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

the ability of third-party service providers to perform their obligations to us; and other economic, competitive, governmental, regulatory and operational factors affecting our operations, pricing, products and services described elsewhere in this prospectus.report.

Comparison of Financial Condition at MarchJune 31,30, 2026 and December 31, 2025

Total assets. Total assets were $251.3$244.5 million at MarchJune 31,30, 2026, a decrease of $5.2$12.1 million, or 2.0%,4.7%, from December 31, 2025. The decrease was primarily comprised of a decrease in cash and cash equivalents of $14.5$30.1 million and a decrease in available for sale securities of $1.2$1.1 million, which were partially offset by an increase in loans and loans held for sale of $10.4$18.5 million.

Cash and cash equivalents. Cash and cash equivalents decreased by $14.5$30.1 million, or 28.7%,59.7%, to $35.9$20.3 million at MarchJune 31,30, 2026 from December 31, 2025. The decrease was attributable primarily to the growth in loans and loans held for sale of $10.4$18.5 million and a decrease in deposits of $4.4$12.1 million.

Investment securities. Investment securities available-for-sale decreased $1.2$1.1 million, or 1.6%,1.5%, to $75.5$75.6 million at MarchJune 31,30, 2026 from $76.7 million at December 31, 2025. The decrease was due primarily to repayments of available-for-sale securities of $1.2$2.7 million, partially offset by purchases of $500,000,$1.8 million, and the effects of a $547,000$197,000 increase in the gross unrealized loss on securities available-for-sale during the threesix months ended MarchJune 31,30, 2026, to a total unrealized loss of $4.8$4.5 million at MarchJune 31,30, 2026 compared to $4.3 million at December 31, 2025.

During the fourth quarter of 2025, management implemented a strategy to enhance portfolio yields, whereby $7.6 million of low-yielding securities were sold and $41.4 million of available-for-sale securities were purchased, funded by the sale proceeds and $35.0 million in advances from the Federal Home Loan Bank (FHLB). Management anticipatesanticipated, and the Company has realized, an increase in net interest income from the overall higher yields obtained along with an improved interest rate risk position following these transactions.

Loans, net. Loans, net increased by $10.2$18.5 million, or 8.7%,15.7%, to $128.0$136.3 million at MarchJune 31,30, 2026, compared to $117.8 million at December 31, 2025. During the threesix months ended MarchJune 31,30, 2026, loan originations totaled $15.7$27.6 million, an increase of $9.7$10.1 million, or 161.7%,57.7%, compared to the loan origination volume of $6.0$17.5 million for the threesix months ended MarchJune 31,30, 2025. Such amounts included loans originated for sale totaling $1.2$1.7 million for the threesix months ended MarchJune 31,30, 2026, compared to $1.8$3.7 million for the threesix months ended MarchJune 31,30, 2025. Loans held for sale were $160,000 at March 31, 2026. We did not have any loans held for sale at June 30, 2026 and December 31, 2025.

During the threesix months ended MarchJune 31,30, 2026, the increase in our loan portfolio was primarily comprised of increases in commercial real estate loans of $6.0 million, or 11.0%, to $60.4 million at March 31, 2026; residential one- to four-family loans of $2.4$6.5 million, or 6.7%,18.6%, to $37.5$41.7 million at MarchJune 31,30, 2026; commercial real estate loans of $6.3 million, or 11.6%, to $60.7 million at June 30, 2026; construction and development loans of $1.7 million,$409,000, or 42.7%,10.1%, to $5.8$4.5 million at MarchJune 31,30, 2026; multifamily loans of $953,000,$903,000, or 23.7%22.4% to $5.0$4.9 million at MarchJune 31,30, 2026; farmland loans of $672,000, or 15.3% to $5.1 million at March 31, 2026. These increases were partially offset by decreases in commercial and industrial loans of $982,000,$3.7 million, or 7.8%,29.5%, to $11.6$16.3 million at MarchJune 31,30, 2026 and consumer loans of $385,000,$870,000, or 8.6%19.5% to $4.1$5.3 million at MarchJune 31,30, 2026.

Deposits. Deposits decreased by $4.4$12.1 million, or 2.2%,6.1%, to $192.1$184.4 million at MarchJune 31,30, 2026 from $196.5 million at December 31, 2025. The decrease was primarily due to a decrease in demand deposits, both retail and commercial, which decreased $5.5$13.0 million, or 4.3%,10.2%, to $121.1$113.5 million at MarchJune 31,30, 2026, compared to December 31, 2025 and a $322,000,$1.2 million, or 0.7%,2.6%, decrease in certificates of deposit, to $44.0$43.1 million at MarchJune 31,30, 2026 from $44.3 million at December 31, 2025. These decreases were partially offset by an increase in savings deposits, of $1.4$2.0 million, or 5.3%,7.9%, to $27.1$27.8 million at MarchJune 31,30, 2026, compared to December 31, 2025.

At each of MarchJune 31,30, 2026 and December 31, 2025, we had a concentration of deposits from cannabis-related business (CRB) customers, comprised primarily of commercial demand accounts. These deposits totaled $49.5$41.4 million and $59.1 million at these respective dates. The balances tend to be cyclical during the year with mid-year balances being lower.

During the threesix months ended MarchJune 31,30, 2026, we continued our strategy of pursuing growth in demand accounts and other lower cost core deposits, in part by enhancing the products and services we offer, expanding our offering of CRB services into other states, and streamlining commercial banking services through enhanced cash management and treasury management services. We intend to continue our efforts to increase our core deposit base, with an emphasis on growth in consumer and business demand deposits.

Borrowings. Advances from the FHLB totaled $35.0 million at both MarchJune 31,30, 2026 and December 31, 2025.

Shareholders' Equity. Shareholders' equity increased $223,000,$1.1 million, or 1.0%,4.9%, to $22.8$23.7 million at MarchJune 31,30, 2026, compared to $22.6 million at December 31, 2025. The increase was due primarily to net income of $418,000$808,000 during the threesix months ended MarchJune 31,30, 2026, partiallycombined offset bywith a $208,000$288,000 increasedecrease in accumulated other comprehensive loss.

Comparison of Operating Results for the Three Months ended MarchJune 31,30, 2026 and 2025

General. Net income for the three months ended MarchJune 31,30, 2026 was $418,000,$390,000, an increase of $17,000,$41,000, or 4.1%,11.6%, compared to the three months ended MarchJune 31,30, 2025. The increase in net income was primarily due to a $239,000$418,000 increase in net interest income, a $54,000 increase in noninterest income and a $2,000 decrease in income taxes, which werewas partially offset by a $205,000$246,000 increase in noninterest expense andexpense, a $73,000$15,000 increase in the provision for credit losses.losses, an $83,000 decrease in noninterest income and a $32,000 increase in income taxes.

Interest income. Interest income increased $534,000,$758,000, or 21.1%,30.8%, to $3.1$3.2 million for the three months ended MarchJune 31,30, 2026 from the three months ended MarchJune 31,30, 2025. This increase was attributable to a $291,000,$468,000, or 16.2%,25.5%, increase in interest on loans and a $378,000,$411,000, or 122.3%,138.9%, increase in interest on investment securities, which were partially offset by a $135,000,$121,000, or 31.5%,36.8%, decrease in interest on interest-bearing deposits and other assets.

The average yield on loans increased by 4236 basis points to 6.80%6.90% for the three months ended MarchJune 31,30, 2026 from 6.38%6.54% for the three months ended MarchJune 31,30, 2025, while the average balance of loans increased by $10.3$21.3 million, or 9.1%,19.0%, to $122.8$133.6 million during the three months ended MarchJune 31,30, 2026 over the average balance for the three months ended MarchJune 31,30, 2025. The increase in the average yield was due to higher market interest rates year-to-year. While the Federal Reserve Board (FRB) had acted to decrease the Fed Funds rate in the latter partparts of 2024 and again in 2025, these rate adjustments did not have a corresponding effect on interest rates in our lending.

The average yield on investment securities increased by 103116 basis points to 3.40%3.50% for the three months ended MarchJune 31,30, 2026 from 2.37%2.34% for the three months ended MarchJune 31,30, 2025, while the average balance of investment securities increased $28.7$30.2 million, or 55.1%,59.6%, to $80.8 million for the three months ended MarchJune 31,30, 2026 from $52.1$50.6 million for the three months ended MarchJune 31,30, 2025. During the fourth quarter of 2025, management implemented a strategy to enhance investment security portfolio yields, whereby $7.6 million of low-yielding securities were sold and $41.4 million of available-for-sale securities were purchased, funded by the sale proceeds and $35.0 million in advances from the Federal Home Loan Bank (FHLB). The increase in the average yield and the average outstanding balance was a result of this strategy.

Interest Expense. Total interest expense increased $295,000,$340,000, or 51.6%,62.2%, to $867,000$887,000 for the three months ended MarchJune 31,30, 2026 compared to $572,000$547,000 for the three months ended MarchJune 31,30, 2025. The increase was primarily comprised of a $311,000$328,000 increase in interest expense on borrowings, which was partially offset byand a $16,000,$12,000, or 2.8%,2.2%, decreaseincrease in interest expense on deposits. The decreaseincrease in interest expense on deposits was primarily due to an increase of $4.5 million, or 3.7%, in the average balance of deposits, to $127.8 million for the three months ended June 30, 2026 from $123.3 million for the three months ended June 30, 2025, partially offset by a decrease of 10two basis points in the average cost of deposits to 1.73%1.75% for the three months ended MarchJune 31,30, 2026 from 1.83%1.77% for the three months ended MarchJune 31, 2025, partially offset by an increase of $3.7 million, or 3.0%, in the average balance of deposits, to $128.6 million for the three months ended March 31, 2026 from $124.9 million for the three months ended March 31,30, 2025.

The increase in interest expense on borrowings was due primarily to the $35.0$36.3 million increase in the average borrowings outstanding, and a 355361 basis point increase in the average cost of borrowings, to 3.55%3.61% for the three months ended MarchJune 31,30, 2026.2026 as the Company had no borrowings outstanding during the three months ended June 30, 2025. The interest expense on borrowings in 2026 was reduced by $29,000$24,000 as a result of the interest rate swap. The borrowings were used to purchase investment securities during the fourth quarter of 2025, as previously discussed.

Net Interest Income. Net interest income increased $239,000,$418,000, or 12.2%,21.8%, to $2.2$2.3 million for the three months ended MarchJune 31,30, 2026 compared to $2.0$1.9 million for the three months ended MarchJune 31,30, 2025. The interest rate spread increased to 3.06%3.39% for the three months ended MarchJune 31,30, 2026 from 3.00%3.37% for the three months ended MarchJune 31,30, 2025. The net interest margin decreasedincreased to 3.72%4.02% for the three months ended MarchJune 31,30, 2026 from 3.74%4.00% for the three months ended MarchJune 31,30, 2025.

Provision for Credit Losses. Based on an analysis of the factors described in “—Critical Accounting Policies—Allowance for Credit Losses,” we recorded a provision for credit losses of $73,000$24,000 for the three months ended MarchJune 31,30, 2026, compared to no provision$9,000 for the three months ended MarchJune 31,30, 2025. The allowance for credit losses on loans was $1.1$1.2 million at MarchJune 31,30, 2026 and $1.0 million at December 31, 2025 and represented 0.87%0.85% of total loans at MarchJune 31,30, 2026 and 0.87% of total loans at December 31, 2025. Net (recoveries) charge-offs totaled $(2,000) and $35,000$(23,000) during the three months ended MarchJune 31,30, 2026 and 2025, respectively.

Management’s determination of the allowance for credit losses on loans at MarchJune 31,30, 2026 primarily included consideration of the $10.3$8.4 million, or 8.7%,6.5%, increase in gross loans outstanding during the three months ended MarchJune 31,30, 2026, along with decreases in nonperforming and delinquent loans. Total nonperforming loans were $222,000$219,000 at MarchJune 31,30, 2026, compared to $317,000 at December 31, 2025. Total loans past due 30 days or greater were $160,000$103,000 and $372,000 at those respective dates. As a percentage of nonperforming loans, the allowance for credit losses on loans was 505.9%531.8% at MarchJune 31,30, 2026 compared to 326.3% at December 31, 2025.

The allowance for credit losses on unfunded commitments was $47,000$29,000 at MarchJune 31,30, 2026, a decrease of $12,000,$30,000, or 19.9%,50.8%, from the $59,000 allowance at December 31, 2025.

The increase in salaries and employee benefits was due primarily to increases in staffing levels, normal annual merit increases and expense of the new employee stock ownership plan (ESOP). The increase in data processing was due primarily to the addition of software to enhance deposit growth and compliance capabilities.The increase in professional fees was due primarily to costs associated with reporting requirements as a public stock company.

Income Taxes. Income taxes decreasedincreased by $2,000,$32,000, or 1.1%,27.3%, to $166,000$151,000 for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025. The provision for income taxes decreasedincreased despitedue to a $15,000,$73,000, or 2.6%15.6% increase in pretax income, due to the nature and timing of certain nontaxable income items and nondeductible expense items. The effective tax rates were 28.4%28.0% and 29.4%25.4% for the three months ended MarchJune 31,30, 2026 and 2025, respectively.