What changed in this filing

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Item 1. Financial Statements

2025-05-08 compared with 2024-11-07 · 970 added, 978 removed, 344 unchanged (85% of the section changed)

3 unchanged sentences

($ in thousands)

and due from banks

bearing time deposits

Available-for-sale

held for sale

net of unearned income

for credit losses

and equipment, net

Reserve and Federal Home Loan Bank Stock, at cost

assets and other assets held for sale, net

value of life insurance

servicing rights

and shareholders’ equity

December 2024

Cash and due from banks

Interest bearing time deposits

Available-for-sale securities

Loans held for sale

Loans, net of unearned income

Allowance for credit losses

Premises and equipment, net

Federal Reserve and Federal Home Loan Bank Stock, at cost

Foreclosed assets and other assets held for sale, net

Interest receivable

Cash value of life insurance

Mortgage servicing rights

Liabilities and shareholders’ equity

Non interest bearing demand

Interest bearing demand

bearing demand

Home Loan Bank advances

preferred securities

debt net of issuance costs

& Contingent Liabilities

Shareholders’

Time deposits

Total deposits

Repurchase agreements

Federal Home Loan Bank advances

Trust preferred securities

Subordinated debt net of issuance costs

Interest payable

Other liabilities

Total liabilities

Commitments & Contingent Liabilities

Shareholders’ Equity

Preferred stock, no par value;

authorized 200,000 shares;

2024 - 0 shares outstanding,

2023 - 0 shares outstanding

Common stock, no par value;

2024 - 10,500,000 shares authorized, 8,525,375 shares issued;

2025 - 0 shares outstanding, 2024 - 0 shares outstanding

Common stock, no par value;2025 - 10,500,000 shares authorized, 8,525,375 shares issued;

2024 - 10,500,000 shares authorized, 8,525,375 shares issued

paid-in capital

other comprehensive loss

Treasury stock, at cost;

(2024 - 1,847,073 common shares;

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

Treasury stock, at cost;(2025 - 1,994,729 common shares;

2024 - 1,977,538 common shares)

shareholders’ equity

liabilities and shareholders’ equity

Total shareholders’ equity

Total liabilities and shareholders’ equity

notes to condensed consolidated financial statements (unaudited)

1 unchanged sentence

Consolidated Statements of Income (unaudited)

($ in thousands,

except per share data)

September 30,

interest income

($ in thousands, except per share data)

Three Months Ended March 31,

Interest Income

agreements & other

Home Loan Bank advance expense

preferred securities expense

Other interest income

Total interest income

Interest Expense

Interest Income

for credit losses - loans

for unfunded commitments

provision for credit losses

interest income after provision for credit losses

management fees

on sale of mortgage loans & OMSR

loan servicing fees, net

on sale of non-mortgage loans

insurance income

on sale of assets

Repurchase agreements & other

Federal Home Loan Bank advance expense

Trust preferred securities expense

Subordinated debt expense

Total interest expense

Net Interest Income

Provision for credit losses - loans

Provision for unfunded commitments

Total provision for credit losses

Net interest income after provision for credit losses

Noninterest Income

and employee benefits

occupancy expense

processing fees

and communications

and delivery expense

local and other taxes

Wealth management fees

Customer service fees

Gain on sale of mortgage loans & OMSR

Mortgage loan servicing fees, net

Gain on sale of non-mortgage loans

Title insurance income

Total noninterest income

Noninterest Expense

before income tax

for income taxes

earnings per common share

common shares outstanding (in thousands):

Salaries and employee benefits

Net occupancy expense

Equipment expense

Data processing fees

Professional fees

Marketing expense

Telephone and communications

Postage and delivery expense

State, local and other taxes

Employee expense

Other expense

Total noninterest expense

Income before income tax

Provision for income taxes

Basic earnings per common share

Diluted earnings per common share

Average common shares outstanding (in thousands):

notes to condensed consolidated financial statements (unaudited)

Financial Group, Inc.

Consolidated Statements of Comprehensive Income (Loss) (unaudited)

September 30,

Consolidated Statements of Comprehensive Income (unaudited)

Months Ended March 31,

($ in thousands)

comprehensive income (loss)

for sale investment securities:

unrealized holding gains (losses) arising in the period

tax (expense) benefit

effect on other comprehensive income (loss)

comprehensive income (loss)

Other comprehensive income (loss)

Available for sale investment securities:

Gross unrealized holding gains (losses) arising in the period

Related tax (expense) benefit

Net effect on other comprehensive income (loss)

Total comprehensive income

notes to condensed consolidated financial statements (unaudited)

1 unchanged sentence

Consolidated Statements of Shareholders’ Equity (unaudited)

in thousands, except per share data)

Paid-in Capital

Other Comprehensive Loss

January 1, 2024

comprehensive loss

Cash dividends on common, $ 0.135 per share

stock vesting

Repurchased stock ( 30,048 shares)

based compensation expense

March 31, 2024

comprehensive loss

Cash dividends on common, $ 0.14 per share

Repurchased stock ( 26,791 shares)

based compensation expense

June 30, 2024

comprehensive income

Accumulated Other Comprehensive

($ in thousands,

except per share data)

Balance, January 1, 2025

Other comprehensive income

Cash dividends on common, $ 0.145 per share

stock vesting

Restricted stock vesting

Repurchased stock ( 33,478 shares)

based compensation expense

September 30, 2024

in thousands, except per share data)

Paid-in Capital

Stock based compensation expense

Balance, March 31, 2025

Accumulated Other Comprehensive

($ in thousands,

except per share data)

Balance, January 1, 2024

Other comprehensive loss

comprehensive income

of ASU 2016-13

Cash dividends on common, $ 0.135 per share

stock vesting

Repurchased stock ( 55,800 shares)

based compensation expense

comprehensive loss

Dividends on common, $ 0.13 per share

Repurchased stock ( 91,260 shares)

based compensation expense

June 30, 2023

comprehensive loss

Cash dividends on common, $ 0.13 per share

stock vesting

Restricted stock vesting

Repurchased stock ( 30,048 shares)

based compensation expense

September 30, 2023

Stock based compensation expense

Balance, March 31, 2024

notes to condensed consolidated financial statements (unaudited)

1 unchanged sentence

Consolidated Statements of Cash Flows (unaudited)

Nine Months Ended

September 30,

($ in thousands)

Three Months Ended March 31,

Operating Activities

10 unchanged sentences

Gain from sale of loans

Gain on sales of assets

Interest receivable

3 unchanged sentences

Purchases of available-for-sale securities

Net increase (decrease) in interest bearing time deposits

Proceeds from maturities of interest bearing time deposits

Proceeds from maturities of available-for-sale securities

Proceeds from sales of available-for-sale securities

Net change in loans

Purchase of premises, equipment

Proceeds from bank owned life insurance

Purchase of bank owned life insurance

2 unchanged sentences

Proceeds from sale of foreclosed assets

Net cash used in investing activities

Acquisition, net of cash acquired (paid)

Net cash provided by investing activities

Financing Activities

Net increase (decrease) in demand deposits, money market, interest checking & savings accounts

Net increase in time deposits

Net increase in securities sold under agreements to repurchase

Net increase in demand deposits, money market, interest

checking & savings accounts

Net (decrease) increase in time deposits

Net increase (decrease) in securities sold under agreements to repurchase

Proceeds from Federal Home Loan Bank advances

2 unchanged sentences

Cash dividends on common shares

Net cash (used in) provided by financing activities

Increase (decrease) in cash and cash equivalents

Net cash provided (used in) by financing activities

Increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

2 unchanged sentences

Interest paid

Income taxes paid

Supplemental non-cash disclosure

Transfer of loans to foreclosed assets

In conjunction with the Marblehead acquisition, liabilities assumed were:

Fair value of assets acquired

Cash paid in acquisition

Liabilities assumed

notes to condensed consolidated financial statements (unaudited)

4 unchanged sentences

and management of its wholly-owned subsidiaries, including The State Bank and Trust Company (“State Bank”), SBFG Title, LLC

(“SBFG Title”), SB Captive, Inc.

(“SB Captive”), RFCBC, Inc.

(“RFCBC”), Rurbanc Data Services, Inc.

dba RDSI Banking Systems (“RDSI”), and Rurban Statutory Trust II (“RST II”).

RDSI is presently inactive and has

had no material operations or employees since 2017.

In addition, State Bank owns all of the outstanding stock of Rurban Mortgage Company

(“RMC”), which is inactive, and State Bank Insurance, LLC (“SBI”).

On August 14, 2024, SB Financial Group, Inc.

Marblehead Bancorp (“Marblehead”), parent company of The Marblehead Bank (“Marblehead Bank”), jointly announced

entry into a definitive agreement pursuant to which Marblehead will be combined with SB Financial and Marblehead Bank will merge with

and into State Bank.

The merger agreement was unanimously approved by the Boards of Directors of both bank holding companies and their

subsidiary banks.

Under the terms of the merger agreement, shareholders

of Marblehead Bancorp will receive $ 196.31 in cash in exchange for each share of Marblehead Bancorp common stock for a transaction valued

in aggregate at approximately $ 5.0 million.

When finalized, the merger will add two full-service

branches and one limited-service branch to State Bank’s branch footprint, strengthening State Bank’s position in the Northwest

Ohio region and expanding State Bank’s presence into the Marblehead, Ohio and Ottawa County, Ohio communities.

consolidated financial statements include the accounts of SBFG, State Bank, RFCBC, RDSI, RMC, SBFG Title, SB Captive and SBI (collectively,

the “Company”).

(“SBFG Title”), and SB Captive, Inc.

(“SB Captive”).

State Bank owns all of the outstanding stock of State Bank

Insurance, LLC (“SBI”).

In December 2024, SBFG completed the dissolution of four of its inactive subsidiaries – RFCBC,

Inc., Rurbanc Data Services, Inc., Rurban Mortgage Company and SBFG Mortgage, LLC.

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.

6 unchanged sentences

Those adjustments consist only of normal recurring adjustments.

Results of operations for the three and nine months ended September

Results of operations for the three-months ended March 31, 2025,

are not necessarily indicative of results for the complete year.

10 unchanged sentences

during the global market-wide reference rate transition period.

The guidance is effective as of March 12, 2020 through December 31, 2022.

However, a deferral of the implementation of the Reference Rate Reform was issued in December of 2022, which extends the implementation

to December 31, 2024.

The Company has implemented a replacement for the reference rate and has determined that the changes did not have

a material impact on the Company’s consolidated financial statements.

Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

January 1, 2023, the Company adopted ASU 2016-13:

Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on

Financial Instruments (“ASU 2016-13”) (“ASC 326”) as amended.

The new accounting guidance in this ASU replaces the

incurred loss methodology with an expected loss methodology, which is referred to as the current expected credit loss (“CECL”)

The CECL methodology is applicable to the measurement of credit losses on financial assets measured at amortized cost, including

loan receivables and held-to-maturity (“HTM”) debt securities.

It also applies to off-balance sheet credit exposures not

accounted for as insurance (including loan commitments, standby letters of credit, financial guarantees, and other similar instruments

that are noncancellable), and net investments in leases recognized by a lessor.

The CECL methodology requires an entity to estimate credit

losses over the life of an asset or off-balance sheet credit exposure.

addition, CECL made changes to the accounting for available-for-sale debt securities.

One such change is to require credit losses to

be presented as an allowance rather than as a write-down on available-for-sale debt securities if management determines that the Company

does not intend to sell and it is more likely than not, that the Company will not be required to sell the securities.

Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet

credit exposures.

Results for reporting periods beginning on or after January 1, 2023, are presented under ASC 326 while prior period

amounts continue to be reported in accordance with previously applicable GAAP.

The transition adjustment of the CECL adoption included

an increase in the allowance for credit losses (“ACL”) of $ 1.4 million and an increase of $ 1.1 million to establish a reserve

for unfunded commitments, with a $ 2.0 million decrease to retained earnings, and $ 0.5 million of deferred tax being recorded as part

of the deferred tax asset in the Company’s consolidated balance sheet.

following table details the impact of the adoption of ASC 326:

in thousands)

Effect on Retained Earnings

Allowance for credit

loss on loans

real estate - owner occupied

real estate - nonowner occupied

equity line of credit (HELOC)

on off-balance sheet commitments

Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures

January 1, 2023, the Company adopted ASU 2022-02:

Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and

Vintage Disclosures, which removed the existing measurement and disclosure requirements for loans considered to be Troubled Debt Restructurings

(“TDRs”) and added additional disclosure requirements related to modifications provided to borrowers experiencing financial

Prior to adoption of ASU 2022-02, a change in contractual terms of a loan where a borrower was experiencing financial difficulty

and received a concession not available through other sources was required to be disclosed as a TDR, whereas now a borrower that is experiencing

financial difficulty and receives a modification in the form of principal forgiveness, interest rate reduction, an other-than-insignificant

payment delay or a term extension in the current period needs to be disclosed.

The amendment was adopted prospectively and had no impact

on the Company’s consolidated financial statements aside from additional and revised financial statement disclosures (see Note

4 to the consolidated financial statements).

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (ASU 2023-02)

ASU permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which

the income tax credits are received, using the proportional amortization method if certain conditions are met.

A reporting entity makes

an accounting policy election to apply the proportional amortization method on a tax-credit-by-tax-credit-program basis rather than electing

to apply the proportional amortization method at the reporting entity level or to individual investments.

The Company adopted the standard

on January 1, 2024.

The adoption of this standard did not have a material effect on the Company’s consolidated financial statements.

The guidance was initially effective as of March 12, 2020, through December

However, a deferral of the implementation of the Reference Rate Reform was issued in December of 2022, which extended the implementation

through December 31, 2024.

The Company has implemented a replacement for the reference rate and has determined that the changes did not

have a material impact on the Company’s consolidated financial statements.

Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures

ASU expands operating segment disclosures and requires all segment disclosures to be reported in both annual and interim periods.

new standard requires disclosure of the following:

significant segment expenses that are regularly provided to the chief operating decision

maker (“CODM”) for reportable segments;

the title and position of the CODM as well as how the CODM uses the reported measure(s)

of profit and loss to assess segment performance;

and “other segment items” by reportable segment and a description of its

The Company adopted the standard on January 1, 2024, and its adoption did not have a material effect on our financial statements.

Standards not yet adopted:

1 unchanged sentence

Improvements to Income Tax Disclosures

December 2023, the FASB issued ASU 2023-09:

Income Taxes (Topic 740) Improvements to Income Tax Disclosures.

The amendments in this ASU

address investor requests for more transparency about income tax information through improvements to income tax disclosures, primarily

related to effective tax rate reconciliation and information related to income taxes paid, among certain other amendments to improve

the effectiveness of such disclosures.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2024, and

are to be applied on a prospective basis.

Adoption of this ASU is not expected to have a material impact on the Company’s consolidated

financial statements.

December 2023, the Financial Accounting Standards Bord (“FASB”) issued ASU 2023-09:

Income Taxes (Topic 740) Improvements

to Income Tax Disclosures.

The amendments in this ASU address investor requests for more transparency about income tax information through

improvements to income tax disclosures, primarily related to effective tax rate reconciliation and information related to income taxes

paid, among certain other amendments to improve the effectiveness of such disclosures.

The amendments in this ASU are effective for annual

periods beginning after December 15, 2024, and are to be applied on a prospective basis.

Adoption of this ASU is not expected to have

a material impact on the Company’s consolidated financial statements.

2 - EARNINGS PER SHARE

4 unchanged sentences

that participate in dividends declared and paid by the Company on its common shares prior to vesting of the restricted shares.

Months Ended Sep.

and outstanding shares in thousands - except per share data)

earnings allocated to common shares

Undistributed

earnings allocated to common shares

earnings allocated to participating securities

Income allocated to common shares and participating securities

Weighted average

shares outstanding for basic earnings per share

effect of stock compensation

average shares outstanding for diluted earnings per share

Basic earnings per

Diluted earnings

per common share

Nine Months Ended Sep.

Three Months Ended March 31,

($ and outstanding shares in thousands - except per share data)

9 unchanged sentences

Diluted earnings per common share

3 – BUSINESS COMBINATION

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.

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.

accordance with ASC 805, the Company expensed approximately $ 0.7 million of direct acquisition costs during the three months ended

March 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.

Loans acquired with deteriorated credit quality (“PCD loans”) since origination were not material.

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 intangible assets are related to core deposits, which are being amortized over 10 years

on a straight-line basis.

For tax purposes, goodwill is non-deductible but will be evaluated annually for impairment.

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 have may have changes to valuation amounts that were not readily determinable

at acquisition date.

($ in thousands)

Fair value of assets acquired

Cash and cash equivalents

Investment securities

Federal Reserve and Federal Home Loan Bank stock

Loans held for investment

Premises and equipment

Core deposit intangible

Total assets acquired

Fair value of liabilities assumed

Other liabilities

Total liabilities assumed

Total purchase price (cash)

Forma Financial Information

results of operations of Marblehead have been included in the Company’s consolidated financial statements since the acquisition

date of January 17, 2025.

The following schedule includes the pro forma results for the three months ended March 31, 2025, and 2024,

as if the Marblehead acquisition had occurred as of the beginning of the reporting periods presented.

The acquisition added less than

$ 0.3 million in revenue to the Company for the three months ended March 31, 2025.

Three Months Ended

Summary of Operations ($ in thousands)

Net interest income

Provision for loan losses

Net interest income after provision

Non interest income

Non interest expense

Income before income taxes

Income tax expense*

Net income to common shareholders

Basic earnings per share

Diluted earnngs per share

* Income tax expense for Marblehead calculated using a 21 % statuatory

4 – AVAILABLE-FOR-SALE Securities

amortized cost and appropriate fair values, together with gross unrealized gains and losses, of securities at September 30, 2024, and

December 31, 2023, were as follows:

amortized cost and appropriate fair values, together with gross unrealized gains and losses, of securities at March 31, 2025, and December

31, 2024, were as follows:

($ in thousands)

Unrealized Gains

Unrealized Losses

September 30, 2024

Treasury and Government

Mortgage-backed

and political subdivisions

corporate securities

Unrealized Gains

Unrealized Losses

March 31, 2025

Treasury and Government agencies

Mortgage-backed securities

State and political subdivisions

Other corporate securities

December 31, 2024

Treasury and Government

Mortgage-backed

and political subdivisions

corporate securities

amortized cost and fair value of securities available-for-sale at September 30, 2024, by contractual maturity, are shown below.

Treasury and Government agencies

Mortgage-backed securities

State and political subdivisions

Other corporate securities

amortized cost and fair value of securities available-for-sale at March 31, 2025, by contractual maturity, are shown below.

maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call

1 unchanged sentence

($ in thousands)

after one year through five years

after five years through ten years

after ten years

Mortgage-backed

fair value of securities pledged as collateral, to secure public deposits and for other purposes, was $ 147.4 million at September 30,

2024, and $ 89.7 million at December 31, 2023.

The fair value of securities delivered for repurchase agreements was $ 18.4 million at September

30, 2024, and $ 19.7 million at December 31, 2023.

were no realized gains or losses from sales of available-for-sale securities for the three and nine months ended September 30, 2024,

or September 30, 2023.

investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost.

fair value of these investments was $ 210.3 million at September 30, 2024, and $ 217.0 million at December 31, 2023, which consisted of

135 securities, or approximately 99 percent, and 139 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.

with unrealized losses, aggregated by investment class and length of time that individual securities have been in a continuous unrealized

loss position at September 30, 2024, and December 31, 2023, are as follows:

Within one year

Due after one year through five years

Due after five years through ten years

Due after ten years

Mortgage-backed securities

The fair value of securities pledged as collateral,

to secure public deposits and for other purposes, was $ 134.1 million at March 31, 2025, and $ 115.5 million at December 31, 2024.

value of securities delivered for repurchase agreements was $ 13.7 million at March 31, 2025, and $ 17.3 million at December 31, 2024.

There were no realized gains or losses from sales

of available-for-sale securities for the three months ended March 31, 2025, or March 31, 2024.

Certain investments in debt securities are reported

in the consolidated financial statements at an amount less than their historical cost.

Total fair value of these investments was $ 199.1

million at March 31, 2025, and $ 201.3 million at December 31, 2024, which consisted of 134 securities, or approximately 93 percent, and

138 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, 2025,

and December 31, 2024, are as follows:

($ in thousands)

than 12 Months

Less than 12 Months

12 Months or Longer

September 30, 2024

March 31, 2025

Treasury and Government agencies

Mortgage-backed

and political subdivisions

corporate securities

than 12 Months

Mortgage-backed securities

State and political subdivisions

Other corporate securities

Less than 12 Months

12 Months or Longer

1 unchanged sentence

Treasury and Government agencies

Mortgage-backed

and political subdivisions

corporate securities

on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information obtained

from regulatory filings, management believes the declines in fair value for these securities are temporary.

Management reviews these

securities on a quarterly basis and evaluates if any security has a fair value less than its amortized cost.

Once these securities are

identified, management determines whether a decline in fair value resulted from a credit loss or other factors.

In making the assessment,

the Company may consider various factors including the extent to which fair value is less than amortized cost, performance on any underlying

collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal

payments and adverse conditions specifically related to the security.

If the assessment indicates that a credit loss exists, a provision

is recorded to the ACL.

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 September 30, 2024, and December 31, 2023, no ACL on available-for-sale securities

was recorded.

Mortgage-backed securities

State and political subdivisions

Other corporate securities

Based on evaluation of available evidence, including

recent changes in market interest rates, credit rating information and information obtained from regulatory filings, management believes

the declines in fair value for these securities are temporary.

Management reviews these securities on a quarterly basis and evaluates

if any security has a fair value less than its amortized cost.

Once these securities are identified, management determines whether a decline

in fair value resulted from a credit loss or other factors.

In making the assessment, the Company may consider various factors including

the extent to which fair value is less than amortized cost, performance on any underlying collateral, downgrades in the ratings of the

security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specifically

related to the security.

If the assessment indicates that a credit loss exists, a provision is recorded to the allowance for credit losses

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, 2025, and December 31, 2024, no ACL on available-for-sale securities was recorded.

Management has made the accounting policy election

1 unchanged sentence

Accrued interest receivable

on available-for-sale debt securities totaled $ 0.6 million at September 30, 2024 and $ 0.7 million at December 31, 2023.

on available-for-sale debt securities totaled $ 0.6 million at March 31, 2025 and $ 0.6 million at December 31, 2024.

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

– LOANS AND ALLOWANCE FOR CREDIT LOSSES

that management has the intent and ability to hold for the foreseeable future, or until maturity or payoffs, are reported at their outstanding

principal balances adjusted for any charge-offs, the 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:

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

charge-offs, 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)

September 30,

real estate - owner occupied

real estate - nonowner occupied

equity line of credit (HELOC)

for credit losses

shown above are net of deferred loan fees and costs, which totaled $ 0.60 million and $ 0.44 million at September 30, 2024, and December

31, 2023, respectively.

characteristics of each loan portfolio segment are as follows:

& Industrial and Agricultural

& 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.

Commercial & industrial

Commercial real estate - owner occupied

Commercial real estate - nonowner occupied

Residential real estate

Home equity line of credit (HELOC)

Allowance for credit losses

The totals shown above are net of accretable

discounts on acquired loans and deferred loan fees and costs, which totaled $ 0.67 million in net fees at March 31, 2025, and $ 0.15

million in net costs at December 31, 2024.

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

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.

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.

Real Estate (Owner and Nonowner Occupied)

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

Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria.

the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk.

management tracks the level of owner-occupied versus non-owner-occupied commercial real estate loans.

loans are underwritten utilizing feasibility studies, independent appraisal reviews and financial analysis of the developers and property

Construction loans are generally underwritten based on estimates of costs and value associated with the completed project.

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.

Real Estate, HELOC and Consumer

and consumer loans consist of two segments – residential mortgage loans and personal loans.

Residential mortgage loans are secured

by 1-4 family residences and are generally owner-occupied, and the Company generally establishes a maximum loan-to-value ratio and requires

private mortgage insurance if that ratio is exceeded.

HELOCs are typically secured by a subordinate interest in 1-4 family residences,

and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles.

Some consumer personal

loans are unsecured, such as small installment loans and certain lines of credit.

Repayment of these loans is primarily dependent on

the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels.

Repayment can also be impacted by changes in property values on residential properties.

Risk is mitigated by the fact that these loans

are of smaller individual amounts and spread over a large number of borrowers.

for Credit Losses (ACL)

ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on

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.

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

Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences

in underwriting standards, portfolio mix, delinquency level, or term as well as changes in environmental conditions, such as changes

in unemployment rates, property values, or other relevant factors.

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

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.

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.

Management estimates the ACL using relevant available

information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

Historical credit loss experience provides the basis for the estimation of expected credit losses.

Adjustments to historical loss information

are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency

level, or term as well as changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant

Accrued interest receivable related to loans totaled

$ 3.3 million at September 30, 2024 and $ 3.2 million at December 31, 2023, and is excluded from the estimate of credit losses.

Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist.

The Company has identified

the following portfolio segments:

& 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.

Real Estate - Owner Occupied - Owner occupied commercial real estate loans consist of

loans to purchase or re-finance owner occupied nonresidential properties.

This includes office

buildings and other commercial facilities.

Commercial mortgages secured by owner occupied

properties are primarily dependent on the ability of borrowers to achieve business results

consistent with those projected at loan origination.

While these loans are collateralized

by real property in an effort to mitigate risk, it is possible the liquidation of collateral

will not fully satisfy the obligation as the commercial real estate collateral may be more

adversely affected by conditions in the real estate markets or in the general economy.

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

or refinance the borrower’s primary dwelling, second residence or vacation home and

are often secured by 1-4 family residential property.

Significant and rapid declines in real

estate values can result in borrowers having debt levels in excess of the current market

value of the collateral.

Equity Line of Credit (HELOCs) - Home equity loans consist of HELOCs and other lines

of credit secured by first or second liens on the borrower’s primary residence.

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

$ 3.4 million at March 31, 2025, and $ 3.3 million at December 31, 2024, 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.

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.

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 often secured by 1-4 family residential property.

Significant and rapid declines in real estate values can result

in borrowers having debt levels in excess of the current market value of the collateral.

● Home Equity Line of Credit (HELOCs) -

Home equity loans consist of HELOCs and other lines of credit secured by first or second liens on the borrower’s primary residence.

These loans are secured by both senior and junior liens on the residential real estate and are particularly susceptible to declining collateral

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 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.

of the underlying collateral within this class is at risk of potential rapid depreciation

● 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.

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 were estimated using

the Remaining Life Method.

For each segment, a Loss Driver Analysis (“LDA”) was performed in order to identify appropriate

loss drivers and create a regression model for use in forecasting cash flows.

The LDA utilized the Company’s own Federal Financial

Institutions Examination Council’s (“FFIEC”) Call Report data, as well as peer institution data.

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 September 30, 2024,

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.

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.

key assumptions in the DCF model include the probability of default (“PD”), loss given default (“LGD”), and prepayment/curtailment

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

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

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.

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.

Company is also required to consider expected credit losses associated with loan commitments over the contractual period in which it

is exposed to credit risk on the underlying commitments.

Any allowance for off-balance sheet credit exposures is reported in Other liabilities

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

consolidated statement of income.

The calculation includes consideration of the likelihood that funding will occur and forecasted credit

losses on commitments expected to be funded over their estimated lives.

The allowance is calculated using the same methodology, inputs

and assumptions as the funded portion of loans at the segment level applied to the amount of commitments expected to be funded.

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.

As a result of the adoption of ASC 326, the Company recorded a $ 1.4 million increase to the ACL as a cumulative-effect adjustment on Jan uary 1, 2023.

The following tables summarize the activity related to the ACL for the three and nine months ended September 30, 2024, and September 30, 2023, and the twelve months ended December 31, 2023.

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 were estimated using the Remaining Life Method.

For each segment, a Loss Driver Analysis

(“LDA”) was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash

The LDA utilized 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.

Company’s own loan-level loss data from January 2016 through March 31, 2025, 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.

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

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 consolidated balance sheet

and is increased or decreased through a provision for credit loss expense on the Company’s consolidated statement of income.

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.

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.

During the first quarter of 2025, the Company

completed the acquisition of Marblehead, in Marblehead, Ohio.

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, 2025, and March 31, 2024, and for

the twelve months ended December 31, 2024.

($ in thousands)

For the three months ended

September 30, 2024

beginning of period

of Adopting ASC 326

for Credit Losses

end of period

real estate - owner occupied

real estate - nonowner occupied

in thousands)

For the nine months ended

September 30, 2024

beginning of period

of Adopting ASC 326

for Credit Losses

end of period

real estate - owner occupied

real estate - nonowner occupied

March 31, 2025

Balance, beginning of period

Provision for Credit Losses

Balance, end of period

Commercial & industrial

Commercial real estate - owner occupied

Commercial real estate - nonowner occupied

Residential real estate

($ in thousands)

For the three months ended

September 30, 2023

beginning of period

of Adopting ASC 326

for Credit Losses

end of period

real estate - owner occupied

real estate - nonowner occupied

in thousands)

For the nine months ended

September 30, 2023

beginning of period

of Adopting ASC 326

for Credit Losses

end of period

real estate - owner occupied

real estate - nonowner occupied

March 31, 2024

Balance, beginning of period

Provision for Credit Losses

Balance, end of period

Commercial & industrial

Commercial real estate - owner occupied

Commercial real estate - nonowner occupied

Residential real estate

($ in thousands)

1 unchanged sentence

December 31, 2024

beginning of period

of Adopting ASC 326

for Credit Losses

end of period

real estate - owner occupied

real estate - nonowner occupied

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.

following table presents an analysis of collateral-dependent loans of the Company as of September 30, 2024, and December 31, 2023.

Balance, beginning of period

Provision for Credit Losses

Balance, end of period

Commercial & industrial

Commercial real estate - owner occupied

Commercial real estate - nonowner occupied

Residential real estate

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, 2025, and December 31, 2024.

($ in thousands)

Collateral Type

September 30, 2024

March 31, 2025

Commercial & industrial

9 unchanged sentences

Residential real estate

CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the ACL based on the fair value of collateral.

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

1 unchanged sentence

If the fair value of the collateral exceeds the amortized cost, no allowance

Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such

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.

analysis is performed on a quarterly basis.

The Company uses the following definitions for risk ratings:

(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.

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

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.

Loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged,

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.

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.

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.

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 September

($ in thousands)

Term Loans by Year of Origination

September 30, 2024

Commercial & industrial

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

Commercial real estate - owner occupied

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

Commercial real estate - nonowner occupied

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

Residential real estate

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

Home equity line of credit (HELOC)

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

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.

uses the following definitions for risk ratings:

Pass (grades 1 – 4):

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):

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):

Current period gross chargeoffs

following table presents loan balances by credit quality indicators and gross chargeoffs by loan category and year of origination as

of December 31, 2023.

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.

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.

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, 2025.

in thousands)

Term Loans by Year of Origination

December 31, 2023

Commercial & industrial

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

Loans by Year of Origination

Loans Converted

period gross chargeoffs

real estate - owner occupied

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

period gross chargeoffs

real estate - nonowner occupied

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

line of credit (HELOC)

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

Special Mention (5)

Substandard (6)

Current period gross chargeoffs

following tables present the Company’s loan portfolio aging analysis as of September 30, 2024, and December 31, 2023.

period gross chargeoffs

equity line of credit (HELOC)

period gross chargeoffs

The following table presents loan balances by

credit quality indicators and gross chargeoffs by loan category and year of origination as of December 31, 2024.

in thousands)

September 30, 2024

Loans by Year of Origination

Loans Converted

period gross chargeoffs

real estate - owner occupied

period gross chargeoffs

real estate - nonowner occupied

period gross chargeoffs

equity line of credit (HELOC)

period gross chargeoffs

The following tables present the Company’s

loan portfolio aging analysis as of March 31, 2025, and December 31, 2024.

($ in thousands)

March 31, 2025

Commercial & industrial

3 unchanged sentences

December 31, 2024

90 Days Past Due

Commercial & industrial

2 unchanged sentences

Residential real estate

past due 90 days are systematically placed on nonaccrual status.

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.

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 September 30, 2024, and December 31, 2023, are presented in the following

September 30, 2024

All loans past due 90 days are systematically placed on nonaccrual

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, 2025, and December 31, 2024, are presented in the following tables.

March 31, 2025

($ in thousands)

loans with no

loans with an

Nonaccrual loans with no allowance

Nonaccrual loans with an allowance

nonaccrual loans

Commercial & industrial

5 unchanged sentences

($ in thousands)

loans with no

loans with an

Nonaccrual loans with no allowance

Nonaccrual loans with an allowance

nonaccrual loans

Commercial & industrial

3 unchanged sentences

Home equity line of credit (HELOC)

Modifications

made to Borrowers Experiencing Financial Difficulty

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.

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 nine months ended September 30, 2024,

the Company did not modify any loans made to borrowers experiencing financial difficulty.

Company had no commitments to lend to borrowers experiencing financial difficulty for which the Company had modified an existing loan

as of September 30, 2024.

The Company monitors loan payments on an ongoing basis to determine if a loan is considered to have a payment

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 nine-month period ended September 30, 2024, 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

Loan Commitments

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.

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, 2025, and March 31, 2024, 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, 2025, and March 31, 2024.

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

For the three months ended March 31, 2025, and March 31, 2024, 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.

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 $ 1.4 million at September 30, 2024, is classified

on the balance sheet within Other liabilities.

following table presents the balance and activity in the ACL for unfunded loan commitments for the three and nine months ended September

30, 2024, and September 30, 2023.

Three Months Ended

September 30,

Nine Months Ended

September 30,

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 $ 1.4 million at March 31, 2025, 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, 2025, and March 31, 2024.

Three Months Ended March 31,

($ in thousands)

Balance, beginning of period

Adjustment for adoption of ASU 2016-13

Adjustment for acquired loans

Provision for unfunded commitments

Balance, end of period

of September 30, 2024, and December 31, 2023, the carrying amount of goodwill was $ 23.2 million.

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

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.

was assessed for impairment using a quantitative test performed as of September 30, 2024.

The estimated fair value of the reporting unit

exceeded the net carrying value, and therefore no goodwill impairment existed as of that date.

No events or circumstances since the September

30, 2024, impairment test were noted that would indicate it was more likely than not a goodwill impairment exists.

6 – MORTGAGE SERVICING RIGHTS

loans serviced for others are not included in the accompanying consolidated balance sheets.

The unpaid principal balance of mortgage

loans serviced for others approximated $ 1.41 billion at September 30, 2024, and $ 1.37 billion at December 31, 2023.

Contractually specified

servicing fees of $ 0.9 million and $ 2.6 million were included in mortgage loan servicing fees in the consolidated income statement for

the three and nine months ended September 30, 2024, respectively.

Servicing fees of $ 0.9 million and $ 2.5 million were included for the

three and nine months ended September 30, 2023, respectively.

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

NOTE 6 – GOODWILL

Three Months Ended March 31,

($ in thousands)

Beginning balance

Acquired goodwill

Ending balance

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, 2025, and December 31, 2024, the carrying amount of goodwill was $ 27.2 and $ 23.2 million respectively.

The acquisition

of Marblehead Bank 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 quantitative

test performed as of March 31,2025.

The estimated fair value of the reporting unit exceeded the net carrying value, and therefore no goodwill

impairment existed as of that date.

No events or circumstances since the March 31, 2025, impairment test were noted that would indicate

it was more likely than not a goodwill impairment exists.

NOTE 7 – MORTGAGE SERVICING RIGHTS

Mortgage loans serviced for others are not included

in the accompanying consolidated balance sheets.

The unpaid principal balance of mortgage loans serviced for others approximated $ 1.43

billion at March 31, 2025, and December 31, 2024.

Contractually specified servicing fees of $ 0.9 million were included in mortgage loan

servicing fees in the consolidated income statement for the three months ended March 31, 2025, and 2024.

The following table summarizes mortgage servicing

rights capitalized and related amortization, along with activity in the related valuation allowance:

Three Months Ended March 31,

($ in thousands)

Balance at beginning of period

9 unchanged sentences

Fair value, end of period

7 – DERIVATIVE FINANCIAL INSTRUMENTS

Risk Management

Objective of Using Derivatives

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

Non-designated

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.

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

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 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 consolidated balance sheets, while derivative

instruments with a negative fair value are reported in accrued expenses and included in Other liabilities in the consolidated balance

table below presents the notional amount and fair value of the Company’s interest rate swaps, IRLCs and forward contracts utilized

as of September 30, 2024, and December 31, 2023.

September 30, 2024

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

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

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.

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.

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 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 consolidated balance sheets, while derivative instruments with a negative

fair value are reported in accrued expenses and included in Other liabilities in the 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, 2025, and December 31, 2024.

March 31, 2025

December 31, 2024

8 unchanged sentences

Interest rate swaps associated with loans

Forward contracts

Total contracts

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.

following table presents the amounts included in the consolidated statements of income for non-hedging derivative financial instruments

for the three and nine months ended September 30, 2024, and 2023.

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 consolidated statements of income for non-hedging derivative financial instruments for the three months ended March 31, 2025, and

Three Months Ended

September 30, Nine Months Ended

September 30,

($ in thousands) Statement of income classification 2025 2024

2 unchanged sentences

Forward contracts Gain on sale of mortgage loans & OMSR ( 44 ) 8

The following

table shows the offsetting of financial assets and derivative assets at September 30, 2024, and at December 31, 2023.

Gross amounts

The following table shows the offsetting of financial assets and derivative assets at March 31, 2025, and at December 31, 2024.

Gross amounts

offset in the

Net amounts of

Net amounts of assets

Gross amounts not offset in the

1 unchanged sentence

($ in thousands)

of recognized

balance sheet

the consolidated

balance sheet

Cash collateral

September 30, 2024

Gross amounts of recognized assets

offset in the consolidated balance sheet

presented in the consolidated balance sheet

Financial instruments

Cash collateral received

March 31, 2025

Interest rate swaps

1 unchanged sentence

Interest rate swaps

The following

table shows the offsetting of financial liabilities and derivative liabilities at September 30, 2024, and at December 31, 2023.

Gross amounts

The following table shows the offsetting of financial liabilities and derivative liabilities at March 31, 2025, and at December 31, 2024.

Gross amounts

offset in the

Net amounts of liabilities

Gross amounts not offset in the

consolidated balance sheet

Gross amounts not offset in the consolidated balance sheet

($ in thousands)

of recognized liabilities

consolidated balance sheet

the consolidated balance sheet

Gross amounts of recognized liabilities

offset in the consolidated balance sheet

presented in the consolidated balance sheet

Financial instruments

Cash collateral pledged

September 30, 2024

March 31, 2025

Interest rate swaps

1 unchanged sentence

Interest rate swaps

classification of deposits at September 30, 2024, and at December 31, 2023, were as follows:

NOTE 9 – DEPOSITS

Major classification of deposits at March 31,

2025, and at December 31, 2024, were as follows:

($ in thousands)

September 30,

Non interest bearing demand

3 unchanged sentences

Total Deposits

in time deposits at September 30, 2024, and at December 31, 2023, were $ 56.8 million and $ 56.5 million, respectively, of deposits which

were obtained through the Certificate of Deposit Account Registry Service (CDARS).

9 – SHORT-TERM BORROWINGS

Included in time deposits at March 31, 2025, and

at December 31, 2024, were $ 56.9 million and $ 58.2 million, respectively, of deposits which were obtained through the Certificate of Deposit

Account Registry Service (CDARS).

NOTE 10 – SHORT-TERM BORROWINGS

($ in thousands)

September 30,

Securities sold under repurchase agreements

Company has retail repurchase (“REPO”) agreements to facilitate cash management transactions with commercial customers.

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 2025 through 2051.

As of September 30, 2024, these REPO agreements were secured by

securities with a fair value totaling $ 18.4 million.

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 2025 through 2051.

As of March 31, 2025, these REPO agreements were secured by securities with a fair value totaling $ 13.7 million.

The REPO agreements mature within one month.

Company has borrowing capabilities at the Federal Reserve Discount Window (“Discount Window”) by pledging either securities

or loans as collateral.

As of September 30, 2024, there was $ 5.6 million pledged to the Discount Window.

both September 30, 2024, and December 31, 2023, the Company had $ 41.0 million in federal funds lines, of which none was drawn.

10 – FEDERAL HOME LOAN BANK (FHLB) ADVANCES

Company’s FHLB advances were secured by $ 298.3 million in mortgage loans at September 30, 2024.

Advances consisted of fixed interest

rates from 3.75 to 4.61 percent.

Fixed rate advances are subject to restrictions or penalties in the event of prepayment.

Aggregate annual

maturities of FHLB advances at September 30, 2024, were:

The Company has borrowing capabilities at the

Federal Reserve Discount Window (“Discount Window”) by pledging either securities or loans as collateral.

As of March 31,

2025, there were no borrowings drawn or securities pledged at the Discount Window.

At both March 31, 2025, and December 31, 2024,

the Company had $ 41.0 million in federal funds lines, of which none was drawn.

NOTE 11 – FEDERAL HOME LOAN BANK (FHLB)

The Company’s FHLB advances were secured

by $ 323.0 million in mortgage loans at March 31, 2025.

Advances consisted of fixed interest rates from 3.75 to 4.61 percent.

advances are subject to restrictions or penalties in the event of prepayment.

Aggregate annual maturities of FHLB advances at March 31,

($ in thousands)

11 – TRUST PREFERRED SECURITIES

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 Term SOFR as adjusted by the relevant spread adjustment plus 1.80 percent and are included

in interest expense in the 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 September 30, 2024, and December 31, 2023, was $ 10.3 million, with a maturity date of September 15,

12 – SUBORDINATED DEBT

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 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.

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.

13 – DISCLOSURES ABOUT FAIR VALUE OF ASSETS AND LIABILITIES

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:

Quoted prices in active markets for identical assets or liabilities

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;

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

Distributions on the Capital Securities are payable quarterly at a variable rate that is currently based upon the 3-month

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 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.

of the Capital Securities as of both March 31, 2025, and December 31, 2024, 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 2031 (the “Notes”).

were sold by the Company in a private placement exempt from the registration requirements under the Securities Act of 1933, as amended.

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.

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.

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

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

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 consolidated balance sheets, as well as the general classifications of such assets pursuant to the valuation hierarchy.

Available-for-Sale

fair values of available-for-sale securities are determined by various valuation methodologies.

Level 2 securities include obligations

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.

Rate Contracts

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).

fair values of forward contracts on to-be-announced securities are determined using quoted prices in active markets or benchmarked thereto

Rate Lock Commitments (IRLCs)

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).

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 September 30, 2024, and at December 31, 2023.

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 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

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

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, 2025, and at December 31, 2024.

($ in thousands)

Fair value at

September 30,

Treasury and Government Agencies

17 unchanged sentences

Level 3 - significant unobservable inputs

following table reconciles the beginning and ending balances of recurring fair value measurements recognized in the accompanying consolidated

balance sheets using significant unobservable (Level 3) inputs for the three and nine months ended September 30, 2024, and 2023.

The following table reconciles the beginning and

ending balances of recurring fair value measurements recognized in the accompanying consolidated balance sheets using significant unobservable

(Level 3) inputs for the three months ended March 31, 2025, and 2024.

for the Three Months Ended

September 30,

for the Nine Months Ended

September 30,

($ in thousands)

4 unchanged sentences

Balance at end of period

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 consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation

Collateral-dependent

Individually evaluated Loans, Net of ACL

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.

requires obtaining an independent appraisal of the collateral, which is reviewed for accuracy and consistency by management.

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 September 30, 2024, and at December 31, 2023.

Servicing Rights

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;

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 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, 2025, and at December 31, 2024.

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;

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.

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)

Fair value at

September 30,

Collateral-dependent Individually evaluated loans

7 unchanged sentences

Level 3 - significant unobservable inputs

(Level 3) Inputs

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

Unobservable (Level 3) Inputs

The following tables present quantitative information

about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

Fair value at

September 30,

($ in thousands) March 31,

2025 Valuation

technique Unobservable inputs Range

(weighted-average)

($ in thousands)

technique Unobservable inputs Range (weighted-

Collateral-dependent individually evaluated loans $ 849 Market comparable properties Comparability adjustments (%) 1 - 28% (14)%

6 unchanged sentences

Fair value at

($ in thousands) December 31,

2024 Valuation

technique Unobservable inputs Range

(weighted-average)

($ in thousands)

technique Unobservable inputs Range (weighted-

Collateral-dependent impaired loans $ 1,167 Market comparable properties Comparability adjustments (%) 24 - 404% (84)%

5 unchanged sentences

IRLCs ( 21 ) Discounted cash flow Loan closing rates 64% - 99%

were no changes in the inputs or methodologies used to determine fair value at September 30, 2024, as compared to December 31, 2023.

following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying consolidated

balance sheets at amounts other than fair value.

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

amount approximates the fair value.

Held for Sale

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.

estimated fair value of loans follows the guidance in ASU 2016-01, 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.

Short-Term Borrowings, and FHLB Advances

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 September 30, 2024, and at December 31, 2023.

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 September 30, 2024, and at December 31, 2023, and are not considered

significant to this presentation.

Preferred Securities

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

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.

following table presents estimated fair values of the Company’s other financial instruments carried at other than fair value.

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.

There were no changes in the inputs or methodologies

used to determine fair value at March 31, 2025, as compared to December 31, 2024.

The following methods were used to estimate the

fair value of all other financial instruments recognized in the accompanying 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.

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.

The estimated fair value of loans follows the

guidance in ASU 2016-01, 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, 2025, and at December 31, 2024.

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, 2025, and at December 31, 2024, 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.

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)

Fair value measurements using

September 30, 2024

March 31, 2025

Financial assets

27 unchanged sentences

Interest payable

14 – SHARE BASED COMPENSATION

April 2017, the Company’s shareholders approved a new share-based incentive compensation plan, the SB Financial Group, Inc.

Stock Incentive Plan (the “2017 Plan”), which replaced the Company’s 2008 Stock Incentive Plan.

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 205,743 shares had been granted under the plan as of March 31, 2025.

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

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 189,456 shares had been

granted under the plan as of September 30, 2024.

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.

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 September 30, 2024, there were no stock options outstanding,

and no unrecognized compensation cost related to stock option awards.

No stock options were granted in the first nine months of 2024.

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

and nine months ended September 30, 2024, was $ 0.1 million and $ 0.5 million, respectively, and for the three and nine months ended September

30, 2023, was $ 0.1 million and $ 0.5 million, respectively.

of September 30, 2024, there was $ 0.7 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.

is expected to be recognized over a weighted-average period of 2.4 years.

table below is a summary of restricted stock activity under the Company’s 2017 Plan for the nine months ended September 30, 2024.

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.

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, 2025, 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 2025.

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.

compensation cost charged against income for awards under the LTI Plan for the three months ended March 31, 2025 and March 31, 2024 was

$ 0.2 million and $ 0.2 million, respectively.

As of March 31, 2025, there was $ 0.8 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 1.9 years.

The table below is a summary of restricted stock

activity under the Company’s 2017 Plan for the three months ended March 31, 2025.

Average Value

Nonvested, January 1, 2025

Nonvested, September 30, 2024

Nonvested, March 31, 2025

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.

the Company’s business activities are dependent and assessed based on the manner in which it supports the other activities of the

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, non-interest income, non-interest 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.

for long-lived assets are also evaluated and are consistent with the reporting on the consolidated statements of cashflows.

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 chief operating decision maker is identical to that which is shown in the Consolidated Statements of

All revenues were derived from banking operations for the three months ended March 31, 2025, and March 31, 2024, and there was

no customer that accounted for more than 10% of the Company’s consolidated revenue.

17 – GENERAL LITIGATION

3 unchanged sentences

It is the opinion of management that the disposition or ultimate resolution

of any such claims, lawsuits and examinations pending at September 30, 2024, will not have a material adverse effect on the consolidated

of any such claims, lawsuits and examinations pending at March 31, 2025, will not have a material adverse effect on the consolidated

financial position, results of operations and cash flow of the Company.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements