financial statements. These changes can be difficult to predict and can materially affect how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, which would result in the restatement of our financial statements for prior periods.

The preparation of consolidated financial statements in conformity with U.S. ~~Generally Accepted Accounting Principles (“~~GAAP”) requires management to make significant estimates ~~that~~ that affect the financial statements. Due to the inherent nature of these estimates, actual results may vary materially from management’s estimates.

Noncompliance with the Bank Secrecy Act (BSA) and other anti-money laundering statutes and regulations could cause a material financial loss.

The BSA and the Patriot Act contain anti-money laundering and financial transparency provisions intended to detect and prevent the use of the U.S. financial system for money laundering and terrorist financing activities. The BSA, as amended by the Patriot Act, requires depository institutions and their holding companies to undertake activities including maintaining an anti-money laundering program, verifying the identity of clients, monitoring for and reporting suspicious transactions, reporting on cash transactions exceeding specified thresholds, and responding to requests for information by regulatory authorities and law enforcement agencies. The Financial Crimes Enforcement Network (“FinCEN”), a unit of the U.S. Department of the Treasury that administers the BSA, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the federal bank regulatory agencies, as well as the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws, which includes a codified risk-based approach to anti-money laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal processes for BSA compliance; expands enforcement-related and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower incentives and protections.

There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control (“OFAC”). If the Company’s policies, procedures, and systems are deemed deficient, or if the policies, procedures, and systems of the financial institutions that the Company has already acquired or may acquire in the future are deficient, the Company may be subject to liability, including fines and regulatory actions such as restrictions on State Bank’s ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain planned business activities, including acquisition plans, which could negatively impact our business, financial condition, and results of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for the Company.

We may be the subject of litigation, which could result in legal liability and damage to our business and reputation.

From time to time, we may be subject to claims or legal action from customers, employees or others. Financial institutions like the Company and State Bank are facing a growing number of significant class actions, including those based on the manner of calculation of interest on loans and the assessment of overdraft fees. Future litigation could include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. We are also involved from time to time in other reviews, investigations and proceedings (both formal and informal) by governmental and other agencies regarding our business. These matters also could result in adverse judgments, settlements, fines, penalties, injunctions or other relief. Like other large financial institutions, we are also subject to risk from potential employee misconduct, including non-compliance with policies and improper use or disclosure of confidential information.

Our insurance may not cover all claims that may be asserted against us, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation. Should the ultimate judgments or settlements in any litigation exceed our insurance coverage, they could have a material adverse effect on our financial condition and results of operations. In addition, we may not be able to obtain appropriate types or levels of insurance in the future, nor may we be able to obtain adequate replacement policies with acceptable terms, if at all.

Risks Related to Our Capital and Common Shares:

Our ability to pay cash dividends is limited, and we may be unable to pay cash dividends in the future ~~even if we elect to do so~~.

We are dependent primarily upon the earnings of our operating subsidiaries for funds to pay dividends on our common shares. The payment of dividends by us is also subject to regulatory restrictions. As a result, any payment of dividends in the future will be dependent, in large part, on our ability to satisfy these regulatory restrictions and our subsidiaries’ earnings, capital requirements, financial condition and other factors. There can be no assurance as to if or when the Company may pay dividends or as to the amount of any dividends which may be declared and paid to shareholders in future periods. Failure to pay dividends on our shares could have a material adverse effect on the market price of our shares.

A limited trading market exists for our common shares, which could lead to price volatility.

The ability to sell our common shares depends upon the existence of an active trading market for those shares. While our shares are listed for trading on the NASDAQ Capital Market, there is moderate trading volume in these shares. As a result, shareholders may be unable to sell our shares at the volume, price and time desired. The limited trading market for our shares may cause fluctuations in the market value of our shares to be exaggerated, leading to price volatility in excess of that which would occur in a more active trading market. In addition, even if a more active market of our shares should develop, we cannot guarantee that such a market will continue.

The market price of our common shares may be subject to fluctuations and volatility.

The market price of our common shares may fluctuate significantly due to, among other things, changes in market sentiment regarding our operations, financial results or business prospects, the banking industry generally or the macroeconomic outlook. Certain events or changes in the market or banking industry generally are beyond our control. In addition to the other risk factors contained or incorporated by reference herein, factors that could affect our trading price:

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our actual or anticipated operating and financial results, including how those results vary from the expectations of management, securities analysts and investors;

● changes in financial estimates or publications of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to us or other financial ~~institution~~institutions;

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failure to declare dividends on our common shares from time to time;

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reports in the press or investment community generally or relating to our reputation or the financial services industry;

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developments in our business or operations or in the financial sector generally;

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any future offerings by us of our common shares;

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any future offerings by us of debt or preferred shares, which would be senior to our common shares upon liquidation and for purposes of dividend distributions;

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legislative or regulatory changes affecting our industry generally or our business and operations specifically;

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the operating and share price performance of companies that investors consider to be comparable to us;

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announcements of strategic developments, acquisitions, restructurings, dispositions, financings and other material events by us or our competitors;

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actions by our current shareholders, including future sales of common shares by existing shareholders, including our directors and executive officers;

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proposed or final regulatory changes or developments;

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anticipated or pending regulatory investigations, proceedings, or litigation that may involve or affect us; and

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other changes in U.S. or global financial markets, global economies and general market conditions, such as interest or foreign exchange rates, stock, commodity, credit or asset valuations or volatility.

Equity markets in general and our common shares have experienced volatility over the past few years. The market price of our common shares may continue to be subject to volatility unrelated to our operating performance or business prospects, which could result in a decline in the market price of our common shares.

Investors could become subject to regulatory restrictions upon ownership of our common shares.

Under the federal Change in Bank Control Act, a person may be required to obtain prior approval from the Federal Reserve Board before acquiring 10 percent or more of our common shares or the power to directly or indirectly control our management, operations, or policies.

We have implemented anti-takeover devices that could make it more difficult for another company to purchase us, even though such a purchase may increase shareholder value.

In many cases, shareholders may receive a premium for their shares if we were purchased by another company. Ohio law and our Amended Articles of Incorporation, as amended, and Amended and Restated Regulations, as amended, make it difficult for anyone to purchase us without the approval of our Board of Directors. Consequently, a takeover attempt may prove difficult, and shareholders may not realize the highest possible price for their securities.

We may be compelled to seek additional capital in the future, but capital may not be available when needed.

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. In addition, federal banking agencies have proposed extensive changes to their capital requirements;, including raising required amounts and eliminating the inclusion of certain instruments from the calculation of capital. In addition, we may elect to raise additional capital to support our business or to finance acquisitions, if any, or we may otherwise elect to raise additional capital. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, many of which are outside our control, and on our financial performance. Accordingly, we cannot be assured of our ability to raise additional capital if needed or on terms acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our financial condition, results of operations and prospects.

General Risk Factors:

Our earnings are significantly affected by the fiscal and monetary policies of the federal government and its agencies.

The policies of the FRB impact us significantly. The FRB regulates the supply of money and credit in the United States. Its policies directly and indirectly influence the rate of interest earned on loans and paid on borrowings and interest-bearing deposits and can also affect the value of financial instruments we hold. Those policies determine to a significant extent our cost of funds for lending and investing. Changes in those policies are beyond our control and are difficult to predict. FRB policies can also affect our borrowers, potentially increasing the risk that they may fail to repay their loans. For example, a tightening of the money supply by the FRB could reduce the demand for a borrower’s products and services. This could adversely affect the borrower’s earnings and ability to repay its loan, which could have a material adverse effect on our financial condition and results of operations.

Changes in tax laws could adversely affect our performance.

We are subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, franchise, withholding and ad valorem taxes. Changes to tax laws could have a material adverse effect on our results of operations; fair values of net deferred tax assets and obligations of state and political subdivisions held in our investment securities portfolio. In addition, our customers are subject to a wide variety of federal, state and local taxes. Changes in taxes paid by our customers may adversely affect their ability to purchase homes or consumer products, which could adversely affect their demand for our loans and deposit products. In addition, such negative effects on our customers could result in defaults on the loans we have made.

The preparation of our financial statements requires the use of estimates that may vary from actual results.

The preparation of consolidated financial statements in conformity with ~~accounting principles generally accepted in the~~ U.S. GAAP requires management to make significant estimates that ~~affect~~ affect the financial statements. Two of our most critical estimates are the level of the ACL and the accounting for goodwill and other intangibles. Because of the inherent nature of these estimates, we cannot provide ~~complete~~ assurance that we will not be required to adjust earnings for significant unexpected loan losses, nor that we will not recognize a material provision for impairment of our goodwill. in the future. For additional information regarding these critical estimates, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 31 of this Annual Report on Form 10-K.

2524

We may experience increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to the Company’s environmental, social and governance (“ESG”) practices.

Financial institutions are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their ESG practices and disclosure. Investor advocacy groups, investment funds, and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions, and human rights. Increased ESG-related compliance costs for the Company as well as among our suppliers, vendors and various other parties within our supply chain could result in increases to our overall operational costs. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, access to capital, and the price of our common shares. New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.

We need to constantly update our technology in order to compete and meet customer demands.

The financial services market, including banking services, is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and may enable us to reduce costs. Our future success will depend, in part, on our ability to use technology to provide products and services that provide convenience to customers and to create additional efficiencies in our operations. Some of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological changes affecting the financial services industry could negatively affect our growth, revenue and profit.

Climate change, severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact our business.

Natural disasters, including severe weather events of increasing strength and frequency due to climate change, acts of war or terrorism, and other adverse external events could have a significant impact on our ability to conduct business or upon third parties who perform operational services for us or our customers. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in lost revenue or cause us to incur additional expenses.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

The Company regularly assesses risks from cybersecurity threats, monitors its information systems for potential vulnerabilities, and tests those systems pursuant to the Company’s cybersecurity policies, standards, processes, and practices, which are integrated into the Company’s overall risk management program. We have adopted aspects of the ~~NIST~~National Institute of Standards and Technology (“NIST”) cybersecurity framework, to which risk management in relation to our information systems is aligned. We categorize our information systems as either Tier 1 (critical) or Tier 2 or Tier 3 (essential), depending on business value and/or risk of financial or compliance impact of cybersecurity incidents. Our information security team uses a multifaceted approach to monitor, assess, identify, and manage material risks to the Company from cybersecurity threats, including testing of the effectiveness of our cybersecurity incident prevention and response systems; conducting routine vulnerability scanning of information systems assets; network/endpoint detection and response coupled with advanced identification-enhanced logging capabilities powered by artificial intelligence software; discovery through collaboration with the Company’s internal audit team; monitoring of threat intelligence feeds provided by industry associations/groups, service providers, and federal/state authorities; and professional service engagements, such as retaining the services of an external 24/7 security operations center and partnering with third parties in testing our information systems for vulnerabilities from external, internal, and social engineering perspectives and assessing the effectiveness of our cybersecurity controls.

2625

The Company partners with third-party service providers and employs processes to assess, identify, and manage material risks from cybersecurity threats arising from the use of such third-party service providers. Our latest assessment attempted to identify vulnerabilities in our network and systems from external, internal, and social engineering perspectives. Our cybersecurity practices (including with respect to third-party service providers) have been assessed to represent a level of maturity consistent with industry best practices.

Risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected the Company, including its business strategy, results of operations, and financial condition. For more information about these and other risks, see ITEM 1A. RISK FACTORS.

Our Board of Directors oversees the Company’s risk management process, including cybersecurity risks, directly and through its committees, specifically the Risk Management Committee of the Board. The Audit Committee and the Board of Directors ~~provides~~ provide structured oversight of the Company’s risk management program, which focuses on the most significant short, intermediate, and long-term risks the Company faces. The Company has an Information Security Council (the “Council”) that is responsible for overseeing the development and upkeep of written policies and procedures aimed at safeguarding the Company’s information systems and the nonpublic information stored within them. In addition, the Council plays a crucial role in the governance of the cybersecurity risk management process. This involves collaborating with third-party industry experts and the Company’s internal audit team to conduct risk assessments of the Company’s information security program (the “Program”). The assessments encompass an evaluation of the Company’s adherence to the Program, including the elements of the Program that are dictated by relevant laws, regulations, and the Company’s information security policy and procedures. Reports of the Council are shared regularly throughout the year with the Board of Directors. Furthermore, the Company conducts periodic cybersecurity assessments and preparedness analyses, supervised by our designated Chief Technology & Innovation Officer (“CTIO”). Our CTIO has extensive systems and network experience at a global scale including work as Network and Telecommunications Leader for GE Corporate in the Latin America group and Manager of Global Networks for GE Lighting. His experience involved managing systems, development, and operations for GE Insurance Solutions, Swiss Re, and GE Capital Treasury. He holds a Cybersecurity Certification from Harvard since 2021 Cybersecurity: Managing Risk in the Information Age.

The Company routinely engages third-party industry experts to perform risk assessments of the Program. At least annually, our internal audit team conducts a formal risk assessment and develops an audit plan that identifies, assesses, and prioritizes risks that include cybersecurity. The results of the risk assessment and the proposed audit plan are communicated to various leaders within the Company as well as the Audit Committee for input. The audit plan is reassessed throughout the year, and the plan is subject to modification by our internal audit team, e.g., based on such considerations as changes to resources, business operations, or internal or external risk factors.

Item 2. Properties.

The Company’s principal executive offices are located at 401 Clinton Street, Defiance, Ohio. State Bank owns this facility, with a portion of the facility utilized as a retail banking center. In addition, State Bank owns the land and buildings occupied by 2324 of its banking centers and leases ~~two~~three other properties used as banking centers. The Company also occupies office space from various parties for loan production and other business purposes on varying lease terms. There is no outstanding mortgage debt on any of the properties which are owned by State Bank.

Listed below are the banking centers, loan production offices and service facilities of the Company and their addresses, all of which are located in Allen, Defiance, Delaware, Franklin, Fulton, Hancock, Henry, Lucas, Ottawa, Paulding, Warren, Williams and Wood counties of Ohio; Allen, Hamilton and Steuben counties of Indiana; and Wayne County of Michigan:

SB Financial Group, Inc. Property List as of December 31, 2025

($ in thousands)	Description/Address	Leased/ Owned	Total Deposits 12/31/25

Main Banking Center & Corporate Office
401	Clinton Street, Defiance, OH	Owned	$	327,688

Banking Centers/Drive-Thru’s
1419	West High Street, Bryan, OH	Owned		63,704
510	Third Street, Defiance, OH (Drive-thru)	Owned		N/A
1600	North Clinton Street, Defiance, OH	Leased		35,795
312	Main Street, Delta, OH	Owned		20,151
4080	West Dublin Granville Road, Dublin, OH	Owned		87,163
104	North Michigan Avenue, Edgerton, OH	Owned		6,431
201	East Lincoln Street, Findlay, OH	Owned		24,449
408	South Main Street Suite A, Findlay, OH	Leased		209
12832	Coldwater Road, Fort Wayne, IN	Owned		32,768
1232	North Main Street, Bowling Green, OH	Owned		28,883
235	Main Street, Luckey, OH	Owned		31,588
133	East Morenci Street, Lyons, OH	Owned		25,262
930	West Market Street, Lima, OH	Owned		72,253
1201	East Main Street, Montpelier, OH	Owned		43,275
218	North First Street, Oakwood, OH	Owned		25,964
220	North Main Street, Paulding, OH	Owned		88,159
610	East South Boundary Street, Perrysburg, OH	Owned		12,905
119	South State Street, Pioneer, OH	Owned		41,004
6401	Monroe Street, Sylvania, OH	Owned		64,258
709	W Main Street, Marblehead, OH	Owned		37,312
259	S Bridge Road, Marblehead, OH	Owned		9,822
311	Main Street, Walbridge, OH	Owned		27,421
101	North Michigan Street, Edon, OH	Owned		73,083
1379	North Shoop Avenue, Wauseon, OH	Owned		115,370
1414	North Scott St, Suite 120, Napoleon, OH	Leased		1,873
307	North Wayne Street, Angola, IN	Owned		10,453

Loan Production Offices
10100	Lantern Road, Suite 240, Fishers, IN	Leased		N/A
94	Granville Street, Gahanna, OH	Owned		N/A
9313	Mason-Montgomery Road, Suite 125, Mason, OH	Leased		N/A
1900	Monroe Street, Suite 108, Toledo, OH	Leased		N/A

Service Facilities (SBT/ SBFG Title)
9275	Haggerty Road, Belleville, MI	Leased		N/A
125	West Butler Street, Bryan OH	Owned		N/A
9101	Antares Avenue, Columbus, OH	Owned		N/A
1911	Baltimore Road, Defiance, OH	Leased		N/A

Total deposits			$	1,307,244

SB Captive operates from office space located at 101 Convention Center Dr., Suite 850, Las Vegas, NV 89109.

The Company’s subsidiaries have several noncancellable leases for business use that expire over the next five years. Aggregate rental expense for these leases was $0.3 million and $0.2 million for the years ended December 31, 2025, and 2024, respectively.

Listed below are the banking centers, loan production offices and service facilities of the Company and their addresses, all of which are located in Allen, Defiance, Delaware, Franklin, Fulton, Hancock, Lucas, Paulding, Williams and Wood counties of Ohio; Allen, Boone, Hamilton and Steuben counties of Indiana; and Monroe county of Michigan:

SB Financial Group, Inc. Property List as of December 31, 2024

($ in thousands)	Description/Address	Leased/ Owned	Total Deposits 12/31/24
Main Banking Center & Corporate Office
401	Clinton Street, Defiance, OH	Owned	$	301,890
Banking Centers/Drive-Thru’s
1419	West High Street, Bryan, OH	Owned		63,596
510	Third Street, Defiance, OH (Drive-thru)	Owned		N/A
1600	North Clinton Street, Defiance, OH	Leased		34,140
312	Main Street, Delta, OH	Owned		19,953
4080	West Dublin Granville Road, Dublin, OH	Owned		88,108
104	North Michigan Avenue, Edgerton, OH	Owned		11,091
201	East Lincoln Street, Findlay, OH	Owned		25,926
408	South Main Street Suite A, Findlay, OH	Leased		133
12832	Coldwater Road, Fort Wayne, IN	Owned		29,979
1232	North Main Street, Bowling Green, OH	Owned		24,782
235	Main Street, Luckey, OH	Owned		29,604
133	East Morenci Street, Lyons, OH	Owned		24,437
930	West Market Street, Lima, OH	Owned		66,383
1201	East Main Street, Montpelier, OH	Owned		43,168
218	North First Street, Oakwood, OH	Owned		23,915
220	North Main Street, Paulding, OH	Owned		84,437
610	East South Boundary Street, Perrysburg, OH	Owned		12,689
119	South State Street, Pioneer, OH	Owned		37,896
6401	Monroe Street, Sylvania, OH	Owned		56,438
311	Main Street, Walbridge, OH	Owned		28,278
101	North Michigan Street, Edon, OH	Owned		58,790
1379	North Shoop Avenue, Wauseon, OH	Owned		86,972
Loan Production Offices
307	North Wayne Street, Angola, IN	Owned		N/A
10100	Lantern Road, Suite 240, Fishers, IN	Leased		N/A
94	Granville Street, Gahanna, OH	Owned		N/A
8204	Secor Road, Lambertville, MI	Leased		N/A
1900	Monroe Street, Suite 108, Toledo, OH	Leased		N/A
100	South Main Street, Suite 102, Zionsville, IN	Leased		N/A
Service Facilities (SBT/ SBFG Title)
105	East Holland Street, Archbold, OH	Leased		N/A
125	West Butler Street, Bryan OH	Owned		N/A
9101	Antares Avenue, Columbus, OH	Owned		N/A
1911	Baltimore Road, Defiance, OH	Leased		N/A
Total deposits			$	1,152,605

SB Captive operates from office space located at 101 Convention Center Dr.,Suite 850, Las, Vegas, NV 89109.

The Company’s subsidiaries have several noncancellable leases for business use that expire over the next five years. Aggregate rental expense for these leases was $0.20 million and $0.19 million for the years ended December 31, 2024, and 2023, respectively.

Future minimum lease payments under operating leases are:

~~($ in thousands)~~	($ in thousands)
2025	$	275
2026	$	308
2026		197
2027		271
2027		158
2028		187
2028		122
2029		178
2029		116
2030		120
Thereafter		~~487~~407
Total minimum lease payments	$	1,~~355~~470

Item 3. Legal Proceedings.

In the ordinary course of our business, the Company and its subsidiaries are parties to various legal actions, which we believe are incidental to the operation of our business. Although the ultimate outcome and amount of liability, if any, with respect to these legal actions cannot presently be ascertained with certainty, in the opinion of management, based upon information currently available to us, any resulting liability is not likely to have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures.

Not Applicable

Supplemental Item: Information about our Executive Officers

The following table lists the names and ages of the executive officers of the Company as of February 21, ~~2025~~2026, the positions presently held by each executive officer, and the principal occupation(s) and business experience of each executive officer during the past five years. Unless otherwise indicated, each person has held his or her principal occupation(s) for more than five years.

Name	Age	Position(s) Held with the Company and its Subsidiaries and Principal Occupation(s)
Mark A. Klein	7071	Chairman of the Company since April 2015; Director of the Company since February 2010; President and Chief Executive Officer of the Company since January 2010 and of State Bank since January 2006; Director of State Bank since 2006; ~~President of RDSI since October 2011;~~ Member of State Bank Trust Investment Review Committee since March 2007.
Anthony V. Cosentino	6364	Executive Vice President and Chief Financial Officer of the Company and State Bank since March 2010; ~~Chief Financial Officer of RDSI since October 2011;~~ Member of State Bank Trust Investment Review Committee since June 2010.
Ernesto Gaytan	5354	Executive Vice President and Chief Technology Innovation Officer of the Company and State Bank since November 2017.
Steven R. Walz	5455	Executive Vice President and Chief Lending Officer of State Bank since December 2021; Senior Vice President and Chief Lending Officer of State Bank from September 2021 through December 2021; Senior Vice President and Chief Credit Officer of State Bank from November 2017 through November 2019; Vice President and Senior Credit Analyst of State Bank from September 2012 through November 2017; Assistant Vice President and Commercial Services Officer of State Bank from September 2011 to September 2012; Assistant Vice President and Credit Analyst of State Bank from January 2010 through September 2012; Began working for State Bank in October 2007 as a Credit Analyst; Mr. Walz left State Bank in November 2019 to work as President for K&P Medical Transport, LLC. prior to rejoining State Bank in September 2021.
Keeta J. Diller	6869	Executive Vice President of the Company since July 2019; Executive Vice President and Chief Operations Officer of State Bank since August 2024; Executive Vice President and Chief Risk Officer from July 2019 to August 2024; Senior Vice President and Chief Enterprise Risk Management Officer of State Bank from August 2018 through July 2019; Senior Vice President and Audit Coordinator and Director of Operations of State Bank from December 2011 through August 2018; Vice President and Internal Auditor of State Bank from January 2010 through December 2011; Corporate Secretary for the Company since 1996; Began working for State Bank in February 1990 as the Accounting Supervisor.
David A. Homoelle	57	Residential Real Estate Executive of State Bank since April 2024; Columbus Regional President and Residential Real Estate Executive of State Bank from May 2021 through April 2024; Columbus Regional President of State Bank from November 2007 through May 2021; Began working for State Bank in November 2007 as a Columbus Regional President.

2928

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common shares are traded on the NASDAQ Capital Market under the symbol “SBFG”. There were 6,~~493~~275,~~526~~958 common shares outstanding as of December 31, ~~2024~~2025, which were held by approximately 1,~~115~~092 record holders.

The Company paid quarterly dividends on its common shares in the aggregate amounts of $0.5660 per share and $0.5256 per share in ~~2024~~2025 and ~~2023~~2024, 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.

The ability of the Company to obtain funds for the payment of dividends and for other cash requirements is largely dependent on the amount of dividends that may be declared by State Bank and the Company’s other subsidiaries. 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 the Company. The Company’s ability to pay dividends on its shares is also conditioned upon the payment, on a current basis, of quarterly interest payments on the subordinated debentures underlying the Company’s trust preferred securities. In addition, under the terms of the Company’s fixed-to-floating rate subordinated debt, the Company’s ability to pay dividends on its shares is conditioned upon the Company continuing to make required principal and interest payments, and not incurring an event of default, with respect to the subordinated debt.

Performance Graph

The following ~~performance~~Performance ~~graph~~Graph ~~compares the five-year total shareholder return of the Company’s common shares, based on an initial investment on December 31, 2019,~~ and ~~assuming~~related ~~reinvestment~~information ~~of dividends, against two indices – the NASDAQ Composite Index and the KBW NASDAQ Bank Index. This Performance Graph~~ shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be deemed to be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates this Performance Graph by reference into such filing.

	Period Ending
Index	12/31/19		12/31/20		12/31/21		12/31/22		12/31/23		12/31/24
SB Financial Group, Inc.		100.00		95.27		104.99		97.59		91.79		129.56
NASDAQ Composite Index		100.00		144.92		177.06		119.45		172.77		223.87
KBW NASDAQ Bank Index		100.00		89.69		124.06		97.52		96.65		132.60

The following performance graph compares the five-year total shareholder return of the Company’s common shares, based on an initial investment on December 31, 2020, and assuming reinvestment of dividends, against two indices – the NASDAQ Composite Index and the KBW NASDAQ Bank Index.

	*Period Ending*
*Index*	12/31/20		12/31/21		12/31/22		12/31/23		12/31/24		12/31/25
SB Financial Group, Inc.		100.00		110.21		102.44		96.35		136.00		148.96
NASDAQ Composite Index		100.00		122.18		82.43		119.22		154.48		187.14
KBW NASDAQ Bank Index		100.00		138.33		108.73		107.76		147.85		196.00

Source: S&P Global Market Intelligence

Issuer Purchases of Equity Securities

The table below reflects the common shares repurchased by the Company during the three months ended December 31, ~~2024~~2025. ~~On December 18, 2024, the Company’s Board of Directors approved a share repurchase program authorizing the repurchase of 500,000 shares through December 31, 2026.~~ As of December 31, ~~2024~~ 2025, the Company had ~~repurchased 17~~199,~~460~~050 shares, ~~and~~remaining ~~482,540~~of ~~shares~~the ~~remained~~500,000 ~~available~~approved ~~for purchase~~ under ~~this~~ ~~program.~~the ~~The~~Company’s ~~December~~existing ~~18, 2024,~~ share repurchase program ~~replaced~~which was authorized by the Company’s ~~prior~~Board ~~repurchase~~of ~~program~~Directors ~~announced~~ on December ~~21,~~ ~~2022~~18, ~~under which an aggregate 500~~2024,~~000~~ ~~common~~and ~~shares~~expires ~~of the Company were repurchased through~~ December ~~2024~~31, 2026.

	(a)		(b)		(c)		(d)
Period	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
10/01/24 - 10/31/24		25,651	$	19.79		25,651		87,354
10/01/25 - 10/31/25		14,083	$	19.10		14,083		216,486
11/01/24 - 11/30/24		33,296		20.59		33,296		54,058
11/01/25 - 11/30/25		5,085		20.54		5,085		211,401
12/01/24 - 12/31/24		71,518		21.69		71,518		482,540
12/01/25 - 12/31/25		12,351		22.34		12,351		199,050
Total		~~130~~31,~~465~~519	$	2120.0460		~~130~~31,~~465~~519		~~482~~199,~~540~~050

Item 6. [Reserved].

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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, including The State Bank and Trust Company (“State Bank”), 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 Notes as of and for the years ended December 31, ~~2024~~2025, and ~~2023~~2024 included in this Annual Report on Form 10-K.

Strategic Discussion

The focus and strategic goal of the Company is to grow into and remain a top decile (>90th percentile) independent financial services company, as measured by annual return on average assets compared to our defined peer group. 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, ~~2024~~2025, the Company generated $17.01 million in noninterest income, or 2926.91 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, ~~2023~~2024, the Company generated $17.70 million in noninterest income, or 3129.19 percent of total operating revenue, from fee-based products.

Strengthen our penetration in all markets served: Over our ~~122~~123-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. Over the past few years, we have expanded and committed additional resources to our presence in the Findlay and Edgerton markets in particular; however, we continue to seek to expand the presence and penetration in all of our markets. On January 17, 2025, we established our presence in Ottawa County with the acquisition of The Marblehead Bank located in Marblehead, Ohio. In late 2025, we expanded our Loan Production office in Angola, Indiana into a full service retail location and we expanded into the neighboring community of Napoleon, Ohio with a hybrid retail location.

Expand product utilization by new and existing customers: As of December 31, ~~2024~~2025, we operated in 1415 counties in Northwest Ohio, Central Ohio and Northeast Indiana with 2327 full-service offices, 2327 ATM’s and ~~seven~~four loan production offices. Combined in the 1415 counties of operation, we command 0.9493 percent of the deposit market share, which has steadily grown. In our traditional markets of Northwest Ohio, the deposit market share is 4.63 percent, which is up from 4.40 percent in 2024.

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, ~~2024~~2025, the Company serviced 8,~~750~~886 residential mortgage loans with an aggregate principal balance of $1.4348 billion. As of December 31, ~~2023~~2024, the Company serviced 8,~~549~~750 loans with an aggregate principal balance of $1.3743 billion.

Sustain asset quality: As of December 31, 2025, the Company’s asset quality metrics remained strong. Specifically, total nonperforming assets were $4.7 million, or 0.30 percent of total assets. Total delinquent loans at December 31, 2025, were 0.49 percent of total loans. As of December 31, 2024, the Company had total nonperforming assets of $5.5 million, or 0.40 percent of total assets. Total delinquent loans at December 31, 2024, were 0.63 percent of total loans.

~~Sustain~~The ~~asset~~successful ~~quality:~~execution As of ~~December~~these ~~31,~~five ~~2024,~~strategies has enabled the Company’s ~~asset~~to ~~quality~~improve financial performance across a broad series of metrics. These ~~remained~~metrics ~~strong~~over the last five years are outlined in the following table. Specifically, the Company has increased total ~~nonperforming~~ assets ~~were~~by $5286.5 2 million, or 022.407 percent ~~of total assets~~. ~~Total~~The ~~delinquent~~growth ~~loans~~has atbeen ~~December~~on ~~31,~~both ~~2024~~sides ~~were 0.63 percent~~ of ~~total~~the ~~loans. As~~balance ofsheet ~~December~~over ~~31, 2023,~~ the ~~Company~~five-year ~~had~~period, ~~total~~with ~~nonperforming~~loans ~~assets~~growing of $3307.3 9 million, or 035.253 percent ofand ~~total~~deposits ~~assets~~growing $258.2 ~~Total delinquent loans at December 31~~million, ~~2023~~or ~~were 0~~24.156 percent ~~of total loans~~.

~~The~~During ~~successful~~the ~~execution~~prior ~~of these~~ five-year ~~strategies~~period, ~~has enabled~~ the Company tohas ~~improve~~raised ~~financial~~capital ~~performance~~through ~~across~~the aissuance ~~broad series~~ of ~~metrics. These~~debt ~~metrics~~securities ~~over~~to the ~~last~~market, ~~five~~which ~~years~~has ~~are~~improved capital ~~outlined~~significantly inand ~~the~~expanded ~~following~~liquidity ~~table.~~for ~~Specifically,~~potential ~~the~~strategic ~~Company~~expansion. Strategic expansion has ~~increased~~also ~~total~~occurred ~~assets~~during bythe ~~$121.7~~period ~~million,~~with orthe ~~9.7~~acquisition ~~percent.~~of ~~The~~two ~~growth~~small ~~has~~community ~~been~~banks on(The ~~both~~Edon ~~sides~~State Bank of ~~the~~Edon, ~~balance~~Ohio ~~sheet~~in ~~over~~2020 ~~the~~and ~~five-year~~The ~~period,~~Marblehead ~~with~~Bank ~~loans~~in ~~growing~~January ~~$174.0~~2025), ~~million~~the oropening ~~19.9~~of ~~percent~~five branch offices and ~~deposits~~the ~~growing~~acquisition ~~$103.6~~of ~~million~~two orfull-service ~~9.9~~title ~~percent~~agencies.

During the prior five-year period, the Company has raised capital through the issuance of debt securities to the market, which has improved capital significantly and expanded liquidity for potential strategic expansion. Strategic expansion has also occurred during the period with the acquisition of a small community bank (The Edon State Bank of Edon, Ohio) in 2020, the opening of three branch offices and the acquisition of two full-service title agencies. As detailed in Note 23, we closed on an acquisition of another small community bank in Marblehead, Ohio on January 17, 2025.

Financial Highlights

Year Ended December 31,

($ in thousands, except per share data)

2025

2024

2023

2022

2021

Earnings

~~2024~~

~~2023~~

~~2022~~

~~2021~~

~~2020~~

Interest income

6473,~~349~~920

5864,~~152~~349

4458,~~569~~152

4144,~~904~~569

4241,~~635~~904

Interest expense

2425,~~427~~467

1824,~~879~~427

518,~~170~~879

45,~~020~~170

64,~~705~~020

Net interest income

3948,~~922~~453

39,~~273~~922

39,~~399~~273

3739,~~884~~399

3537,~~930~~884

Provision for loan losses

~~124~~1,306

~~315~~124

-315

~~1,050~~-

41,~~500~~050

Noninterest income

17,~~017~~107

17,~~721~~017

1817,~~231~~721

3018,~~697~~231

30,~~096~~697

Noninterest expense

4246,~~959~~999

4142,~~962~~959

4241,~~314~~962

4442,~~808~~314

4344,~~087~~808

Provision for income taxes

23,~~386~~281

2,~~622~~386

2,~~795~~622

42,~~446~~795

34,~~495~~446

Net income

1113,~~470~~974

1211,~~095~~470

12,~~521~~095

1812,~~277~~521

1418,~~944~~277

Net income available to common shareholders

1113,~~470~~974

1211,~~095~~470

12,~~521~~095

1812,~~277~~521

1418,~~944~~277

Per Common Share Data

Basic earnings

12.7219

1.7772

1.7977

21.5879

12.9658

Diluted earnings

12.7219

1.7572

1.7775

21.5677

12.9656

Cash dividends declared

0.5660

0.5256

0.4852

0.4448

0.4044

Total equity per share

1922.6465

1819.5064

1718.0850

2117.0508

1921.3905

Average Balances

Average total assets

1,~~361~~499,~~274~~323

1,~~334~~361,~~644~~274

1,~~318~~334,~~781~~644

1,~~322~~318,~~253~~781

1,~~161~~322,~~396~~253

Average equity

~~124~~134,~~742~~606

~~118~~124,~~315~~742

~~126~~118,~~963~~315

~~144~~126,~~223~~963

~~139~~144,~~197~~223

Ratios

Return on average total assets

0.8493

0.9184

0.9591

10.3895

1.2938

Return on average equity

910.1938

109.2219

910.8622

129.6786

1012.7467

Cash dividend payout ratio1

3227.8754

2932.6287

2729.2562

1727.1825

2017.5418

Average equity to average assets

98.1698

89.8616

98.6386

109.9163

1110.9991

Period End Totals

Total assets

1,~~379~~545,~~517~~367

1,~~343~~379,~~249~~517

1,~~335~~343,~~633~~249

1,~~330~~335,~~854~~633

1,~~257~~330,~~839~~854

Available-for-sale securities

~~201~~188,~~587~~626

~~219~~201,~~708~~587

~~238~~219,~~780~~708

~~263~~238,~~259~~780

~~149~~263,~~406~~259

Loans held for sale

61,~~770~~761

26,~~525~~770

2,~~073~~525

72,~~472~~073

7,~~234~~472

Total loans & leases

1,~~046~~180,~~735~~591

1,~~000~~046,~~212~~735

~~962~~1,~~075~~000,212

~~822~~962,~~714~~075

~~872~~822,~~723~~714

Allowance for credit losses

1516,~~096~~114

15,~~786~~096

1315,~~818~~786

13,~~805~~818

1213,~~574~~805

Total deposits

1,~~152~~307,~~605~~244

1,~~070~~152,~~205~~605

1,~~086~~070,~~665~~205

1,~~113~~086,~~045~~665

1,~~049~~113,~~011~~045

Advances from FHLB

35,000

8335,~~600~~000

6083,~~000~~600

560,~~500~~000

85,~~000~~500

Trust preferred securities

10,310

Subordinated debt, net

19,~~690~~739

19,~~642~~690

19,~~594~~642

19,~~546~~594

-19,546

Total equity

~~127~~141,~~508~~236

~~124~~127,~~342~~508

~~118~~124,~~428~~342

~~144~~118,~~929~~428

~~142~~144,~~923~~929

Cash dividends on common shares divided by net income available to common.

Critical Accounting Policies and Estimates

The accounting and reporting policies of the Company are in accordance with ~~generally~~U.S. ~~accepted~~GAAP ~~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, ~~2024~~2025, and ~~2023~~2024. The preparation of financial statements in conformity with ~~generally~~U.S. GAAP ~~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.

Allowance for Credit Losses: The Company believes the determination of the ACL involves a higher degree of judgment and complexity than its other significant accounting policies. The ACL is calculated with the objective of maintaining a reserve level believed by management to be sufficient to absorb estimated credit losses over the life of an asset or an off-balance sheet credit exposure. Management’s determination of the adequacy of the ACL is based on periodic evaluations of past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. However, this evaluation has subjective components requiring material estimates, including expected default probabilities, the expected loss given default, the amounts and timing of expected future cash flows on individually evaluated loans, and estimated losses based on historical loss experience and forecasted economic conditions. All of these factors may be susceptible to significant change. To the extent that actual results differ from management estimates, additional provisions for credit losses may be required that would adversely impact earnings in future periods.

Goodwill and Other Intangibles: The 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.

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years. Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

An effective tax rate of 21% is used to determine after-tax components of other comprehensive income (loss) included in the statements of shareholders’ equity.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

Changes in Financial Condition

Total assets at December 31, ~~2024~~2025, were $1.3855 billion, compared to $1.3438 billion at December 31, ~~2023~~2024. Loans (excluding loans held for sale) were $1.0518 billion at December 31, ~~2024~~2025, compared to $1.0005 billion at December 31, ~~2023~~2024. Total deposits were $1.1531 billion at December 31, ~~2024~~2025, compared to $1.0715 billion at December 31, ~~2023~~2024. The Company continued to allocate the reductions in our bond portfolio, from scheduled amortization, into higher yielding loan balances.

The following are the condensed average balance sheets of the Company for the years ending December 31, ~~and~~which ~~includes~~include the interest earned or or paid, and the average interest rate, on each asset and liability:

	2024								2023								2022
	2025								2024								2023
($ in thousands)	Average					Average			Average					Average			Average					Average
	Balance			Interest		Rate			Balance			Interest		Rate			Balance			Interest		Rate
Assets
Taxable securities/cash	$	~~247~~196,~~026~~831		$	64,~~844~~495		2.7728	%	$	~~254~~247,~~133~~026		$	65,~~092~~490		2.4022	%	$	~~330~~254,~~549~~133		$	56,~~798~~092		12.7540	%
Non-taxable securities		6,~~393~~243			~~146~~144		2.2831	%		76,~~181~~393			~~170~~146		2.3728	%		87,~~106~~181			~~198~~170		2.4437	%
Loans, net1		1,014,375			57,359		5.65	%		985,217			51,890		5.27	%		888,116			38,573		4.34	%
Overnight Cash		87,283			3,840		4.40	%		43,171			1,354		3.14	%		-			-		0.00	%
Total earning assets		1,267,794			64,349		5.08	%		1,246,531			58,152		4.67	%		1,226,771			44,569		3.63	%
Loans, net1		1,108,531			65,441		5.90	%		1,014,375			57,359		5.65	%		985,217			51,890		5.27	%
Cash and due from banks		4,388								4,035								7,296
Total earning assets		1,398,888			73,920		5.28	%		1,310,965			64,349		4.91	%		1,246,531			58,152		4.67	%
Allowance for credit losses		(15,536	)							(15,478	)							(13,808	)
Cash and due from banks		5,390								4,388								4,035
Premises and equipment		20,929								22,990								24,137
Allowance for credit losses		(15,631	)							(15,536	)							(15,478	)
Other assets		83,699								76,566								74,385
Premises and equipment		21,624								20,929								22,990
Total assets	$	1,361,274							$	1,334,644							$	1,318,781
Other assets		89,052								40,528								76,566
Total assets	$	1,499,323							$	1,361,274							$	1,334,644
Liabilities
Savings and interest-bearing demand deposits	$	~~643~~742,~~710~~153		$	1113,~~073~~092		1.7276	%	$	~~619~~643,~~906~~710		$	711,~~599~~073		1.2372	%	$	~~693~~619,~~271~~906		$	27,~~258~~599		01.3323	%
Time deposits		~~259~~273,~~818~~228			9,~~962~~398		3.8344	%		~~236~~259,~~665~~818			79,~~109~~962		3.0083	%		~~159~~236,~~401~~665			17,~~219~~109		03.7600	%
Repurchase agreements & other		1412,~~336~~085			~~154~~95		10.0779	%		1514,~~765~~336			74154		01.4707	%		2015,~~481~~765			3974		0.1947	%
Advances from FHLB		3935,~~092~~011			1,~~721~~467		4.4019	%		5539,~~044~~092			21,~~603~~721		4.7340	%		1655,~~420~~044			~~515~~2,603		34.1473	%
Trust preferred securities		10,310			~~739~~637		76.1718	%		10,310			~~716~~739		67.9417	%		10,310			~~361~~716		36.5094	%
Subordianted debt		19,655			778		3.96	%		19,616			778		3.97	%		19,570			778		3.98	%
Subordinated debt		19,713			778		3.95	%		19,655			778		3.96	%		19,616			778		3.97	%
Total interest-bearing liabilities		~~986~~1,~~921~~092,500			2425,~~427~~467		2.4833	%		~~957~~986,~~306~~921			1824,~~879~~427		12.9748	%		~~919~~957,~~453~~306			518,~~170~~879		01.5697	%
Demand deposits		~~227~~251,~~445~~820								~~237~~227,~~976~~445								~~252~~237,~~899~~976
Other liabilities		2220,~~156~~397								2122,~~047~~156								1921,~~466~~047
Total liabilities		1,~~236~~364,~~522~~717								1,~~216~~236,~~329~~522								1,~~191~~216,~~818~~329
Shareholders’ equity		~~124~~134,~~742~~606								~~118~~124,~~315~~742								~~126~~118,~~963~~315
Total liabilities and shareholders’ equity	$	1,~~361~~499,~~264~~323							$	1,~~334~~361,~~644~~264							$	1,~~318~~334,~~781~~644
Net interest income (tax equivalent basis)				$	3948,~~922~~453							$	39,~~273~~922							$	39,~~399~~273
Net interest income as a percent
Net interest income as a percent of average interest-earning assets - GAAP measure							3.46	%							3.05	%							3.15	%
of average interest-earning assets - GAAP measure							3.15	%							3.15	%							3.21	%
Net interest income as a percent of average
interest-earning assets - Non-GAAP measure 2							3.1647	%							3.1606	%							3.2216	%
-- Computed on a fully tax equivalent basis (FTE)

Nonaccruing loans and loans held for sale are included in the average balances.

2 Interest on tax exempt securities and loans is computed on a tax equivalent basis using a 21 percent statutory tax rate, and added to the net interest income. The tax equivalent adjustment was $0.1413, $0.14 and $0.1114 million in ~~2024~~2025, ~~2023~~2024 and ~~2022~~2023, respectively.

34The following table sets forth the effect of volume and rate changes on interest income and expense for the periods indicated. For purposes of these tables, changes in interest due to volume and rate were determined as follows:

The following tables set forth the effect of volume and rate changes on interest income and expense for the periods indicated. For purposes of these tables, changes in interest due to volume and rate were determined as follows:

●

Volume variance - change in volume multiplied by the previous year’s rate.

●

Rate variance - change in rate multiplied by the previous year’s volume.

●

Rate/volume variance - change in volume multiplied by the change in rate. This variance allocates the volume variance and rate variance in proportion to the relationship of the absolute dollar amount of the change in each.

	Total
	Variance			Variance Attributable To
($ in thousands)	2024/2023			Volume			Rate
Interest income
Taxable securities	$	752		$	(170	)	$	922
Non-taxable securities1		(24	)		(19	)		(5	)
Loans, net of unearned income and deferred fees1		5,469			1,536			3,933
Total interest income		6,197			1,346			4,851
Interest expense
Savings and interest-bearing demand deposits		3,474			292			3,182
Time deposits		2,853			695			2,158
Repurchase agreements & other		80			(7	)		87
Advances from FHLB		(882	)		(754	)		(128	)
Trust preferred securities		23			-			23
Subordinated debt		-			-			-
Total interest expense		5,548			226			5,322
Net interest income	$	649		$	1,119		$	(470	)

	Total
	Variance			Variance Attributable To
($ in thousands)	2025/2024			Volume			Rate

Interest income
Taxable securities	$	(995	)	$	(1,116	)	$	121
Overnight Cash		2,486			1,384			1,102
Non-taxable securities¹		(2	)		(3	)		1
Loans, net of unearned income and deferred fees¹		8,082			5,324			2,758
Total interest income		9,571			5,589			3,982

Interest expense
Savings and interest-bearing demand deposits		2,019			1,693			326
Time deposits		(564	)		514			(1,078	)
Repurchase agreements & other		(59	)		(24	)		(35	)
Advances from FHLB		(254	)		(180	)		(74	)
Trust preferred securities		(102	)		-			(102	)
Subordinated debt		-			-			-
Total interest expense		1,040			2,003			(963	)

Net interest income	$	8,531		$	3,586		$	4,945

Interest on non-taxable securities and loans has been adjusted to fully tax equivalent

The maturity distribution and weighted-average interest rates of debt securities available-for-sale at December 31, 2025, are set forth in the table below. The weighted-average interest rates are based on coupon rates for securities purchased at par value and on effective interest rates considering amortization or accretion for securities purchased at a premium or discount:

	Maturing
			Weighted					Weighted					Weighted					Weighted					Weighted
	Within		Average			1-5		Average			5-10		Average			After		Average					Average
($ in thousands)	1 Year		Yield			Years		Yield			Years		Yield			10 Years		Yield			Total		Yield
Available-for-sale:
U.S. Treasury and Government agencies	$	-				$	782		3.51	%	$	4,421		1.46	%		-				$	5,203		1.77	%
Mortgage-backed securities		-					17,044		1.38	%		16,041		1.78	%		126,867		1.89	%		159,952		1.82	%
State and political subdivisions		275		4.99	%		1,119		3.82	%		2,461		3.72	%		5,994		2.35	%		9,849		2.93	%
Other corporate securities		-					-					13,622		3.64	%		-					13,622		3.64	%
Total securities by maturity	$	275		4.99	%	$	18,945		1.61	%	$	36,545		2.57	%	$	132,861		1.91	%	$	188,626		2.01	%

($ in thousands)	Years Ended December 31,
Total loans	2025			2024		% Change
Commercial business & agriculture	$	190,942		$	189,298		0.9	%
Commercial real estate		596,983			479,573		24.5	%
Residential real estate		304,741			308,378		-1.2	%
Consumer & other		88,475			69,340		27.6	%

Total loans		1,181,141			1,046,589		12.9	%

Net deferred costs (fees)		(550	)		146		-476.7	%

Total loans, net deferred costs (fees)		1,180,591			1,046,735		12.8	%

Loans held for sale	$	1,761		$	6,770		-74.0	%

The maturity distribution and weighted-average interest rates of debt securities available-for-sale at December 31, 2024, are set forth in the table below. The weighted-average interest rates are based on coupon rates for securities purchased at par value and on effective interest rates considering amortization or accretion if the securities were purchased at a premium or discount:

Total deposits	2025		2024		% Change
Noninterest bearing demand	$	254,063	$	232,155		9.4	%
Interest-bearing demand		202,501		201,085		0.7	%
Savings & money market		577,380		460,148		25.5	%
Time deposits		273,300		259,217		5.4	%

Total deposits		1,307,244		1,152,605		13.4	%

Total shareholders’ equity	$	141,236	$	127,508		10.8	%

	Maturing
			Weighted					Weighted					Weighted					Weighted					Weighted
	Within		Average			1-5		Average			5-10		Average			After		Average					Average
($ in thousands)	1 Year		Yield			Years		Yield			Years		Yield			10 Years		Yield			Total		Yield
Available-for-sale:
U.S. Treasury and Government agencies	$	2,138		4.08	%	$	817		3.39	%	$	4,434		1.46	%		-				$	7,389		1.84	%
Mortgage-backed securities		756		2.95	%		16,536		1.38	%		8,645		1.97	%		143,683		1.90	%		169,620		1.86	%
State and political subdivisions		-					276		2.61	%		3,446		3.75	%		5,685		2.35	%		9,407		2.83	%
Other corporate securities		-					-					15,171		3.69	%		-					15,171		3.69	%
Total securities by maturity	$	2,894		3.78	%	$	17,629		1.49	%	$	31,696		2.92	%	$	149,368		1.92	%	$	201,587		2.04	%

Loans held for investment (“HFI”) increased $133.9 million, or 12.8 percent, to $1.18 billion at December 31, 2025, which was due to an increase in commercial real estate and agricultural lending during 2025. The Company allowed its residential real estate portfolio to amortize with minimal new production generated on the balance sheet during 2025.

($ in thousands)	Years Ended December 31,
Total loans	2024		2023		% Change
Commercial business & agriculture	$	189,298	$	191,932		-1.4	%
Commercial real estate		479,573		424,041		13.1	%
Residential real estate		308,378		318,123		-3.1	%
Consumer & other		69,340		65,673		5.6	%
Total loans		1,046,589		999,769		4.7	%
Net deferred costs (fees)		146		443		-67.0	%
Total loans, net deferred costs (fees)		1,046,735		1,000,212		4.7	%
Loans held for sale	$	6,770	$	2,525		168.1	%

Concentrations of Credit Risk: The Company makes commercial, real estate and installment loans to customers located mainly in the Tri-State region of Ohio, Indiana and Michigan. Commercial loans are expected to be repaid from cash flow from operations of businesses and include loans collateralized by commercial real estate, business assets and, in the case of agricultural loans, crops and farm equipment. As of December 31, 2025, commercial business and agricultural loans made up approximately 16.1 percent of the HFI loan portfolio while commercial real estate loans accounted for approximately 50.6 percent of the HFI loan portfolio. As of December 31, 2025, residential first mortgage loans, which are secured by first mortgages on residential real estate, made up approximately 25.8 percent of the HFI portfolio, while consumer loans to individuals, which are primarily secured by consumer assets, made up approximately 7.5 percent of the HFI loan portfolio.

Total deposits	2024		2023		% Change
Noninterest bearing demand	$	232,155	$	228,713		1.5	%
Interest-bearing demand		201,085		166,413		20.8	%
Savings & money market		460,148		419,570		9.7	%
Time deposits		259,217		255,509		1.5	%
Total deposits		1,152,605		1,070,205		7.7	%
Total shareholders’ equity	$	127,508	$	124,342		2.5	%

Maturities and Sensitivities of Loans to Changes in Interest Rates: The following table shows the maturity distribution of loans outstanding as of December 31, 2025. The amounts have been categorized between loans with a fixed or floating interest rate (floating rate loans have an adjustable interest rate that changes based on a rate index).

Loans held for investment (“HFI”) increased $46.5 million, or 4.7 percent, to $1.05 billion at December 31, 2024, which was due to an increase in commercial real estate lending during 2024. The Company allowed the residential real estate to amortize and minimal new production on the balance sheet was generated.

Concentrations of Credit Risk: The Company makes commercial, real estate and installment loans to customers located mainly in the Tri-State region of Ohio, Indiana and Michigan. Commercial loans include loans collateralized by commercial real estate, business assets and, in the case of agricultural loans, crops and farm equipment and the loans are expected to be repaid from cash flow from operations of businesses. As of December 31, 2024, commercial business and agricultural loans made up approximately 18.0 percent of the HFI loan portfolio while commercial real estate loans accounted for approximately 43.9 percent of the HFI loan portfolio. As of December 31, 2024, residential first mortgage loans, which are secured by first mortgages on residential real estate, made up approximately 30.0 percent of the HFI portfolio, while consumer loans to individuals, which are primarily secured by consumer assets, made up approximately 6.5 percent of the HFI loan portfolio.

Maturities and Sensitivities of Loans to Changes in Interest Rates: The following table shows the maturity distribution of loans outstanding as of December 31, 2024. The amounts have been categorized between loans with a fixed or floating interest rate (floating rate loans have an adjustable interest rate that changes based on a rate index).

Maturities and Sensitivities of Loans to Changes in Interest Rates

As of December 31, ~~2024~~2025

($ in thousands)

Within one year

After one, but within five years

After five, but within fifteen years

After fifteen years

Total

Loans with fixed interest rates:

Commercial & industrial

1,~~063~~137

3130,~~732~~979

1713,~~717~~017

1715

5045,~~529~~148

Commercial real estate - owner occupied

23,~~962~~803

67,~~044~~395

65,~~889~~418

1516,~~895~~616

Commercial real estate - nonowner occupied

45,~~012~~585

3262,~~770~~637

82,~~217~~268

~~216~~201

4570,~~215~~691

Agricultural

~~775~~1,264

4,~~979~~873

76,~~014~~093

1,~~525~~558

1413,~~293~~788

Residential real estate

12,~~300~~819

~~929~~885

1210,~~550~~824

2931,~~277~~459

4445,~~056~~987

HELOC

-2

-3

-150

-153

-308

Consumer

43,~~026~~699

7,~~177~~206

~~907~~2,889

-499

1214,~~110~~293

Total

1418,~~138~~309

83113,~~631~~978

5340,~~294~~659

3133,~~035~~885

~~182~~206,~~098~~831

Loans with floating interest rates:

Commercial & industrial

2322,~~696~~405

1612,~~178~~939

3231,~~533~~306

12,~~828~~080

7468,~~235~~730

Commercial real estate - owner occupied

511,~~768~~087

1015,~~013~~961

4857,~~570~~416

5460,~~185~~006

~~118~~144,~~536~~470

Commercial real estate - nonowner occupied

112,~~016~~176

6599,~~696~~865

97109,~~472~~650

~~135~~143,~~743~~515

~~299~~365,~~927~~206

Agricultural

~~505~~4,547

3,~~954~~322

2022,~~444~~375

2532,~~484~~482

5062,~~387~~726

Residential real estate

~~363~~1,118

~~436~~1,678

107,~~198~~429

~~253~~248,~~325~~529

~~264~~258,~~322~~754

HELOC

1822

~~367~~364

4043,~~791~~041

1225,~~635~~438

5368,~~811~~865

Consumer

~~1,981~~877

12,~~438~~911

-1,221

35,~~419~~009

Total

3352,~~347~~232

98137,~~082~~040

~~250~~272,~~008~~438

~~483~~512,~~200~~050

~~864~~973,~~637~~760

Total loans:

Commercial & industrial

2423,~~759~~542

4743,~~910~~918

5044,~~250~~323

12,~~845~~095

~~124~~113,~~764~~878

Commercial real estate - owner occupied

814,~~730~~890

1623,~~057~~356

5562,~~459~~834

5460,~~185~~006

~~134~~161,~~431~~086

Commercial real estate - nonowner occupied

517,~~028~~761

98162,~~466~~502

~~105~~111,~~689~~918

~~135~~143,~~959~~716

~~345~~435,~~142~~897

Agricultural

15,~~280~~811

8,~~933~~195

2728,~~458~~468

2734,~~009~~040

6476,~~680~~514

Residential real estate

13,~~663~~937

12,~~365~~563

2218,~~748~~253

~~282~~279,~~602~~988

~~308~~304,~~378~~741

HELOC

1824

367

4043,~~791~~191

1225,~~635~~591

5369,~~811~~173

Consumer

64,~~007~~576

810,~~615~~117

~~907~~4,110

-499

1519,~~529~~302

Total loans

4770,~~485~~541

~~181~~251,~~713~~018

~~303~~313,~~302~~097

~~514~~545,~~235~~935

1,~~046~~180,~~735~~591

Total deposits increased $82.4 million, or 7.7 percent, to $1.15 billion at December 31, 2024. The State of Ohio Homebuyer Plus program impacted transactional deposit growth during 2024, as the Company added approximately $50 million in lower cost deposits from this program.36

Total deposits increased $154.6 million, or 13.4 percent, to $1.31 billion at December 31, 2025. Inclusive of that growth was approximately $47 million in acquired deposits.

The average amount of deposits and weighted-average rates paid are summarized as follows for the years ended December 31:

	2024					2023					2022
	2025					2024					2023
	Average		Average			Average		Average			Average		Average
($ in thousands)	Amount		Rate			Amount		Rate			Amount		Rate
Savings and interest bearing demand deposits	$	~~643~~742,~~710~~153		1.7276	%	$	~~619~~643,~~906~~710		1.2372	%	$	~~693~~619,~~271~~906		01.3323	%
Time deposits		~~259~~273,~~818~~228		3.8344	%		~~236~~259,~~665~~818		3.0083	%		~~159~~236,~~401~~665		03.7600	%
Non interest bearing demand deposits		~~227~~251,~~445~~820		-			~~237~~227,~~976~~445		-			~~252~~237,~~899~~976		-
Totals	$	1,~~130~~267,~~973~~201		1.8677	%	$	1,~~094~~130,~~547~~973		1.3586	%	$	1,~~105~~094,~~571~~547		01.3135	%

Time deposits that exceeded the FDIC insurance limit of $250,000 are summarized as follows:

($ in thousands)	~~2024~~2025		~~2023~~2024
Three months or less	$	46,~~912~~813	$	64,~~637~~912
Over three months through six months		78,~~249~~420		17,~~599~~249
Over six months and through twelve months		63,~~533~~370		56,~~209~~533
Over twelve months		45,~~750~~258		84,~~935~~750
Total	$	23,~~444~~861	$	2223,~~380~~444

Shareholders’ equity at December 31, ~~2024~~2025, was $~~127~~141.52 million, or 9.21 percent of total assets compared to $~~124~~127.35 million or 9.32 percent of total assets, at December 31, ~~2023~~2024. Retained earnings increased during the year due to earnings of $1114.50 million less dividends paid to common shareholders of $3.8 million and repurchases of Company common shares of $45.74 million. The fair market value of the bond portfolio ~~declined~~increased ~~slightly~~ during 2025 ~~2024~~ due to the valuation adjustment on the portfolio, which resulted in accumulated other comprehensive loss (“AOCI”) ~~rising~~ declining to $3021.25 million at December 31, 2025, from $2930.82 million at December 31, 2024.

The Company continued to repurchase its own common shares during the year under the Company’s publicly announced share repurchase ~~programs~~program. Specifically, the Company repurchased ~~253~~283,~~817~~490 shares during ~~2024~~2025 at an average price of $1819.4347 per share. On December 18, 2024, the Company’s Board of Directors approved a share repurchase program authorizing the repurchase of 500,000 shares through December 31, 2026. As of December 31, ~~2024~~2025, the Company had repurchased a total of 17300,~~460~~950 shares, and ~~482~~199,~~540~~050 shares remained available for purchase, under this program. The December 18, 2024, share repurchase program replaced the Company’s prior repurchase program announced on December 21, 2022, under which an aggregate of 500,000 common shares of the Company were repurchased through December 2024.

Asset Quality	Years Ended December 31,
($ in thousands)	~~2024~~2025			~~2023~~2024			% Change
Nonaccruing loans	$	54,~~516~~579		$	25,~~818~~516			95-17.70	%
Foreclosed assets and other assets held for sale, net		-104			~~511~~-			N/M
Nonperforming assets		54,~~516~~683			35,~~329~~516			65-15.71	%
Net charge-offs/(recoveries)		~~250~~261			92250			~~171~~4.74	%
Provision for credit losses		~~124~~1,306			~~315~~124			~~-60~~953.62	%
Allowance for credit losses		1516,~~096~~114			15,~~786~~096			-46.47	%
Nonaccruing loans/total loans		0.5339	%		0.2853	%		87-26.04	%
Allowance/nonaccruing loans		~~273~~351.79	%		~~560~~273.27	%		~~-51~~28.16	%
Nonperforming assets/total assets		0.4030	%		0.2540	%		61-24.32	%
Net charge offs/average loans		0.0102	%		0.01	%		0100.0	%
Allowance/loans		1.4436	%		1.5844	%		-85.64	%
Allowance/nonperforming loans		~~273~~351.689	%		~~560~~273.187	%		~~-51~~28.16	%

Nonperforming assets totaled $54.57 million, or 0.4030 percent of total assets, at December 31, ~~2024~~2025, ana ~~increase~~decrease of $20.28 million, or 6515.71 percent, from ~~2023~~December 31, 2024. The Company had total net charge-offs on loans of $~~250~~261,000 in ~~2024~~2025, as compared to net charge-offs of $92250,000 in ~~2023~~ 2024. The Company’s ACL at December 31, ~~2024~~2025, now covers nonperforming loans at ~~274~~351.9 percent, ~~down~~up from ~~560~~273.7 percent at December 31, ~~2023~~2024.

3837

The following schedule presents an analysis of the ACL, average loan data and related ratios at December 31 for the years indicated:

($ in thousands)	Provision for Credit Losses			Net (Chargeoffs) Recoveries			Average Loans		Ratio of annualized net (chargeoffs) recoveries to average loans
December 31, 2025
Commercial & industrial	$	(673	)	$	(177	)	$	120,891		-0.15	%
Commercial real estate - owner occupied		427			-			142,734		0.00	%
Commercial real estate - nonowner occupied		1,123			2			386,153		0.00	%
Agricultural		(576	)		-			63,260		0.00	%
Residential real estate		617			(16	)		311,773		-0.01	%
HELOC		154			(1	)		60,770		0.00	%
Consumer		202			(69	)		14,760		-0.47	%
Total	$	1,274		$	(261	)	$	1,100,341		-0.02	%
December 31, 2024
Commercial & industrial	$	891		$	(228	)	$	123,238		-0.19	%
Commercial real estate - owner occupied		(146	)		-			131,168		0.00	%
Commercial real estate - nonowner occupied		3			-			311,855		0.00	%
Agricultural		444			-			63,580		0.00	%
Residential real estate		(1,603	)		(3	)		314,066		0.00	%
HELOC		10			-			50,240		0.00	%
Consumer		(39	)		(19	)		13,204		-0.14	%
Total	$	(440	)	$	(250	)	$	1,007,351		-0.02	%
December 31, 2023
Commercial & industrial	$	110		$	-		$	124,435		0.00	%
Commercial real estate - owner occupied		202			-			118,583		0.00	%
Commercial real estate - nonowner occupied		119			-			301,072		0.00	%
Agricultural		23			-			59,720		0.00	%
Residential real estate		190			(52	)		313,034		-0.02	%
HELOC		39			-			46,576		0.00	%
Consumer		5			(40	)		15,470		-0.26	%
Total	$	688		$	(92	)	$	978,890		-0.01	%
December 31, 2022
Commercial & industrial	$	(227	)	$	-		$	126,496		0.00	%
Commercial real estate - owner occupied		(868	)		-			122,031		0.00	%
Commercial real estate - nonowner occupied		367			-			276,805		0.00	%
Agricultural		12			-			58,745		0.00	%
Residential real estate		923			-			239,162		0.00	%
HELOC		(45	)		13			43,210		0.03	%
Consumer		(162	)		-			14,039		0.00	%
Total	$	-		$	13		$	880,488		0.00	%

The ACL balance and the provision for credit losses are determined by management based upon periodic reviews of the loan portfolio. In addition, management considers the level of charge offs on loans, as well as the fluctuations of charge offs and recoveries on loans, in the factors which caused these changes. Estimating the risk of loss and the amount of loss is necessarily subjective. Accordingly, the allowance is maintained by management at a level considered adequate to cover losses that are currently anticipated based on past loss experience, economic conditions, information about specific borrower situations, including their financial position and collateral values, and other factors and estimates which are subject to change over time.

The Company has substantially increased its reserve level over the last several years. Specifically, the Company’s ACL balance has increased from $8.8 million at December 31, 2019 to $15.1 million at December 31, 2024, which reflects an increase of $6.3 million, or 72 percent. This increase was the result of $6.8 million in provision expense during the period and $1.0 million in net charge-offs over the five-year period. The reserve increased during 2023 due to the one-time CECL adjustment of $1.4 million taken in January of 2023 upon the Company’s adoption of the CECL methodology.38

39The Company has substantially increased its reserve level over the last several years. Specifically, the Company’s ACL balance has increased from $12.6 million at December 31, 2020, to $16.1 million at December 31, 2025, which reflects an increase of $3.5 million, or 28 percent. This increase was the result of $2.8 million in provision expense during the period and $0.4 million in net charge-offs over the five-year period. The reserve increased during 2023 due to the one-time CECL adjustment of $1.4 million taken in January of 2023 upon the Company’s adoption of the CECL methodology.

The following schedule provides a breakdown of the ACL allocated by type of loan and related ratios at December 31 for the years indicated:

	Allowance Amount		Percentage of Loans In Each Category to Total Loans			Allowance Amount		Percentage of Loans In Each Category to Total Loans			Allowance Amount		Percentage of Loans In Each Category to Total Loans
			Percentage					Percentage					Percentage
($ in thousands)	2024					2023					2022
			of Loans					of Loans					of Loans
Commercial & industrial	$	2,666		17.7	%	$	2,003		12.7	%	$	1,663		12.0	%
			In Each					In Each					In Each
Commercial real estate - owner occupied		1,806		12.0	%		1,952		12.4	%		1,696		12.3	%
			Category					Category					Category
Commercial real estate - nonowner occupied		5,721		37.9	%		5,718		36.2	%		4,584		33.2	%
	Allowance		to Total			Allowance		to Total			Allowance		to Total
Agricultural		884		5.9	%		440		2.8	%		611		4.4	%
	Amount		Loans			Amount		Loans			Amount		Loans
Residential real estate		3,330		22.1	%		4,936		31.3	%		4,438		32.1	%
($ in thousands)	2025					2024					2023
HELOC		520		3.4	%		510		3.2	%		547		4.0	%
Commercial & industrial	$	1,821		11.3	%	$	2,666		17.7	%	$	2,003		12.7	%
Consumer		169		1.1	%		227		1.4	%		279		2.0	%
Commercial real estate - owner occupied		2,233		13.9	%		1,806		12.0	%		1,952		12.4	%
	$	15,096		100.0	%	$	15,786		100.0	%	$	13,818		100.0	%
Commercial real estate - nonowner occupied		6,846		42.5	%		5,721		37.9	%		5,718		36.2	%
Agricultural		308		1.9	%		884		5.9	%		440		2.8	%
Residential real estate		3,931		24.4	%		3,330		22.1	%		4,936		31.3	%
HELOC		673		4.2	%		520		3.4	%		510		3.2	%
Consumer		302		1.9	%		169		1.1	%		227		1.4	%
	$	16,114		100.0	%	$	15,096		100.0	%	$	15,786		100.0	%

Regulatory capital reporting is required for State Bank only, as the Company is currently exempt from quarterly regulatory capital level measurement pursuant to the Small Bank Holding Company Policy Statement. As of December 31, ~~2024~~2025, State Bank met all regulatory capital levels required to be considered well-capitalized (see Note 16 to the Consolidated Financial Statements).

On May 27, 2021, the Company issued and sold $20.0 million in aggregate principal amount of its 3.65% Fixed to Floating Rate Subordinated Notes due 2031 in a private placement exempt from the registration requirements under the Securities Act. The Subordinated Notes bear interest at a fixed rate of 3.65% through May 31, 2026. From June 1, 2026 to the maturity date or earlier redemption of the Subordinated Notes, the interest rate will reset quarterly to an interest rate per annum, equal to the then-current-three-month Secured Overnight Financing Rate (“SOFR”) provided by the Federal Reserve Bank of New York plus 296 basis points. The Subordinated Notes have a maturity of 10 years.

Earnings Summary – ~~2024~~2025 vs. ~~2023~~2024

Net income for ~~2024~~2025 was $1114.50 million, or $12.7219 per diluted common share, compared with net income of $1211.15 million, or $1.7572 per diluted common share, for ~~2023~~2024. State Bank reported net income for ~~2024~~2025 of $1315.09 million, which was ~~down~~up ~~slightly~~ from the $13.30 million of net income in ~~2023.~~ 2024. SBFG Title reported net income for ~~2024~~2025 of $0.3658 million, which was up from net income of $0.2436 million for ~~2023~~2024.

Positive results for 2024 included loan growth of $46.5 million, with deposits higher by $82.4 million. Deposit growth was boosted by the Company’s participation in the State of Ohio’s Homebuyer Plus program. For the full year of 2024, residential real estate loan production was $261.3 million, with $4.6 million of revenue from gains on sale. The level of mortgage origination was up from the $215.5 million in 2023. The Company’s loans serviced for others ended the year at $1.427 billion, up slightly from $1.367 billion at December 31, 2023.39

~~Operating~~Positive ~~revenue~~results ~~was~~for ~~steady~~2025 atincluded loan growth of $57133.09 million, aswith ~~increased~~deposits ~~mortgage~~higher ~~volume~~by ~~offset~~$154.6 million. Loan and deposit growth were supplemented by our acquisition of The Marblehead Bank in the ~~sale~~first quarter of ~~Visa~~2025, Badding ~~shares~~$18 ~~that~~million ~~occurred~~and in$47 ~~2023~~million of loans and deposits, respectively. Residential real estate loan production was $1277.47 million, with $5. ~~SBFG~~0 ~~Title~~million of revenue ~~also~~from ~~remained~~gains on sale. The level of mortgage origination was up from the $261.3 million in 2024. The Company’s loans serviced for others ended the year at $1.6448 ~~million~~billion, up from $1.43 billion at December 31, 2024.

40Operating revenue was higher at $65.6 million in 2025, compared to $56.9 million in 2024 as balance sheet growth and margin improvement drove net interest income higher, supplemented by higher mortgage revenues. SBFG Title revenue expanded by $0.4 million compared to the prior year.

Operating expense increased by $14.0 million, or 29.4 percent, from $4243.0 million in ~~2023~~2024 to $4347.0 million in ~~2024~~2025, due to higher incentive and commission levels,. ~~which~~Operating ~~were~~expense ~~partially~~included ~~offset~~conversion byexpenses ~~moving~~of ~~higher~~$0.8 ~~medical~~million ~~costs~~and toalmost ~~the~~a ~~Captive~~full year of Marblehead operations.

Results of Operations

Years Ended December 31,

($ in thousands, except per share data)

~~2024~~2025

~~2023~~2024

% Change

Total assets

1,~~379~~545,~~517~~367

1,~~343~~379,~~249~~517

212.70

Total investments

~~201~~188,~~588~~626

~~219~~201,~~708~~588

-86.24

Loans held for sale

61,~~770~~761

26,~~525~~770

~~168~~-74.10

Loans, net of unearned income

1,~~046~~180,~~735~~591

1,~~000~~046,~~212~~735

412.78

Allowance for credit losses

1516,~~096~~114

15,~~786~~096

-46.47

Total deposits

1,~~152~~307,~~605~~244

1,~~070~~152,~~205~~605

713.74

Total operating revenue1

5665,~~939~~560

56,~~994~~939

-015.1

Net interest income

3948,~~922~~453

39,~~273~~922

121.74

Loan loss provision

~~124~~1,306

~~315~~124

~~-60~~953.62

Noninterest income

17,~~017~~107

17,~~721~~017

~~-4.~~0.5

Noninterest expense

4246,~~959~~999

4142,~~962~~959

29.4

Net income

1113,~~470~~974

1211,~~095~~470

-521.28

Diluted earnings per share

12.7219

1.7572

-127.73

Operating revenue equals net interest income plus noninterest income.

Net interest income was $3948.94 million for ~~2024~~2025 and increased ~~slightly~~by 21 percent from net interest income of $3940.30 million for ~~2023~~2024. Average earning assets increased ~~slightly~~ to $1.2740 billion in ~~2024~~2025, compared to $1.2531 billion in ~~2023~~2024, primarily due to the increase in our loan portfolio, with ~~partially~~higher overnight cash offset by lower ~~cash and~~ securities. The consolidated ~~2024~~2025 full year net interest margin on a fully-taxable equivalent (“FTE”) basis was 3.1647 percent compared to 3.1606 percent for the full year of ~~2023~~2024.

Provision for credit losses was taken in ~~2024~~2025 in the amount of $01.1231 million compared to $0.3212 million taken during ~~2023~~2024. For ~~2024~~2025, net charge-offs totaled $0.2526 million, or 0.02 percent of average loans, compared to net charge-offs of $0.0125 million, or 0.0102 percent of average loans, for ~~2023~~2024.

Noninterest Income	Years Ended December 31,
($ in thousands)	~~2024~~2025		~~2023~~2024		% Change
Wealth management fees	$	3,~~511~~535	$	3,~~532~~511		-0.67	%
Customer service fees		3,~~467~~544		3,~~403~~467		12.92	%
Gains on sale of residential loans & OMSR’s		45,~~564~~015		34,~~609~~564		269.59	%
Mortgage loan servicing fees, net		21,~~183~~562		2,~~101~~183		-328.94	%
Gain on sale of non-mortgage loans		~~146~~143		~~429~~146		-662.01	%
Title insurance income		12,~~635~~048		1,635		025.03	%
Other		1,~~511~~260		31,~~012~~511		-4916.86	%
Total noninterest income	$	17,~~017~~107	$	17,~~721~~017		~~-4.~~0.5	%

Total noninterest income was $17.1 million for 2025 compared to $17.0 million for 2024, representing an increase of $0.17 million, or 0.5 percent, year-over-year. Gains on sale of residential mortgage loans was up from 2024 by $0.45 million, or 9.9 percent. The Company sold $250.4 million of originated mortgages into the secondary market in 2025, which due to being higher than the amortization on the serviced portfolio, increased the size of our serviced loan portfolio to $1.48 billion at December 31, 2025 from $1.43 billion at December 31, 2024. Sales of non-mortgage loans (small business and farm credits) in 2025 was just $1.0 million, resulting in gain on sale of $0.14 million. The Company saw its wealth management assets under management increase by $18.3 million to $566.0 million at December 31, 2025, with total wealth management fees of $3.5 million.

Noninterest Expense	Years Ended December 31,
($ in thousands)	2025		2024		% Change
Salaries & employee benefits	$	25,077	$	23,603		6.2	%
Net occupancy expense		3,309		2,884		14.7	%
Equipment expense		4,535		4,333		4.7	%
Data processing fees		3,840		3,075		24.9	%
Professional fees		3,594		2,927		22.8	%
Marketing expense		651		821		-20.7	%
Telephone and communications		511		525		-2.7	%
Postage and delivery expense		541		447		21.0	%
State, local and other taxes		1,091		907		20.3	%
Employee expense		763		733		4.1	%
Other expense		3,087		2,704		14.2	%
Total noninterest expense	$	46,999	$	42,959		9.4	%

Total noninterest expense was $47.0 million for 2025 compared to $43.0 million for 2024, representing a $4.0 million, or 9.4 percent, increase year-over-year. Included in the 2025 expense levels are $0.8 million in one-time conversion expenses and almost a full year of Marblehead operations. Total full-time equivalent employees ended 2025 at 252, which was flat from year end 2024.

Earnings Summary – 2024 vs. 2023

Net income for 2024 was $11.5 million, or $1.72 per diluted common share, compared with net income of $12.1 million, or $1.75 per diluted common share, for 2023. State Bank reported net income for 2024 of $13.0 million, which was down slightly from the $13.3 million of net income in 2023. SBFG Title reported net income for 2024 of $0.36 million, which was up from net income of $0.24 million for 2023.

~~Total~~Operating ~~noninterest~~revenue ~~income was $17.0 million~~ for 2024 ~~compared~~was tosteady ~~$17.7~~at ~~million for 2023, representing a decrease of~~ $057.70 million, oras ~~4.0~~increased ~~percent, year-over-year. Gains on sale of residential~~ mortgage ~~loans~~volume ~~was~~offset upthe ~~from~~sale ~~2023 by $0.96 million, or 26.5 percent. The Company sold $216.0 million~~ of ~~originated~~Visa ~~mortgages~~B ~~into~~shares ~~the~~that ~~secondary~~occurred ~~market~~ in ~~2024,~~2023 ~~which due to being higher than the amortization on the serviced portfolio, increased the size~~ of ~~our serviced loan portfolio to~~ $1.~~428~~4 ~~billion at December 31, 2024 from $1.367 billion at December 31, 2023. Sales of non-mortgage loans (small business and farm credits) in 2024 was just $0.7~~ million. ~~The~~SBFG ~~Company~~Title ~~saw~~revenue ~~its~~also ~~wealth~~remained ~~management~~level ~~assets under management increase by $45.9 million to $547.7 million~~ at ~~December 31, 2024, with total wealth management fees of~~ $31.564 million.

Noninterest Expense	Years Ended December 31,
($ in thousands)	2024		2023		% Change
Salaries & employee benefits	$	23,603	$	22,777		3.6	%
Net occupancy expense		2,884		3,096		-6.8	%
Equipment expense		4,333		4,078		6.3	%
Data processing fees		3,075		2,659		15.6	%
Professional fees		2,927		3,024		-3.2	%
Marketing expense		821		782		5.0	%
Telephone and communications		525		501		4.8	%
Postage and delivery expense		447		432		3.5	%
State, local and other taxes		907		949		-4.4	%
Employee expense		733		631		16.2	%
Other expense		2,704		3,033		-10.8	%
Total noninterest expense	$	42,959	$	41,962		2.4	%

Operating expense increased by $1.0 million, or 2.4 percent, from $42.0 million in 2023 to $43.0 million in 2024, due to higher incentive and commission levels, which were partially offset by moving higher medical costs to SB Captive.

Total noninterest expense was $43.0 million for 2024 compared to $42.0 million for 2023, representing a $1.0 million, or 2.4 percent, increase year-over-year. Total full-time equivalent employees ended 2024 at 252, which was up 1 from year end 2023.

Earnings Summary – 2023 vs. 2022

Net income for 2023 was $12.1 million, or $1.75 per diluted share, compared with net income of $12.5 million, or $1.77 per diluted share, for 2022. State Bank reported net income for 2023 of $13.3 million, which was down slightly from the $13.4 million of net income in 2022. SBFG Title reported net income for 2023 of $0.24 million, which was down from net income of $0.39 million for 2022.

Positive results for 2023 included loan growth of $38.1 million, while deposits were slightly lower by $16.5 million. The Company completed the final forgiveness in January of 2023 from the nearly 1,200 PPP loans processed during 2020 and 2021. The mortgage banking business line was impacted by the rapidly rising rates, which contributed to the reduction in both balance growth and gains on sale. For the full year of 2023, residential real estate loan production was $215.5 million, with $3.6 million of revenue from gains on sale. The level of mortgage origination was down from the $313.0 million in 2022. The Company’s loans serviced for others ended the year at $1.367 billion, up slightly from $1.352 billion at December 31, 2022.

Operating revenue decreased just slightly by $0.6 million, or 1.1 percent, from $57.6 million in 2022 to $57.0 million in 2023 due to decreased originated mortgage servicing rights (“OMSR”) recapture, significantly lower mortgage gain revenue offset by a $1.4 million gain on the sale of equity securities. SBFG Title revenue decreased by $0.6 million to $1.6 million for 2023.

Operating expense decreased by $0.35 million, or 0.8 percent, from $42.3 million in 2022 to $42.0 million in 2023, due to lower incentive and commission levels, which were partially offset by higher medical costs and increased spending on technology.

Goodwill, Intangibles and Capital Purchases

The Company completed its most recent annual goodwill impairment review as of December 31, ~~2024~~2025. Due to declines in the Company’s share price, a quantitative evaluation of goodwill was completed as of September 30, 2024, which revealed that impairment was not warranted. No triggering events have occurred since that assessment, which would warrant impairment. At December 31, ~~2024~~2025, the Company concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying value, resulting in no impairment. The Company’s goodwill is further discussed in Note 6 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. Management expects that cash on hand and cash generated from current operations will fund these capital expenditures and purchases.

Liquidity

Liquidity 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. These assets, excluding the borrowings, are commonly referred to as liquid assets. Liquid assets were $~~235~~263.91 million at December 31, ~~2024~~2025, which included pledged available-for-sale securities of $~~132~~141.82 million, compared to liquid assets of $~~246~~235.79 million at December 31, ~~2023~~2024.

The Company does not have material cash requirements for capital expenditures over the next year. Any cash needs for capital requirements would be funded by cash existing at the Company.

The Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolio of $~~852~~978.62 million at December 31, ~~2024~~2025, 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, ~~2024~~2025, all eligible commercial real estate, residential first, multi-family mortgage and agricultural loans were pledged under a 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. Based on the current collateralization requirements of the FHLB, approximately $~~142~~159.59 million of additional borrowing capacity existed at December 31, ~~2024~~2025.

At December 31, ~~2024~~2025, and ~~2023~~2024, the Company had $41.0 million in federal funds lines available. The Company also had $6647.84 million in unpledged securities at December 31, ~~2024~~2025, 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 2024 and 2023 follows:42

The ~~Company experienced positive~~ cash ~~flows~~flow ~~from~~statements ~~operating~~for ~~activities~~the inperiods ~~2024~~presented ~~and~~provide ~~2023.~~an ~~Net~~indication ~~cash~~of ~~from operating activities was $9.5 million and $14.0 million for~~ the ~~years~~Company’s ~~ended~~sources ~~December 31, 2024~~ and ~~2023,~~uses ~~respectively.~~of ~~Significant~~cash ~~operating~~as ~~items~~well ~~for~~as ~~2024~~an ~~included gain on~~indication ~~sale~~ of ~~loans~~the ofability ~~$4.7 million and net income~~ of ~~$11.5~~the ~~million.~~Company ~~Cash~~to ~~provided~~maintain byan ~~the~~adequate ~~sale~~level of ~~loans held for sale were $216~~liquidity.0 ~~million. Cash~~A ~~used~~discussion inof the ~~origination~~cash offlow ~~loans~~statements ~~held~~ for ~~sale~~2025 ~~were~~and ~~$217.8 million.~~2024 follows:

The Company experienced ~~negative~~positive cash flows from ~~investing~~operating activities in ~~2024~~2025 and ~~2023~~2024. Net cash ~~used~~from inoperating ~~investing~~ activities was $2824.90 million and $179.45 million for the years ended December 31, ~~2024~~2025, and ~~2023~~2024, respectively. ASignificant ~~net~~operating ~~increase~~items infor 2025 included gain on sale of loans of $465.82 million ~~was~~and ~~the~~net ~~primary change~~income inof ~~2024~~$14.0 ~~The~~million. ~~primary~~Cash ~~change~~provided ~~for~~by ~~2023~~the ~~was~~sale aof ~~net~~loans ~~increase~~held infor ~~loans~~sale ofwas $38251.7 million. ~~The Company had proceeds from repayments, maturities,~~Cash ~~sales~~used ~~and~~in ~~calls~~the origination of ~~securities~~loans ofheld ~~$18.8~~for ~~million~~sale ~~and~~were $22244.20 million ~~in 2024 and 2023, respectively~~.

The Company experienced ~~positive~~negative cash flows from ~~financing~~investing activities in ~~2024~~2025 and ~~negative cash flows in 2023~~2024. Net cash ~~provided~~used byin ~~financing~~ investing activities was $2268.51 million and ~~net cash used in financing activities was~~ $128.59 million for the years ended December 31, ~~2024~~2025, and ~~2023~~2024, respectively. ~~The~~A net increase in ~~deposits~~loans of $82115.46 million ~~attributed~~was to the ~~positive~~primary change ~~cash~~in ~~flows~~2025. inThe primary change for 2024 ~~and~~was ~~the~~a ~~decrease~~net increase in ~~deposits~~loans of $1646.58 million. ~~attributed~~The toCompany ~~the~~had ~~negative~~proceeds ~~cash~~from ~~flows~~repayments, maturities, sales and calls of securities of $53.8 million and $18.8 million in ~~2023~~2025 and 2024, respectively.

43The Company experienced positive cash flows from financing activities in 2025 and 2024. Net cash provided by financing activities was $89.7 million and $22.5 million for the years ended December 31, 2025, and 2024, respectively. The increase in deposits of $101.6 million and $82.4 million attributed to the positive cash flows in 2025 and 2024, 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, which reflects the Company’s neutral balance sheet that directionally is trending to a liability sensitive position:

Economic Value of Equity
December 31, 2025
($ in thousands)
Change in rates	$ Amount		$ Change			% Change
+400 basis points	$	287,836	$	29,143			11.27	%
+300 basis points		283,095		24,402			9.43	%
+200 basis points		275,227		16,534			6.39	%
+100 basis points		267,386		8,693			3.36	%
Base Case		258,693		-			-
-100 basis points		245,130		(13,563	)		-5.24	%
-200 basis points		226,992		(31,701	)		-12.25	%
-300 basis points		206,265		(52,428	)		-20.27	%
-400 basis points		212,241		(46,452	)		-17.96	%

Economic Value of Equity
December 31, 2024
($ in thousands)
Change in rates	$ Amount		$ Change			% Change
+400 basis points	$	258,979	$	10,652			4.29	%
+300 basis points		258,247		9,920			3.99	%
+200 basis points		253,713		5,386			2.17	%
+100 basis points		250,545		2,218			0.89	%
Base Case		248,327		-			-
-100 basis points		240,798		(7,529	)		-3.03	%
-200 basis points		229,540		(18,787	)		-7.57	%
-300 basis points		213,379		(34,948	)		-14.07	%
-400 basis points		190,188		(58,139	)		-23.41	%

Economic Value of Equity
December 31, 2023
($ in thousands)
Change in rates	$ Amount		$ Change			% Change
+400 basis points	$	206,660	$	(9,716	)		-4.49	%
+300 basis points		211,240		(5,136	)		-2.37	%
+200 basis points		211,639		(4,737	)		-2.19	%
+100 basis points		213,900		(2,476	)		-1.14	%
Base Case		216,376		-			-
-100 basis points		213,526		(2,850	)		-1.32	%
-200 basis points		206,761		(9,616	)		-4.44	%
-300 basis points		195,925		(20,452	)		-9.45	%
-400 basis points		196,802		(19,574	)		-9.05	%

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Asset liability management involves developing, executing and monitoring strategies to maintain appropriate liquidity, ~~maximize~~maximizing net interest income and ~~minimize~~minimizing the impact that significant fluctuations in market interest rates would have on current and future earnings. The business of the Company and the composition of its balance sheet consist of investments in interest-earning assets (primarily loans, mortgage-backed securities, and securities available-for-sale) which are primarily funded by interest-bearing liabilities (deposits and borrowings). With the exception of specific loans which are originated and held for sale, all of the financial instruments of the Company are for other than trading purposes. All of the Company’s transactions are denominated in U.S. dollars with no specific foreign exchange exposure. In addition, the Company has limited exposure to commodity prices related to agricultural loans. The impact of changes in foreign exchange rates and commodity prices on interest rates are assumed to be insignificant. The Company’s financial instruments have varying levels of sensitivity to changes in market interest rates resulting in market risk. Interest rate risk is the Company’s primary market risk exposure; to a lesser extent, liquidity risk also impacts market risk exposure.

Interest rate risk is the exposure of a banking institution’s financial condition and results to adverse movements in interest rates. Accepting this risk can be an important source of profitability and shareholder value; however, excessive levels of interest rate risk could pose a significant threat to the Company’s earnings and capital base. Accordingly, effective risk management that maintains interest rate risks at prudent levels is essential to the Company’s safety and soundness.

Evaluating a financial institution’s exposure to changes in interest rates includes assessing both the adequacy of the management process used to control interest rate risk and the organization’s quantitative level of exposure. When assessing the interest rate risk management process, the Company seeks to ensure that appropriate policies, procedures, management information systems and internal controls are in place to maintain interest rate risks at prudent levels of consistency and continuity. Evaluating the quantitative level of interest rate risk exposure requires the Company to assess the existing and potential future effects of changes in interest rates on its consolidated financial condition, including capital adequacy, earnings, liquidity and asset quality (when appropriate).

The FRB together with the OCC and the FDIC adopted a Joint Agency Policy Statement on interest rate risk effective June 26, 1996. The policy statement provides guidance to examiners and bankers on sound practices for managing interest rate risk, which will form the basis for ongoing evaluation of the adequacy of interest rate risk management at supervised institutions. The policy statement also outlines fundamental elements of sound management that have been identified in prior Federal Reserve guidance and discusses the importance of these elements in the context of managing interest rate risk. Specifically, the guidance emphasizes the need for active board of director and senior management oversight and a comprehensive risk management process that effectively identifies, measures and controls interest rate risk.

Financial institutions derive their income primarily from the excess of interest collected over interest paid. The rates of interest an institution earns on its assets and owes on its liabilities generally are established contractually for a period of time. Since market interest rates change over time, an institution is exposed to lower profit margins (or losses) if it cannot adapt to interest rate changes. For example, assume that an institution’s assets carry intermediate or long-term fixed rates and that those assets are funded with short-term liabilities. If market interest rates rise by the time the short-term liabilities must be refinanced, the increase in the institution’s interest expense on its liabilities may not be sufficiently offset if assets continue to earn at the long-term fixed rates. Accordingly, an institution’s profits could decrease on existing assets because the institution will either have lower net interest income or possibly, net interest expense. Similar risks exist when assets are subject to contractual interest rate ceilings, or rate-sensitive assets are funded by longer-term, fixed-rate liabilities in a declining rate environment.

There are several ways an institution can manage interest rate risk including: 1) matching repricing periods for new assets and liabilities, for example, by shortening or lengthening terms of new loans, investments, or liabilities; 2) selling existing assets or repaying certain liabilities; and 3) hedging existing assets, liabilities, or anticipated transactions. An institution might also invest in more complex financial instruments intended to hedge or otherwise change interest rate risk. Interest rate swaps, futures contracts, options on futures contracts, and other such derivative financial instruments can be used for this purpose. Because these instruments are sensitive to interest rate changes, they require management’s expertise to be effective. The Company has not purchased derivative financial instruments in the past, but during ~~2024~~2025 and ~~2023~~2024 the Company entered into interest rate swap agreements as an accommodation to certain loan customers (see Note 8 to the Consolidated Financial Statements). The Company may purchase such instruments in the future if market conditions are favorable.

The Company manages its interest rate risk by the employment of strategies to assure that desired levels of both interest-earning assets and interest-bearing liabilities mature or reprice with similar time frames. Such strategies include: 1) loans receivable which are renewed (and repriced) annually, 2) variable rate loans, 3) certificates of deposit with terms from one month to six years, 4) securities available-for-sale which mature at various times primarily from one through ten years, 5) federal funds borrowings with terms of one day to 90 days, and 6) FHLB borrowings with terms of one day to ten years.

Management believes the most significant impact on financial results is the Company’s ability to react to changes in interest rates. Management seeks to maintain an essentially balanced position between interest sensitive assets and liabilities and actively manages loan, security, and liability maturities in order to protect against the effects of wide interest rate fluctuations on net income and shareholders’ equity.

For additional quantitative and qualitative information regarding the Company’s interest rate risk, refer to the section captioned “Liquidity” under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K, which is incorporated herein by reference.

4544

Item 8. Financial Statements and Supplementary Data.

Our Consolidated Financial Statements and Notes thereto and other supplementary data follow.

Index to Consolidated Financial Statements

	Page
Consolidated Balance Sheets as of December 31, 2024, and 2023	F-2
Consolidated Balance Sheets as of December 31, 2025, and 2024	F-2
Consolidated Statements of Income for the Years ended December 31, 2024, and 2023	F-3
Consolidated Statements of Income for the Years ended December 31, 2025, and 2024	F-3
Consolidated Statements of Comprehensive Income for the Years ended December 31, 2024 and 2023	F-4
Consolidated Statements of Comprehensive Income for the Years ended December 31, 2025, and 2024	F-4
Consolidated Statements of Shareholders’ Equity for the Years ended December 31, 2024, and 2023	F-5
Consolidated Statements of Shareholders’ Equity for the Years ended December 31, 2025, and 2024	F-5
Consolidated Statements of Cash Flows for the Years ended December 31, 2024, and 2023	F-6
Consolidated Statements of Cash Flows for the Years ended December 31, 2025, and 2024	F-6
Notes to Consolidated Financial Statements	F-7
Report of Independent Registered Public Accounting Firm (Forvis Mazars, LLP) (PCAOB ID: 686)	F-4644

F-1

SB Financial Group, Inc.

Consolidated Balance Sheets

at December 31,

($ in thousands)
	2024			2023
	2025			2024
Assets
Cash and due from banks	$	2571,~~928~~543		$	2225,~~965~~928
Interest bearing time deposits		1,~~565~~140			1,~~535~~565
Available-for-sale securities		~~201~~188,~~587~~626			~~219~~201,~~708~~587
Loans held for sale		61,~~770~~761			26,~~525~~770
Loans, net of unearned income		1,~~046~~180,~~735~~591			1,~~000~~046,~~212~~735
Allowance for credit losses		(1516,~~096~~114	)		(15,~~786~~096	)
Premises and equipment, net		2021,~~456~~688			2120,~~378~~456
Federal Reserve and Federal Home Loan Bank Stock, at cost		5,~~223~~610			75,~~279~~223
Foreclosed assets and other assets held for sale, net		-104			~~511~~-
Interest receivable		45,~~908~~490			4,~~657~~908
Goodwill		2327,~~239~~158			23,239
Cash value of life insurance		3032,~~685~~208			2930,~~121~~685
Mortgage servicing rights		1415,~~868~~254			1314,~~906~~868
Other assets		1210,~~649~~308			1112,~~999~~649
Total assets	$	1,~~379~~545,~~517~~367		$	1,~~343~~379,~~249~~517
Liabilities and shareholders’ equity
Liabilities
Deposits
Non interest bearing demand	$	~~232~~254,~~155~~063		$	~~228~~232,~~713~~155
Interest bearing demand		~~201~~202,~~085~~501			~~166~~201,~~413~~085
Savings		~~237~~296,~~987~~484			~~216~~237,~~965~~987
Money market		~~222~~280,~~161~~896			~~202~~222,~~605~~161
Time deposits		~~259~~273,~~217~~300			~~255~~259,~~509~~217
Total deposits		1,~~152~~307,~~605~~244			1,~~070~~152,~~205~~605
Repurchase agreements		109,~~585~~230			1310,~~387~~585
Federal Home Loan Bank advances		35,000			8335,~~600~~000
Trust preferred securities		10,310			10,310
Subordinated debt net of issuance costs		19,~~690~~739			19,~~642~~690
Interest payable		2,~~351~~460			2,~~443~~351
Other liabilities		2120,~~468~~148			1921,~~320~~468
Total liabilities		1,~~252~~404,~~009~~131			1,~~218~~252,~~907~~009
Commitments & Contingent Liabilities
Shareholders’ Equity
Preferred stock, no par value; authorized 200,000 shares; 2024 - 0 shares outstanding, 2023 - 0 shares outstanding		-			-
Preferred stock, no par value; authorized 200,000 shares; 2025 - 0 shares outstanding, 2024 - 0 shares outstanding		-			-
Common stock, no par value; 2024 - 10,500,000 shares authorized, 8,525,375 shares issued; 2023 - 10,500,000 shares authorized, 8,525,375 shares issued		61,319			61,319
Common stock, no par value; 2025 - 10,500,000 shares authorized, 8,525,375 shares issued; 2024 - 10,500,000 shares authorized, 8,525,375 shares issued		61,319			61,319
Additional paid-in capital		15,~~194~~160			15,~~124~~194
Retained earnings		~~116~~126,~~186~~311			~~108~~116,~~486~~186
Accumulated other comprehensive loss		(3021,~~234~~481	)		(2930,~~831~~234	)
Treasury stock, at cost; (2024 - 1,977,538 common shares; 2023 - 1,756,733 common shares)		(34,957	)		(30,756	)
Treasury stock, at cost; ( 2025 - 2,249,417 common shares; 2024 - 1,977,538 common shares)		(40,073	)		(34,957	)
Total shareholders’ equity		~~127~~141,~~508~~236			~~124~~127,~~342~~508
Total liabilities and shareholders’ equity	$	1,~~379~~545,~~517~~367		$	1,~~343~~379,~~249~~517

See Notes to Consolidated Financial Statements

F-2

SB Financial Group, Inc.

Consolidated Statements of Income

Years Ended December 31,

($ in thousands, except per share data)	~~2024~~2025			~~2023~~2024
Interest Income
Loans
Taxable	$	5664,~~863~~986		$	5156,~~407~~863
Tax exempt		~~496~~455			~~483~~496
Securities
Taxable		4,~~870~~495			54,~~245~~870
Tax exempt		~~146~~144			~~170~~146
Other interest income		13,~~974~~840			~~847~~1,974
Total interest income		6473,~~349~~920			5864,~~152~~349
Interest Expense
Deposits		2122,~~035~~490			1421,~~708~~035
Repurchase agreements & other		~~154~~95			74154
Federal Home Loan Bank advance expense		1,~~721~~467			21,~~603~~721
Trust preferred securities expense		~~739~~637			~~716~~739
Subordinated debt expense		778			778
Total interest expense		2425,~~427~~467			1824,~~879~~427
Net Interest Income		3948,~~922~~453			39,~~273~~922
Provision (benefit) for credit losses - loans		~~(440~~1,274	)		~~688~~(440	)
Provision (benefit) for unfunded commitments		564			(373	)
Provision for unfunded commitments		32			564
Total provision for credit losses		~~124~~1,306			~~315~~124
Net interest income after provision for credit losses		3947,~~798~~147			3839,~~958~~798
Noninterest Income
Wealth management fees		3,~~511~~535			3,~~532~~511
Customer service fees		3,~~467~~544			3,~~403~~467
Gain on sale of mortgage loans & OMSR		45,~~565~~015			34,~~609~~565
Mortgage loan servicing fees, net		21,~~183~~562			2,~~101~~183
Gain on sale of non-mortgage loans		~~145~~143			~~429~~145
Title insurance income		12,~~635~~048			1,635
Net gain on sale of securities		-			1,453
Other income		1,260			1,511
Other income		1,511			1,559
Total noninterest income		17,107			17,017
Total noninterest income		17,017			17,721
Noninterest Expense
Salaries and employee benefits		2325,~~603~~077			2223,~~777~~603
Net occupancy expense		23,~~884~~309			32,~~096~~884
Equipment expense		4,~~333~~535			4,~~078~~333
Data processing fees		3,~~075~~840			23,~~659~~075
Professional fees		23,~~927~~594			32,~~024~~927
Marketing expense		~~821~~651			~~782~~821
Telephone and communications		~~525~~511			~~501~~525
Postage and delivery expense		~~447~~541			~~432~~447
State, local and other taxes		~~907~~1,091			~~949~~907
Employee expense		~~733~~763			~~631~~733
Other expense		23,~~704~~087			32,~~033~~704
Total noninterest expense		4246,~~959~~999			4142,~~962~~959
Income before income tax		1317,~~856~~255			1413,~~717~~856
Provision for income taxes		23,~~386~~281			2,~~622~~386
Net Income	$	1113,~~470~~974		$	1211,~~095~~470
Basic earnings per common share	$	12.7219		$	1.7772
Diluted earnings per common share	$	12.7219		$	1.7572

See Notes to Consolidated Financial Statements

F-3

SB Financial Group, Inc.

Consolidated Statements of Comprehensive Income

Years Ended December 31,

($ in thousands)	~~2024~~2025			~~2023~~2024
Net income	$	1113,~~470~~974		$	1211,~~095~~470
Other comprehensive income (loss)
Investment securities available for sale Available-for-sale investment securities:
Available-for-sale investment securities:
Gross unrealized holding gain (loss) arising in the period		~~(510~~11,081	)		~~2,897~~(510	)
Related tax benefit (expense)		~~107~~(2,328	)		~~(608~~107	)
Net effect on other comprehensive income (loss)		~~(403~~8,753	)		~~2,289~~(403	)
Total comprehensive income	$	1122,~~067~~727		$	1411,~~384~~067

See Notes to Consolidated Financial Statements

F-4

SB Financial Group, Inc.

Consolidated Statements of Shareholders’ Equity

Years Ended December 31,

	Common		Additional Paid-in			Retained			Accumulated Other Comprehensive			Treasury
($ in thousands, except per share data)	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total
($ in thousands, except per share data)	Stock		Capital			Earnings			Loss			Stock			Total
January 1, 2025	$	61,319	$	15,194		$	116,186		$	(30,234	)	$	(34,957	)	$	127,508
January 1, 2024	$	61,319	$	15,124		$	108,486		$	(29,831	)	$	(30,756	)	$	124,342
Net income							13,974									13,974
Net income							11,470									11,470
Other comprehensive income										8,753						8,753
Other comprehensive loss										(403	)					(403	)
Dividends on common, $0.60 per share							(3,849	)								(3,849	)
Dividends on common, $0.56 per share							(3,770	)								(3,770	)
Restricted stock vesting				(570	)								570			-
Restricted stock vesting				(567	)								567			-
Repurchased stock (283,490 shares)													(5,686	)		(5,686	)
Repurchased stock (253,817 shares)													(4,768	)		(4,768	)
Stock based compensation expense				536												536
Stock based compensation expense				637												637
December 31, 2025	$	61,319	$	15,160		$	126,311		$	(21,481	)	$	(40,073	)	$	141,236
December 31, 2024	$	61,319	$	15,194		$	116,186		$	(30,234	)	$	(34,957	)	$	127,508

	Common		Additional Paid-in			Retained			Accumulated Other Comprehensive			Treasury
($ in thousands, except per share data)	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total
($ in thousands, except per share data)	Stock		Capital			Earnings			Loss			Stock			Total
January 1, 2024	$	61,319	$	15,124		$	108,486		$	(29,831	)	$	(30,756	)	$	124,342
January 1, 2023	$	61,319	$	15,087		$	101,966		$	(32,120	)	$	(27,824	)	$	118,428
Net income							11,470									11,470
Net income							12,095									12,095
Other comprehensive loss										(403	)					(403	)
Other comprehensive income										2,289						2,289
Dividends on common, $0.56 per share							(3,770	)								(3,770	)
CECL initial adjustment							(1,991	)								(1,991	)
Restricted stock vesting				(567	)								567			-
Dividends on common, $0.52 per share							(3,584	)								(3,584	)
Repurchased stock (253,817 shares)													(4,768	)		(4,768	)
Restricted stock vesting				(539	)								539			-
Stock based compensation expense				637												637
Repurchased stock (244,325 shares)													(3,471	)		(3,471	)
December 31, 2024	$	61,319	$	15,194		$	116,186		$	(30,234	)	$	(34,957	)	$	127,508
Stock based compensation expense				576												576
December 31, 2023	$	61,319	$	15,124		$	108,486		$	(29,831	)	$	(30,756	)	$	124,342

See Notes to Consolidated Financial Statements

F-5

SB Financial Group, Inc.

Consolidated Statements of Cash Flows

Years Ended December 31,

($ in thousands)

($ in thousands)
	2025			2024
Operating Activities
Net Income	$	13,974		$	11,470
Items not requiring (providing) cash
Depreciation and amortization		2,198			2,151
Provision for credit losses		1,306			124
Expense of share-based compensation plan		536			637
Amortization of premiums and discounts on securities		432			493
Amortization of intangible assets		237			66
Amortization of originated mortgage servicing rights		1,789			1,335
Impairment (recovery) of mortgage servicing rights		289			(41	)
Deferred income taxes		(111	)		2,017
Proceeds from sale of loans held for sale		251,665			216,031
Originations of loans held for sale		(243,962	)		(217,822	)
Gain from sale of loans		(5,158	)		(4,710	)
Changes in
Interest receivable		(582	)		(251	)
Other assets		5,023			(2,656	)
Interest payable & other liabilities		(3,597	)		607
Net cash provided by operating activities		24,039			9,451

Investing Activities
Purchases of available-for-sale securities		(100	)		(1,677	)
Proceeds from maturities of interest bearing time deposits		1,375			1,184
Purchase of interest bearing time deposits		(950	)		(1,214	)
Proceeds from maturities of available-for-sale securities		23,709			18,794
Proceeds from sales of available-for-sale securities		30,122			-
Net change in loans		(115,646	)		(46,773	)
Purchase of premises, equipment		(2,602	)		(1,229	)
Purchase of bank owned life insurance		(800	)		(800	)
Purchase of Federal Reserve and Federal Home Loan Bank Stock		(560	)		-
Proceeds from sale of Federal Reserve and Federal Home Loan Bank Stock		290			2,056
Proceeds from sale of foreclosed assets		91			711
Acquisition, net of cash acquired (paid)		(3,014	)		-
Net cash used in investing activities		(68,085	)		(28,948	)

Financing Activities
Net increase in demand deposits, money market, interest checking & savings accounts		87,468			86,108
Net increase (decrease) in time deposits		14,083			(3,708	)
Net decrease in securities sold under agreements to repurchase		(1,355	)		(2,802	)
Proceeds from Federal Home Loan Bank advances		-			133,000
Repayment of Federal Home Loan Bank advances		(1,000	)		(181,600	)
Stock repurchase plan		(5,686	)		(4,768	)
Dividends on common shares		(3,849	)		(3,770	)
Net cash provided by financing activities		89,661			22,460

Increase in cash and cash equivalents		45,615			2,963
Cash and cash equivalents, beginning of year		25,928			22,965
Cash and cash equivalents, end of year	$	71,543		$	25,928
Supplemental cash flow information
Interest paid	$	25,576		$	24,519
Income taxes paid	$	2,050		$	417
Supplemental non-cash disclosure
Recognition of right-of-use lease assets	$	75		$	-
Transfer of loans to foreclosed assets	$	195		$	-

	2024			2023
Operating Activities
Net Income	$	11,470		$	12,095
Items not requiring (providing) cash
Depreciation and amortization		2,151			2,235
Provision for credit losses		124			315
Expense of share-based compensation plan		637			576
Amortization of premiums and discounts on securities		493			522
Amortization of intangible assets		66			90
Amortization of originated mortgage servicing rights		1,335			1,242
Impairment (recovery) of mortgage servicing rights		(41	)		50
Deferred income taxes		2,017			1,878
Proceeds from sale of loans held for sale		216,031			161,183
Originations of loans held for sale		(217,822	)		(159,292	)
Gain from sale of loans		(4,710	)		(4,038	)
Net gains on sales of securities		-			(1,453	)
Changes in
Interest receivable		(251	)		(566	)
Other assets		(2,656	)		3,876
Interest payable & other liabilities		607			(4,724	)
Net cash provided by operating activities		9,451			13,989
Investing Activities
Purchases of available-for-sale securities		(1,677	)		(723	)
Proceeds from maturities of interest bearing time deposits		1,184			1,686
Purchase of interest bearing time deposits		(1,214	)		(1,090	)
Proceeds from maturities of available-for-sale securities		18,794			22,170
Net change in loans		(46,773	)		(38,736	)
Purchase of premises, equipment		(1,229	)		(958	)
Proceeds from bank owned life insurance		-			398
Purchase of bank owned life insurance		(800	)		-
Purchase of Federal Reserve and Federal Home Loan Bank Stock		-			(953	)
Proceeds from sale of Federal Reserve and Federal Home Loan Bank Stock		2,056			-
Proceeds from sale of foreclosed assets		711			816
Net cash used in investing activities		(28,948	)		(17,390	)
Financing Activities
Net increase (decrease) in demand deposits, money market, interest checking & savings accounts		86,108			(81,089	)
Net increase (decrease) in time deposits		(3,708	)		64,629
Net decrease in securities sold under agreements to repurchase		(2,802	)		(1,536	)
Proceeds from Federal Home Loan Bank advances		133,000			810,500
Repayment of Federal Home Loan Bank advances		(181,600	)		(786,900	)
Stock repurchase plan		(4,768	)		(3,471	)
Dividends on common shares		(3,770	)		(3,584	)
Net cash provided by (used in) financing activities		22,460			(1,451	)
Increase (decrease) in cash and cash equivalents		2,963			(4,852	)
Cash and cash equivalents, beginning of year		22,965			27,817
Cash and cash equivalents, end of year	$	25,928		$	22,965
Supplemental cash flow information
Interest paid	$	24,519		$	17,205
Income taxes paid	$	417		$	-
Supplemental non-cash disclosure
Transfer of loans to foreclosed assets	$	-		$	507

See Notes to Consolidated Financial Statements

F-6

SB Financial Group, Inc.

Notes to Consolidated Financial Statements

Years Ended December 31, ~~2024~~2025, and ~~2023~~2024

Note 1: Organization and Summary of Significant Accounting Policies

Organization and Nature of Operations

SB Financial Group, Inc. (“SB Financial”) is a financial holding company whose principal activity is the ownership and management of its wholly-owned subsidiaries, The State Bank and Trust Company (“State Bank”), SBFG Title, LLC dba Peak Title Agency (“SBFG Title”), and SB Captive, Inc. (“SB Captive”). State Bank owns all the outstanding stock of ~~State~~SBT ~~Bank~~ Insurance, LLC (“SBI”). In December 2024, the Company completed the dissolution of four of its inactive subsidiaries – RFCBC, Inc., Rurbanc Data Services Inc., Rurban Mortgage Company and SBFG Mortgage, LLC. The “Company” refers to SB Financial ~~and~~ and its consolidated subsidiaries collectively, except where the context indicates the reference relates solely to the registrant, SB Financial.

The Company is primarily engaged in providing a full range of banking and wealth management services to individual and corporate customers primarily located in Ohio, Indiana, and Michigan. The Company is subject to competition from other financial institutions in its market areas. The Company is regulated by certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company, State Bank, SBFG Title, SB Captive, and SBI. All significant intercompany accounts and transactions were eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the ACL, loan servicing rights, and fair value of financial instruments.

Significant Accounting Policies

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, ~~2024~~2025 and ~~2023~~2024, cash equivalents consisted primarily of interest-bearing and noninterest bearing demand deposit balances held by correspondent banks.

At December 31, ~~2024~~2025, the Company’s correspondent cash accounts exceeded federally insured limits by $0.67 million. Additionally, the Company had approximately $1860.45 million of cash held by the Federal Reserve Bank (“FRB”) and the Federal Home Loan Bank (“FHLB”), which is not federally insured.

F-7

Securities

Available-for-sale securities, which include any debt security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Unrealized gains and losses are recorded, net of related income tax effects, in other comprehensive income.

Amortization of premiums and accretion of discounts are recorded as interest income from securities. Realized gains and losses are recorded as net security gains (losses). Gains and losses on sales of securities are determined on the specific-identification method.

The Company has made a policy election to exclude accrued interest from the amortized cost basis of securities and report accrued interest separately in other assets on the consolidated balance sheets. A security is placed on nonaccrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a security placed on nonaccrual is reversed against interest income. There was no accrued interest related to securities reversed against interest income for the years ended December 31, ~~2024~~2025, or ~~2023~~2024.

Allowance for Credit Losses – Available-for-Sale Securities

For available-for-sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income as a provision for credit losses. For available-for-sale securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.

Changes in the ACL are recorded as provision for (or reversal of) credit losses. Available-for-sale securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met. At December 31, ~~2024~~2025, no ACL on available-for-sale securities was recorded.

Management has made the accounting policy election to exclude accrued interest receivable on available-for-sale securities from the estimate of credit losses. Should a decline in fair value be the result of credit losses or other factors, the security would be moved into a nonaccrual status and all accrued interest be reversed. Accrued interest receivable on available-for-sale debt securities totaled $0.6 million at December 31, ~~2024~~2025.

Mortgage Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains and losses on loan sales are recorded in noninterest income. The Company utilizes third-party hedges to minimize the impact of interest rate risk fluctuations, and their impact is realized through noninterest income.

F-8

Loans

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 ACL, 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, loans are placed on nonaccrual status not later than 90 days past due. Past due status is based on the contractual terms of the loan. All interest accrued, but not collected for loans that are placed on nonaccrual or charged off, is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

F-8

Allowance for Credit Losses - Loans

The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes that the uncollectability of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Management estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors.

The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company has identified the following portfolio segments:

●

Commercial & Industrial - Commercial & industrial loans consist of loans or lines of credit to finance accounts receivable, inventory or other general business needs, and lease financing agreements for equipment, vehicles, or other assets. The primary risk associated with commercial & industrial loans and lease financing agreements is the ability of borrowers to achieve business results consistent with those projected at origination. Failure to achieve these projections presents risk the borrower will be unable to service the debt consistent with the contractual terms of the loan or lease.

●

Commercial Real Estate - Owner Occupied - Owner occupied commercial real estate loans consist of loans to purchase or re-finance owner occupied nonresidential properties. This includes office buildings and other commercial facilities. Commercial mortgages secured by owner occupied properties are primarily dependent on the ability of borrowers to achieve business results consistent with those projected at loan origination. While these loans are collateralized by real property in an effort to mitigate risk, it is possible the liquidation of collateral will not fully satisfy the obligation as the commercial real estate collateral may be more adversely affected by conditions in the real estate markets or in the general economy.

●

Commercial Real Estate – Nonowner Occupied - Nonowner occupied commercial real estate loans consist of loans to purchase, construct, or refinance investment nonresidential properties. This includes office buildings and other facilities rented or leased to unrelated parties, as well as multifamily properties. The primary risk associated with nonowner occupied commercial real estate loans is the ability of the income-producing property that collateralizes the loan to produce adequate cash flow to service the debt. While these loans are collateralized by real property in an effort to mitigate risk, it is possible the liquidation of collateral will not fully satisfy the obligation as the commercial real estate collateral may be more adversely affected by conditions in the real estate markets or in the general economy.

F-9

●

Agricultural - Agricultural loans consist of loans or lines of credit to finance farmland, equipment, and general business needs or other assets. The primary risk associated with agricultural loans is the ability of borrowers to achieve business results consistent with those projected at origination. Failure to achieve these projections presents risk the borrower will be unable to service the debt consistent with the contractual terms of the loan.

●

Residential Real Estate – Residential real estate mortgage loans consist of loans to purchase or refinance the borrower’s primary dwelling, second residence or vacation home and are often secured by 1-4 family residential property. Significant and rapid declines in real estate values can result in borrowers having debt levels in excess of the current market value of the collateral.

● Home Equity Line of Credit (HELOCs) - Home equity loans consist of HELOCs and other lines of credit secured by first or second liens on the borrower’s primary residence. These loans are secured by both senior and junior liens on the residential real estate and are particularly susceptible to declining collateral values. This risk is elevated for loans secured by junior liens as a substantial decline in value could render the junior lien position effectively unsecured.

F-9

●

Consumer - Consumer loans consist of loans to finance unsecured home improvements, personal assets, such as automobiles or recreational vehicles, and revolving lines of credit that can be secured or unsecured. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas. The value of the underlying collateral within this class is at risk of potential rapid depreciation which could result in unpaid balances in excess of the collateral.

The Company utilizes a Discounted Cash Flow (“DCF”) method to estimate the quantitative portion of the ACL for all loan pools evaluated on a collective pooled basis, with the exception of the credit card portfolio, which ~~was~~is estimated using the Remaining Life Method. For each segment, a Loss Driver Analysis (“LDA”) ~~was~~ is performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA ~~utilized~~ utilizes the Company’s own Federal Financial Institutions Examination Council’s (“FFIEC”) Call Report data, as well as peer institution data.

In creating the DCF model, the Company has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average. The Company’s own loan-level loss data contained within the model is being supplemented with peer data in most loan pools as there was not sufficient loan-level detail from prior cycles reflecting similar economic conditions as the forecasted loss drivers to result in a sound calculation.

Key inputs into the DCF model include loan-level detail, including the amortized cost basis of individual loans, payment structure, loss history, and forecasted loss drivers. The Company utilizes data from Federal Reserve Economic Data (“FRED”) to provide economic forecasts under various scenarios, which are applied to loan pools to reflect credit risk in the current economic environment.

Additional key assumptions in the DCF model include the probability of default (“PD”), loss given default (“LGD”), and prepayment/curtailment rates. When possible, the Company utilizes its own PDs for the reasonable and supportable forecast period. When it is not possible to use the Company’s own PDs, the LDA is utilized to determine PDs based on the forecasted economic factors. When possible, the Company utilizes its own LGDs for the reasonable and supportable forecast period. When it is not possible to use the Company’s own LGDs, the LGD is derived using a method referred to as Frye Jacobs. The Frye Jacobs method is a mathematical formula that traces the relationship between LGD and PD over time and projects the LGD based on the level of PD forecasted. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the reversion period and long-term historical average. The Company’s own prepayment and curtailment rates were used in the ACL estimate.

Management also considers further adjustments to historical loss information for current conditions and reasonable and supportable forecasts that differ from the conditions that exist for the period over which historical information is evaluated as well as other changes in qualitative factors not inherently considered in the quantitative analyses. A number of factors are considered including economic forecast uncertainty, credit quality trends, valuation trends, concentration risk, quality of loan review, changes in personnel, impact of rising interest rates, external factors and other considerations. The resulting qualitative adjustments are applied to the relevant collectively evaluated loan pools. The qualitative analysis increases or decreases the allowance allocation for each loan pool based on the assessment of factors described above. During each reporting period, management also considers the need to adjust the baseline lifetime loss rates for factors that may cause expected losses to differ from those experienced in the historical loss periods.

Loans that do not share risk characteristics are evaluated on an individual basis. When management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting dated adjusted for selling costs as appropriate.

F-10

The Company is also required to consider expected credit losses associated with loan commitments over the contractual period in which it is exposed to credit risk on the underlying commitments. Any allowance for off-balance sheet credit exposures is reported in Other liabilities on the Company’s consolidated balance sheet and is increased or decreased through a provision for credit loss expense on the Company’s consolidated statement of income. The calculation includes consideration of the likelihood that funding will occur and forecasted credit losses on commitments expected to be funded over their estimated lives. The allowance is calculated using the same methodology, inputs and assumptions as the funded portion of loans at the segment level applied to the amount of commitments expected to be funded.

While the Company’s policies and procedures used to estimate the ACL, as well as the resultant provision for credit losses charged to income, are considered adequate by management and are reviewed periodically by regulators, model validators and internal audit, they are necessarily approximate and imprecise. There are factors beyond the Company’s control, such as changes in projected economic conditions, real estate markets or particular industry conditions, which may materially impact asset quality and the adequacy of the ACL and thus the resulting provision for credit losses.

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method for buildings and equipment over the estimated useful lives of the assets. Leasehold improvements are capitalized and depreciated using the straight-line method over the terms of the respective leases.

Long-lived Asset Impairment

The Company evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset is less than the carrying amount of the asset, the asset’s cost is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB) Stock

FRB and FHLB stock are required investments for institutions that are members of the FRB and FHLB systems. The required investment in the common stock is based on a predetermined formula, carried at cost and evaluated for impairment.

Foreclosed Assets and Other Assets Held for Sale

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less costs to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of the carrying amount or the fair value less cost to sell. Revenue and expenses from operations related to foreclosed assets and changes in the valuation allowance are included in net income or expense from foreclosed assets.

F-11

Goodwill

Goodwill is tested for impairment annually or upon a triggering event. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value.

Core Deposits and Other Intangibles

Intangible assets are being amortized on a straight-line basis over weighted-average periods ranging from one to ~~eight~~ten years. Such assets are periodically evaluated as to the recoverability of their carrying value. Purchased software is being amortized using the straight-line method over periods ranging from one to three years.

Derivatives

The Company enters into forward contracts for the future delivery of mortgage loans to third-party investors and enters into interest rate lock commitments (“IRLCs”) with potential borrowers to fund specific mortgage loans that will be sold into the secondary market. The forward contracts are entered into in order to economically hedge the effect of changes in interest rates resulting from the Company’s commitment to fund the loans.

~~F-11~~The IRLCs and forward contracts are not designated as accounting hedges and are recorded at fair value with the changes in fair value reflected in noninterest income on the consolidated statements of income. The fair value of derivative instruments with a positive fair value are reported in accrued income and other assets on the consolidated balance sheets, while the derivative instruments with a negative fair value are reported in accrued expenses and other liabilities on the consolidated balance sheets.

The IRLCs and forward contracts are not designated as accounting hedges and are recorded at fair value with the changes in fair value reflected in noninterest income on the consolidated statements of income. The fair value of derivative instruments with a positive fair value are reported in accrued income and other assets in the consolidated balance sheets, while the derivative instruments with a negative fair value are reported in accrued expenses and other liabilities in the consolidated balance sheets.

For exchange-traded contracts, fair value is based on quoted market prices. For non-exchange traded contracts, fair value is based on dealer quotes, pricing models, discounted cash flow methodologies or similar techniques for which the determination of fair value may require significant management judgment or estimation.

Mortgage Servicing Rights

Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance (Accounting Standards Codification “ASC” 860-50), servicing rights from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer. The Company subsequently measures each class of servicing asset using the amortization method. Under the amortization method, servicing rights are amortized in proportion to and over the period of estimated net servicing income. The amortized assets are assessed for impairment based on fair value at each reporting date.

Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost of service, the discount rate, the custodial earning rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. These variables change from quarter to quarter as market conditions and projected interest rates change, and may have an adverse impact on the value of the mortgage servicing right and may result in a reduction to noninterest income.

Each class of separately recognized servicing assets subsequently measured using the amortization method is evaluated and measured for impairment. Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the carrying amount of the servicing assets for that tranche. The valuation allowance is adjusted to reflect changes in the measurement of impairment after the initial measurement of impairment. Changes in valuation allowances are reported with “Mortgage loan servicing fees, net” in the income statement. Fair value in excess of the carrying amount of servicing assets for that stratum is not recognized.

F-12

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income.

Share-Based Employee Compensation Plan

At December 31, ~~2024~~2025 and ~~2023~~2024, the Company had a share-based employee compensation plan that permits the grant of stock options, restricted stock and other share-based awards to employees, directors and advisory board members of the Company and its subsidiaries (see Note 18 to the Consolidated Financial Statements).

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company – put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before the maturity or the ability to unilaterally cause the holder to return specific assets.

F-12

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Uncertain tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the term “upon examination” also includes resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company files consolidated income tax returns with its subsidiaries. With a few exceptions, the Company is no longer subject to U.S. Federal, State and Local examinations by tax authorities for the years before ~~2020~~2021. As of December 31, ~~2024~~2025, the Company had no uncertain ~~income~~ income tax positions.

Treasury Shares

Treasury stock is stated at cost. Cost is determined by the weighted-average cost method.

F-13

Earnings Per Share

Earnings per share (“EPS”) is computed using the two-class method. Basic EPS represent income available to common shareholders divided by the weighted-average number of common shares outstanding during each period. Diluted EPS reflect additional potential common shares that may be issued by the Company related solely to outstanding stock options or awards which are determined using the treasury stock method. Treasury stock shares are not deemed outstanding for EPS calculations.

Comprehensive Income ~~(Loss)~~

Comprehensive income ~~(loss)~~ consists of net income ~~(loss)~~ and other comprehensive income (loss), net of applicable income taxes. Other comprehensive income (loss) includes unrealized appreciation (depreciation) on available-for-sale securities. AOCI consists solely of the cumulative unrealized gains and losses on available-for-sale securities net of income tax.

Subordinated Debt

At December 31, ~~2024~~2025, the Company had subordinated debt obligations of $20.0 million related to its 3.65% Fixed to Floating Rate Subordinated Notes due 2031, which were issued and sold by the Company on May 27, 2021. The Subordinated Notes were issued in order to provide additional funds for various corporate obligations of the Company, including share buybacks, acquisition costs and organic asset growth (see Note 13 to the Consolidated Financial Statements).

F-13

Revenue Recognition

The Company recognizes revenues as they are earned based on contractual terms, as transactions occur, or services are provided and collectability is reasonably assured. The Company’s principal source of revenue is interest income from loans and leases and investment securities. The Company also earns noninterest income from various banking and financial services offered through State Bank, and title insurance provided by SBFG Title.

Interest income is the largest source of revenue for the Company and is primarily recognized on an accrual basis.

Noninterest income is earned through a variety of financial and transaction services provided to corporate and consumer clients such as trust and wealth advisory, deposit account, debit card, mortgage banking and title insurance.

Adoption of New Accounting Standards:

ASU No. 2020-04: Reference Rate Reform – Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848)

This guidance provides temporary options to ease the potential burden in accounting for reference rate reform. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective as of March 12, 2020 through December 31, 2022. However, a deferral of the implementation of the Reference Rate Reform was issued in December of 2022, which ~~extends~~extended the implementation to December 31, ~~2024~~2025. The Company has implemented a replacement for the reference rate and has determined that the changes did not have a material impact on the Company’s consolidated financial statements.

ASU No. 2023-02: Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (ASU 2023-02)

This ASU permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization if certain conditions are met. A reporting entity makes an accounting policy election to apply the proportional amortization method on a tax-credit-by-tax-credit-program basis rather than electing to apply the proportional amortization method at the reporting entity level or to individual investments. The Company adopted the standard using a modified retrospective transition approach to the amendments related to our low income housing tax credit (“LIHTC”) investments that are eligible to apply proportional amortization. The adoption of this standard did not have a material effect on the Company’s operating results or financial condition.

F-14

ASU No. 2023-07: Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures

This ASU expands operating segment disclosures and requires all segment disclosures to be reported in both annual and interim periods. The new standard requires disclosure of the following: significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) for reportable segments; the title and position of the CODM as well as how the CODM uses the reported measure(s) of profit and loss to assess segment performance; and “other segment items” by reportable segment and a description of its composition. The Company adopted the standard on January 1, 2024, and its adoption did not have a material effect on our financial statements.

Accounting Standards not yet adopted:

ASU No. 2023-09: Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” and became effective on January 1, 2025. The amendments require that public business entities on an annual basis (1) disclose specific categories in ~~this~~the ~~update~~rate ~~address~~reconciliation, ~~investor~~and ~~requests~~(2) provide additional information for ~~more~~reconciling ~~transparency~~items ~~about~~that ~~income~~meet ~~tax~~a ~~information~~quantitative ~~through~~threshold ~~improvements~~(if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income ~~tax~~(or ~~disclosures, primarily~~loss) ~~related~~by tothe applicable ~~effective~~statutory income tax rate). ~~reconciliation~~The ~~and~~amendments require that all entities disclose on an annual basis the following information about ~~related~~income totaxes paid: (1) the amount of income taxes paid, ~~among~~(net ~~certain~~of ~~other~~refunds ~~amendments~~received) todisaggregated by federal (national), state, and ~~improve~~foreign taxes; and (2) the ~~effectiveness~~amount of ~~such~~income ~~disclosures.~~taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amendments ofalso ~~this~~require ~~ASU~~that ~~are~~all ~~effective~~entities ~~for~~disclose ~~fiscal~~the ~~years~~following ~~beginning~~information: ~~after~~(1) ~~December~~income ~~15,~~(or loss) from continuing operations before ~~2024~~income tax expense (or benefit) disaggregated between domestic and ~~are~~foreign; toand be(2) ~~applied~~income ontax aexpense ~~prospective~~(or ~~basis~~benefit) from continuing operations disaggregated by federal (national), state, and foreign. ~~Adoption~~The ofCompany ~~this~~adopted ASU isNo. ~~not~~2023-09 ~~expected~~on toa retrospective basis and its adoption did not have a material impact onto the ~~Company’s Consolidated~~financial ~~Financial~~statements ~~Statements~~of the Company.

F-14

Note 2: Earnings Per Share

Earnings Per Share (“EPS”) is computed using the two-class method. Basic EPS is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the applicable period, excluding participating securities. Participating securities include non-vested restricted stock awards. Non-vested restricted stock awards are considered participating securities to the extent the holders of these securities receive non-forfeitable dividends at the same rate as holders of common shares. Diluted EPS is computed using the weighted-average number of shares determined for the basic EPS plus the dilutive effect of stock compensation using the treasury stock method. EPS for the years ended December 31, ~~2024~~2025, and ~~2023~~2024 is computed as follows:

	Twelve Months Ended December 31,
	Twelve Months Ended Dec. 31,
($ and outstanding shares in thousands - except per share data)	~~2024~~2025		~~2023~~2024
Distributed earnings allocated to common shares	$	3,~~770~~848	$	3,~~584~~770
Undistributed earnings allocated to common shares		710,~~666~~100		87,~~482~~666
Net earnings allocated to common shares		1113,~~436~~948		1211,~~066~~436
Net earnings allocated to participating securities		3426		2934
Net Income allocated to common shares and participating securities	$	1113,~~470~~974	$	1211,~~095~~470
Weighted average shares outstanding for basic earnings per share		6,~~660~~369		6,~~829~~660
Dilutive effect of stock compensation		2019		8820
Weighted average shares outstanding for diluted earnings per share		6,~~680~~388		6,~~917~~680
Basic earnings per common share	$	12.7219	$	1.7772
Diluted earnings per common share	$	12.7219	$	1.7572

There were no anti-dilutive shares in ~~2024~~2025 or ~~2023~~ 2024.

F-15

Note 3: Available-for-Sale Securities

The amortized cost and appropriate fair values, together with gross unrealized gains and losses, of available-for-sale securities at at December 31, ~~2024~~2025 and December 31, ~~2023~~2024 were as follows:

Gross

($ in thousands)

Amortized

Unrealized

Cost

Gains

Losses

Fair Value

December 31, 2024

December 31, 2025

U.S. Treasury and Government agencies

85,~~120~~687

-3

(~~731~~487

)

75,~~389~~203

Mortgage-backed securities

~~203~~184,~~646~~588

(3424,~~030~~641

)

~~169~~159,~~620~~952

State and political subdivisions

10,~~893~~842

-8

(1,~~486~~001

)

9,~~407~~849

Other corporate securities

1714,~~200~~700

(21,~~029~~078

)

1513,~~171~~622

Totals

~~239~~215,~~859~~817

416

(3827,~~276~~207

)

~~201~~188,~~587~~626

Gross

Amortized

Unrealized

Cost

Gains

Losses

Fair Value

December 31, 2023

December 31, 2024

U.S. Treasury and Government agencies

78,~~339~~120

(~~823~~731

)

67,~~517~~389

Mortgage-backed securities

~~221~~203,~~717~~646

(3234,~~853~~030

)

~~188~~169,~~867~~620

State and political subdivisions

1110,~~212~~893

(1,~~322~~486

)

9,~~898~~407

Other corporate securities

17,200

(2,~~774~~029

)

1415,~~426~~171

Totals

~~257~~239,~~468~~859

124

(3738,~~772~~276

)

~~219~~201,~~708~~587

The amortized cost and fair value of securities available-for-sale at December 31, ~~2024~~2025, by contractual maturity, are shown below. Expected maturities differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
($ in thousands)	Cost		Value
Within one year	$	~~2,140~~275	$	~~2,140~~275
Due after one year through five years		1,~~125~~281		1,~~093~~272
Due after five years through ten years		2622,~~023~~794		2321,~~049~~133
Due after ten years		6,~~925~~879		5,~~685~~994
		36,213		31,967
		31,229		28,674
Mortgage-backed securities		~~203~~184,~~646~~588		~~169~~159,~~620~~952
Totals	$	~~239~~215,~~859~~817	$	~~201~~188,~~587~~626

The fair value of securities pledged as collateral, to secure public deposits and for other purposes, was $115.5 million at December 31, 2024, and $89.7 million at December 31, 2023. Securities delivered for repurchase agreements (not included above) were $17.3 million at December 31, 2024 and $19.7 million at December 31, 2023.

F-16

~~Certain~~The fair ~~investments~~value inof ~~debt~~ securities ~~are~~pledged ~~reported in~~as ~~the~~collateral, ~~financial~~to ~~statements~~secure atpublic andeposits ~~amount~~and ~~less~~for ~~than~~other ~~their~~purposes, ~~historical~~was ~~cost~~$115.1 ~~There~~million ~~were~~at ~~138~~December ~~securities~~31, 2025, and ~~139~~$115.5 ~~securities~~million ~~reported with amounts less than their historical value~~ at December 31, 2024 ~~and 2023, respectively~~. ~~Total~~Securities ~~fair~~delivered ~~value~~for ofrepurchase ~~these~~agreements ~~investments~~(not ~~was~~included ~~$201.3~~above) ~~million and~~were $~~217~~26.0 million at December 31, ~~2024~~2025, and ~~2023,~~$17.3 ~~respectively,~~million ~~which~~at ~~was~~December ~~approximately 99 percent and 99 percent~~31, ~~respectively, of the Company’s available-for-sale investment portfolio~~2024.

~~The~~Certain investments ~~following~~in ~~tables~~debt ~~present~~securities are reported in the financial statements at an amount less than their historical cost. There were 125 securities and 138 securities reported with ~~unrealized~~amounts less than their historical value at December 31, 2025, and 2024, respectively. Total ~~losses~~fair value of these investments was $187.0 million and $201.3 million at December 31, 2025 and 2024, respectively, which was approximately 99 percent and ~~2023:~~99 percent, respectively, of the Company’s available-for-sale investment portfolio.

($ in thousands)			Less than 12 Months					12 Months or Longer					Total
	Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2024
U.S. Treasury and Government agencies		11	$	1,929	$	-		$	5,460	$	(731	)	$	7,389	$	(731	)
Mortgage-backed securities		92		-	$	-			169,286		(34,030	)		169,286		(34,030	)
State and political subdivisions		21		1,319	$	(21	)		8,088		(1,465	)		9,407		(1,486	)
Other corporate securities		14		385	$	(115	)		14,786		(1,914	)		15,171		(2,029	)
Totals		138	$	3,633	$	(136	)	$	197,620	$	(38,140	)	$	201,253	$	(38,276	)

The following tables present securities with unrealized losses at December 31, 2025 and 2024 aggregated by major security type and length of time in a continuous unrealized loss position:

			Less than 12 Months				12 Months or Longer					Total
($ in thousands)			Less than 12 Months				12 Months or Longer					Total
	Number of Securities		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2025	Number of Securities		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2023
U.S. Treasury and Government agencies		5	$	-	$	-	$	5,100	$	(487	)	$	5,100	$	(487	)
U.S. Treasury and Government agencies		8	$	-	$	-	$	6,022	$	(823	)	$	6,022	$	(823	)
Mortgage-backed securities		89		-		-		159,690		(24,641	)		159,690		(24,641	)
Mortgage-backed securities		98		-		-		188,508		(32,853	)		188,508		(32,853	)
State and political subdivisions		18		-		-		8,634		(1,001	)		8,634		(1,001	)
State and political subdivisions		20		-		-		8,541		(1,322	)		8,541		(1,322	)
Other corporate securities		13		-		-		13,622		(1,078	)		13,622		(1,078	)
Other corporate securities		13		-		-		13,926		(2,774	)		13,926		(2,774	)
Totals		125	$	-	$	-	$	187,046	$	(27,207	)	$	187,046	$	(27,207	)
Totals		139	$	-	$	-	$	216,997	$	(37,772	)	$	216,997	$	(37,772	)

			Less than 12 Months					12 Months or Longer					Total
December 31, 2024	Number of Securities		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

U.S. Treasury and Government agencies		11	$	1,929	$	-		$	5,460	$	(731	)	$	7,389	$	(731	)
Mortgage-backed securities		92		-		-			169,286		(34,030	)		169,286		(34,030	)
State and political subdivisions		21		1,319		(21	)		8,088		(1,465	)		9,407		(1,486	)
Other corporate securities		14		385		(115	)		14,786		(1,914	)		15,171		(2,029	)
Totals		138	$	3,633	$	(136	)	$	197,620	$	(38,140	)	$	201,253	$	(38,276	)

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these securities are temporary. Management reviews these securities on a quarterly basis and evaluates if any security has a fair value less than its amortized cost. Once these securities are identified, management determines whether a decline in fair value resulted from a credit loss or other factors. In making the assessment, the Company may consider various factors including the extent to which fair value is less than amortized cost, performance on any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specifically related to the security. If the assessment indicates that a credit loss exists, a provision is recorded to the ACL.

F-17

Note 4: Loans and Allowance for Credit Losses

The following ~~tables present~~table presents the categories of loans at December 31, ~~2024~~2025, and ~~2023~~2024:

	Total Loans
($ in thousands)	~~2024~~2025			~~2023~~2024
Commercial & industrial	$	~~124~~113,~~764~~878		$	~~126~~124,~~716~~764
Commercial real estate - owner occupied		~~134~~161,~~431~~086			~~126~~134,~~717~~431
Commercial real estate - nonowner occupied		~~345~~435,~~142~~897			~~297~~345,~~323~~142
Agricultural		6476,~~680~~514			6564,~~659~~680
Residential real estate		~~308~~304,~~378~~741			~~318~~308,~~123~~378
Home equity line of credit (HELOC)		5369,~~811~~173			4753,~~845~~811
Consumer		1519,~~529~~302			1715,~~829~~529
Total loans		1,~~046~~180,~~735~~591			1,~~000~~046,~~212~~735
Allowance for credit losses		(1516,~~096~~114	)		(15,~~786~~096	)
Loans, net	$	1,~~031~~164,~~639~~477		$	~~984~~1,~~426~~031,639

The Company makes commercial, agri-business, consumer and residential loans to customers throughout its defined market area. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

Listed below is a summary of loan commitments, unused lines of credit, and standby letters of credit as of December 31, ~~2024~~2025, and ~~2023~~2024.

($ in thousands)	~~2024~~2025		~~2023~~2024
Loan commitments and unused lines of credit	$	~~224~~232,~~895~~870	$	~~201~~224,~~605~~895
Standby letters of credit		~~915~~1,223		~~1,184~~915
Totals	$	~~225~~234,~~810~~093	$	~~202~~225,~~789~~810

F-18

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

Commercial & Industrial and Agricultural

Commercial & industrial and agricultural loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include a personal guarantee. Short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

F-18

Commercial Real Estate (Owner and Nonowner Occupied)

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The characteristics of properties securing the Company’s commercial real estate portfolio are diverse, but with geographic location almost entirely in the Company’s market area. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In general, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate versus non-owner-occupied loans.

Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews and financial analysis of the developers and property owners. Construction loans are generally based on estimates of costs and value associated with the completed project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Residential Real Estate, Home Equity Line of Credit (“HELOC”) and Consumer

Residential and consumer loans consist of two segments – residential mortgage loans and personal loans. Residential mortgage loans are secured by 1-4 family residences and are generally owner-occupied, and the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. HELOCs are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles. Some consumer personal loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that these loans are of smaller individual amounts and spread over a large number of borrowers.

Allowance for Credit Losses (ACL)

The ACL is an estimate of the expected credit losses on financial assets measured at amortized cost, which is measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual term of the financial assets. A provision for credit losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors.

The following table summarizes the activity related to the ACL for the twelve months ended December 31, 2024.

($ in thousands) For the twelve months ended December 31, 2024	Balance, beginning of period		Chargeoffs			Recoveries		Provision for Credit Losses			Balance, end of period
Commercial & industrial	$	2,003	$	(233	)	$	5	$	891		$	2,666
Commercial real estate - owner occupied		1,952		-			-		(146	)		1,806
Commercial real estate - nonowner occupied		5,718		-			-		3			5,721
Agricultural		440		-			-		444			884
Residential real estate		4,936		(3	)		-		(1,603	)		3,330
HELOC		510		-			-		10			520
Consumer		227		(53	)		34		(39	)		169
Total	$	15,786	$	(289	)	$	39	$	(440	)	$	15,096

F-19

~~As a result of the adoption of ASC 326, the Company recorded a $1.4 million increase to the ACL as a cumulative-effect adjustment on January 1, 2023.~~ The following ~~table~~tables ~~summarizes~~summarize the activity related to the ACL for the twelve months ended December 31, ~~2023~~2025, and 2024.

($ in thousands) For the twelve months ended December 31, 2023	Balance, beginning of period		Impact of Adopting ASC 326			Chargeoffs			Recoveries		Provision for Credit Losses			Balance, end of period
($ in thousands) For the twelve months ended December 31, 2025	Balance, beginning of period		Initial allowance for credit losses on acquired PCD loans			Chargeoffs			Recoveries		Provision for Credit Losses			Balance, end of period
Commercial & industrial	$	12,~~663~~666	$	~~230~~5		$	-(177	)	$	-	$	~~110~~(673	)	$	21,~~003~~821
Commercial real estate - owner occupied		1,~~696~~806		54-			-			-		~~202~~427			12,~~952~~233
Commercial real estate - nonowner occupied		45,~~584~~721		~~1,015~~-			-			-2		~~119~~1,123			56,~~718~~846
Agricultural		~~611~~884		~~(194~~-	)		-			-		23(576	)		~~440~~308
Residential real estate		43,~~438~~330		~~360~~-			(5317	)		1		~~190~~617			43,~~936~~931
HELOC		~~547~~520		~~(76~~-	)		-(4	)		-3		39154			~~510~~673
Consumer		~~279~~169		~~(17~~-	)		(6581	)		2512		5202			~~227~~302
Total	$	1315,~~818~~096	$	~~1,372~~5		$	(~~118~~279	)	$	2618	$	~~688~~1,274		$	1516,~~786~~114

($ in thousands) For the twelve months ended December 31, 2024	Balance, beginning of period		Initial allowance for credit losses on acquired PCD loans		Chargeoffs			Recoveries		Provision for Credit Losses			Balance, end of period
Commercial & industrial	$	2,003	$	-	$	(233	)	$	5	$	891		$	2,666
Commercial real estate - owner occupied		1,952		-		-			-		(146	)		1,806
Commercial real estate - nonowner occupied		5,718		-		-			-		3			5,721
Agricultural		440		-		-			-		444			884
Residential real estate		4,936		-		(3	)		-		(1,603	)		3,330
HELOC		510		-		-			-		10			520
Consumer		227		-		(53	)		34		(39	)		169
Total	$	15,786	$	-	$	(289	)	$	39	$	(440	)	$	15,096

Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The Company reviews individually evaluated loans for designation as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the ACL.

The following ~~table~~tables ~~presents~~present an analysis of collateral-dependent loans of the Company as of December 31, 2025, and 2024.

($ in thousands)	Collateral Type						Allocated
December 31, 2024	Real Estate		Other		Total		Allowance
December 31, 2025	Real Estate		Other		Total		Allowance
Commercial & industrial	$	21,~~252~~367	$	~~625~~673	$	2,~~877~~040	$	~~380~~67
Commercial real estate - owner occupied		429		-		429		13
Commercial real estate - nonowner occupied		~~370~~342		-		~~370~~342		-
Agricultural		-		-		-		-
Residential real estate		561		-		561		17
Residential real estate		801		-		801		26
Total	$	2,699	$	673	$	3,372	$	97
HELOC		-		-		-		-
Consumer		-		-		-		-
Total	$	3,852	$	625	$	4,477	$	419

($ in thousands)	Collateral Type						Allocated
December 31, 2023	Real Estate		Other		Total		Allowance
Commercial & industrial	$	604	$	-	$	604	$	97
Commercial real estate - owner occupied		-		-		-		-
Commercial real estate - nonowner occupied		284		-		284		40
Agricultural		-		-		-		-
Residential real estate		1,023		-		1,023		18
HELOC		-		-		-		-
Consumer		-		-		-		-
Total	$	1,911	$	-	$	1,911	$	155

F-20

($ in thousands)	Collateral Type						Allocated
December 31, 2024	Real Estate		Other		Total		Allowance
Commercial & industrial	$	2,252	$	625	$	2,877	$	380
Commercial real estate - owner occupied		429		-		429		13
Commercial real estate - nonowner occupied		370		-		370		-
Residential real estate		801		-		801		26
Total	$	3,852	$	625	$	4,477	$	419

Credit Risk Profile

The Company categorizes loans into risk categories (loan grades) 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. The Company uses the following definitions for risk ratings:

Pass (grades 1 – 4): Loans which management has determined to be performing as expected and in agreement with the terms established at the time of loan origination.

Special Mention (grade 5): ~~Assets~~Loans 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~~loan or in the Company’s credit position at some future date. Special mention ~~assets~~loans 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 (grade 6): Loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardized the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful (grade 7): Loans classified as doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current known facts, conditions and values, highly questionable and improbable.

Loss (grade 8): Loans are considered uncollectable and of such little value that continuing to carry them as assets on the Company’s financial statement is not feasible. 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 Company evaluates the loan risk grading system definitions and allowance for credit loss methodology on an ongoing basis. The following table presents loan balances by credit quality indicators and gross chargeoffs by year of origination as of December 31, 2025.

F-21

($ in thousands)	Term Loans by Year of Origination												Revolving		Revolving Loans Converted
December 31, 2025	2025		2024		2023		2022		2021		Prior		Loans		to Term		Total

Commercial & industrial
Pass (1 - 4)	$	17,280	$	18,882	$	7,189	$	9,298	$	8,971	$	14,998	$	33,505	$	561	$	110,684
Special Mention (5)		-		30		-		-		231		116		25		517		919
Substandard (6)		-		-		310		153		-		155		99		62		779
Doubtful (7)		-		121		153		433		204		481		-		104		1,496
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	17,280	$	19,033	$	7,652	$	9,884	$	9,406	$	15,750	$	33,629	$	1,244	$	113,878
Current period gross chargeoffs	$	-	$	116	$	-	$	-	$	-	$	33	$	28	$	-	$	177

Commercial real estate - owner occupied
Pass (1 - 4)	$	50,318	$	21,967	$	21,273	$	14,931	$	19,387	$	31,347	$	1,204	$	228	$	160,655
Special Mention (5)		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		-		-		431		-		-		431
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	50,318	$	21,967	$	21,273	$	14,931	$	19,387	$	31,778	$	1,204	$	228	$	161,086
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial real estate - nonowner occupied
Pass (1 - 4)	$	107,361	$	96,667	$	39,358	$	48,962	$	35,737	$	98,539	$	8,058	$	969	$	435,651
Special Mention (5)		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		141		-		105		-		-		246
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	107,361	$	96,667	$	39,358	$	49,103	$	35,737	$	98,644	$	8,058	$	969	$	435,897
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Pass (1 - 4)	$	19,218	$	4,810	$	6,313	$	12,609	$	9,812	$	7,772	$	15,968	$	12	$	76,514
Special Mention (5)		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		-		-		-		-		-		-
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	19,218	$	4,810	$	6,313	$	12,609	$	9,812	$	7,772	$	15,968	$	12	$	76,514
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential real estate
Pass (1 - 4)	$	28,287	$	23,003	$	36,413	$	92,889	$	68,439	$	54,268	$	1	$	-	$	303,300
Special Mention (5)		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		257		96		236		852		-		-		1,441
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	28,287	$	23,003	$	36,670	$	92,985	$	68,675	$	55,120	$	1	$	-	$	304,741
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	17	$	-	$	-	$	17

Home equity line of credit (HELOC)
Pass (1 - 4)	$	605	$	62	$	260	$	391	$	295	$	497	$	60,294	$	6,560	$	68,964
Special Mention (5)		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		-		-		35		81		93		209
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	605	$	62	$	260	$	391	$	295	$	532	$	60,375	$	6,653	$	69,173
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	4	$	-	$	-	$	4

Consumer
Pass (1 - 4)	$	6,935	$	1,082	$	1,249	$	1,670	$	645	$	467	$	7,239	$	-	$	19,287
Special Mention (5)		-		-		-		-		-		-		-		-		-
Substandard (6)		-		6		-		9		-		-		-		-		15
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	6,935	$	1,088	$	1,249	$	1,679	$	645	$	467	$	7,239	$	-	$	19,302
Current period gross chargeoffs	$	-	$	2	$	4	$	-	$	-	$	-	$	75	$	-	$	81

Total Loans
Pass (1 - 4)	$	230,004	$	166,473	$	112,055	$	180,750	$	143,286	$	207,888	$	126,269	$	8,330	$	1,175,055
Special Mention (5)		-		30		-		-		231		116		25		517		919
Substandard (6)		-		6		567		399		236		1,578		180		155		3,121
Doubtful (7)		-		121		153		433		204		481		-		104		1,496
Loss (8)		-		-		-		-		-		-		-		-		-
Total Loans	$	230,004	$	166,630	$	112,775	$	181,582	$	143,957	$	210,063	$	126,474	$	9,106	$	1,180,591
Current period gross chargeoffs	$	-	$	118	$	4	$	-	$	-	$	54	$	103	$	-	$	279

															Revolving Loans
($ in thousands)	Term Loans by Year of Origination												Revolving		Converted
December 31, 2024	2024		2023		2022		2021		2020		Prior		Loans		to Term		Total
Commercial & industrial
Pass (1 - 4)	$	22,688	$	12,927	$	12,813	$	14,207	$	9,101	$	10,022	$	36,363	$	3,204	$	121,325
Special Mention (5)		-		355		-		-		133		-		25		-		513
Substandard (6)		-		-		585		-		-		673		1,147		88		2,493
Doubtful (7)		-		153		-		204		-		48		-		28		433
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	22,688	$	13,435	$	13,398	$	14,411	$	9,234	$	10,743	$	37,535	$	3,320	$	124,764
Current period gross chargeoffs	$	-	$	42	$	25	$	23	$	143	$	-	$	-	$	-	$	233
Commercial real estate - owner occupied
Pass (1 - 4)	$	15,070	$	30,372	$	20,002	$	24,406	$	13,491	$	30,140	$	463	$	49	$	133,993
Special Mention (5)		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		-		430		-		-		-		430
Doubtful (7)		-		-		-		7		-		1		-		-		8
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	15,070	$	30,372	$	20,002	$	24,413	$	13,921	$	30,141	$	463	$	49	$	134,431
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial real estate - nonowner occupied
Pass (1 - 4)	$	94,098	$	47,026	$	50,942	$	40,584	$	39,093	$	72,609	$	118	$	-	$	344,470
Special Mention (5)		398		-		-		-		-		-		-		-		398
Substandard (6)		-		-		154		-		-		120		-		-		274
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	94,496	$	47,026	$	51,096	$	40,584	$	39,093	$	72,729	$	118	$	-	$	345,142
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural
Pass (1 - 4)	$	8,100	$	8,295	$	14,482	$	10,748	$	2,618	$	8,967	$	11,470	$	-	$	64,680
Special Mention (5)		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		-		-		-		-		-		-
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	8,100	$	8,295	$	14,482	$	10,748	$	2,618	$	8,967	$	11,470	$	-	$	64,680
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Residential real estate
Pass (1 - 4)	$	31,291	$	41,982	$	100,375	$	76,146	$	28,237	$	28,797	$	-	$	-	$	306,828
Special Mention (5)		-		-		-		-		-		-		-		-		-
Substandard (6)		-		279		-		256		50		965		-		-		1,550
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	31,291	$	42,261	$	100,375	$	76,402	$	28,287	$	29,762	$	-	$	-	$	308,378
Current period gross chargeoffs	$	-	$	-	$	-	$	3	$	-	$	-	$	-	$	-	$	3
Home equity line of credit (HELOC)
Pass (1 - 4)	$	-	$	-	$	-	$	12	$	18	$	51	$	46,908	$	6,591	$	53,580
Special Mention (5)		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		-		-		48		139		44		231
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	12	$	18	$	99	$	47,047	$	6,635	$	53,811
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer
Pass (1 - 4)	$	1,909	$	1,993	$	3,247	$	725	$	319	$	94	$	7,229	$	-	$	15,516
Special Mention (5)		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		13		-		-		-		-		-		13
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	1,909	$	1,993	$	3,260	$	725	$	319	$	94	$	7,229	$	-	$	15,529
Current period gross chargeoffs	$	-	$	-	$	-	$	5	$	2	$	-	$	46	$	-	$	53
Total Loans
Pass (1 - 4)	$	173,156	$	142,595	$	201,861	$	166,828	$	92,877	$	150,680	$	102,551	$	9,844	$	1,040,392
Special Mention (5)		398		355		-		-		133		-		25		-		911
Substandard (6)		-		279		752		256		480		1,806		1,286		132		4,991
Doubtful (7)		-		153		-		211		-		49		-		28		441
Loss (8)		-		-		-		-		-		-		-		-		-
Total Loans	$	173,554	$	143,382	$	202,613	$	167,295	$	93,490	$	152,535	$	103,862	$	10,004	$	1,046,735
Current period gross chargeoffs	$	-	$	42	$	25	$	31	$	145	$	-	$	46	$	-	$	289

F-22

The following table presents loan balances by credit quality indicators and gross chargeoffs by year of origination as of December 31, ~~2023~~2024.

															Revolving Loans
($ in thousands)	Term Loans by Year of Origination												Revolving		Revolving Loans Converted
($ in thousands)	Term Loans by Year of Origination												Revolving		Converted
December 31, 2024	2024		2023		2022		2021		2020		Prior		Loans		to Term		Total
December 31, 2023	2023		2022		2021		2020		2019		Prior		Loans		to Term		Total
Commercial & industrial
Pass (1 - 4)	$	1722,~~239~~688	$	1812,~~076~~927	$	1912,~~143~~813	$	1014,~~573~~207	$	79,~~449~~101	$	510,~~965~~022	$	4536,~~831~~363	$	~~444~~3,204	$	~~124~~121,~~720~~325
Special Mention (5)		-		~~731~~355		-		64-		-133		~~140~~-		~~201~~25		-		~~1,136~~513
Substandard (6)		-		41-		-585		-		25-		~~137~~673		-1,147		8088		~~283~~2,493
Doubtful (7)		~~195~~-		-153		~~226~~-		-204		1-		~~100~~48		50-		528		~~577~~433
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	1722,~~434~~688	$	1813,~~848~~435	$	1913,~~369~~398	$	1014,~~637~~411	$	79,~~475~~234	$	610,~~342~~743	$	4637,~~082~~535	$	~~529~~3,320	$	~~126~~124,~~716~~764
Current period gross chargeoffs	$	-	$	-42	$	-25	$	-23	$	-143	$	-	$	-	$	-	$	-233
Commercial real estate - owner occupied
Pass (1 - 4)	$	2915,~~253~~070	$	2130,~~427~~372	$	2620,~~808~~002	$	1224,~~931~~406	$	1213,~~881~~491	$	2030,~~409~~140	$	~~112~~463	$	~~173~~49	$	~~123~~133,~~994~~993
Special Mention (5)		-		-		-		~~2,338~~-		~~358~~-		-		-		-		~~2,696~~-
Substandard (6)		-		-		-		-		-430		-		-		-		-430
Doubtful (7)		-		-		26-		-7		1-		-1		-		-		278
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	2915,~~253~~070	$	2130,~~427~~372	$	2620,~~834~~002	$	1524,~~269~~413	$	13,~~240~~921	$	2030,~~409~~141	$	~~112~~463	$	~~173~~49	$	~~126~~134,~~717~~431
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial real estate - nonowner occupied
Pass (1 - 4)	$	5294,~~915~~098	$	6747,~~285~~026	$	4750,~~658~~942	$	4640,~~364~~584	$	3039,~~561~~093	$	4772,~~895~~609	$	~~2,377~~118	$	-	$	~~295~~344,~~055~~470
Special Mention (5)		-398		-		-		-		~~838~~-		~~1,134~~-		-		-		~~1,972~~398
Substandard (6)		-		-		-154		-		-		~~154~~120		18-		-		~~172~~274
Doubtful (7)		-		-		-		-		-		~~124~~-		-		-		~~124~~-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	5294,~~915~~496	$	6747,~~285~~026	$	4751,~~658~~096	$	4640,~~364~~584	$	3139,~~399~~093	$	4972,~~307~~729	$	~~2,395~~118	$	-	$	~~297~~345,~~323~~142
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural
Pass (1 - 4)	$	98,~~496~~100	$	168,~~131~~295	$	1214,~~940~~482	$	310,~~029~~748	$	12,~~859~~618	$	98,~~801~~967	$	1211,~~403~~470	$	-	$	6564,~~659~~680
Special Mention (5)		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		-		-		-		-		-		-
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	98,~~496~~100	$	168,~~131~~295	$	1214,~~940~~482	$	310,~~029~~748	$	12,~~859~~618	$	98,~~801~~967	$	1211,~~403~~470	$	-	$	6564,~~659~~680
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Residential real estate
Pass (1 - 4)	$	5331,~~013~~291	$	~~110~~41,~~531~~982	$	85100,~~075~~375	$	3176,~~558~~146	$	1028,~~425~~237	$	2228,~~564~~797	$	~~1,816~~-	$	~~1,300~~-	$	~~316~~306,~~282~~828
Special Mention (5)		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-279		~~361~~-		54256		~~485~~50		~~920~~965		-		-		1,~~820~~550
Doubtful (7)		-		-		-		-		-		21-		-		-		21-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	5331,~~013~~291	$	~~110~~42,~~531~~261	$	85100,~~436~~375	$	3176,~~612~~402	$	1028,~~910~~287	$	2329,~~505~~762	$	~~1,816~~-	$	~~1,300~~-	$	~~318~~308,~~123~~378
Current period gross chargeoffs	$	-	$	-	$	32-	$	213	$	-	$	-	$	-	$	-	$	533
Home equity line of credit (HELOC)
Pass (1 - 4)	$	-	$	-	$	46-	$	1812	$	8518	$	9451	$	4046,~~932~~908	$	6,~~492~~591	$	4753,~~667~~580
Special Mention (5)		-		-		-		-		-		59-		20-		99-		~~178~~-
Substandard (6)		-		-		-		-		-		-48		-139		-44		-231
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	46-	$	1812	$	8518	$	~~153~~99	$	4047,~~952~~047	$	6,~~591~~635	$	4753,~~845~~811
Current period gross chargeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer
Pass (1 - 4)	$	31,~~296~~909	$	51,~~142~~993	$	13,~~429~~247	$	~~740~~725	$	~~221~~319	$	~~128~~94	$	67,~~863~~229	$	-	$	1715,~~819~~516
Special Mention (5)		-		-		-		1-		-		-		-		-		1-
Substandard (6)		-		9-		-13		-		-		-		-		-		913
Doubtful (7)		-		-		-		-		-		-		-		-		-
Loss (8)		-		-		-		-		-		-		-		-		-
Total	$	31,~~296~~909	$	51,~~151~~993	$	13,~~429~~260	$	~~741~~725	$	~~221~~319	$	~~128~~94	$	67,~~863~~229	$	-	$	1715,~~829~~529
Current period gross chargeoffs	$	-	$	12-	$	8-	$	115	$	-2	$	-	$	-46	$	34-	$	6553
Total Loans
Pass (1 - 4)	$	~~165~~173,~~212~~156	$	~~238~~142,~~592~~595	$	~~193~~201,~~099~~861	$	~~105~~166,~~213~~828	$	6392,~~481~~877	$	~~106~~150,~~856~~680	$	~~110~~102,~~334~~551	$	89,~~409~~844	$	~~991~~1,~~196~~040,392
Special Mention (5)		-398		~~731~~355		-		~~2,403~~-		~~1,196~~133		1

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