# SB Financial Group (SBFG) 10-Q SEC filing - Q1 FY2026

- Filed: May 7, 2026, 3:06 PM EDT
- Fiscal quarter: Q1 FY2026
- Calendar quarter: Q1 2026
- Accession: 0001213900-26-053234
- OpenCapital page: https://www.opencapital.sh/filings/0001213900-26-053234
- Markdown URL: https://www.opencapital.sh/filings/0001213900-26-053234.md
- Official SEC filing index: https://www.sec.gov/Archives/edgar/data/767405/000121390026053234/0001213900-26-053234-index.htm

## Filing documents

- [10-Q (ea0289130-10q_sbfinan.htm)](https://www.sec.gov/Archives/edgar/data/767405/000121390026053234/ea0289130-10q_sbfinan.htm)

---

## 10-Q

SEC source: [ea0289130-10q_sbfinan.htm](https://www.sec.gov/Archives/edgar/data/767405/000121390026053234/ea0289130-10q_sbfinan.htm)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2026

OR

☐ 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 1-36785

SB FINANCIAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Ohio 34-1395608

(State or other jurisdiction of     incorporation or organization) (I.R.S. Employer     Identification No.)

401 Clinton Street, Defiance, Ohio 43512

(Address of principal executive offices)

(Zip Code)

(419) 783-8950

(Registrant’s telephone number, including area code)

N/A

(Former name,  former address and former fiscal year, if changed since last report)

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

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common Shares, No Par Value **6,275,117** Outstanding at May 7, 2026 SBFG The NASDAQ Stock Market, LLC     (NASDAQ Capital Market)

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.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerate Filer ☐ Accelerated
Filer ☐ Non-Accelerated Filer ☒ Smaller Reporting Company ☒ Emerging Growth 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
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

**SB FINANCIAL GROUP, INC.**

**FORM 10-Q**

**TABLE OF CONTENTS**

| [**PART I – FINANCIAL INFORMATION**](#a_001) |  | 1 |
| --- | --- | --- |
| Item 1. | [Financial Statements](#a_002) | 1 |
| Item 2. | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#a_003) | 32 |
| Item 3. | [Quantitative and Qualitative Disclosures About Market Risk](#a_004) | 40 |
| Item 4. | [Controls and Procedures](#a_005) | 40 |
| **[PART II – OTHER INFORMATION](#a_006)** |  | 41 |
| Item 1. | [Legal Proceedings](#a_007) | 41 |
| Item 1A. | [Risk Factors](#a_008) | 41 |
| Item 2. | [Unregistered Sales of Equity Securities and Use of Proceeds](#a_009) | 41 |
| Item 3. | [Defaults Upon Senior Securities](#a_010) | 41 |
| Item 4. | [Mine Safety Disclosures](#a_011) | 41 |
| Item 5. | [Other Information](#a_012) | 41 |
| Item 6. | [Exhibits](#a_013) | 42 |
| [Signatures](#a_014) |  | 43 |

i

**PART
I – FINANCIAL INFORMATION**

## Item 1. Financial Statements

**SB Financial Group, Inc.**

### Condensed Consolidated Balance Sheets

| ($ in thousands) | March 31, 2026 / (unaudited) | December 31, 2025 |
| --- | --- | --- |
| Assets |  |  |
| Cash and due from banks | $126,293 | $71,543 |
| Interest bearing time deposits | 1,965 | 1,140 |
| Available-for-sale securities | 183,626 | 188,626 |
| Loans held for sale | 7,203 | 1,761 |
| Loans, net of unearned income | 1,181,135 | 1,180,591 |
| Allowance for credit losses | (16,388) | (16,114) |
| Premises and equipment, net | 21,295 | 21,688 |
| Federal Reserve and Federal Home Loan Bank Stock, at cost | 5,463 | 5,610 |
| Foreclosed assets and other assets held for sale, net | 974 | 104 |
| Interest receivable | 5,499 | 5,490 |
| Goodwill | 27,158 | 27,158 |
| Cash value of life insurance | 32,401 | 32,208 |
| Mortgage servicing rights | 15,728 | 15,254 |
| Other assets | 12,246 | 10,308 |
| Total assets | $1,604,598 | $1,545,367 |
| Liabilities and shareholders’ equity |  |  |
| Liabilities |  |  |
| Deposits |  |  |
| Non interest bearing demand | $248,239 | $254,063 |
| Interest bearing demand | 215,594 | 202,501 |
| Savings | 333,662 | 296,484 |
| Money market | 300,028 | 280,896 |
| Time deposits | 274,300 | 273,300 |
| Total deposits | 1,371,823 | 1,307,244 |
| Repurchase agreements | 9,433 | 9,230 |
| Federal Home Loan Bank advances | 27,500 | 35,000 |
| Trust preferred securities | 10,310 | 10,310 |
| Subordinated debt net of issuance costs | 19,751 | 19,739 |
| Interest payable | 2,553 | 2,460 |
| Other liabilities | 19,573 | 20,148 |
| Total liabilities | 1,460,943 | 1,404,131 |
| Commitments & Contingent Liabilities |  |  |
| Shareholders’ Equity |  |  |
| Preferred stock, no par value; authorized 200,000 shares; 2026 - 0 shares outstanding, 2025 - 0 shares outstanding | - | - |
| Common stock, no par value; 2026 - 10,500,000 shares authorized, 8,525,375 shares issued; 2025 - 10,500,000 shares authorized, 8,525,375 shares issued | 61,319 | 61,319 |
| Additional paid-in capital | 15,065 | 15,160 |
| Retained earnings | 129,631 | 126,311 |
| Accumulated other comprehensive loss | (21,861) | (21,481) |
| Treasury stock, at cost; (2026 - 2,240,560 common shares; 2025 - 2,249,417 common shares) | (40,499) | (40,073) |
| Total shareholders’ equity | 143,655 | 141,236 |
| Total liabilities and shareholders’ equity | $1,604,598 | $1,545,367 |

See notes to condensed consolidated financial statements (unaudited)

1

**SB Financial Group, Inc.**

### Condensed Consolidated Statements of Income (unaudited)

| ($ in thousands, except per share data) | Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 |
| --- | --- | --- |
| Interest Income |  |  |
| Loans |  |  |
| Taxable | $17,246 | $15,244 |
| Tax exempt | 99 | 115 |
| Securities |  |  |
| Taxable | 1,029 | 1,169 |
| Tax exempt | 36 | 38 |
| Other interest income | 897 | 806 |
| Total interest income | 19,307 | 17,372 |
| Interest Expense |  |  |
| Deposits | 5,957 | 5,352 |
| Repurchase agreements & other | 14 | 24 |
| Federal Home Loan Bank advance expense | 285 | 362 |
| Trust preferred securities expense | 144 | 160 |
| Subordinated debt expense | 195 | 195 |
| Total interest expense | 6,595 | 6,093 |
| Net Interest Income | 12,712 | 11,279 |
| Provision for credit losses - loans | 300 | 374 |
| Provision (benefit) for unfunded commitments | (86) | 13 |
| Total provision for credit losses | 214 | 387 |
| Net interest income after provision for credit losses | 12,498 | 10,892 |
| Noninterest Income |  |  |
| Wealth management fees | 941 | 864 |
| Customer service fees | 910 | 879 |
| Gain on sale of mortgage loans & OMSR | 978 | 849 |
| Mortgage loan servicing fees, net | 851 | 611 |
| Gain on sale of non-mortgage loans | 144 | 15 |
| Title insurance income | 485 | 397 |
| Gain on sale of assets | 8 | - |
| Other income | 395 | 492 |
| Total noninterest income | 4,712 | 4,107 |
| Noninterest Expense |  |  |
| Salaries and employee benefits | 6,096 | 6,237 |
| Net occupancy expense | 882 | 893 |
| Equipment expense | 1,244 | 1,072 |
| Data processing fees | 726 | 1,439 |
| Professional fees | 1,016 | 1,034 |
| Marketing expense | 277 | 165 |
| Telephone and communications | 118 | 139 |
| Postage and delivery expense | 187 | 137 |
| State, local and other taxes | 288 | 224 |
| Employee expense | 184 | 174 |
| Other expense | 911 | 896 |
| Total noninterest expense | 11,929 | 12,410 |
| Income before income tax | 5,281 | 2,589 |
| Provision for income taxes | 985 | 431 |
| Net Income | $4,296 | $2,158 |
| Basic earnings per common share | $0.69 | $0.33 |
| Diluted earnings per common share | $0.69 | $0.33 |
| Average common shares outstanding (in thousands): |  |  |
| Basic: | 6,230 | 6,481 |
| Diluted: | 6,243 | 6,502 |

*See notes to condensed consolidated
financial statements (unaudited)*

2

**SB Financial Group, Inc.**

### Condensed Consolidated Statements of Comprehensive Income (unaudited)

| ($ in thousands) | Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 |
| --- | --- | --- |
| Net income | $4,296 | $2,158 |
| Other comprehensive income |  |  |
| Available for sale investment securities: |  |  |
| Gross unrealized holding gains (losses) arising in the period | (481) | 4,256 |
| Related tax (expense) benefit | 101 | (894) |
| Net effect on other comprehensive income | (380) | 3,362 |
| Total comprehensive income | $3,916 | $5,520 |

See notes to condensed consolidated financial statements (unaudited)

3

**SB Financial Group, Inc.**

### Condensed Consolidated Statements of Shareholders’ Equity (unaudited)

| ($ in thousands, except per share data) | Common Stock | Additional / Paid-in Capital | Retained Earnings | Accumulated Other / Comprehensive Loss | Treasury Stock | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Balance, January 1, 2026 | $61,319 | $15,160 | $126,311 | $(21,481) | $(40,073) | $141,236 |
| Net income |  |  | 4,296 |  |  | 4,296 |
| Other comprehensive loss |  |  |  | (380) |  | (380) |
| Cash dividends on common, $0.155 per share |  |  | (976) |  |  | (976) |
| Restricted stock vesting |  | (250) |  |  | 250 | - |
| Repurchased stock (32,365 shares) |  |  |  |  | (676) | (676) |
| Stock based compensation expense |  | 155 |  |  |  | 155 |
| Balance, March 31, 2026 | $61,319 | $15,065 | $129,631 | $(21,861) | $(40,499) | $143,655 |

| ($ in thousands, except per share data) | Common Stock | Additional / Paid-in Capital | Retained Earnings | Accumulated Other / Comprehensive Loss | Treasury Stock | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Balance, January 1, 2025 | $61,319 | $15,194 | $116,186 | $(30,234) | $(34,957) | $127,508 |
| Net income |  |  | 2,158 |  |  | 2,158 |
| Other comprehensive income |  |  |  | 3,362 |  | 3,362 |
| Cash dividends on common, $0.145 per share |  |  | (947) |  |  | (947) |
| Restricted stock vesting |  | (396) |  |  | 396 | - |
| Repurchased stock (33,478 shares) |  |  |  |  | (712) | (712) |
| Stock based compensation expense |  | 157 |  |  |  | 157 |
| Balance, March 31, 2025 | $61,319 | $14,955 | $117,397 | $(26,872) | $(35,273) | $131,526 |

See notes to condensed consolidated financial statements (unaudited)

4

**SB Financial Group, Inc.**

### Condensed Consolidated Statements of Cash Flows (unaudited)

| ($ in thousands) | Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 |
| --- | --- | --- |
| Operating Activities |  |  |
| Net Income | $4,296 | $2,158 |
| Items not requiring (providing) cash |  |  |
| Depreciation and amortization | 582 | 544 |
| Provision for credit losses | 214 | 387 |
| Expense of share-based compensation plan | 155 | 157 |
| Amortization of premiums and discounts on securities | 104 | 106 |
| Amortization of intangible assets | 60 | 101 |
| Amortization of originated mortgage servicing rights | 529 | 293 |
| Recovery of mortgage servicing rights | (452) | (10) |
| Proceeds from sale of loans held for sale | 54,662 | 39,279 |
| Originations of loans held for sale | (59,533) | (36,311) |
| Gain from sale of loans | (1,122) | (864) |
| Gain on sale of assets | (8) | - |
| Changes in |  |  |
| Interest receivable | (9) | (164) |
| Other assets | (2,290) | 2,173 |
| Interest payable & other liabilities | (184) | (1,146) |
| Net cash provided by (used in) operating activities | (2,996) | 6,703 |
| Investing Activities |  |  |
| Purchases of available-for-sale securities | - | (100) |
| Purchases of interest bearing time deposits | (1,715) | - |
| Proceeds from maturities of interest bearing time deposits | 890 | - |
| Proceeds from maturities of available-for-sale securities | 4,415 | 6,117 |
| Proceeds from sales of available-for-sale securities | - | 30,123 |
| Net change in loans | (1,440) | (23,030) |
| Purchase of premises, equipment | (229) | (923) |
| Proceeds from sales of premises, equipment | 48 | - |
| Proceeds from sale of Federal Home Loan Bank Stock | 147 | - |
| Acquisition, net of cash acquired (paid) | - | (3,014) |
| Net cash provided by investing activities | 2,116 | 9,173 |
| Financing Activities |  |  |
| Net increase in demand deposits, money |  |  |
| market, interest checking & savings accounts | 65,579 | 45,468 |
| Net (decrease) increase in time deposits | (1,000) | 20,059 |
| Net increase in securities sold under agreements to repurchase | 203 | 473 |
| Repayment of Federal Home Loan Bank advances | (7,500) | (1,000) |
| Stock repurchase plan | (676) | (712) |
| Cash dividends on common shares | (976) | (947) |
| Net cash provided by financing activities | 55,630 | 63,341 |
| Increase in cash and cash equivalents | 54,750 | 79,217 |
| Cash and cash equivalents, beginning of period | 71,543 | 25,928 |
| Cash and cash equivalents, end of period | $126,293 | $105,145 |
| Supplemental cash flow information |  |  |
| Interest paid | $6,502 | $6,257 |
| Transfer of loans to foreclosed assets | $870 | $73 |
| In conjunction with the Marblehead acquisition, liabilities assumed were: |  |  |
| Fair value of assets acquired | - | $59,161 |
| Cash paid in acquisition | - | (5,009) |
| Liabilities assumed | - | $54,152 |

See notes to condensed consolidated financial statements (unaudited)

5

SB FINANCIAL GROUP, INC.

### **NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

### **NOTE 1 — BASIS OF PRESENTATION**

SB Financial Group, Inc., an Ohio corporation
(“SBFG”), is a financial holding company whose principal activity is the ownership and management of its wholly-owned subsidiaries,
including The State Bank and Trust Company (“State Bank”), SBFG Title, LLC (“SBFG Title”), and SB Captive, Inc.
(“SB Captive”). State Bank owns all of the outstanding stock of State Bank Insurance, LLC (“SBI”).

The condensed consolidated financial statements
include the accounts of SBFG, State Bank, SBFG Title, SB Captive and SBI (collectively, the “Company”). All significant intercompany
accounts and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim
financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statements. The condensed consolidated financial statements reflect all adjustments that are,
in the opinion of management, necessary to fairly present the financial position, results of operations and cash flows of the Company.
Those adjustments consist only of normal recurring adjustments. Results of operations for the three months ended March 31, 2026, are
not necessarily indicative of results for the complete year.

The condensed consolidated balance sheet of the
Company as of December 31, 2025, has been derived from the audited consolidated balance sheet of the Company as of that date.

For further information, refer to the condensed
consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December
31, 2025.

**Accounting Standards not yet adopted:**

**ASU No. 2024-03: Income Statement –
Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses**

In November 2024, the FASB issued ASU 2024-03,
Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income
Statement Expenses. The new standard requires tabular disclosure of certain costs and expenses including more detailed disclosures of
certain categories of expenses such as employee compensation, depreciation and intangible asset amortization that are components of existing
expense captions presented on the face of the income statement. The ASU should be applied prospectively for annual reporting periods
beginning after December 15, 2026, with retrospective application and early adoption permitted. The Company is currently evaluating the
impacts of this guidance on the Company’s consolidated financial statements.

6

### **NOTE 2 - EARNINGS PER SHARE**

Earnings per share (“EPS”) have been
computed based on the weighted average number of common shares outstanding during the periods presented. The average number of common
shares used in the computation of basic and diluted earnings per share are set forth in the table below. There were no anti-dilutive
shares in 2026 or 2025. Participating securities in the table reflect nonvested restricted shares that participate in dividends declared
and paid by the Company on its common shares prior to vesting of the restricted shares.

| ($ and outstanding shares in thousands - except per share data) | Three Months Ended Mar. 31, 2026 | Three Months Ended Mar. 31, 2025 |
| --- | --- | --- |
| Distributed earnings allocated to common shares | $976 | $947 |
| Undistributed earnings allocated to common shares | 3,310 | 1,204 |
| Net earnings allocated to common shares | 4,286 | 2,151 |
| Net earnings allocated to participating securities | 10 | 7 |
| Net Income allocated to common shares and participating securities | $4,296 | $2,158 |
| Weighted average shares outstanding for basic earnings per share | 6,230 | 6,481 |
| Dilutive effect of stock compensation | 13 | 21 |
| Weighted average shares outstanding for diluted earnings per share | 6,243 | 6,502 |
| Basic earnings per common share | $0.69 | $0.33 |
| Diluted earnings per common share | $0.69 | $0.33 |

### **Note 3 – BUSINESS COMBINATIONS**

Effective January 17, 2025, the Company acquired
all of the outstanding common shares of Marblehead Bancorp and its subsidiary The Marblehead Bank of Marblehead, Ohio (collectively,
“Marblehead”). Marblehead was headquartered in Marblehead, Ohio and had two retail offices. At closing, Marblehead Bancorp
was merged with and into SBFG, with SBFG surviving, and immediately thereafter, The Marblehead Bank was merged with and into State Bank,
with State Bank surviving. Under the terms of the merger agreement, shareholders of Marblehead received fixed consideration of $196.31
in cash for each share of Marblehead common stock for total consideration of $5.0 million. The acquisition of Marblehead enabled the
Company to increase both its deposit and loan base and acquire new households in a new market. It is expected that this transaction will
result in business synergies and economies of scale. The acquisition was consistent with the Company’s strategy to expand its presence
in Northwest Ohio and to increase profitability by introducing existing products and services to the acquired customer base.

The Company accounted for the transaction under
the acquisition method of accounting, which means that the acquired assets and liabilities were recorded at fair value at the date of
acquisition. In accordance with ASC 805, the Company expensed approximately $0.7 million of direct acquisition costs during the twelve
months ended December 31, 2025. The $0.7 million in merger expense is split between data processing and professional fees expense. As
a result of the acquisition, the Company recorded $3.9 million of goodwill and $1.7 million of intangible assets in the first quarter
of 2025. The intangible assets are related to core deposits, which are being amortized over 10 years on a straight-line basis. Loans
acquired with deteriorated credit quality (“PCD loans”) since origination were not material. For tax purposes, goodwill is
non-deductible but will be evaluated annually for impairment.

7

The following table summarizes the fair value
of the total consideration transferred as part of the acquisition as well as the fair value of identifiable assets and liabilities assumed
as of the effective date of the transaction based on assumptions that are subject to change as management continues to evaluate as relevant
information becomes available. If, prior to the end of the one-year measurement period for finalizing the purchase price allocation,
relevant information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments
will be recorded in the reporting period in which the adjustment amounts are determined. Potential adjustments, if any, will be related
to assets that may have changes to valuation amounts that were not readily determinable at the acquisition date.

| ($ in thousands) | January 17, 2025 |
| --- | --- |
| Fair value of assets acquired |  |
| Cash and cash equivalents | $1,995 |
| Investment securities | 30,123 |
| Federal Reserve and Federal Home Loan Bank stock | 117 |
| Loans held for investment | 18,661 |
| Premises and equipment | 1,036 |
| Goodwill | 3,919 |
| Core deposit intangible | 1,710 |
| Other assets | 1,600 |
| Total assets acquired | $59,161 |
| Fair value of liabilities assumed |  |
| Deposits | $53,088 |
| Other liabilities | 1,064 |
| Total liabilities assumed | 54,152 |
| Total purchase price (cash) | $5,009 |

### **Note 4 – AVAILABLE-FOR-SALE Securities**

The amortized cost and appropriate fair values,
together with gross unrealized gains and losses, of securities at March 31, 2026, and December 31, 2025, were as follows:

| ($ in thousands) / March 31, 2026 | Amortized / Cost | Gross / Unrealized / Gains | Gross / Unrealized / Losses | Fair / Value |
| --- | --- | --- | --- | --- |
| U.S. Treasury and Government agencies | $5,290 | $2 | $(466) | $4,826 |
| Mortgage-backed securities | 180,479 | 4 | (25,018) | 155,465 |
| State and political subdivisions | 10,829 | 5 | (1,149) | 9,685 |
| Other corporate securities | 14,700 | - | (1,050) | 13,650 |
| Totals | $211,298 | $11 | $(27,683) | $183,626 |

| December 31, 2025 | Amortized / Cost | Gross / Unrealized / Gains | Gross / Unrealized / Losses | Fair / Value |
| --- | --- | --- | --- | --- |
| U.S. Treasury and Government agencies | $5,687 | $3 | $(487) | $5,203 |
| Mortgage-backed securities | 184,588 | 5 | (24,641) | 159,952 |
| State and political subdivisions | 10,842 | 8 | (1,001) | 9,849 |
| Other corporate securities | 14,700 | - | (1,078) | 13,622 |
| Totals | $215,817 | $16 | $(27,207) | $188,626 |

8

The amortized cost and fair value of securities
available-for-sale at March 31, 2026, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities
because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

| ($ in thousands) | Amortized / Cost | Fair / Value |
| --- | --- | --- |
| Within one year | $443 | $441 |
| Due after one year through five years | 3,508 | 3,345 |
| Due after five years through ten years | 20,000 | 18,522 |
| Due after ten years | 6,868 | 5,853 |
|  | 30,819 | 28,161 |
| Mortgage-backed securities | 180,479 | 155,465 |
| Totals | $211,298 | $183,626 |

The fair value of securities pledged as collateral,
to secure public deposits and for other purposes, was $156.9 million at March 31, 2026, and $115.1 million at December 31, 2025. The
fair value of securities delivered for repurchase agreements was $17.9 million at March 31, 2026, and $26.0 million at December 31, 2025.

There were no realized gains or losses from sales
of available-for-sale securities for the three months ended March 31, 2026, and March 31, 2025.

Certain investments in debt securities are reported
in the condensed consolidated financial statements at an amount less than their historical cost. Total fair value of these investments
was $182.4 million at March 31, 2026, and $187.0 million at December 31, 2025, which consisted of 127 securities, or approximately 91
percent, and 125 securities, or approximately 99 percent, respectively, of the Company’s available-for-sale investment portfolio
at such dates. 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.

Securities with unrealized losses, aggregated
by investment class and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2026,
and at December 31, 2025, are as follows:

| Line item | Less than 12 Months | 12 Months or Longer | Total |
| --- | --- | --- | --- |
| Number of Securities | Unrealized Losses | Unrealized Losses | Unrealized Losses |
| 5 | - | $$(466) | $$(466) |
| 90 | - | (25,018) | (25,018) |
| 19 | (21) | (1,128) | (1,149) |
| 13 | - | (1,050) | (1,050) |
| 127 | $$(21) | $$(27,662) | $$(27,683) |

| Line item | Less than 12 Months | 12 Months or Longer | Total |
| --- | --- | --- | --- |
| Number of Securities | Unrealized Losses | Unrealized Losses | Unrealized Losses |
| 5 | - | $$(487) | $$(487) |
| 89 | - | (24,641) | (24,641) |
| 18 | - | (1,001) | (1,001) |
| 13 | - | (1,078) | (1,078) |
| 125 | - | $$(27,207) | $$(27,207) |

9

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 the
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 of 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 allowance
for credit losses (the “ACL”).

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 March 31, 2026, and December 31, 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. Accrued interest receivable
on available-for-sale debt securities totaled $0.6 million at March 31, 2026, and $0.6 million at December 31, 2025. Should the decline
in fair value be the result of credit losses or other factors, the security would be moved to nonaccrual status and all accrued interest
reversed.

### **NOTE 5 – LOANS AND ALLOWANCE FOR CREDIT LOSSES**

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
chargeoffs, the allowance for credit losses, 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, all loan classes are placed on nonaccrual status not later than 90 days past due, unless the loan is well-secured
and in the process of collection. 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.

The following table summarizes the composition of the loan portfolio:

| ($ in thousands) | Total Loans / 2026 | Total Loans / 2025 |
| --- | --- | --- |
| Commercial & industrial | $112,226 | $113,878 |
| Commercial real estate - owner occupied | 155,500 | 161,086 |
| Commercial real estate - nonowner occupied | 446,056 | 435,897 |
| Agricultural | 78,569 | 76,514 |
| Residential real estate | 299,741 | 304,741 |
| Home equity line of credit (HELOC) | 69,457 | 69,173 |
| Consumer | 19,586 | 19,302 |
| Total loans | 1,181,135 | 1,180,591 |
| Allowance for credit losses | (16,388) | (16,114) |
| Loans, net | $1,164,747 | $1,164,477 |

10

The totals shown above are net of accretable
discounts on acquired loans and deferred loan fees and costs, which totaled $0.35 million in net fees at March 31, 2026, and $0.55 million
at December 31, 2025.

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

Commercial & Industrial and Agricultural

Commercial & industrial loans and agricultural
loans are primarily underwritten 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.

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
versus non-owner-occupied commercial real estate loans.

Construction loans are underwritten utilizing
feasibility studies, independent appraisal reviews and financial analysis of the developers and property owners. Construction loans are
generally underwritten 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, 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. Home equity lines of credit (“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 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.

11

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 economic conditions, such as changes in unemployment rates, property values, or other
relevant factors.

Accrued interest receivable related to loans
totaled $3.7 million both at March 31, 2026, and at December 31, 2025, and is excluded from the estimate of credit losses.

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, construct, or refinance 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.
- 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,  construct, or refinance the borrower’s primary dwelling, second residence or vacation  home and are 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 Loans- 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.
- 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.

12

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 and consumer loan portfolios, which are estimated using the Remaining Life Method. For each segment, a Loss Driver
Analysis (“LDA”) is performed in order to identify appropriate loss drivers and create a regression model for use in forecasting
cash flows. The LDA 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 from January 2016 through March 31, 2026, contained within the model was 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 utilizes its own prepayment and curtailment rates in the ACL
estimate. In pools where observations are not sufficient, the Company utilizes the model’s most relevant benchmark rate.

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 date adjusted for selling costs as
appropriate.

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 condensed consolidated balance
sheet and is increased or decreased through a provision for credit loss expense on the Company’s condensed 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.

13

During the first quarter of 2025, the Company
completed the acquisition of Marblehead. The Company performed an analysis of the acquired non-PCD loan portfolio as part of the acquisition
process and recorded a provision for credit losses of $0.23 million subsequent to the date of acquisition.

The following tables summarize the activity related
to the ACL for the three months ended March 31, 2026, and March 31, 2025, and for the twelve months ended December 31, 2025.

| ($ in thousands) For the three months ended March 31, 2026 | 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 | $1,821 | - | - | - | $(15) | $1,806 |
| Commercial real estate - owner occupied | 2,233 | - | - | - | 180 | 2,413 |
| Commercial real estate - nonowner occupied | 6,846 | - | - | - | (449) | 6,397 |
| Agricultural | 308 | - | - | - | 46 | 354 |
| Residential real estate | 3,931 | - | - | - | 349 | 4,280 |
| HELOC | 673 | - | - | - | 68 | 741 |
| Consumer | 302 | - | (33) | 7 | 121 | 397 |
| Total | $16,114 | - | $(33) | $7 | $300 | $16,388 |

| ($ in thousands) For the three months ended March 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 | $2,666 | $5 | $(61) | - | $(171) | $2,439 |
| Commercial real estate - owner occupied | 1,806 | - | - | - | 58 | 1,864 |
| Commercial real estate - nonowner occupied | 5,721 | - | - | - | 333 | 6,054 |
| Agricultural | 884 | - | - | - | (22) | 862 |
| Residential real estate | 3,330 | - | - | - | 128 | 3,458 |
| HELOC | 520 | - | (4) | - | 23 | 539 |
| Consumer | 169 | - | (21) | 2 | 25 | 175 |
| Total | $15,096 | $5 | $(86) | $2 | $374 | $15,391 |

| ($ 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 | $2,666 | $5 | $(177) | - | $(673) | $1,821 |
| Commercial real estate - owner occupied | 1,806 | - | - | - | 427 | 2,233 |
| Commercial real estate - nonowner occupied | 5,721 | - | - | 2 | 1,123 | 6,846 |
| Agricultural | 884 | - | - | - | (576) | 308 |
| Residential real estate | 3,330 | - | (17) | 1 | 617 | 3,931 |
| HELOC | 520 | - | (4) | 3 | 154 | 673 |
| Consumer | 169 | - | (81) | 12 | 202 | 302 |
| Total | $15,096 | $5 | $(279) | $18 | $1,274 | $16,114 |

14

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 presents an analysis of collateral-dependent
loans of the Company as of March 31, 2026, and December 31, 2025.

| ($ in thousands) / March 31, 2026 | Collateral Type / Real Estate | Collateral Type / Other | Collateral Type / Total | Allocated / Allowance |
| --- | --- | --- | --- | --- |
| Commercial & industrial | $495 | $648 | $1,143 | $62 |
| Commercial real estate - owner occupied | 429 | - | 429 | 13 |
| Commercial real estate - nonowner occupied | 239 | - | 239 | - |
| Residential real estate | 553 | - | 553 | 12 |
| Total | $1,716 | $648 | $2,364 | $87 |

| ($ in thousands) / December 31, 2025 | Collateral Type / Real Estate | Collateral Type / Other | Collateral Type / Total | Allocated / Allowance |
| --- | --- | --- | --- | --- |
| Commercial & industrial | $1,367 | $673 | $2,040 | $67 |
| Commercial real estate - owner occupied | 429 | - | 429 | 13 |
| Commercial real estate - nonowner occupied | 342 | - | 342 | - |
| Residential real estate | 561 | - | 561 | 17 |
| Total | $2,699 | $673 | $3,372 | $97 |

Under the current expected credit loss (“CECL”)
model, for collateral dependent loans, the Company has adopted the practical expedient to measure the ACL based on the fair value of
collateral. The ACL is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral,
which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost,
no allowance is required.

*Credit Risk Profile*

The Company categorizes loans into risk categories
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 (5): 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 loan or in the Company’s credit position at some future date. Special mention
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 (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 jeopardize 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 (7): Loans classified
as doubtful have all the weaknesses inherent in those classified as 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 (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 warranted.
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.

15

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 loan category and year of origination as of March 31, 2026.

| ($ in thousands) / March 31, 2026 | Term Loans by Year of Origination / 2026 | Term Loans by Year of Origination / 2025 | Term Loans by Year of Origination / 2024 | Term Loans by Year of Origination / 2023 | Term Loans by Year of Origination / 2022 | Term Loans by Year of Origination / Prior | Revolving / Loans | Revolving Loans Converted / to Term | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Commercial & industrial |  |  |  |  |  |  |  |  |  |
| Pass (1 - 4) | $5,308 | $16,648 | $18,025 | $6,769 | $8,623 | $22,064 | $32,082 | $697 | $110,216 |
| Special Mention (5) | - | 24 | - | - | - | 111 | - | 516 | 651 |
| Substandard (6) | - | - | - | 285 | 152 | 126 | 99 | 62 | 724 |
| Doubtful (7) | - | - | 123 | 153 | - | 255 | - | 104 | 635 |
| Loss (8) | - | - | - | - | - | - | - | - | - |
| Total | $5,308 | $16,672 | $18,148 | $7,207 | $8,775 | $22,556 | $32,181 | $1,379 | $112,226 |
| Current period gross chargeoffs | - | - | - | - | - | - | - | - | - |
| Commercial real estate - owner occupied |  |  |  |  |  |  |  |  |  |
| Pass (1 - 4) | $7,149 | $51,814 | $12,973 | $19,500 | $14,428 | $48,131 | $850 | $226 | $155,071 |
| Special Mention (5) | - | - | - | - | - | - | - | - | - |
| Substandard (6) | - | - | - | - | - | 429 | - | - | 429 |
| Doubtful (7) | - | - | - | - | - | - | - | - | - |
| Loss (8) | - | - | - | - | - | - | - | - | - |
| Total | $7,149 | $51,814 | $12,973 | $19,500 | $14,428 | $48,560 | $850 | $226 | $155,500 |
| Current period gross chargeoffs | - | - | - | - | - | - | - | - | - |
| Commercial real estate - nonowner occupied |  |  |  |  |  |  |  |  |  |
| Pass (1 - 4) | $35,103 | $93,675 | $97,202 | $32,770 | $48,104 | $128,974 | $9,023 | $966 | $445,817 |
| Special Mention (5) | - | - | - | - | - | - | - | - | - |
| Substandard (6) | - | - | - | - | 137 | 102 | - | - | 239 |
| Doubtful (7) | - | - | - | - | - | - | - | - | - |
| Loss (8) | - | - | - | - | - | - | - | - | - |
| Total | $35,103 | $93,675 | $97,202 | $32,770 | $48,241 | $129,076 | $9,023 | $966 | $446,056 |
| Current period gross chargeoffs | - | - | - | - | - | - | - | - | - |
| Agricultural |  |  |  |  |  |  |  |  |  |
| Pass (1 - 4) | $4,778 | $18,638 | $4,492 | $6,020 | $12,373 | $16,266 | $15,990 | $12 | $78,569 |
| Special Mention (5) | - | - | - | - | - | - | - | - | - |
| Substandard (6) | - | - | - | - | - | - | - | - | - |
| Doubtful (7) | - | - | - | - | - | - | - | - | - |
| Loss (8) | - | - | - | - | - | - | - | - | - |
| Total | $4,778 | $18,638 | $4,492 | $6,020 | $12,373 | $16,266 | $15,990 | $12 | $78,569 |
| Current period gross chargeoffs | - | - | - | - | - | - | - | - | - |
| Residential real estate |  |  |  |  |  |  |  |  |  |
| Pass (1 - 4) | $3,550 | $27,914 | $22,563 | $33,313 | $90,271 | $120,582 | $1 | - | $298,194 |
| Special Mention (5) | - | - | - | - | - | - | - | - | - |
| Substandard (6) | - | - | - | 249 | 181 | 1,117 | - | - | 1,547 |
| Doubtful (7) | - | - | - | - | - | - | - | - | - |
| Loss (8) | - | - | - | - | - | - | - | - | - |
| Total | $3,550 | $27,914 | $22,563 | $33,562 | $90,452 | $121,699 | $1 | - | $299,741 |
| Current period gross chargeoffs | - | - | - | - | - | - | - | - | - |
| Home equity line of credit (HELOC) |  |  |  |  |  |  |  |  |  |
| Pass (1 - 4) | - | $599 | $60 | $258 | $386 | $802 | $60,830 | $6,291 | $69,226 |
| Special Mention (5) | - | - | - | - | - | - | - | - | - |
| Substandard (6) | - | - | - | - | - | 16 | 79 | 136 | 231 |
| Doubtful (7) | - | - | - | - | - | - | - | - | - |
| Loss (8) | - | - | - | - | - | - | - | - | - |
| Total | - | $599 | $60 | $258 | $386 | $818 | $60,909 | $6,427 | $69,457 |
| Current period gross chargeoffs | - | - | - | - | - | - | - | - | - |
| Consumer |  |  |  |  |  |  |  |  |  |
| Pass (1 - 4) | $1,992 | $6,444 | $945 | $999 | $1,403 | $999 | $6,802 | - | $19,584 |
| Special Mention (5) | - | - | - | - | - | - | - | - | - |
| Substandard (6) | - | - | - | 1 | 1 | - | - | - | 2 |
| Doubtful (7) | - | - | - | - | - | - | - | - | - |
| Loss (8) | - | - | - | - | - | - | - | - | - |
| Total | $1,992 | $6,444 | $945 | $1,000 | $1,404 | $999 | $6,802 | - | $19,586 |
| Current period gross chargeoffs | - | - | $5 | $1 | - | - | $27 | - | $33 |
| Total Loans |  |  |  |  |  |  |  |  |  |
| Pass (1 - 4) | $57,880 | $215,732 | $156,260 | $99,629 | $175,588 | $337,818 | $125,578 | $8,192 | $1,176,677 |
| Special Mention (5) | - | 24 | - | - | - | 111 | - | 516 | 651 |
| Substandard (6) | - | - | - | 535 | 471 | 1,790 | 178 | 198 | 3,172 |
| Doubtful (7) | - | - | 123 | 153 | - | 255 | - | 104 | 635 |
| Loss (8) | - | - | - | - | - | - | - | - | - |
| Total Loans | $57,880 | $215,756 | $156,383 | $100,317 | $176,059 | $339,974 | $125,756 | $9,010 | $1,181,135 |
| Current period gross chargeoffs | - | - | $5 | $1 | - | - | $27 | - | $33 |

16

The following table presents loan balances by
credit quality indicators and gross chargeoffs by loan category and year of origination as of December 31, 2025.

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

17

The following tables present the Company’s
loan portfolio aging analysis as of March 31, 2026, and December 31, 2025.

| ($ in thousands) | 30-59 Days | 60-89 Days | Greater Than 90 Days |  |
| --- | --- | --- | --- | --- |
| March 31, 2026 | Past Due | Past Due | Past Due | Total Loans |
| Commercial & industrial | - | - | $1,136 | $$$112,226 |
| Commercial real estate - owner occupied | - | - | 429 | 155,500 |
| Commercial real estate - nonowner occupied | - | 136 | 198 | 446,056 |
| Agricultural | - | - | - | 78,569 |
| Residential real estate | 85 | - | 642 | 299,741 |
| HELOC | 143 | 46 | 134 | 69,457 |
| Consumer | 238 | 92 | - | 19,586 |
| Total Loans | $466 | $274 | $2,539 | $$$1,181,135 |

| Line item | 30-59 Days | 60-89 Days | Greater Than 90 Days |  |
| --- | --- | --- | --- | --- |
| December 31, 2025 | Past Due | Past Due | Past Due | Total Loans |
| Commercial & industrial | $394 | - | $2,009 | $$$113,878 |
| Commercial real estate - owner occupied | 51 | - | 429 | 161,086 |
| Commercial real estate - nonowner occupied | 39 | 141 | 201 | 435,897 |
| Agricultural | - | - | - | 76,514 |
| Residential real estate | 51 | 1,086 | 629 | 304,741 |
| HELOC | 338 | 74 | 88 | 69,173 |
| Consumer | 214 | 110 | 10 | 19,302 |
| Total Loans | $1,087 | $1,411 | $3,366 | $$$1,180,591 |

18

All loans past due 90 days are systematically placed on nonaccrual
status.

When a loan is moved to nonaccrual status, total
unpaid interest accrued to date is reversed from income. Subsequent payments are applied to the outstanding principal balance with the
interest portion of the payment recorded on the balance sheet as a contra-loan. Interest received on nonaccrual loans may be realized
once all contractual principal amounts are received. It is at the discretion of management to determine when a loan is placed back on
accrual status once a borrower establishes a history of six consecutive timely principal and interest payments. The categories of nonaccrual
loans as of March 31, 2026, and December 31, 2025, are presented in the following tables.

_March 31, 2026_

| ($ in thousands) | Nonaccrual loans with no allowance | Nonaccrual loans with an allowance | Total nonaccrual loans |
| --- | --- | --- | --- |
| Commercial & industrial | $1,080 | $279 | $1,359 |
| Commercial real estate - owner occupied | - | 429 | 429 |
| Commercial real estate - nonowner occupied | 239 |  | 239 |
| Agricultural | - | - | - |
| Residential real estate | 455 | 984 | 1,439 |
| Home equity line of credit (HELOC) |  | 231 | 231 |
| Consumer | - | 2 | 2 |
| Total loans | $1,774 | $1,925 | $3,699 |

_December 31, 2025_

| ($ in thousands) | Nonaccrual loans with no allowance | Nonaccrual loans with an allowance | Total nonaccrual loans |
| --- | --- | --- | --- |
| Commercial & industrial | $2,074 | $182 | $2,256 |
| Commercial real estate - owner occupied | - | 429 | 429 |
| Commercial real estate - nonowner occupied | 342 | - | 342 |
| Agricultural | - | - | - |
| Residential real estate | 1,227 | 103 | 1,330 |
| Home equity line of credit (HELOC) | 210 | - | 210 |
| Consumer | 12 | - | 12 |
| Total loans | $3,865 | $714 | $4,579 |

*Modifications made to Borrowers Experiencing Financial Difficulty*

In the normal course of business, the Company
may execute loan modifications with borrowers. These modifications are analyzed to determine whether the modification is considered concessionary,
long term and made to a borrower experiencing financial difficulty. The Company’s modifications generally include interest rate
adjustments, principal reductions, and amortization and maturity date extensions. These modifications allow the borrowers short-term
cash relief to allow them to improve their financial condition. If a loan modification is determined to be made to a borrower experiencing
financial difficulty, the loan is considered collateral dependent and evaluated as part of the ACL as described above in the Allowance
for Credit Losses section of this note. For the three months ended March 31, 2026, and March 31, 2025, the Company did not modify any
loans made to borrowers experiencing financial difficulty.

The Company had no commitments to lend to borrowers
experiencing financial difficulty for which the Company had modified an existing loan as of March 31, 2026, and March 31, 2025. The Company
monitors loan payments on an ongoing basis to determine if a loan is considered to have a payment default. Determination of payment default
involves analyzing the economic conditions that exist for each customer and its ability to generate positive cash flows during the loan
term. For the three months ended March 31, 2026, and March 31, 2025, the Company had no loan modifications made to borrowers experiencing
financial difficulty for which there was a payment default within the 12 months following the modification date.

19

*Foreclosures*

At March 31, 2026, the Company had $0.4 million
in residential real estate loans in the process of foreclosure compared to $0.3 million at December 31, 2025.

*Unfunded Loan Commitments*

The Company maintains an allowance for off-balance
sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby
and commercial letters of credit when there is a contractual obligation to extend credit and when the extension of credit is not unconditionally
cancellable (i.e. the commitment cannot be canceled at any time). The allowance for off-balance sheet credit exposures is adjusted as
a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on
a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be
funded over its estimated life, which are the same loss rates that are used in computing the ACL for loans. The allowance for credit
losses for unfunded loan commitments of $1.3 million at March 31, 2026, is classified on the balance sheet within Other liabilities.

The following table presents the balance and
activity in the ACL for unfunded loan commitments for the three months ended March 31, 2026, and March 31, 2025.

| ($ in thousands) | Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 |
| --- | --- | --- |
| Balance, beginning of period | $1,372 | $1,340 |
| Adjustment for acquired loans | - | 3 |
| Provision (benefit) for unfunded commitments | (86) | 10 |
| Balance, end of period | $1,286 | $1,353 |

### **NOTE 6 – GOODWILL**

| ($ in thousands) | Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 |
| --- | --- | --- |
| Beginning balance | $27,158 | $23,239 |
| Acquired goodwill | - | 3,919 |
| Ending balance | $27,158 | $27,158 |

Goodwill is not amortized, but is evaluated for
impairment annually as of December 31, or more frequently if events occur or circumstances change that indicate an impairment may exist.
As of March 31, 2026, and December 31, 2025, the carrying amount of goodwill was $27.2. The acquisition of Marblehead on January 17,
2025, resulted in the acquisition of approximately $3.9 million in goodwill.

When assessing goodwill for impairment, first,
a qualitative assessment can be made to determine whether it is more likely than not that the estimated fair value of a reporting unit
is less than its estimated carrying value. If the results of the qualitative assessment are not conclusive, a quantitative goodwill test
is performed. Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.

Goodwill was assessed for impairment using a
qualitative test performed as of March 31, 2026. The estimated fair value of the reporting unit was less than the net carrying value;
however, Management believes the cumulative impact of certain factors, including; assets, loan and deposit growth, revenue expansion,
and stable asset quality, are sufficient to overcome the Company’s market value being slightly below its carrying value at March
31, 2026, and therefore no goodwill impairment existed as of that date. No events or circumstances since March 31, 2026, were noted that
would indicate it was more likely than not a goodwill impairment exists.

20

### **NOTE 7 – MORTGAGE SERVICING RIGHTS**

Mortgage loans serviced for others are not included
in the accompanying condensed consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others approximated
$1.48 billion at March 31, 2026, and December 31, 2025. Contractually specified servicing fees of $0.9 million and $0.9 million were
included in mortgage loan servicing fees in the condensed consolidated income statement for the three months ended March 31, 2026, and
2025, respectively.

The following table summarizes mortgage servicing
rights capitalized and related amortization, along with activity in the related valuation allowance:

| Line item | Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 |
| --- | --- | --- |
| ($ in thousands) |  |  |
| Carrying amount, beginning of year | $15,254 | $14,868 |
| Mortgage servicing rights capitalized during the year | 551 | 380 |
| Mortgage servicing rights amortization during the year | (529) | (293) |
| Net change in valuation allowance | 452 | 10 |
| Carrying amount, end of year | $15,728 | $14,965 |
| Valuation allowance: |  |  |
| Beginning of year | $475 | $186 |
| Increase (reduction) | (452) | (10) |
| End of year | $23 | $176 |
| Fair value, beginning of period | $17,964 | $17,782 |
| Fair value, end of period | $19,239 | $18,212 |

### **NOTE 8 – DERIVATIVE FINANCIAL INSTRUMENTS**

*Risk Management Objective of Using Derivatives*

The Company is exposed to certain risks arising
from both its business operations and economic conditions. The Company manages its exposures to a wide variety of business and operational
risks primarily through management of its core business activities. The Company manages economic risks, including interest rate, liquidity
and credit risk, primarily by managing the amount, sources and duration of its assets and liabilities and through the use of derivative
financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business
activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest
rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the
Company’s known or expected cash payments principally related to certain variable-rate assets.

*Non-designated Hedges*

The Company does not use derivatives for trading
or speculative purposes. Derivatives not designated as hedges are not speculative and result from a service the Company provides to certain
customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management
strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third
party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated
with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the
offsetting swaps are recognized directly in earnings.

21

Additionally, 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 that are
entered into, economically hedge the effect of changes in interest rates resulting from the Company’s commitment to fund the loans.
The IRLCs and forward contracts are not designated as accounting hedges and are recorded at fair value with changes in fair value reflected
in noninterest income on the condensed consolidated statements of income. The fair value of derivative instruments with a positive fair
value are reported in accrued income and included in Other assets in the condensed consolidated balance sheets, while derivative instruments
with a negative fair value are reported in accrued expenses and included in Other liabilities in the condensed consolidated balance sheets.

The table below presents the notional amount
and fair value of the Company’s interest rate swaps, IRLCs and forward contracts utilized as of March 31, 2026, and December 31,
2025.

| ($ in thousands) | March 31, 2026 / Notional / Amount | March 31, 2026 / Fair / Value | December 31, 2025 / Notional / Amount | December 31, 2025 / Fair / Value |
| --- | --- | --- | --- | --- |
| Asset Derivatives |  |  |  |  |
| Derivatives not designated as hedging instruments |  |  |  |  |
| Interest rate swaps associated with loans | $126,326 | $1,781 | $118,701 | $1,465 |
| IRLCs | - | - | 10,701 | 15 |
| Forward contracts | 21,000 | 148 | - | - |
| Total contracts | $147,326 | $1,929 | $129,402 | $1,480 |
| Liability Derivatives |  |  |  |  |
| Derivatives not designated as hedging instruments |  |  |  |  |
| Interest rate swaps associated with loans | $126,326 | $(1,781) | $118,701 | $(1,465) |
| IRLCs | 17,082 | (90) | - | - |
| Forward contracts | - | - | 11,000 | (30) |
| Total contracts | $143,408 | $(1,871) | $129,701 | $(1,495) |

The fair value of interest rate swaps was estimated
using a discounted cash flow method that incorporates current market interest rates as of the balance sheet date. Fair values of IRLCs
and forward contracts were estimated using changes in mortgage interest rates from the date the Company entered into the IRLC or forward
contract and the balance sheet date.

The following table presents the amounts included
in the condensed consolidated statements of income for non-hedging derivative financial instruments for the three months ended March
31, 2026, and 2025.

| ($ in thousands) | Statement of income classification | Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 |
| --- | --- | --- | --- |
| Interest rate swap contracts | Other income | $120 | $107 |
| IRLCs | Gain on sale of mortgage loans & OMSR | (105) | 18 |
| Forward contracts | Gain on sale of mortgage loans & OMSR | 178 | (44) |

22

The following table shows the offsetting of financial assets and derivative
assets at March 31, 2026, and at December 31, 2025.

| ($ in thousands) / March 31, 2026 | Gross amounts of / recognized assets | Gross amounts offset in the / consolidated balance sheet | Net amounts of assets presented in the / consolidated balance sheet | Gross amounts not offset in the consolidated balance sheet / Financial instruments | Gross amounts not offset in the consolidated balance sheet / Cash collateral received | Net amount |
| --- | --- | --- | --- | --- | --- | --- |
| Interest rate swaps | $2,543 | $762 | $1,781 | - | $1,850 | $(69) |
| December 31, 2025 |  |  |  |  |  |  |
| Interest rate swaps | $2,525 | $1,060 | $1,465 | - | $1,220 | $245 |

The following table shows the offsetting of financial liabilities
and derivative liabilities at March 31, 2026, and at December 31, 2025.

| ($ in thousands) / March 31, 2026 | Gross amounts / of recognized liabilities | Gross amounts offset in the / consolidated balance sheet | Net amounts of liabilities presented in the / consolidated balance sheet | Gross amounts not offset in the consolidated balance sheet / Financial instruments | Gross amounts not offset in the consolidated balance sheet / Cash collateral pledged | Net amount |
| --- | --- | --- | --- | --- | --- | --- |
| Interest rate swaps | $2,543 | $762 | $1,781 | - | - | $1,781 |
| December 31, 2025 |  |  |  |  |  |  |
| Interest rate swaps | $2,525 | $1,060 | $1,465 | - | - | $1,465 |

### **NOTE 9 – DEPOSITS**

Major classification of deposits at March 31,
2026, and at December 31, 2025, were as follows:

| ($ in thousands) | March 31, 2026 | December 31, 2025 |
| --- | --- | --- |
| Non interest bearing demand | $248,239 | $254,063 |
| Interest bearing demand | 215,594 | 202,501 |
| Savings | 333,662 | 296,484 |
| Money market | 300,028 | 280,896 |
| Time deposits $250,000 or less | 217,259 | 219,939 |
| Time deposits greater than $250,000 | 57,041 | 53,361 |
| Total Deposits | $1,371,823 | $1,307,244 |

Included in time deposits at March 31, 2026,
and at December 31, 2025, were $41.6 million and $49.9 million, respectively, of reciprocal deposits which were obtained through the
Certificate of Deposit Account Registry Service (CDARS).

23

### **NOTE 10 – SHORT-TERM BORROWINGS**

| ($ in thousands) | March 31, 2026 | December 31, 2025 |
| --- | --- | --- |
| Securities sold under repurchase agreements | $9,433 | $9,230 |

The Company has retail repurchase (“REPO”)
agreements to facilitate cash management transactions with commercial customers. These obligations are secured by agency and mortgage-backed
securities and such collateral is held by the Federal Home Loan Bank (“FHLB”). These securities have various maturity dates
from 2028 through 2051. As of March 31, 2026, these REPO agreements were secured by securities with a fair value totaling $17.9 million.
The maximum amount of outstanding agreements at any month end during the periods ending March 31, 2026, and December 31, 2025, was $10.8
million and $16.7 million, respectively. The monthly average of such agreements totaled $10.0 million and $12.0 million, as of March
31, 2026, and December 31, 2025, respectively. The REPO agreements mature within one month.

The Company has borrowing capabilities at the
Federal Reserve Discount Window (“Discount Window”) by pledging either securities or loans as collateral. At both March 31,
2026, and December 31, 2025, there were no borrowings drawn or securities pledged at the Discount Window.

At both March 31, 2026, and December 31, 2025,
the Company had $41.0 million in federal funds lines, of which none was drawn.

### **NOTE 11 – FEDERAL HOME LOAN BANK (FHLB) ADVANCES**

The Company’s FHLB advances were secured
by $343.0 million in mortgage loans at March 31, 2026. Advances consisted of fixed interest rates from 3.75 to 4.45 percent. Fixed rate
advances are subject to restrictions or penalties in the event of prepayment. Aggregate annual maturities of FHLB advances at March 31,
2026, were:

| ($ in thousands) | Debt |
| --- | --- |
| 2026 | $5,000 |
| 2027 | 5,000 |
| 2028 | 17,500 |
| Total | $27,500 |

### **NOTE 12 – TRUST PREFERRED SECURITIES**

On September 15, 2005, RST II, a wholly owned
subsidiary of the Company, 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. Distributions on the Capital Securities are payable quarterly at a variable rate that is currently based upon the 3-month
CME Group Benchmark Administration (“CME”) Term Secured Overnight Financing Rate (“SOFR”) as adjusted by the relevant
spread adjustment plus 1.80 percent and are included in interest expense in the condensed consolidated financial statements. These securities
may be included in Tier 1 capital and may be prepaid at any time without penalty (with certain limitations applicable) under current
regulatory guidelines and interpretations. The balance of the Capital Securities as of both March 31, 2026, and December 31, 2025, was
$10.3 million, with a maturity date of September 15, 2035.

### **NOTE 13 – SUBORDINATED DEBT**

On May 27, 2021, the Company entered into Subordinated
Note Purchase Agreements with qualified institutional buyers and accredited investors pursuant to which the Company issued and sold $20.0
million in aggregate principal amount of its 3.65% Fixed to Floating Rate Subordinated Notes due in 2031 (the “Notes”). The
Notes were sold by the Company in a private placement exempt from the registration requirements under the Securities Act of 1933, as
amended.

24

The Notes mature on June 1, 2031, and 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 Notes, the interest
rate will reset quarterly to an interest rate per annum, equal to the then-current-three-month SOFR provided by the Federal Reserve Bank
of New York plus 296 basis points. The Company may redeem the Notes at any time after May 31, 2026, and at any time in whole, but not
in part, upon the occurrence of certain events. Any redemption of the Notes will be subject to prior regulatory approval. The Company
incurred debt issuance costs for placement fees, legal and other out-of-pocket expenses of approximately $0.5 million, which are being
amortized over the life of the Notes.

### **NOTE 14 – DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES**

Fair value is the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair
value measurement must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three
levels of inputs that may be used to measure fair value:

**Level 1** Quoted prices in active markets for identical assets or liabilities

**Level 2** Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

**Level 3** Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

The following is a description of the valuation
methodologies and inputs used for assets measured at fair value on a recurring basis, recognized in the accompanying condensed consolidated
balance sheets, as well as the general classifications of such assets pursuant to the valuation hierarchy.

Available-for-Sale Securities

The fair values of available-for-sale securities
are determined by various valuation methodologies. Level 2 securities include obligations of the U.S. Treasury and government agencies,
mortgage-backed securities, obligations of political and state subdivisions, and other corporate securities. Level 2 inputs do not include
quoted prices for individual securities in active markets; however, they do include inputs that are either directly or indirectly observable
for the individual security being valued. Such observable inputs include interest rates and yield curves at commonly quoted intervals,
volatilities, prepayment speeds, credit risks and default rates. Also included are inputs derived principally from or corroborated by
observable market data by correlation or other means.

Interest Rate Contracts

The fair values of interest rate contracts are
based upon the estimated amount the Company would receive or pay to terminate the contracts or agreements, taking into account underlying
interest rates, creditworthiness of underlying customers for credit derivatives and, when appropriate, the creditworthiness of the counterparties
(Level 2).

Forward contracts

The fair values of forward contracts on to-be-announced
securities are determined using quoted prices in active markets or benchmarked thereto (Level 1).

Interest Rate Lock Commitments (IRLCs)

The fair value of IRLCs are determined using
the projected sale price of individual loans based on changes in the market interest rates, projected “pull-through” rates
(the probability that an IRLC will ultimately result in an originated loan), the reduction in the value of the applicant’s option
due to the passage of time, and the remaining origination costs to be incurred based on management’s estimate of market costs (Level
3).

25

The following tables present the fair value measurements
of assets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements
fell at March 31, 2026, and at December 31, 2025.

| ($ in thousands) | Fair value at March 31, 2026 | (Level 1) | (Level 2) | (Level 3) |
| --- | --- | --- | --- | --- |
| U.S. Treasury and Government Agencies | $$4,826 | - | $4,826 | - |
| Mortgage-backed securities | 155,465 | - | 155,465 | - |
| State and political subdivisions | 9,685 | - | 9,685 | - |
| Other corporate securities | 13,650 | - | 13,650 | - |
| Interest rate contracts - assets | 1,781 | - | 1,781 | - |
| Interest rate contracts - liabilities | (1,781) | - | (1,781) | - |
| Forward contracts | 148 | 148 | - | - |
| IRLCs | (90) | - | - | (90) |

| ($ in thousands) | Fair value at December 31, 2025 | (Level 1) | (Level 2) | (Level 3) |
| --- | --- | --- | --- | --- |
| U.S. Treasury and Government Agencies | $$5,203 | - | $5,203 | - |
| Mortgage-backed securities | 159,952 | - | 159,952 | - |
| State and political subdivisions | 9,849 | - | 9,849 | - |
| Other corporate securities | 13,622 | - | 13,622 | - |
| Interest rate contracts - assets | 1,465 | - | 1,465 | - |
| Interest rate contracts - liabilities | (1,465) | - | (1,465) | - |
| Forward contracts | (30) | (30) | - | - |
| IRLCs | 15 | - | - | 15 |

Level 1 - quoted prices in active markets for identical assets

Level 2 - significant other observable inputs

Level 3 - significant unobservable inputs

The following table reconciles the beginning
and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheets using significant
unobservable (Level 3) inputs for the three months ended March 31, 2026, and 2025.

| ($ in thousands) | for the Three Months Ended March 31, 2026 | for the Three Months Ended March 31, 2025 |
| --- | --- | --- |
| Interest rate lock commitments |  |  |
| Balance at beginning of period | $15 | $(21) |
| Change in fair value | (105) | 18 |
| Balance at end of period | $(90) | $(3) |

26

The following is a description of the valuation
methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying condensed
consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Collateral-dependent Individually evaluated
Loans, Net of ACL

The estimated fair value of collateral-dependent
individually evaluated loans is based on the appraised value of the collateral, less estimated cost to sell. Collateral-dependent individually
evaluated loans are classified within Level 3 of the fair value hierarchy. This method requires obtaining an independent appraisal of
the collateral, which is reviewed for accuracy and consistency by management. Appraisers are selected from an approved list which is
maintained by management. The appraised values are reduced by applying a discount factor to the value based on the Company’s loan
review policy. All individually evaluated loans held by the Company were collateral dependent at March 31, 2026, and at December 31,
2025.

Mortgage Servicing Rights

Mortgage servicing rights do not trade in an
active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models associated
with the servicing rights and discounting the cash flows using discount market rates, prepayment speeds and default rates. The servicing
portfolio has been valued using all relevant positive and negative cash flows including servicing fees; miscellaneous income and float;
marginal costs of servicing; the cost of carry of advances; and foreclosure losses; and applying certain prevailing assumptions used
in the marketplace. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy. These mortgage servicing rights are tested for impairment on a quarterly basis.

| ($ in thousands) | (Level 3) |
| --- | --- |
| Mortgage servicing rights | $$$$393 |

| ($ in thousands) | Fair value at December 31, 2025 | (Level 1) | (Level 2) | (Level 3) |
| --- | --- | --- | --- | --- |
| Collateral-dependent |  |  |  |  |
| Individually evaluated loans | $$955 | - | - | 955 |
| Mortgage servicing rights | 5,813 | - | - | 5,813 |

Level 1 - quoted prices in active markets for identical assets

Level 2 - significant other observable inputs

Level 3 - significant unobservable inputs

27

**Unobservable (Level 3) Inputs**

The following tables present quantitative information
about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

| ($ in thousands) | Fair value at March 31, 2026 | Valuation / technique | Unobservable inputs | Range (weighted- / average) |
| --- | --- | --- | --- | --- |
| Mortgage servicing rights | $ 393 | Discounted cash flow | Discount rate | 10.63% |
|  |  |  | Constant prepayment rate | 5.61% |
|  |  |  | P&I earnings credit | 3.65% |
|  |  |  | T&I earnings credit | 3.70% |
|  |  |  | Inflation for cost of servicing | 2.50% |
| IRLCs | (90) | Discounted cash flow | Loan closing rates | 41% - 99% |

| ($ in thousands) | Fair value at December 31, 2025 | Valuation / technique | Unobservable / inputs | Range (weighted- / average) |
| --- | --- | --- | --- | --- |
| Collateral-dependent individually evaluated loans | $955 | Market comparable properties | Comparability adjustments (%) | 1 - 19% (12%) |
| Mortgage servicing rights | 5,813 | Discounted cash flow | Discount rate | 10.38% |
|  |  |  | Constant prepayment rate | 7.34% |
|  |  |  | P&I earnings credit | 3.73% |
|  |  |  | T&I earnings credit | 3.93% |
|  |  |  | Inflation for cost of servicing | 3.50% |
| IRLCs | 15 | Discounted cash flow | Loan closing rates | 43% - 99% |

There were no changes in the inputs or methodologies
used to determine fair value at March 31, 2026, as compared to December 31, 2025.

The following methods were used to estimate the
fair value of all other financial instruments recognized in the accompanying condensed consolidated balance sheets at amounts other than
fair value.

Cash and Due From Banks, Interest Bearing
Time Deposits, Federal Reserve and Federal Home Loan Bank Stock, and Accrued Interest Receivable and Payable

The carrying amount approximates the fair value.

28

Loans Held for Sale

The fair value of loans held for sale is based
upon quoted market prices, where available, or is determined by discounting estimated cash flows using interest rates approximating the
Company’s current origination rates for similar loans and adjusted to reflect the inherent credit risk.

Loans

The estimated fair value of loans follows the
guidance in ASC 820, Fair Value Measurements, which prescribes an “exit price” approach in estimating and disclosing fair
value of financial instruments. The “exit price” is determined based on discounted estimated future cash flows using rates
that incorporate discounts for credit, liquidity, and marketability factors.

Deposits, Short-Term Borrowings, and FHLB
Advances

Deposits include demand deposits, savings accounts,
and certain money market deposits. Short-term borrowings include federal funds borrowed and REPO agreements. The carrying amount of these
instruments approximates the fair value. The estimated fair value for fixed-maturity time deposits and FHLB advances are based on estimates
of the rate State Bank could pay on similar instruments with similar terms and maturities at March 31, 2026, and at December 31, 2025.

Loan Commitments

The fair value of loan commitments is estimated
using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the
present creditworthiness of the counterparties. The estimated fair values for other financial instruments and off-balance-sheet loan
commitments approximate cost at March 31, 2026, and at December 31, 2025, and are not considered significant to this presentation.

Trust Preferred Securities

The fair value for Trust Preferred Securities
is estimated by discounting the cash flows using an appropriate discount rate.

Subordinated Debt

The fair value for subordinated debt is estimated
by discounting the cash flows using a discount rate equal to the rate currently offered on similar borrowings.

29

The following table presents estimated fair values
of the Company’s other financial instruments carried at other than fair value. The fair values of certain of these instruments
were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value
is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments, and because management
does not intend to sell these financial instruments, the Company does not know whether the fair values shown below represent values at
which the respective financial instruments could be sold individually or in the aggregate.

| ($ in thousands) / March 31, 2026 | Carrying / amount | Fair value measurements using / (Level 3) |
| --- | --- | --- |
| Financial assets |  |  |
| Cash and due from banks | $126,293 | - |
| Interest bearing time deposits | 1,965 | - |
| Loans held for sale | 7,203 | - |
| Loans, net of allowance for credit losses | 1,164,747 | 1,130,585 |
| Federal Reserve and FHLB Bank stock, at cost | 5,463 | - |
| Interest receivable | 5,499 | - |
| Financial liabilities |  |  |
| Deposits | $1,371,823 | - |
| Repurchase agreements | 9,433 | - |
| FHLB advances | 27,500 | - |
| Trust preferred securities | 10,310 | - |
| Subordinated debt, net of issuance costs | 19,751 | - |
| Interest payable | 2,553 | - |

| ($ in thousands) / December 31, 2025 | Carrying / amount | Fair value measurements using / (Level 3) |
| --- | --- | --- |
| Financial assets |  |  |
| Cash and due from banks | $71,543 | - |
| Interest bearing time deposits | 1,140 | - |
| Loans held for sale | 1,761 | - |
| Loans, net of allowance for credit losses | 1,164,477 | 1,127,003 |
| Federal Reserve and FHLB Bank stock, at cost | 5,610 | - |
| Interest receivable | 5,490 | - |
| Financial liabilities |  |  |
| Deposits | $1,307,244 | - |
| Repurchase agreements | 9,230 | - |
| FHLB advances | 35,000 | - |
| Trust preferred securities | 10,310 | - |
| Subordinated debt, net of issuance costs | 19,739 | - |
| Interest payable | 2,460 | - |

### **NOTE 15 – SHARE BASED COMPENSATION**

In April 2017, the Company’s shareholders
approved a new share-based incentive compensation plan, the SB Financial Group, Inc. 2017 Stock Incentive Plan (the “2017 Plan”),
which replaced the Company’s 2008 Stock Incentive Plan. The 2017 Plan permits the Company to grant or award incentive stock options,
nonqualified stock options, stock appreciation rights (“SARs”), restricted stock, and restricted stock units to employees
and non-employee directors and advisory board members of the Company and its subsidiaries. A total of 500,000 common shares of the Company
are available for grants or awards under the 2017 Plan, of which 248,821 shares had been granted under the plan as of March 31, 2026.

The 2017 Plan is intended to advance the interests
of the Company and its shareholders by offering employees, directors and advisory board members of the Company and its subsidiaries an
opportunity to acquire or increase their ownership interest in the Company through grants of equity-based awards. The 2017 Plan permits
equity-based awards to be used to attract, motivate, reward and retain highly competent individuals upon whose judgment, initiative,
leadership and efforts are key to the success of the Company by encouraging those individuals to become shareholders of the Company.

30

Stock option awards are granted with an exercise
price equal to the market price of the Company’s stock at the date of grant and those option awards vest based on five years of
continuous service and have 10-year contractual terms. The fair value of each option award is estimated on the date of grant using the
Black-Scholes valuation model. As of March 31, 2026, there were no stock options outstanding, and no unrecognized compensation cost related
to stock option awards. No stock options were granted in the first three months of 2026.

On February 5, 2013, the Company adopted a Long
Term Incentive Plan (the “LTI Plan”), which provides for awards of restricted stock in the Company to certain key executives.
These restricted stock awards vest over a four-year period and are intended to assist the Company in retention of key executives. The
compensation cost charged against income for awards under the LTI Plan for the three months ended March 31, 2026 and March 31, 2025 was
$0.2 million.

As of March 31, 2026, there was $1.2 million
of total unrecognized compensation cost related to non-vested share-based compensation arrangements related to the restricted stock awards
under the 2017 Plan which were granted in accordance with the LTI Plan. That cost is expected to be recognized over a weighted-average
period of 2.2 years.

The table below is a summary of restricted stock
activity under the Company’s 2017 Plan for the three months ended March 31, 2026.

| Line item | Shares | Weighted-Average Value per Share |
| --- | --- | --- |
| Nonvested, January 1, 2026 | 39,638 | $19.05 |
| Granted | 41,222 | 22.14 |
| Vested | (14,471) | 18.62 |
| Forfeited | (500) | 16.64 |
| Nonvested, March 31, 2026 | 65,889 | $21.10 |

### **NOTE 16 – OPERATING SEGMENTS**

The Company provides a range of community banking
services, including commercial and consumer lending, personal and business banking, treasury management and merchant services, personal
wealth management and brokerage services, and other financial services primarily to individuals, businesses, and municipalities. All
of the Company’s business activities are dependent and assessed based on the manner in which it supports the other activities of
the Company.

The chief operating decision maker (“CODM”)
of the Company is the Chief Executive Officer, who along with others in the Company’s executive management, evaluates performance
and allocates resources based upon analysis of the Company as one operating segment. The activities of the Company comprise one reportable
segment, “Banking.” All the consolidated assets are attributable to the Banking segment. The accounting policies of the Banking
segment are the same as those described in Note 1 “Basis of Presentation.”

The CODM is provided with the Company’s
consolidated statements of financial condition and operations and evaluates the Company’s operating results based on consolidated
net interest income, noninterest income, noninterest expense, and net income, which can be seen on the consolidated statement of operations.
These results are used to benchmark the Company against its competitors. Other significant non-cash items assessed by the CODM are depreciation,
amortization and provision for credit losses consistent with the reporting on the consolidated statements of cash flows. Expenditures
for long-lived assets are also evaluated and are consistent with the reporting on the consolidated statements of cashflows. Strategic
plans and budget to actual monitoring are evaluated as one reportable segment. The actual results are used in assessing performance of
the segment, determining the allocation of resources, and in establishing management’s compensation. Information reported internally
for performance assessment by the CODM is identical to that which is shown in the consolidated statements of income. All revenues were
derived from banking operations for the three months ended March 31, 2026, and March 31, 2025, and there was no customer that accounted
for more than 10% of the Company’s consolidated revenue.

### **NOTE 17 – GENERAL LITIGATION**

The Company is subject to claims and lawsuits
that arise primarily in the ordinary course of business. Additionally, the Company is subject to periodic examinations by various regulatory
agencies. It is the opinion of management that the disposition or ultimate resolution of any such claims, lawsuits and examinations pending
at March 31, 2026, will not have a material adverse effect on the consolidated financial position, results of operations and cash flow
of the Company.

31

## Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations**

**Cautionary Statement Regarding Forward-Looking
Information**

This Quarterly Report on Form 10-Q, including
Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains certain forward-looking statements,
which are not historical fact, that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking
statements, which are provided to assist in the understanding of anticipated future financial performance, provide current expectations
or forecasts of future events and are not guarantees of future performance. 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 management or Board of Directors, including those relating to products or services; (c)
statements of future economic performance; (d) statements regarding future customer attraction or retention; and (e) statements of assumptions
underlying such statements. Words such as “anticipates”, “believes”, “plans”, “intends”,
“expects”, “projects”, “estimates”, “should”, “may”, “would be”,
“will allow”, “will likely result”, “will continue”, “will remain”, or other similar
expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying those statements. Forward-looking
statements are based on management’s expectations and are subject to a number of risks and uncertainties. Although management believes
that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed
or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include, without limitation:

- current  and future economic and financial market conditions, either nationally or in the states in  which we do business, including conditions such as inflation, recession, unemployment, changes  in interest rates, fiscal and monetary policy, U.S. government shutdowns, an increasing federal  government budget deficit, the failure of the federal government to raise the federal debt  ceiling, slowing gross domestic product, energy price volatility, potential or imposed tariffs,  a U.S. withdrawal from or significant renegotiation of trade agreements, trade wars and other  change in trade regulation, and other factors beyond our control, any of which may result  in adverse impacts on 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;
- recent  and future bank failures may reduce customer confidence, affect sources of funding and liquidity,  increase regulatory requirements and costs, adversely affect financial markets and/or have  a negative reputational ramification for the banking industry as a whole, any of which could  adversely affect the Company’s business, earnings and financial condition;
- instability  in global economic conditions and geopolitical matters (including the ongoing military conflicts  in Ukraine and the Middle East), and volatility in financial markets, which could have a  material adverse effect on our results of operations and financial condition;
- changes  in interest rates resulting from national and local economic conditions and the policies  of regulatory authorities, including monetary policies of the Board of Governors of the Federal  Reserve System, which may adversely affect interest rates, interest margins, loan demand  and interest rate sensitivity;
- the  volatility of mortgage banking income, whether due to interest rates, demand, the fair value  of mortgage loans, or other factors;
- factors  that can impact the performance of our loan portfolio, including changes in real estate values  and liquidity in our primary market areas, the financial health of our borrowers and the  success of construction projects that we finance;

32

- changes  in customers’, suppliers’, and other counterparties’ performance and creditworthiness  may be different than anticipated due to inflationary pressures and/or other economic and  financial market conditions;
- operational  risks, reputational risks, legal and compliance risks, and other risks related to potential  fraud or theft by employees or outsiders, unauthorized transactions by employees or operational  errors, or failures, disruptions or breaches in security of our systems, including those  resulting from computer viruses or cyber-attacks;
- our  ability to secure sensitive or confidential client information against unauthorized disclosure  or access through computer systems and telecommunication networks, including those of our  third-party vendors and other service providers, which may prove inadequate;
- a  failure in or breach of our operational or security systems or infrastructure, or those of  our third-party vendors and other service providers, resulting in failures or disruptions  in customer account management, general ledger, deposit, loan, or other systems, including  as a result of cyber-attacks;
- competitive  pressures and factors among financial services organizations could increase significantly,  including product and pricing pressures, changes to third-party relationships and our ability  to recruit and retain qualified management and banking personnel;
- unexpected  losses of services of our key management personnel, or the inability to recruit and retain  qualified personnel in the future;
- risks  inherent in pursuing strategic growth initiatives, including integration and other risks  involved in past and possible future acquisitions;
- uncertainty  regarding the nature, timing, cost and effect of legislative or regulatory changes in the  banking industry or otherwise affecting the Company, including major reform of the regulatory  oversight structure of the financial services industry and changes in laws and regulations  concerning taxes, FDIC insurance premium levels, pensions, bankruptcy, consumer protection,  rent regulation and housing, financial accounting and reporting, environmental protection,  insurance, bank products and services, bank and bank holding company capital and liquidity  standards, fiduciary standards, securities and other aspects of the financial services industry;
- changes  in federal, state and/or local tax laws may adversely affect our reported financial condition  or results of operations;
- changes  in accounting standards, policies and practices may adversely affect our reported financial  condition or results of operations;
- litigation  and regulatory compliance exposure, including the costs and effects of any adverse developments  in legal proceedings or other claims and the costs and effects of unfavorable resolution  of regulatory and other governmental examinations or inquiries;
- continued  availability of earnings and dividends from State Bank and excess capital sufficient for  us to service our debt and pay dividends to our shareholders in compliance with applicable  legal and regulatory requirements;
- our  ability to adapt to or comply with regulatory requirements and increasing scrutiny and evolving  expectations from customers, regulators, investors and other stakeholders with respect to  the Company’s environmental, social and governance (ESG) practices, which could affect  our reputation and business and operating results;
- our  ability to anticipate and successfully keep pace with technological changes affecting the  financial services industry;
- an  unexpected inability to obtain needed liquidity which could adversely affect our business,  profitability, and viability as a going concern;
- the  impact on our businesses, as well as on the risks described above, of various domestic or  international widespread natural or other disasters (including severe weather events), pandemics,  cybersecurity attacks, system failures, civil unrest, military or terrorist activities or  international conflicts, including Russia’s ongoing war in Ukraine and the conflict  in Iran (and the resulting disruptions to oil and other commodity markets and supply chains),  which can affect our earnings and capital as well as the ability of our customers to repay  loans; and
- other  risks identified from time to time in the Company’s other filings with the Securities  and Exchange Commission, including the risks identified under the heading “Item 1A.  Risk Factors” of Part I of the Company’s Annual Report on Form 10-K for the fiscal  year ended December 31, 2025.

33

Undue reliance should
not be placed on the forward-looking statements, which speak only as of the date hereof. Except as may be required by law, the Company
undertakes no obligation to update any forward-looking statement to reflect unanticipated events or circumstances after the date on which
the statement is made.

**Overview of SB Financial**

SB Financial Group, Inc. (“SB Financial”)
is an Ohio corporation and a financial holding company registered with the Board of Governors of the Federal Reserve System (“Federal
Reserve Board”). SB Financial’s wholly owned subsidiary, The State Bank and Trust Company (“State Bank”), is
an Ohio-chartered bank engaged in commercial banking.

Rurban Statutory Trust II (“RST II”)
was established in August 2005. In September 2005, RST II completed a pooled private offering of 10,000 Trust Preferred Securities with
a liquidation amount of $1,000 per security. The proceeds of the offering were loaned to SB Financial in exchange for junior subordinated
debentures of SB Financial with terms substantially similar to the Trust Preferred Securities. The sole assets of RST II are the junior
subordinated debentures, and the back-up obligations, in the aggregate, constitute a full and unconditional guarantee by SB Financial
of the obligations of RST II.

State Bank Insurance, LLC (“SBI”)
is an Ohio corporation and a wholly owned subsidiary of State Bank incorporated in June 2010. SBI is an insurance company that engages
in the sale of insurance products to retail and commercial customers of State Bank.

SBFG Title, LLC (“SBFG Title”) is
an Ohio corporation that was formed in March 2019. SBFG Title engages in the sale of title insurance services.

SB Captive, Inc. (“SB Captive”) is
a Nevada corporation that was formed in March 2019. SB Captive pools insurance risk among like sized banking institutions.

Unless the context indicates otherwise, all references
herein to “we”, “us”, “our”, or the “Company” refer to SB Financial and its consolidated
subsidiaries.

**Critical Accounting Policies**

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.

**Allowance for Credit Losses –** The
Company believes the determination of the allowance for credit losses involves a higher degree of judgment and complexity than its other
significant accounting policies. The allowance for credit losses 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 allowance for credit losses 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 (“LGD”),
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.

34

**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 or 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. A decrease in earnings resulting from these or other factors could lead to an impairment of goodwill
that could adversely impact earnings in future periods.

**Three Months Ended March 31, 2026, compared
to Three Months Ended March 31, 2025**

**Net Income:** Net income for the
first quarter of 2026 was $4.3 million compared to net income of $2.2 million for the first quarter of 2025, an increase of $2.1 million,
or 99.1 percent. Diluted earnings per share (“DEPS”) of $0.69 for the first quarter of 2026 were higher compared to the DEPS
of $0.33 for the first quarter of 2025. Net income for the first 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 recapture on Mortgage
Servicing Rights (“OMSR”) of $0.45 million. Total noninterest income increased slightly compared to the prior year to $4.7
million. Mortgage loan volume was higher as compared to the prior year, with sales of originated mortgages for the first quarter of 2026
up 36 percent as compared to the same period in 2025.

**Provision for Credit Losses:** The
first quarter provision for credit losses was $214,000 as compared to a $387,000 provision for the prior year first quarter. The Company
had net chargeoffs of $26,000 for the first quarter of 2026 compared to net chargeoffs of $84,000 for the year-ago quarter. The provision
expense included $300,000 of growth-related provision, partially offset by a recapture of $86,000 for unfunded commitments. Total delinquent
loans ended the quarter at $3.3 million, or 0.28 percent of total loans.

| Asset Quality Review – For the Period Ended / ($ in thousands) | March 31, 2026 | March 31, 2025 |
| --- | --- | --- |
| Net chargeoffs – QTD | $26 | $84 |
| Nonaccruing loans | 3,792 | 6,051 |
| OREO / Other Assets Owned (OAO) | 974 | 73 |
| Non-performing assets | 4,766 | 6,124 |
| Non-performing assets/Total assets | 0.30% | 0.41% |
| Allowance for credit losses/Total loans | 1.39% | 1.41% |
| Allowance for credit losses/Non-performing loans | 432.2% | 254.4% |

**Consolidated Revenue:** Operating
revenue, consisting of net interest income (“NII”) and noninterest income, was $17.4 million for the first quarter of 2026,
an increase of $2.0 million, or 13.3 percent, from the $15.4 million generated during the first quarter of 2025.

NII for the first quarter of 2026 was $12.7 million,
which was up $1.4 million from the prior year first quarter’s $11.3 million. Comparing the first quarter of 2026 to the prior year
first quarter, the Company’s earning assets increased $133.3 million, and the average yield on earning assets increased by 6 basis
points. The net interest margin for the first quarter of 2026 was 3.48 percent compared to 3.40 percent for the first quarter of 2025.
Funding costs (interest paid to consumers and other entities) for deposits and other interest-bearing liabilities for the first quarter
of 2026 were 2.31 percent compared to 2.32 percent for the prior year first quarter.

35

Total noninterest income was $4.7 million for
the first quarter of 2026, which increased compared to $4.1 million for the prior year first quarter. Mortgage revenue increased during
the first quarter of 2026, as detailed below, with wealth management revenue also up compared to the prior year. Impairment of mortgage
servicing rights increased noninterest income by $0.45 million in the quarter, compared to a recapture of $0.01 million in the prior
year first quarter. SBFG Title contributed revenue of $0.49 million in the first quarter of 2026, up $0.09 million from the prior year.
Noninterest income as a percentage of average assets for the first quarter of 2026 was 1.21 percent compared to 1.14 percent for the
prior year first quarter.

State Bank originated $65.8 million of mortgage
loans during the first quarter of 2026 and sold $53.4 million, with $12.3 million of loans held for investment. This compares to $39.8
million originated for the first quarter of 2025, of which $39.3 million were sold with the remainder of loans held for investment. The
first quarter 2026 originations and subsequent sales resulted in $0.98 million of gains, slightly higher than the gains for the first
quarter of 2025. Net mortgage banking revenue was $1.89 million for the first quarter of 2026 compared to $1.46 million for the first
quarter of 2025.

**Consolidated Noninterest Expense:** Total noninterest expense for the first quarter of 2026 was $11.9 million, which was down $0.5 million compared to $12.4 million in the
prior-year first quarter. The quarter included higher expenses related to increased mortgage activity and various expenses 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.

**Income Taxes:** Income taxes for
the first quarter of 2026 were $0.99 million (18.7 percent) compared to $0.43 million (16.6 percent) for the first quarter of 2025.

**Changes in Financial Condition**

Total assets at March 31, 2026, were $1.60 billion,
up $59.2 million, or 3.8 percent, since December 31, 2025. Total loans, net of unearned income, were $1.18 billion as of March 31, 2026,
up $0.5 million, or 0.01 percent, from year-end. Total deposits at March 31, 2026, were $1.37 billion, an increase of $64.6 million,
or 4.9 percent, since 2025 year end.

Borrowed funds (consisting of FHLB advances, repurchase
(“REPO”) agreements, trust preferred securities and subordinated debt) totaled $67.0 million at March 31, 2026. This was down
slightly from year-end 2025 when borrowed funds totaled $77.3 million. Total shareholders’ equity for the Company of $143.7 million
now stands at 8.95 percent of total assets compared to the level at December 31, 2025, of $141.2 million, or 9.14 percent of total assets.
Adjusting for the temporary impairment of Accumulated other comprehensive loss, total equity would increase to $165.5 million, or 10.31
percent of total assets. The allowance for credit losses of $16.4 million is up $0.27 million, or 1.70 percent from the December 2025
year-end level.

**Capital Resources**

As of March 31, 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 March 31, 2026, that
management believes have changed State Bank’s capital classification.

36

State Bank’s actual capital levels and
ratios as of March 31, 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:

| ($ in thousands) / As of March 31, 2026 | Actual / Amount | Actual / Ratio | For Capital Adequacy / Purposes / Amount | For Capital Adequacy / Purposes / Ratio | To Be Well Capitalized Under / Prompt Corrective Action / Procedures / Amount | To Be Well Capitalized Under / Prompt Corrective Action / Procedures / Ratio |
| --- | --- | --- | --- | --- | --- | --- |
| Tier I Capital to average assets | $156,299 | 9.91% | $63,101 | 4.0% | $78,876 | 5.0% |
| Tier I Common equity capital to risk-weighted assets | $156,299 | 12.21% | $57,584 | 4.5% | $83,177 | 6.5% |
| Tier I Capital to risk-weighted assets | $156,299 | 12.21% | $76,779 | 6.0% | $102,372 | 8.0% |
| Total Risk-based capital to risk-weighted assets | $172,315 | 13.47% | $102,372 | 8.0% | $127,964 | 10.0% |
| As of December 31, 2025 |  |  |  |  |  |  |
| Tier I Capital to average assets | $151,592 | 9.86% | $61,486 | 4.0% | $76,857 | 5.0% |
| Tier I Common equity capital to risk-weighted assets | $151,592 | 11.78% | $57,902 | 4.5% | $83,636 | 6.5% |
| Tier I Capital to risk-weighted assets | $151,592 | 11.78% | $77,202 | 6.0% | $102,937 | 8.0% |
| Total Risk-based capital to risk-weighted assets | $167,693 | 13.03% | $102,937 | 8.0% | $128,671 | 10.0% |

Regulatory capital requirements commonly referred
to as “Basel III” were fully phased in as of January 1, 2019, and are reflected in the capital table above. Management opted
out of the accumulated other comprehensive income treatment under the new requirements and, as such, unrealized gains and losses from
available-for-sale securities will continue to be excluded from State Bank’s regulatory capital.

**Liquidity**

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
$319.1 million at March 31, 2026, compared to $263.1 million at December 31, 2025.

Liquidity risk arises from the possibility that
the Company may not be able to meet the Company’s financial obligations and operating cash needs or may become overly reliant upon
external funding sources. In order to manage this risk, the Board of Directors of the Company has established a Liquidity Policy that
identifies primary sources of liquidity, establishes procedures for monitoring and measuring liquidity and quantifies minimum liquidity
requirements. This policy designates the Asset/Liability Committee (“ALCO”) as the body responsible for meeting these objectives.
The ALCO reviews liquidity regularly and evaluates significant changes in strategies that affect balance sheet or cash flow positions.
Liquidity is centrally managed on a daily basis by the Company’s Chief Financial Officer and Asset Liability Manager.

The Company’s commercial real estate, first
mortgage residential, agricultural and multi-family mortgage portfolio of $979.9 million at March 31, 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 March 31, 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 three months ended March 31, 2026, and March 31, 2025,
follows.

37

The Company experienced negative cash flows from
operating activities for the three months ended March 31, 2026, and positive cash flows from operating activities for the three months
ended March 31, 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 million for the three months ended March 31, 2025. Highlights for the current year include
$54.7 million in proceeds from the sale of loans, which is up $15.4 million from the prior year. Originations of loans held for sale
was a use of cash of $59.5 million, which is up $23.2 million from the prior year . For the three months ended March 31, 2026, there
was a gain on sale of loans of $1.1 million, and depreciation and amortization on premises and equipment of $0.6 million.

The Company experienced positive cash flows from
investing activities for the three months ended March 31, 2026, and March 31, 2025. Net cash provided by investing activities was $2.1
million for the three months ended March 31, 2026, and $9.2 million for the three months ended March 31, 2025. Highlights for the current
year include $4.4 million in proceeds from maturing securities, partially offset by a $1.4 million decrease in loans. The prior year
activities include a $23.0 million decrease in loans and $3.0 million paid for the Marblehead acquisition, net of cash acquired, offset
by $6.1 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 three months ended March 31, 2026, and March 31, 2025. Net cash provided by financing activities was $55.6
million for the three months ended March 31, 2026, and $63.3 million for the three months ended March 31, 2025. Highlights for the current
period include a $65.6 million increase in transaction deposits compared to a $45.5 million increase for the three months ended March
31, 2025. Repayments of Federal Home Loan Bank advances for the three months ended March 31, 2026, were $7.5 million, compared to $1.0
million for the prior year three-month period.

**Off-Balance-Sheet Borrowing Arrangements:**

Significant additional off-balance-sheet liquidity
is available in the form of FHLB advances and unused federal funds lines from correspondent banks. Management expects the risk of changes
in off-balance-sheet arrangements to be immaterial to earnings.

The Company’s commercial
real estate, first mortgage residential, agricultural and multi-family mortgage portfolios in the total amount of $979.9 million were
pledged to meet FHLB collateralization requirements as of March 31, 2026. Based on the current collateralization requirements of the
FHLB, the Company had approximately $171.8 million of additional borrowing capacity at March 31, 2026. The Company also had $26.7 million
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 March 31, 2026, the Company had commitments to sell
mortgage loans totaling $20.4 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.

**Asset Liability Management**

**Asset liability management** involves developing,
executing and monitoring strategies to maintain appropriate liquidity, maximize net interest income and minimize 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.

38

**Interest rate risk** is the exposure of
a banking institution’s financial condition 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 Federal Reserve Board** together with
the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation 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 Board
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 does not currently utilize any derivative financial instruments to
manage interest rate risk. As market conditions warrant, the Company may implement various interest rate risk management strategies,
including the use of derivative financial instruments.

39

## Item 3. Quantitative and Qualitative Disclosures About Market Risk

Management believes there has been no material
change in the Company’s market risk from the information contained in the Company’s Annual Report on Form 10-K filed with
the Securities and Exchange Commission (the “SEC”) for the year ended December 31, 2025.

## Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

With the participation of the President and Chief
Executive Officer (the principal executive officer) and the Executive Vice President and Chief Financial Officer (the principal financial
officer) of the Company, the Company’s management has evaluated the effectiveness of the Company’s disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of
the end of the quarterly period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company’s President
and Chief Executive Officer and the Company’s Executive Vice President and Chief Financial Officer have concluded that:

- information required to be disclosed by the Company in this Quarterly Report on Form 10-Q and other reports which the Company files or submits under the Exchange Act would be accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure;
- information required to be disclosed by the Company in this Quarterly Report on Form 10-Q and other reports which the Company files or submits under the Exchange Act would be recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and
- the Company’s disclosure controls and procedures were effective as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial
Reporting

There were
no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that
occurred during the Company’s fiscal quarter ended March 31, 2026, that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.

40

**PART
II – OTHER INFORMATION**

## Item 1. 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 1A. Risk Factors

There are certain risks and uncertainties in
our business that could cause our actual results to differ materially from those anticipated. A detailed discussion of our risk factors
is included in “Item 1A. Risk Factors” of Part I of the Company’s Annual Report on Form 10-K for the year ended December
31, 2025.

## Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds**

(a) Not Applicable

(b) Not Applicable

(c) Repurchases of Common Shares

On December 18, 2024, the Company
announced a share repurchase program authorizing the repurchase of up to 500,000 common shares of the Company through December 31, 2026.
The table below sets forth information regarding common shares repurchased by the Company during the quarter ended March 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 |
| --- | --- | --- | --- | --- |
| 01/01/26 - 01/31/26 | 9,010 | $18.78 | 9,010 | 190,040 |
| 02/01/26 - 02/28/26 | 6,272 | 21.58 | 6,272 | 183,768 |
| 03/01/26 - 03/31/26 | 13,852 | 20.36 | 13,852 | 169,916 |
| Total | 29,134 | $20.13 | 29,134 | 169,916 |

## Item 3. Defaults Upon Senior Securities

Not applicable

## Item 4. Mine Safety Disclosures

Not applicable

## Item 5. Other Information

(a) None

(b) None

(c) During the quarter ended March 31, 2026, no director or officer (as defined in Rule 16a-1 under the Exchange Act) adopted or terminated any Rule 10b5-1 trading arrangements or any non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).

41

## Item 6. Exhibits

| Exhibits |  |  |
| --- | --- | --- |
| 3.1 | – | Amended Articles of the Company (Incorporated herein by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (File No. 31-36785)) |
| 3.2 | – | Certificate of Amendment to the Amended Articles of the Company as filed with the Ohio Secretary of State on April 27, 1993 (Incorporated herein by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (File No. 31-36785)) |
| 3.3 | – | Certificate of Amendment to the Amended Articles of the Company as filed with the Ohio Secretary of State on April 30, 1997 (Incorporated herein by reference to Exhibit 3(c) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 0-13507)) |
| 3.4 | – | Certificate of Amendment to the Amended Articles of the Company as filed with the Ohio Secretary of State on May 27, 2011 (Incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 1, 2011 (File No. 0-13507)) |
| 3.5 | – | Certificate of Amendment to the Amended Articles of the Company as filed with the Ohio Secretary of State on April 12, 2013 (Incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed April 18, 2013 (File No. 0-13507)) |
| 3.6 | – | Certificate of Amendment by Directors or Incorporators to Articles filed with the Secretary of State of the State of Ohio on November 6, 2014 (Incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed November 12, 2014 (File No. 0-13507)) |
| 3.7 | – | Certificate of Amendment to the Amended Articles of the Company as filed with the Ohio Secretary of State on January 25, 2022 (Incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed January 27, 2022 (File No. 0-13507)) |
| 3.8 | – | Amended Articles of the Company, as amended (reflecting amendments through January 25, 2022) [for SEC reporting compliance purposes only – not filed with the Ohio Secretary of State] (Incorporated herein by reference to Exhibit 3.8 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (File No. 31-36785)) |
| 3.9 | – | Amended and Restated Regulations of the Company (Incorporated herein by reference to Exhibit 3.5 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 (File No. 0-13507)) |
| 3.10 | – | Certificate Regarding Adoption of Amendment to Section 2.01 of the Amended and Restated Regulations of the Company by the Shareholders on April 16, 2009 (Incorporate herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed April 22, 2009 (File No. 0-13507)) |
| 31.1 | – | Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer) |
| 31.2 | – | Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer) |
| 32.1 | – | Section 1350 Certification (Principal Executive Officer) |
| 32.2 | – | Section 1350 Certification (Principal Financial Officer) |
| 101.INS | – | Inline XBRL Instance Document. |
| 101.SCH | – | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL | – | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF | – | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB | – | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE | – | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 | – | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |

42

**SIGNATURES**

Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: May 7, 2026 SB FINANCIAL GROUP, INC.

By: /s/  Mark A. Klein

Mark A. Klein

Chairman, President & CEO

By: /s/ Anthony  V. Cosentino

Anthony V. Cosentino

Executive Vice President &

Chief Financial Officer

43