SBFG 10-K & 10-Q changes, risk factors and insider trading

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.

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, 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.

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. Further, there has been increased tension with Venezuela in recent months as well as increased trade competition with China. Although the length, impact and outcome of theglobal ongoing war in Ukraine and the conflict in the Middle Eastconflicts 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.

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,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 andthat 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 theof Company,January to1, annual reporting periods and interim reporting periods within those annual periods, 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.

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 generallyU.S. accepted accounting principlesGAAP 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 generallyU.S. accepted accounting principlesGAAP or that are materially misleading.

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 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.

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 generallyU.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.

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.

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.future.

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;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.

The preparation of consolidated financial statements in conformity with accountingU.S. 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. 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.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.

The focus and strategic goal of the Company is to grow into and remain a top decile (>90th percentile) independent financial services company.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 $17.0$17.1 million in noninterest income, or 29.926.1 percent of total operating revenue, from fee-based products. These revenue sources include fees generated from saleable residential mortgage loans, retail deposit products, wealth management services, saleable business-based loans (small business and farm service) and title agency revenue. For the twelve months ended December 31, 2023,2024, the Company generated $17.7$17.0 million in noninterest income, or 31.129.9 percent of total operating revenuerevenue, from fee-based products.

Strengthen our penetration in all markets served: Over our 122-year123-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 sevenfour loan production offices. Combined in the 1415 counties of operation, we command 0.940.93 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.percent in 2024.

The successful execution of these five strategies has enabled the Company to improve financial performance across a broad series of metrics. These metrics over the last five years are outlined in the following table. Specifically, the Company has increased total assets by $121.7$286.2 million, or 9.722.7 percent. The growth has been on both sides of the balance sheet over the five-year period, with loans growing $174.0$307.9 millionmillion, or 19.935.3 percent and deposits growing $103.6$258.2 millionmillion, or 9.924.6 percent.

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 atwo small community bankbanks (The Edon State Bank of Edon, Ohio) in 2020,2020 and The Marblehead Bank in January 2025), the opening of threefive 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.

The accounting and reporting policies of the Company are in accordance with generallyU.S. acceptedGAAP 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, 20242025, and 2023.2024. The preparation of financial statements in conformity with generally accepted accounting principlesU.S. GAAP 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.

The following are the condensed average balance sheets of the Company for the years ending December 3131, andwhich includesinclude the interest earned or or paid, and the average interest rate, on each asset and liability:

The following tablestable setsets 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 maturity distribution and weighted-average interest rates of debt securities available-for-sale at December 31, 2024,2025, 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 if thefor securities were purchased at a premium or discount:

Loans held for investment (“HFI”) increased $46.5$133.9 million, or 4.712.8 percent, to $1.05$1.18 billion at December 31, 2024,2025, which was due to an increase in commercial real estate and agricultural lending during 2024.2025. The Company allowed theits residential real estate portfolio to amortize andwith minimal new production generated on the balance sheet wasduring generated.2025.

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.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, 2024,2025, commercial business and agricultural loans made up approximately 18.016.1 percent of the HFI loan portfolio while commercial real estate loans accounted for approximately 43.950.6 percent of the HFI loan portfolio. As of December 31, 2024,2025, residential first mortgage loans, which are secured by first mortgages on residential real estate, made up approximately 30.025.8 percent of the HFI portfolio, while consumer loans to individuals, which are primarily secured by consumer assets, made up approximately 6.57.5 percent of the HFI loan portfolio.

Total deposits increased $82.4$154.6 million, or 7.713.4 percent, to $1.15$1.31 billion at December 31, 2024.2025. The StateInclusive of Ohio Homebuyer Plus program impacted transactional depositthat growth during 2024, as the Company addedwas approximately $50 $47 million in loweracquired cost deposits from this program.deposits.

Shareholders’ equity at December 31, 2024,2025, was $127.5$141.2 million, or 9.29.1 percent of total assets compared to $124.3$127.5 million or 9.39.2 percent of total assetsassets, at December 31, 2023.2024. Retained earnings increased during the year due to earnings of $11.5$14.0 million less dividends paid to common shareholders of $3.8 million and repurchases of Company common shares of $4.7$5.4 million. The fair market value of the bond portfolio declinedincreased slightlyduring during 20242025 due to the valuation adjustment on the portfolio, which resulted in accumulated other comprehensive loss (“AOCI”) declining risingto to$21.5 million at December 31, 2025, from $30.2 million fromat $29.8December million.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 253,817283,490 shares during 20242025 at an average price of $18.43$19.47 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 17,460300,950 shares, and 482,540199,050 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.

Nonperforming assets totaled $5.5$4.7 million, or 0.400.30 percent of total assetsassets, at December 31, 2024,2025, ana increasedecrease of $2.2$0.8 million, or 65.715.1 percentpercent, from 2023.December 31, 2024. The Company had total net charge-offs on loans of $250,000$261,000 in 2024,2025, as compared to net charge-offs of $92,000$250,000 in 2023. 2024. The Company’s ACL at December 31, 2024,2025, now covers nonperforming loans at 274351.9 percent, downup from 560273.7 percent at December 31, 2023.2024.

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.

Operating revenue for 2024 was steady at $57.0 millionmillion, as increased mortgage volume offset the sale of Visa B shares that occurred in 2023 of $1.4 million. SBFG Title revenue also remained level at $1.64 million.

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 theSB Captive.

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 Company’s goodwill is further discussed in Note 6 to the Consolidated Financial Statements.

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 salesale, and borrowings from various sources. These assets, excluding the borrowings, are commonly referred to as liquid assets. Liquid assets were $235.9$263.1 million at December 31, 2024,2025, which included pledged available-for-sale securities of $132.8$141.2 million, compared to liquid assets of $246.7$235.9 million at December 31, 2023.2024.

The Company experienced positive cash flows from operating activities in 20242025 and 2023.2024. Net cash from operating activities was $9.5$24.0 million and $14.0$9.5 million for the years ended December 31, 20242025, and 2023,2024, respectively. Significant operating items for 20242025 included gain on sale of loans of $4.7$5.2 million and net income of $11.5$14.0 million. Cash provided by the sale of loans held for sale werewas $216.0$251.7 million. Cash Cash used in the origination of loans held for sale were $217.8$244.0 million.

The Company experienced positive cash flows from financing activities in 20242025 and negative cash flows in 2023.2024. Net cash provided by financing activities was $22.5 million and net cash used in financing activities was $1.5$89.7 million and $22.5 million for the years ended December 31, 20242025, and 2023, 2024, respectively. The increase in deposits of $101.6 million and $82.4 million attributed to the positive cash flows in 20242025 and the2024, decrease in deposits of $16.5 million attributed to the negative cash flows in 2023.respectively.

Note 1 to the condensed consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, describes the significant accounting policies used in the development and presentation of the Company’s financial statements. The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States and conform to general practices within the banking industry. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. The Company’s financial position and results of operations can be affected by these estimates and assumptions and are integral to the understanding of reported results. Critical accounting policies are those policies that management believes are the most important to the portrayal of the Company’s financial condition and results, and they require management to make estimates that are difficult, subjective, and/or complex.

Three Months Ended MarchJune 31,30, 2026, compared to Three Months Ended MarchJune 31,30, 2025

Net Income: Net income for the second first quarter of 2026 was $4.3$4.5 million compared to net income of $2.2$3.9 million for the firstsecond quarter of 2025, an increase of $2.1$0.6 million, or or 99.116.7 percent. Diluted earnings per share (“DEPS”) of $0.69$0.72 for the firstsecond quarter of 2026 were higher compared to the DEPS of $0.33$0.60 for the firstsecond quarter of 2025. Net income for the firstsecond quarter of 2026 was positively impacted by higher interest income on loans, partially offset by higher interest expense on deposits and wholesale borrowings. The quarter included a recapturesmall impairment on Mortgage Servicing Rights (“OMSR”) of $0.45$0.05 million. Total noninterest income increasedwas $5.0 million and decreased slightly compared to the prior year second quarter. Mortgage loan volume was lower as compared to the prior year toby $4.7 million.19 Mortgage loan volume was higher as compared to the prior year,percent, with sales of originated mortgages for the firstsecond quarter of 2026 up 36also down by 5 percent as compared to the same period in 2025.

Provision for Credit Losses: The firstsecond quarter provision for credit losses was $214,000$299,000 as compared to a $387,000$597,000 provision for the prior year firstsecond quarter. The Company had net chargeoffs of $26,000$193,000 for the firstsecond quarter of 2026 compared to net chargeoffs of $84,000$46,000 for the year-ago quarter. The provision expense included $300,000$200,000 of growth-related provision, partially offset byand a recaptureprovision of $86,000$99,000 for the growth in unfunded commitments. Total delinquent loans ended the quarter at $3.3$3.8 million, or 0.280.32 percent of total loans.

Consolidated Revenue: Operating revenue, consisting of net interest income (“NII”) and noninterest income, was $17.4$17.9 million for the firstsecond quarter of 2026, an increase of $2.0$0.7 million, or 13.34.5 percent, from the $15.4$17.2 million generated during the firstsecond quarter of 2025.

NII for the firstsecond quarter of 2026 was $12.7$13.0 million, which was up $1.4$0.8 million from the prior year firstsecond quarter’s $11.3$12.1 million. Comparing the firstsecond quarter of 2026 to the prior year year firstsecond quarter, the Company’s earning assets increased $133.3$112.5 million, andbut the average yield on earning assets increaseddecreased by 6 3 basis points. The net interest margin for the firstsecond quarter of 2026 was 3.483.43 percent compared to 3.403.48 percent for the firstsecond quarter of 2025. Funding costs (interest paid to consumers and other entities) for deposits and other interest-bearing liabilities for the firstsecond quarter quarter of 2026 were 2.312.34 percent compared to 2.322.33 percent for the prior year firstsecond quarter.

Total noninterest income was $4.7$5.0 million for the firstsecond quarter of 2026, which increaseddecreased minimally compared to $4.1 million for the prior year firstsecond quarter. Mortgage revenue increaseddecreased during the the firstsecond quarter of 2026, as detailed below, withhowever wealth management and customer service revenue alsowere up compared to the prior year. Impairment of mortgage servicing rights increaseddecreased noninterest income by $0.45$0.05 million in the quarter, compared to a recapture of $0.01 $0.16 million in the prior year firstsecond quarter. SBFG Title contributed revenue of $0.49$0.58 million in the firstsecond quarter of 2026, uplevel $0.09 million fromcompared to the prior year. Noninterest income as a percentage of average assets for the firstsecond quarter of 2026 was 1.211.24 percent compared to 1.14 1.35 percent for the prior year firstsecond quarter.

State Bank originated $65.8$79.3 million of mortgage loans during the firstsecond quarter of 2026 and sold $53.4$70.3 million, with $12.3$9.0 million of loans held for investment. This compares to $39.8$97.9 million originated for the firstsecond quarter of 2025, of which $39.3$74.3 million were sold with the remainder of loans held for investment. The firstsecond quarter 2026 originations and subsequent sales resulted in $0.98$1.5 million of gains, slightlyin higherline thanwith the gains for the firstsecond quarter quarter of 2025. Net mortgage banking revenue was $1.89$1.92 million for the firstsecond quarter of 2026 compared to $1.46$2.16 million for the firstsecond quarter quarter of 2025.

Consolidated Noninterest Expense: Total noninterest expense for the firstsecond quarter of 2026 was $11.9$12.1 million, which was downup $0.5$0.3 million compared to $12.4$11.9 million in the prior-year firstsecond quarter. The quarter included higher expenses related to increasedincentive mortgage activityaccruals and variousother expensesemployee related to pending conversions of our technology systems. The prior year quarter included $0.73 million in one-time costs related to the merger of Marblehead into the Company.benefits.

Income Taxes: Income taxes for the the firstsecond quarter of 2026 were $0.99$1.01 million (18.718.3 percent) compared to $0.43$0.88 million (16.618.5 percent) for the firstsecond quarter of 2025.

Total assets at MarchJune 31,30, 2026, were $1.60$1.62 billion, up $59.2$74.7 million, or 3.84.8 percent, since December 31, 2025. Total loans, net of unearned income, were $1.18$1.19 billion as of MarchJune 31,30, 2026, up $0.5$9.0 million, or 0.010.8 percent, from year-end. Total deposits at MarchJune 31,30, 2026, were $1.37$1.39 billion, an increase of $64.6$83.9 million, or or 4.96.4 percent, since 2025 year end.

Borrowed funds (consisting of FHLB advances, repurchase (“REPO”) agreements, trust preferred securities and subordinated debt) totaled $67.0$59.3 million at MarchJune 31,30, 2026. This was down slightly from year-end 2025 when borrowed funds totaled $77.3$74.3 million. Total shareholders’ equity for the Company of $143.7$146.7 million now stands at 8.959.06 percent of total assets compared to the level at December 31, 2025, of $141.2 million, or 9.14 percent of total assets. Adjusting Adjusting for the temporary impairment of Accumulated other comprehensive loss, total equity would increase to $165.5$168.6 million, or 10.3110.41 percent percent of total assets. The allowance for credit losses of $16.4 million is up $0.27$0.28 million, or 1.701.7 percent from the December 2025 year-end year-end level.

As of MarchJune 31,30, 2026, based on the computations for the FFIEC 041 Consolidated Reports of Condition and Income filed by State Bank with the Federal Reserve Board, State Bank was classified as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as well capitalized, State Bank must maintain capital ratios as set forth in the table below. There are no conditions or events since MarchJune 31,30, 2026, that management management believes have changed State Bank’s capital classification.

State Bank’s actual capital levels and ratios ratios as of MarchJune 31,30, 2026, and December 31, 2025, are presented in the following table. Capital levels are presented for State Bank only as the Company is exempt from quarterly reporting on capital levels at the holding company level:

Liquidity relates primarily to the Company’s ability to fund loan demand, meet deposit customers’ withdrawal requirements and provide for operating expenses. Assets used to satisfy these needs consist of cash and due from banks, federal funds sold, interest-earning deposits in other financial institutions, securities available-for-sale and loans held for sale. These assets are commonly referred to as liquid assets. Liquid assets totaled $327.1 $319.1 million at MarchJune 31,30, 2026, compared to $263.1 million at December 31, 2025.

The Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolio of $979.9$988.1 million at MarchJune 31,30, 2026, and $978.2 million at December 31, 2025, which can and has been used to collateralize borrowings, is an additional source of liquidity. Management believes the Company’s current liquidity level, without these borrowings, is sufficient to meet its liquidity needs. At MarchJune 31,30, 2026, all eligible commercial real estate, first mortgage residential, agricultural and multi-family mortgage loans were pledged under an FHLB blanket lien.

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 the threesix months ended MarchJune 31,30, 2026, and MarchJune 31,30, 2025, follows.

The Company experienced negativepositive cash flows from operating activities for the threesix months ended MarchJune 31,30, 2026, and positiveJune cash flows from operating activities for the three months ended March 31,30, 2025. Net cash used by operating activities was $3.0 million for the three months ended March 31, 2026, and net cash provided by operating activities was $6.7$3.8 million for the six months ended June 30, 2026, and $3.1 million for the threesix months ended MarchJune 31,30, 2025. Highlights for the current year include $54.7$125.4 million in proceeds from the sale of loans, which is up $15.4$11.8 million from the prior year. Originations of loans held for sale was a use of cash of $59.5$129.4 million, which is up $23.2$11.1 million from the prior year . For the threesix months ended MarchJune 31,30, 2026, there was was a gain on sale of loans of $1.1$2.7 million, and depreciation and amortization on premises and equipment of $0.6$1.2 million.

The Company experienced positivenegative cash flows from investing activities for the threesix months ended MarchJune 31,30, 2026, and Marchpositive 31,cash flows from investing activities for the six months ended June 30, 2025. Net cash providedused byin investing activities was $2.1 million for the three months ended March 31, 2026, and $9.2$2.9 million for the threesix months ended MarchJune 31,30, 2026, and net cash provided by investing activities was $7.2 million for the six months ended June 30, 2025. Highlights for the current year include $4.4a $10.3 million increase in loans and $2.5 million interest bearing time deposits purchased, mostly offset by $8.9 million in proceeds from maturing securities, partially offset by a $1.4 million decrease in loans. securities. The prior year activities include a $23.0$29.7 million decreaseincrease in loans and $3.0 million paid for the Marblehead acquisition, net of cash acquired, offset by $6.1$11.5 million in proceeds from maturing securities, and $30.1 million in proceeds from the sale of securities which were acquired from Marblehead.

The Company experienced positive cash flows from financing activities for the threesix months ended MarchJune 31,30, 2026, and MarchJune 31,30, 2025. Net cash provided by financing activities was $55.6$65.6 million million for the threesix months ended MarchJune 31,30, 2026, and $63.3$43.2 million for the threesix months ended MarchJune 31,30, 2025. Highlights for the current period include a $65.6$72.3 million increase in transaction deposits compared to a $45.5$32.2 million increase for the threesix months ended March 31,June 30, 2025. Repayments of Federal Home Loan Bank advances for the threesix months ended MarchJune 31,30, 2026, were $7.5$12.5 million, compared to $1.0 million for the prior year three-monthsix-month period.

The Company’s commercial real estate, first mortgage residential, agricultural and multi-family mortgage portfolios in the total amount of $979.9$988.1 million were pledged to meet FHLB collateralization requirements as of MarchJune 31,30, 2026. Based on the current collateralization requirements of the FHLB, FHLB, the Company had approximately $171.8$180.9 million of additional borrowing capacity at MarchJune 31,30, 2026. The Company also had $26.7$41.0 million in in unpledged securities available to pledge for additional borrowings.

The Company has contractual obligations consisting of long-term debt obligations and operating lease obligations. In addition, as of MarchJune 31,30, 2026, the Company had commitments to sell mortgage mortgage loans totaling $20.4$19.9 million. The Company believes that it has adequate resources to fund commitments as they arise and that it can adjust the rate on savings and time deposits to retain deposits in changing interest rate environments. If the Company requires funds beyond its internal funding capabilities, advances from the FHLB of Cincinnati and other financial institutions are available.