What changed in this filing

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Item 1. Financial Statements

2025-11-06 compared with 2025-08-07 · 425 added, 403 removed, 1011 unchanged (45% of the section changed)

43 unchanged sentences

Total liabilities and shareholders’ equity

See notes to condensed consolidated financial statements (unaudited)

See notes to condensed consolidated financial

statements (unaudited)

SB Financial Group, Inc.

1 unchanged sentence

in thousands, except per share data)

Months Ended June 30,

Interest Income

September 30,

Other interest income

7 unchanged sentences

Net Interest Income

Provision for credit losses - loans

Provision for unfunded commitments

Provision (benefit) for credit losses - loans

Provision (benefit) for unfunded commitments

Total provision for credit losses

7 unchanged sentences

Title insurance income

Gain on sale of assets

Total noninterest income

21 unchanged sentences

Consolidated Statements of Comprehensive Income (unaudited)

September 30,

in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive income (loss)

Other comprehensive income

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)

Gross unrealized holding gains arising in the period

Related tax expense

Net effect on other comprehensive income

Total comprehensive income

See notes to condensed consolidated financial statements (unaudited)

See notes to condensed consolidated financial

statements (unaudited)

Financial Group, Inc.

14 unchanged sentences

Balance, June 30, 2025

Other comprehensive income

Cash dividends on common, $ 0.15 per share

Restricted stock vesting

Repurchased stock ( 101,030 shares)

Stock based compensation expense

Balance, September 30, 2025

Accumulated Other Comprehensive

12 unchanged sentences

Balance, June 30, 2024

See notes to condensed consolidated financial statements (unaudited)

Other comprehensive income

Cash dividends on common, $ 0.14 per share

Restricted stock vesting

Repurchased stock ( 66,513 shares)

Stock based compensation expense

Balance, September 30, 2024

See notes to condensed consolidated financial

statements (unaudited)

SB Financial Group, Inc.

2 unchanged sentences

in thousands)

Six Months Ended June 30,

September 30,

Operating Activities

10 unchanged sentences

Gain from sale of loans

Loss (gain) on sales of assets

Interest receivable

Interest payable & other liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Investing Activities

11 unchanged sentences

Acquisition, net of cash acquired (paid)

Net cash provided by investing activities

Net cash used in investing activities

Financing Activities

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

Net increase in demand deposits, money market, interest checking & savings

Net increase in time deposits

4 unchanged sentences

Cash dividends on common shares

Net cash provided by (used in) financing activities

Increase (decrease) in cash and cash equivalents

Net cash provided by financing activities

Increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

9 unchanged sentences

Liabilities assumed

See notes to condensed consolidated financial statements (unaudited)

See notes to condensed consolidated financial

statements (unaudited)

SB FINANCIAL GROUP, INC.

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The accompanying unaudited condensed consolidated

financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim

financial information and with the instructions for Form 10-Q.

Accordingly, they do not include all of the information and footnotes

required by GAAP for complete financial statements.

The financial statements reflect all adjustments that are, in the opinion of management,

necessary to fairly present the financial position, results of operations and cash flows of the Company.

Those adjustments consist only

of normal recurring adjustments.

Results of operations for the six-months ended June 30, 2025, are not necessarily indicative of results

for the complete year.

financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial

information and with the instructions for Form 10-Q.

Accordingly, they do not include all of the information and footnotes required by

GAAP for complete financial statements.

The financial statements reflect all adjustments that are, in the opinion of management, necessary

to fairly present the financial position, results of operations and cash flows of the Company.

Those adjustments consist only of normal

recurring adjustments.

Results of operations for the nine months ended September 30, 2025, are not necessarily indicative of results for

the complete year.

The condensed consolidated balance sheet of the

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The guidance was initially 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 extended the implementation through December 31,

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

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

This ASU expands operating segment disclosures

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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.

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.

Income Statement –

Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Income Statement – Reporting

Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses

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expense captions presented on the face of the income statement.

The ASU should be applied prospectively for annual reporting periods

beginning after December 15, 2026, with retrospective application and early adoption permitted.

The Company is currently evaluating the

impacts of this guidance on the Company’s Consolidated Financial Statements.

The ASU should be applied prospectively for annual reporting periods beginning

after December 15, 2026, with retrospective application and early adoption permitted.

The Company is currently evaluating the impacts

of this guidance on the Company’s consolidated financial statements.

NOTE 2 - EARNINGS PER SHARE

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shares used in the computation of basic and diluted earnings per share are set forth in the table below.

There were no anti-dilutive

shares in 2025 or 2024.

Participating securities in the table reflect nonvested restricted shares that participate in dividends declared

and paid by the Company on its common shares prior to vesting of the restricted shares.

Three Months Ended June 30,

There were no anti-dilutive shares

in 2025 or 2024.

Participating securities in the table reflect nonvested restricted shares that participate in dividends declared and

paid by the Company on its common shares prior to vesting of the restricted shares.

Three Months Ended Sep.

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

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Diluted earnings per common share

Six Months Ended June 30,

Nine Months Ended Sep.

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

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Effective January 17, 2025, the Company acquired

all of the outstanding common shares of Marblehead Bancorp and its subsidiary The Marblehead Bank of Marblehead, Ohio (collectively,

“Marblehead”).

all of the outstanding common shares of Marblehead Bancorp and its subsidiary The Marblehead Bank of Marblehead, Ohio (collectively, “Marblehead”).

Marblehead was headquartered in Marblehead, Ohio and had two retail offices.

At closing, Marblehead Bancorp

was merged with and into SBFG, with SBFG surviving, and immediately thereafter, The Marblehead Bank was merged with and into State Bank,

with State Bank surviving.

Under the terms of the merger agreement, shareholders of Marblehead received fixed consideration of $ 196.31

in cash for each share of Marblehead common stock for total consideration of $ 5.0 million.

The acquisition of Marblehead enabled the

Company to increase both its deposit and loan base and acquire new households in a new market.

It is expected that this transaction will

result in business synergies and economies of scale.

The acquisition was consistent with the Company’s strategy to expand its presence

in Northwest Ohio and to increase profitability by introducing existing products and services to the acquired customer base.

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.

the terms of the merger agreement, shareholders of Marblehead received fixed consideration of $ 196.31 in cash for each share of Marblehead

common stock for total consideration of $ 5.0 million.

The acquisition of Marblehead enabled the Company to increase both its deposit and

loan base and acquire new households in a new market.

It is expected that this transaction will result in business synergies and economies

The acquisition was consistent with the Company’s strategy to expand its presence in Northwest Ohio and to increase profitability

by introducing existing products and services to the acquired customer base.

The Company accounted for the transaction under

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In accordance with ASC 805, the Company expensed

approximately $ 0.7 million of direct acquisition costs during the six months ended June 30, 2025.

approximately $ 0.7 million of direct acquisition costs during the nine months ended September 30, 2025.

The $ 0.7 million in merger expense

is split between data processing and professional fees expense.

As a result of the acquisition, the Company recorded $ 3.9 million of

goodwill and $ 1.7 million of intangible assets in the first quarter of 2025.

The intangible assets are related to core deposits, which

are being amortized over 10 years on a straight-line basis.

Loans acquired with deteriorated credit quality (“PCD loans”)

since origination were not material.

As a result of the acquisition, the Company recorded $ 3.9 million of goodwill

and $ 1.7 million of intangible assets in the first quarter of 2025.

The intangible assets are related to core deposits, which are being

amortized over 10 years on a straight-line basis.

Loans acquired with deteriorated credit quality (“PCD loans”) since origination

were not material.

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

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information becomes available.

If, prior to the end of the one-year measurement period for finalizing the purchase price allocation,

relevant information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments

will be recorded in the reporting period in which the adjustment amounts are determined.

Potential adjustments, if any, will be related

to assets that may have changes to valuation amounts that were not readily determinable at the acquisition date.

If, prior to the end of the one-year measurement period for finalizing the purchase price allocation, relevant

information becomes available which would indicate adjustments are required to the purchase price allocation, such adjustments will be

recorded in the reporting period in which the adjustment amounts are determined.

Potential adjustments, if any, will be related to assets

that may have changes to valuation amounts that were not readily determinable at the acquisition date.

($ in thousands)

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Pro Forma Financial Information

The 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 and six months ended June 30, 2025, and 2024, as if the Marblehead acquisition

had occurred as of the beginning of the reporting periods presented.

The acquisition added $ 0.4 million and $ 0.7 million in revenue to

the Company for the three and six months ended June 30, 2025.

of Operations ($ in thousands)

The 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 and nine months ended September 30, 2025, and 2024, as if the Marblehead acquisition had

occurred as of the beginning of the reporting periods presented.

The acquisition added $ 0.4 million and $ 0.7 million in revenue to the

Company for the three and nine months ended September 30, 2025.

Summary of Operations ($ in thousands)

Net interest income

1 unchanged sentence

Net interest income after provision

Non interest income

Non interest expense

Noninterest income

Noninterest expense

Income before income taxes

4 unchanged sentences

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

of Operations ($ in thousands)

Summary of Operations ($ in thousands)

Net interest income

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Diluted earnngs per share

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

tax expense for Marblehead calculated using a 21 % statutory rate

4 – AVAILABLE-FOR-SALE Securities

The amortized cost and appropriate fair values,

together with gross unrealized gains and losses, of securities at June 30, 2025, and December 31, 2024, were as follows:

together with gross unrealized gains and losses, of securities at September 30, 2025, and December 31, 2024, were as follows:

($ in thousands)

June 30, 2025

September 30, 2025

Government agencies

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The amortized cost and fair value of securities

available-for-sale at June 30, 2025, by contractual maturity, are shown below.

available-for-sale at September 30, 2025, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities

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The fair value of securities pledged as collateral,

to secure public deposits and for other purposes, was $ 137.7 million at June 30, 2025, and $ 115.5 million at December 31, 2024.

value of securities delivered for repurchase agreements was $ 19.3 million at June 30, 2025, and $ 17.3 million at December 31, 2024.

to secure public deposits and for other purposes, was $ 148.9 million at September 30, 2025, and $ 115.5 million at December 31, 2024.

fair value of securities delivered for repurchase agreements was $ 26.2 million at September 30, 2025, and $ 17.3 million at December 31,

There were no realized gains or losses from sales

of available-for-sale securities for the three and six months ended June 30, 2025, or June 30, 2024.

of available-for-sale securities for the three and nine months ended September 30, 2025, or September 30, 2024.

Certain investments in debt securities are reported

1 unchanged sentence

Total fair value of these investments was $ 192.2

million at June 30, 2025, and $ 201.3 million at December 31, 2024, which consisted of 133 securities, or approximately 94 percent, and

138 securities, or approximately 99 percent, respectively, of the Company’s available-for-sale investment portfolio at such dates.

million at September 30, 2025, and $ 201.3 million at December 31, 2024, which consisted of 127 securities, or approximately 91 percent,

and 138 securities, or approximately 99 percent, respectively, of the Company’s available-for-sale investment portfolio at such

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

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Securities with unrealized losses, aggregated

by investment class and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2025,

by investment class and length of time that individual securities have been in a continuous unrealized loss position at September 30,

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

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12 Months or Longer

June 30, 2025

Treasury and Government agencies

September 30, 2025

Government agencies

Mortgage-backed securities

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December 31, 2024

Number of Securities

Unrealized Losses

Treasury and Government agencies

Government agencies

Mortgage-backed securities

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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 (the “ACL”).

Changes in the ACL are recorded as provision

for (or reversal of) credit losses.

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,

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requirement to sell is met.

At June 30, 2025, and December 31, 2024, no ACL on available-for-sale securities was recorded.

At September 30, 2025, and December 31, 2024, no ACL on available-for-sale securities was recorded.

Management has made the accounting policy election

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Accrued interest receivable

on available-for-sale debt securities totaled $ 0.6 million at June 30, 2025, and $ 0.6 million at December 31, 2024.

on available-for-sale debt securities totaled $ 0.6 million at September 30, 2025, and $ 0.6 million at December 31, 2024.

Should the decline

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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.

chargeoffs, the allowance for credit losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased

Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan

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,

Commercial & industrial

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Allowance for credit losses

The totals shown above are net of accretable

discounts on acquired loans and deferred loan fees and costs, which totaled $ 0.59 million in net fees at June 30, 2025, and $ 0.15 million

in net costs at December 31, 2024.

The totals shown above are net of accretable discounts

on acquired loans and deferred loan fees and costs, which totaled $ 0.64 million in net fees at September 30, 2025, and $ 0.15 million in

net costs at December 31, 2024.

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

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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.

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

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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.

Accrued interest receivable related to loans

totaled $ 3.8 million at June 30, 2025, and $ 3.3 million at December 31, 2024, and is excluded from the estimate of credit losses.

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

$ 3.8 million at September 30, 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

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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, construct, or refinance

owner occupied nonresidential properties.

● 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.

Real Estate – Nonowner Occupied - Nonowner occupied commercial real estate loans

consist of loans to purchase, construct, or refinance investment nonresidential properties.

This includes office buildings and other facilities rented or leased to unrelated parties,

as well as multifamily properties.

The primary risk associated with nonowner occupied commercial

real estate loans is the ability of the income-producing property that collateralizes the

loan to produce adequate cash flow to service the debt.

While these loans are collateralized

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

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

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

● Agricultural

- Agricultural loans consist of loans or lines of credit to finance farmland, equipment,

and general business needs or other assets.

The primary risk associated with agricultural

loans is the ability of borrowers to achieve business results consistent with those projected

at origination.

Failure to achieve these projections presents risk the borrower will be unable

to service the debt consistent with the contractual terms of the loan.

● Residential

Real Estate – Residential real estate mortgage loans consist of loans to purchase,

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

home and are 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

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.

The Company utilizes a Discounted Cash Flow (“DCF”)

method to estimate the quantitative portion of the ACL for all loan pools evaluated on a collective pooled basis, with the exception

of the credit card and consumer loan portfolios, which are estimated using the Remaining Life Method.

For each segment, a Loss Driver

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

The LDA utilizes the Company’s own Federal Financial Institutions Examination Council’s (“FFIEC”) Call

Report data, as well as peer institution data.

method to estimate the quantitative portion of the ACL for all loan pools evaluated on a collective pooled basis, with the exception of

the credit card and consumer loan portfolios, which are estimated using the Remaining Life Method.

For each segment, a Loss Driver Analysis

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

The LDA utilizes the Company’s own Federal Financial Institutions Examination Council’s (“FFIEC”) Call Report

data, as well as peer institution data.

In creating the DCF model, the Company has established

a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.

Company’s own loan-level loss data from January 2016 through June 30, 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.

Company’s own loan-level loss data from January 2016 through September 30, 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

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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.

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

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

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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.

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

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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 and six months ended June 30, 2025, and June 30, 2024, and for the twelve months ended

December 31, 2024.

The following tables summarize the activity related

to the ACL for the three and nine months ended September 30, 2025, and September 30, 2024, and for the twelve months ended December 31,

($ in thousands)

For the three months ended

June 30, 2025

Balance, beginning of period

allowance for

September 30, 2025

(benefit) for

Credit Losses

Provision for Credit Losses

Commercial & industrial

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($ in thousands)

For the six months ended

June 30, 2025

Balance, beginning of period

allowance for

For the nine months ended

September 30, 2025

(benefit) for

Credit Losses

Provision for Credit Losses

Commercial & industrial

4 unchanged sentences

For the three months ended

June 30, 2024

Balance, beginning of period

Provision for Credit Losses

September 30, 2024

(benefit) for

Credit Losses

Commercial & industrial

3 unchanged sentences

($ in thousands)

For the six months ended

June 30, 2024

Balance, beginning of period

Provision for Credit Losses

For the nine months ended

September 30, 2024

(benefit) for

Credit Losses

Commercial & industrial

5 unchanged sentences

December 31, 2024

Balance, beginning of period

Provision for Credit Losses

(benefit) for

Credit Losses

Commercial & industrial

10 unchanged sentences

The following table presents an analysis of collateral-dependent

loans of the Company as of June 30, 2025, and December 31, 2024.

loans of the Company as of September 30, 2025, and December 31, 2024.

($ in thousands)

Collateral Type

June 30, 2025

September 30, 2025

Commercial & industrial

25 unchanged sentences

This analysis is performed on a quarterly basis.

Company uses the following definitions for risk ratings:

uses the following definitions for risk ratings:

Pass (grades 1 – 4):

Loans which management has determined to be performing as expected and in agreement with the terms established at the time of loan origination.

Special Mention (5):

have potential weaknesses that deserve management’s close attention.

If left uncorrected, these potential weaknesses may result

in deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date.

which management has determined to be performing as expected and in agreement with the terms established at the time of loan origination.

Special Mention (5):

loans 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.

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):

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.

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

11 unchanged sentences

The following table presents loan balances by credit quality

indicators and gross chargeoffs by loan category and year of origination as of June 30, 2025.

indicators and gross chargeoffs by loan category and year of origination as of September 30, 2025.

in thousands)

Term Loans by Year of Origination

Loans Converted

Loans by Year of Origination

period gross chargeoffs

13 unchanged sentences

Term Loans by Year of Origination

Loans Converted

period gross chargeoffs

10 unchanged sentences

The following tables present the Company’s

loan portfolio aging analysis as of June 30, 2025, and December 31, 2024.

loan portfolio aging analysis as of September 30, 2025, and December 31, 2024.

($ in thousands)

90 Days or Greater

June 30, 2025

September 30, 2025

Commercial & industrial

18 unchanged sentences

The categories of nonaccrual

loans as of June 30, 2025, and December 31, 2024, are presented in the following tables.

June 30, 2025

loans as of September 30, 2025, and December 31, 2024, are presented in the following tables.

September 30, 2025

($ in thousands)

Nonaccrual loans with no allowance

Nonaccrual loans with an allowance

loans with no

loans with an

Commercial & industrial

7 unchanged sentences

loans with an

Total nonaccrual

Commercial & industrial

10 unchanged sentences

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.

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

1 unchanged sentence

for Credit Losses section of this note.

For the six months ended June 30, 2025, and June 30, 2024, the Company did not modify any loans

made to borrowers experiencing financial difficulty.

For the nine months ended September 30, 2025, and September 30, 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 June 30, 2025, and June 30, 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 six months ended June 30, 2025, and June 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 date.

experiencing financial difficulty for which the Company had modified an existing loan as of September 30, 2025, and September 30, 2024.

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

Determination of

payment default involves analyzing the economic conditions that exist for each customer and its ability to generate positive cash flows

during the loan term.

For the nine months ended September 30, 2025, and 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 date.

Unfunded Loan Commitments

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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 $ 1.7 million at June 30, 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 and six months ended June 30, 2025, and June 30, 2024.

Three Months Ended June 30,

Six Months Ended June 30,

The allowance for credit losses

for unfunded loan commitments of $ 1.5 million at September 30, 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 and nine months ended September 30, 2025, and September 30, 2024.

Three Months Ended

September 30,

Nine Months Ended

September 30,

($ in thousands)

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NOTE 6 – GOODWILL

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

($ in thousands)

2 unchanged sentences

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

As of June 30, 2025, and December 31, 2024, the carrying amount of goodwill was $ 27.2 million and $ 23.2 million,

respectively.

The acquisition of Marblehead on January 17, 2025, resulted in the acquisition of approximately $ 3.9 million in

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 September 30, 2025, and December 31, 2024, the carrying amount of goodwill was $ 27.2 and $ 23.2 million, respectively.

The acquisition

of Marblehead on January 17, 2025, resulted in the acquisition of approximately $ 3.9 million in goodwill.

When assessing goodwill for impairment, first,

4 unchanged sentences

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 June 30, 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 June 30, 2025 impairment test were noted

that would indicate it was more likely than not a goodwill impairment exists.

Goodwill was assessed for impairment using a qualitative

test performed as of September 30, 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 September 30, 2025 impairment test were noted that

would indicate it was more likely than not a goodwill impairment exists.

NOTE 7 – MORTGAGE SERVICING RIGHTS

2 unchanged sentences

The unpaid principal balance of mortgage loans serviced for others approximated $ 1.47

billion at June 30, 2025, and $ 1.43 billion at December 31, 2024.

Contractually specified servicing fees of $ 0.9 million and $ 1.8 million

were included in mortgage loan servicing fees in the consolidated income statement for the three and six months ended June 30, 2025,

billion at September 30, 2025, and $ 1.43 billion at December 31, 2024.

Contractually specified servicing fees of $ 0.9 million and $ 2.7

million were included in mortgage loan servicing fees in the consolidated income statement for the three and nine months ended September

30, 2025, respectively.

Servicing fees of $ 0.9 million and $ 1.7 million were included for the three and six months ended June 30, 2024, respectively.

Servicing fees of $ 0.9 million and $ 2.6 million were included for the three and nine months ended September 30,

2024, respectively.

The following table summarizes mortgage servicing

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

($ in thousands)

21 unchanged sentences

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.

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

2 unchanged sentences

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

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.

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

1 unchanged sentence

with potential borrowers to fund specific mortgage loans that will be sold into the secondary market.

The forward contracts that are

entered into, economically hedge the effect of changes in interest rates resulting from the Company’s commitment to fund the loans.

The IRLCs and forward contracts are not designated as accounting hedges and are recorded at fair value with changes in fair value reflected

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.

2 unchanged sentences

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 June 30, 2025, and December 31,

June 30, 2025

The 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, 2025, and December 31,

September 30, 2025

December 31, 2024

15 unchanged sentences

The following table presents the amounts included

in the consolidated statements of income for non-hedging derivative financial instruments for the three and six months ended June 30,

in the consolidated statements of income for non-hedging derivative financial instruments for the three and nine months ended September

30, 2025, and 2024.

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

($ in thousands) Statement of income classification 2025 2024 2025 2024

3 unchanged sentences

The following table shows the offsetting of financial assets and derivative

assets at June 30, 2025, and at December 31, 2024.

assets at September 30, 2025, and at December 31, 2024.

offset in the

amounts of assets

presented in the

amounts not offset in the consolidated balance sheet

2 unchanged sentences

balance sheet

September 30, 2025

December 31, 2024

The following table shows the offsetting of financial liabilities

and derivative liabilities at June 30, 2025, and at December 31, 2024.

The following table shows the offsetting of financial liabilities and

derivative liabilities at September 30, 2025, and at December 31, 2024.

Gross amounts

offset in the

amounts of liabilities

amounts not offset in the consolidated balance sheet

Net amounts of liabilities

presented in the

Gross amounts not offset in the consolidated balance sheet

($ in thousands)

of recognized

balance sheet

June 30, 2025

Cash collateral

September 30, 2025

Interest rate swaps

December 31, 2024

Interest rate swaps

NOTE 9 – DEPOSITS

Major classification of deposits at June 30,

Major classification of deposits at September

30, 2025, and at December 31, 2024, were as follows:

($ in thousands)

September 30,

Non interest bearing demand

3 unchanged sentences

Total Deposits

Included in time deposits at June 30, 2025, and

at December 31, 2024, were $ 54.6 million and $ 58.2 million, respectively, of deposits which were obtained through the Certificate of

Deposit Account Registry Service (CDARS).

Included in time deposits at September 30, 2025,

and at December 31, 2024, were $ 48.5 million and $ 58.2 million, respectively, of reciprocal 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

5 unchanged sentences

from 2027 through 2061.

As of June 30, 2025, these REPO agreements were secured by securities with a fair value totaling $ 19.3 million.

The maximum amount of outstanding agreements at any month end during the periods ending June 30, 2025, and December 31, 2024, was $ 16.7

As of September 30, 2025, these REPO agreements were secured by securities with a fair value totaling $ 26.2 million.

The maximum amount of outstanding agreements at any month end during the periods ending September 30, 2025, and December 31, 2024, was

$ 13.1 million and $ 26.9 million, respectively.

The monthly average of such agreements totaled $ 11.8 million and $ 14.3 million, respectively.

The monthly average of such agreements totaled $ 13.2 million and $ 14.3 million, , as of

September 30, 2025, and December 31, 2024, respectively.

The REPO agreements mature within one month .

1 unchanged sentence

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

As of June 30,

As of September

30, 2025, there were no borrowings drawn or securities pledged at the Discount Window.

At both June 30, 2025, and December 31, 2024,

At both September 30, 2025, and December 31, 2024,

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

1 unchanged sentence

The Company’s FHLB advances were secured

by $ 320.1 million in mortgage loans at June 30, 2025.

by $ 312.7 million in mortgage loans at September 30, 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 June 30,

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

Aggregate annual maturities of FHLB advances at September

30, 2025, were:

($ in thousands)

3 unchanged sentences

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

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

balance of the Capital Securities as of both June 30, 2025, and December 31, 2024, was $ 10.3 million, with a maturity date of September

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 September 30, 2025, and December 31, 2024, was $ 10.3 million, with a maturity date of September 15,

NOTE 13 – SUBORDINATED DEBT

28 unchanged sentences

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.

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

20 unchanged sentences

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 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 June 30, 2025, and at December 31, 2024.

fell at September 30, 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

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 six months ended June 30, 2025, and 2024.

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 nine months ended September 30, 2025, and 2024.

for the Three Months Ended

for the Six Months Ended

September 30,

for the Nine Months Ended

September 30,

($ in thousands)

15 unchanged sentences

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 June 30, 2025, and at December 31, 2024.

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 September 30, 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;

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.

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.

These mortgage servicing

rights are tested for impairment on a quarterly basis.

($ in thousands)

Fair value at

Collateral-dependent Individually evaluated loans

September 30,

Collateral-dependent

Individually evaluated loans

Mortgage servicing rights

1 unchanged sentence

Fair value at

Collateral-dependent impaired loans

Collateral-dependent

impaired loans

Mortgage servicing rights

5 unchanged sentences

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

Fair value at

June 30, Valuation Range

($ in thousands) 2025 technique Unobservable inputs average)

Fair value at Range

($ in thousands) September 30,

2025 Valuation

technique Unobservable inputs (weighted-

Collateral-dependent individually evaluated loans $ 842 Market comparable properties Comparability adjustments (%) 1 - 25% (14%)

5 unchanged sentences

IRLCs ( 52 ) Discounted cash flow Loan closing rates 42% - 99%

Fair value at

December 31, Valuation Range

($ in thousands) 2024 technique Unobservable inputs average)

Fair value at Range

($ in thousands) December 31,

2024 Valuation

technique Unobservable inputs (weighted-

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

6 unchanged sentences

There were no changes in the inputs or methodologies

used to determine fair value at June 30, 2025, as compared to December 31, 2024.

used to determine fair value at September 30, 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

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.

4 unchanged sentences

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

guidance in ASC 820, Fair Value Measurements, which prescribes an “exit price” approach in estimating and disclosing fair

value of financial instruments.

The “exit price” is determined based on discounted estimated future cash flows using rates

that incorporate discounts for credit, liquidity, and marketability factors.

Deposits, Short-Term Borrowings, and FHLB Advances

Deposits include demand deposits, savings accounts,

4 unchanged sentences

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 June 30, 2025, and at December 31, 2024.

of the rate State Bank could pay on similar instruments with similar terms and maturities at September 30, 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 June 30, 2025, and at December 31, 2024, and are not considered significant to this presentation.

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, 2025, and at December 31, 2024, and are not considered significant to this presentation.

Trust Preferred Securities

6 unchanged sentences

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.

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.

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

June 30, 2025

September 30, 2025

Financial assets

36 unchanged sentences

A total of 500,000 common shares of the Company

are available for grants or awards under the 2017 Plan, of which 202,093 shares had been granted under the plan as of June 30, 2025.

are available for grants or awards under the 2017 Plan, of which 209,327 shares had been granted under the plan as of September 30, 2025.

The 2017 Plan is intended to advance the interests

2 unchanged sentences

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.

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

3 unchanged sentences

Black-Scholes valuation model.

As of June 30, 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 six months of 2025.

As of September 30, 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 nine months of 2025.

On February 5, 2013, the Company adopted a Long

1 unchanged sentence

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 and six months ended June 30, 2025, was $ 0.2 million

and $ 0.3 million, respectively, and for the three and six months ended June 30, 2024, was $ 0.2 million and $ 0.4 million, respectively.

As of June 30, 2025, there was $ 0.6 million of

total unrecognized compensation cost related to non-vested share-based compensation arrangements related to the restricted stock awards

compensation cost charged against income for awards under the LTI Plan for the three and nine months ended September 30, 2025, was $ 0.1

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

respectively.

As of September 30, 2025, there was $ 0.6 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.

2 unchanged sentences

The table below is a summary of restricted stock

activity under the Company’s 2017 Plan for the six months ended June 30, 2025.

activity under the Company’s 2017 Plan for the nine months ended September 30, 2025.

Average Value

Nonvested, January 1, 2025

Nonvested, June 30, 2025

Nonvested, September 30, 2025

NOTE 16 – OPERATING SEGMENTS

2 unchanged sentences

wealth management and brokerage services, and other financial services primarily to individuals, businesses, and municipalities.

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

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”)

7 unchanged sentences

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.

net interest income, noninterest income, noninterest expense, and net income, which can be seen on the consolidated statement of operations.

These results are used to benchmark the Company against its competitors.

8 unchanged sentences

All revenues were

derived from banking operations for the six months ended June 30, 2025, and June 30, 2024, and there was no customer that accounted for

more than 10% of the Company’s consolidated revenue.

derived from banking operations for the nine months ended September 30, 2025, and September 30, 2024, and there was no customer that accounted

for more than 10% of the Company’s consolidated revenue.

NOTE 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 June 30, 2025, will not have a material adverse effect on the consolidated financial position, results of operations and cash flow

of the Company.

at September 30, 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