What changed in this filing

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Item 1. Business

2026-03-06 compared with 2025-03-07 · 531 added, 653 removed, 23 unchanged (98% of the section changed)

Certain statements contained in this Annual Report

on Form 10-K which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities

Litigation Reform Act of 1995.

See “Cautionary Statement Regarding Forward-Looking Information” under Item 1A.

on page 13 of this Annual Report on Form 10-K.

SB Financial Group, Inc., an Ohio corporation

(the “SB Financial”), is a financial holding company subject to regulation under the Bank Holding Company Act of 1956, as

amended, and to inspection, examination and supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve

Board” or the “FRB”).

statements contained in this Annual Report on Form 10-K which are not statements of historical fact constitute forward-looking statements

within the meaning of the Private Securities Litigation Reform Act of 1995.

See “Cautionary Statement Regarding Forward-Looking

Information” under Item 1A.

Risk Factors on page 12 of this Annual Report on Form 10-K.

Financial Group, Inc., an Ohio corporation (the “SB Financial”), is a financial holding company subject to regulation under

the Bank Holding Company Act of 1956, as amended, and to inspection, examination and supervision by the Board of Governors of the Federal

Reserve System (the “Federal Reserve Board” or the “FRB”).

SB Financial was organized in 1983.

The executive offices of the SB Financial are located at

401 Clinton Street, Defiance, Ohio 43512.

Through its direct and indirect subsidiaries,

SB Financial is engaged in a variety of financial activities, including commercial banking, and wealth management services, as explained

in more detail below.

As used in this Annual Report on Form 10-K, the

“Company” refers to SB Financial and its consolidated subsidiaries collectively, except where the context indicates the reference

relates solely to the registrant, SB Financial.

The State Bank and Trust Company

The State Bank and Trust Company (“State

Bank”) is an Ohio state-chartered bank and wholly owned subsidiary of SB Financial.

State Bank offers a full range of commercial

banking services, including checking accounts, savings accounts, money market accounts and time certificates of deposit;

automatic teller

machines (“ATMs”);

commercial, consumer, agricultural and residential mortgage loans;

The executive

offices of SB Financial are located at 401 Clinton Street, Defiance, Ohio 43512.

its direct and indirect subsidiaries, SB Financial is engaged in a variety of financial activities, including commercial banking, trust

and wealth management services, and title insurance, as explained in more detail below.

used in this Annual Report on Form 10-K, the “Company” refers to SB Financial and its consolidated subsidiaries collectively,

except where the context indicates the reference relates solely to the registrant, SB Financial.

State Bank and Trust Company

State Bank and Trust Company (“State Bank”) is an Ohio state-chartered bank and wholly owned subsidiary of SB Financial.

State Bank offers a full range of commercial banking services, including checking accounts, savings accounts, money market accounts and

time certificates of deposit;

automatic teller machines (“ATMs”);

commercial, consumer, agricultural and residential mortgage

personal and corporate trust services;

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private client group services;

and other personalized

banking services.

The trust and financial services division of State Bank offers various trust and financial services, including asset

management services for individuals and corporate employee benefit plans, as well as brokerage services through Cetera Investment Services,

an unaffiliated company.

State Bank presently operates 25 banking centers, located within the Ohio counties of Allen, Defiance, Franklin,

Fulton, Hancock, Lucas, Paulding, Ottawa, Williams and Wood, and one banking center located in Allen County, Indiana.

State Bank also

presently operates seven loan production offices, located in Franklin and Lucas Counties, Ohio, Boone, Hamilton and Steuben Counties,

Indiana, and Monroe County, Michigan.

At December 31, 2024, State Bank had 244 full-time equivalent employees.

SBFG Title, LLC

SBFG Title, LLC dba Peak Title Agency (“SBFG

Title”) was formed as an Ohio limited liability company in January 2019 and purchased all of the assets and real estate of an Ohio-based

title agency effective March 15, 2019.

SBFG Title is a wholly owned subsidiary of SB Financial.

SBFG Title provides title insurance and

operates two locations within the Ohio Counties of Franklin and Williams.

At December 31, 2024, SBFG Title had 8 full-time equivalent

SBT Insurance

SBT Insurance, LLC (“SBI”) is an Ohio corporation and

wholly owned subsidiary of State Bank.

SBI is an insurance company that engages in the sale of insurance products to retail and commercial

customers of State Bank.

and other personalized banking services.

The trust and financial services division of State Bank offers

various trust and financial services, including asset management services for individuals and corporate employee benefit plans, as well

as brokerage services through Cetera Investment Services, an unaffiliated company.

State Bank presently operates 27 banking centers,

located within the Ohio counties of Allen, Defiance, Franklin, Fulton, Hancock, Henry, Lucas, Ottawa, Paulding, Williams and Wood, with

one banking center located in Allen County, Indiana and one located in Steuben County, Indiana.

State Bank also presently operates four

loan production offices, located in Franklin, Lucas and Warren Counties, Ohio, and Hamilton County, Indiana.

At December 31, 2025, State

Bank had 246 full-time equivalent employees.

Title, LLC dba Peak Title Agency (“SBFG Title”) was formed as an Ohio limited liability company in January 2019 and purchased

all of the assets and real estate of an Ohio-based title agency effective March 15, 2019.

SBFG Title is a wholly owned subsidiary of

SB Financial.

SBFG Title provides title insurance and operates two locations within the Ohio Counties of Franklin and Williams.

31, 2025, SBFG Title had 8 full-time equivalent employees.

Insurance, LLC (“SBI”) is an Ohio corporation and wholly owned subsidiary of State Bank.

SBI is an insurance company that

engages in the sale of insurance products to retail and commercial customers of State Bank.

At December 31, 2025, SBI had no employees.

SB Captive, Inc.

(“SB Captive”) is

a Nevada corporation and wholly owned subsidiary of SB Financial.

SB Captive is a self-insurance company that provides coverage to State

Bank and SB Financial.

The purpose of the SB Captive is to mitigate insurance risk by participating in a pool with other banks.

31, 2024, SB Captive had no employees.

Rurban Statutory Trust II

Rurban Statutory Trust II (“RST II”)

is a trust that was organized in August 2005.

In September 2005, RST II 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.

The sole assets of RST II are the junior subordinated debentures and the back-up

obligations, which in the aggregate, constitute a full and unconditional guarantee by the Company of the obligations of RST II under

the Capital Securities.

Dissolved Subsidiaries

In December 2024, the Company completed the dissolution

of four of its inactive subsidiaries:

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

The Company experiences significant competition

in attracting depositors and borrowers.

Competition in lending activities comes principally from other commercial banks in the lending

areas of State Bank, and to a lesser extent, from savings associations, insurance companies, governmental agencies, credit unions, securities

brokerage firms, finance companies, financial technology companies (“fintechs”) and pension funds.

The primary factors in

competing for loans are interest rates and overall banking services.

State Bank’s competition for deposits comes

from other commercial banks, savings associations, money market funds and credit unions as well as from insurance companies, securities

brokerage firms, and fintechs.

The primary factors in competing for deposits are interest rates paid on deposits and convenience of office

State Bank operates in the highly competitive wealth management services field and its competition consists primarily of other

bank wealth management departments.

Supervision and Regulation

The following is a summary discussion of the

significant statutes and regulations applicable to the Company.

This discussion is qualified in its entirety by reference to the full

text of the statutes, regulations and policies that are described.

Also, such statutes, regulations and policies are continually under

review by the U.S.

Captive, Inc.

(“SB Captive”) is a Nevada corporation and wholly owned subsidiary of SB Financial.

SB Captive is a self-insurance

company that provides coverage to State Bank and SB Financial .

The purpose of SB Captive is to mitigate insurance risk by participating

in a pool with other banks.

At December 31, 2025, SB Captive had no employees.

Statutory Trust II

Statutory Trust II (“RST II”) is a trust that was organized in August 2005.

In September 2005, RST II 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.

The sole assets of RST II are the

junior subordinated debentures and the back-up obligations, which in the aggregate, constitute a full and unconditional guarantee by

the Company of the obligations of RST II under the Capital Securities.

December 2024, the Company completed the dissolution of four of its inactive subsidiaries:

RFCBC, Inc., Rurbanc Data Services Inc., Rurban

Mortgage Company, and SBFG Mortgage, LLC.

Company experiences significant competition in attracting depositors and borrowers.

Competition in lending activities comes principally

from other commercial banks in the lending areas of State Bank, and to a lesser extent, from savings associations, insurance companies,

governmental agencies, credit unions, securities brokerage firms, finance companies, financial technology companies (“fintechs”)

and pension funds.

The primary factors in competing for loans are interest rates and overall banking services.

Bank’s competition for deposits comes from other commercial banks, savings associations, money market funds and credit unions as

well as from insurance companies, securities brokerage firms, and fintechs.

The primary factors in competing for deposits are interest

rates paid on deposits and convenience of office location.

State Bank operates in the highly competitive wealth management services field

and its competition consists primarily of other bank wealth management departments.

and Regulation

following is a summary discussion of the significant statutes and regulations applicable to the Company.

This discussion is qualified

in its entirety by reference to the full text of the statutes, regulations and policies that are described.

Also, such statutes, regulations

and policies are continually under review by the U.S.

Congress and state legislatures and federal and state regulatory agencies.

A change in statutes, regulations or regulatory

policies applicable to the Company could have a material effect on our business.

Regulation of Bank Holding Companies and Their Subsidiaries in General

SB Financial is a financial holding company and,

as such, is subject to regulation under the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”).

SB Financial is subject to the reporting requirements of, and examination and regulation by, the FRB.

The FRB has extensive enforcement

authority over bank holding companies, including, without limitation, the ability to assess civil money penalties, issue cease and desist

or removal orders, and require that a bank holding company divest subsidiaries, including its subsidiary banks.

In general, the FRB may

initiate enforcement actions for violations of laws and regulations and for unsafe or unsound practices.

A bank holding company and its

subsidiaries are prohibited from engaging in certain tying arrangements in connection with extensions of credit and/or the provision of

other property or services to a customer by the bank holding company or its subsidiaries.

The Bank Holding Company Act requires the prior

approval of the FRB before a financial or bank holding company may acquire direct or indirect ownership or control of more than 5 percent

of the voting shares of any bank (unless the bank is already majority owned by the bank holding company), acquire all or substantially

all of the assets of another bank or another financial or bank holding company, or merge or consolidate with any other bank holding company.

Subject to certain exceptions, the Bank Holding Company Act also prohibits a financial or bank holding company from acquiring 5 percent

or more of the voting shares of any company that is not a bank and from engaging in any business other than banking or managing or controlling

The primary exception to this prohibition allows a bank holding company to own shares in any company the activities of which the

FRB had determined, as of November 19, 1999, to be so closely related to banking as to be a proper incident thereto.

In April 2020, the FRB adopted a final rule to

revise its regulations related to determinations of whether a company has the ability to exercise a controlling influence over another

company for purposes of the Bank Holding Company Act.

The final rule expands and codifies the presumptions for use in such determinations.

By codifying the presumptions, the final rule provides greater transparency on the types of relationships that the FRB generally views

as supporting a facts-and-circumstances determination that one company controls another company.

The FRB’s final rule applies to

questions of control under the Bank Holding Company Act but does not extend to the Change in Bank Control Act.

As a result of the Gramm-Leach-Bliley Act of 1999,

also known as the Financial Services Modernization Act of 1999, which amended the Bank Holding Company Act, bank holding companies that

are financial holding companies may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that

is either (1) financial in nature or incidental to such financial activity (as determined by the FRB in consultation with the Secretary

of the Treasury), or (2) complementary to a financial activity, and that does not pose a substantial risk to the safety and soundness

of depository institutions or the financial system generally.

Activities that are financial in nature include securities underwriting

dealing and market-making, insurance underwriting and agency, and merchant banking activities.

On January 2, 2019, SB Financial elected,

and received approval from the FRB, to become a financial holding company.

Various requirements and restrictions under the

laws of the United States and the State of Ohio affect the operations of State Bank, including requirements to maintain reserves against

deposits, restrictions on the nature and amount of loans that may be made and the interest that may be charged thereon, restrictions relating

to investments and other activities, limitations on credit exposure to correspondent banks, limitations on activities based on capital

and surplus, limitations on payment of dividends, and limitations on branching.

Various consumer laws and regulations also affect

the operations of State Bank.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”)

established the Consumer Financial Protection Bureau (the “CFPB”), which regulates consumer financial products and services

and certain financial services providers.

The CFPB is authorized to prevent unfair, deceptive or abusive acts or practices and ensures

consistent enforcement of laws so that consumers have access to fair, transparent and competitive markets for consumer financial products

and services.

Since it was established, the CFPB has exercised extensively its rulemaking and interpretative authority.

The Federal Home Loan Bank (the “FHLB”)

provide credit to their members in the form of advances.

As a member of the FHLB of Cincinnati, State Bank must maintain certain minimum

investments in the capital stock of the FHLB of Cincinnati.

State Bank was in compliance with these requirements at December 31, 2024.

Federal Reserve System

The FRB requires all depository institutions to

maintain reserves at specified levels against their transaction accounts, primarily checking accounts.

In response to the COVID-19 pandemic,

the FRB reduced reserve requirement ratios to 0 percent effective on March 26, 2020, to support lending to households and businesses.

in statutes, regulations or regulatory policies applicable to the Company could have a material effect on our business.

of Bank Holding Companies and Their Subsidiaries in General

Financial is a financial holding company and, as such, is subject to regulation under the Bank Holding Company Act of 1956, as amended

(the “Bank Holding Company Act”).

SB Financial is subject to the reporting requirements of, and examination and regulation

The FRB has extensive enforcement authority over bank holding companies, including, without limitation, the ability to assess

civil money penalties, issue cease and desist or removal orders, and require that a bank holding company divest subsidiaries, including

its subsidiary banks.

In general, the FRB may initiate enforcement actions for violations of laws and regulations and for unsafe or unsound

A bank holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with

extensions of credit and/or the provision of other property or services to a customer by the bank holding company or its subsidiaries.

Bank Holding Company Act requires the prior approval of the FRB before a financial or bank holding company may acquire direct or indirect

ownership or control of more than 5 percent of the voting shares of any bank (unless the bank is already majority owned by the bank holding

company), acquire all or substantially all of the assets of another bank or another financial or bank holding company, or merge or consolidate

with any other bank holding company.

Subject to certain exceptions, the Bank Holding Company Act also prohibits a financial or bank holding

company from acquiring 5 percent or more of the voting shares of any company that is not a bank and from engaging in any business other

than banking or managing or controlling banks.

The primary exception to this prohibition allows a bank holding company to own shares

in any company the activities of which the FRB had determined, as of November 19, 1999, to be so closely related to banking as to be

a proper incident thereto.

April 2020, the FRB adopted a final rule to revise its regulations related to determinations of whether a company has the ability to

exercise a controlling influence over another company for purposes of the Bank Holding Company Act.

The final rule expands and codifies

the presumptions for use in such determinations.

By codifying the presumptions, the final rule provides greater transparency on the types

of relationships that the FRB generally views as supporting a facts-and-circumstances determination that one company controls another

The FRB’s final rule applies to questions of control under the Bank Holding Company Act but does not extend to the Change

in Bank Control Act.

a result of the Gramm-Leach-Bliley Act of 1999, also known as the Financial Services Modernization Act of 1999, which amended the Bank

Holding Company Act, bank holding companies that are financial holding companies may engage in any activity, or acquire and retain the

shares of a company engaged in any activity, that is either (1) financial in nature or incidental to such financial activity (as determined

by the FRB in consultation with the Secretary of the Treasury), or (2) complementary to a financial activity, and that does not pose

a substantial risk to the safety and soundness of depository institutions or the financial system generally.

Activities that are financial

in nature include securities underwriting dealing and market-making, insurance underwriting and agency, and merchant banking activities.

On January 2, 2019, SB Financial elected, and received approval from the FRB, to become a financial holding company.

requirements and restrictions under the laws of the United States and the State of Ohio affect the operations of State Bank, including

requirements to maintain reserves against deposits, restrictions on the nature and amount of loans that may be made and the interest

that may be charged thereon, restrictions relating to investments and other activities, limitations on credit exposure to correspondent

banks, limitations on activities based on capital and surplus, limitations on payment of dividends, and limitations on branching.

consumer laws and regulations also affect the operations of State Bank.

The Dodd-Frank Wall Street Reform and Consumer Protection Act

of 2010 (the “Dodd-Frank Act”) established the Consumer Financial Protection Bureau (the “CFPB”), which regulates

consumer financial products and services and certain financial services providers.

The CFPB is authorized to prevent unfair, deceptive

or abusive acts or practices and ensures consistent enforcement of laws so that consumers have access to fair, transparent and competitive

markets for consumer financial products and services.

Since it was established, the CFPB has exercised extensively its rulemaking and

interpretative authority.

Federal Home Loan Banks ( “FHLBs”) provide credit to their members in the form of advances.

As a member of the FHLB of Cincinnati,

State Bank must maintain certain minimum investments in the capital stock of the FHLB of Cincinnati.

State Bank was in compliance with

these requirements at December 31, 2025.

Reserve System

FRB requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking

In response to the COVID-19 pandemic, the FRB reduced reserve requirement ratios to 0 percent effective on March 26, 2020,

to support lending to households and businesses.

The reserve requirement ratio remained at 0 percent as of December 31, 2025.

Economic Growth, Regulatory Relief and Consumer Protection Act

On May 25, 2018, the Economic Growth, Regulatory

Relief and Consumer Protection Act (the “Regulatory Relief Act”) was enacted, which repealed or modified certain provisions

Growth, Regulatory Relief and Consumer Protection Act

Economic Growth, Regulatory Relief and Consumer Protection Act (the “Regulatory Relief Act”) repealed or modified certain provisions

of the Dodd-Frank Act and eased restrictions on all but the largest banks (those with consolidated assets in excess of $250 billion).

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Certain other regulatory requirements applied

only to banks with consolidated assets in excess of $50 billion and so did not apply to the Company even before the enactment of the Regulatory

Restrictions on Dividends

There can be no assurance as to the amount of

dividends which may be declared in future periods with respect to the common shares of the Company, since such dividends are subject to

the discretion of the Company’s Board of Directors, cash needs, and general business conditions, dividends from the Company’s

subsidiaries and applicable governmental regulations and policies.

The ability of the Company to obtain funds for

the payment of dividends and for other cash requirements is largely dependent on the amount of dividends that may be declared by State

Bank and the Company’s other subsidiaries.

State Bank may not pay dividends to the Company if, after paying such dividends, it would

fail to meet the required minimum levels under the risk-based capital guidelines and the minimum leverage ratio requirements.

State Bank must obtain the approval of the FRB and the Ohio Division of Financial Institutions (the “ODFI”) if a dividend

in any year would cause the total dividends for that year to exceed the sum of the current year’s net profits and the retained net

profits for the preceding two years, less required transfers to surplus.

At December 31, 2024, State Bank had $24.7 million of excess

earnings over the preceding three years.

Payment of dividends by State Bank may be restricted

at any time at the discretion of the regulatory authorities, if they deem such dividends to constitute an unsafe and/or unsound banking

Moreover, the FRB expects the Company to serve as a source of strength to its subsidiary bank, which may require it to retain

capital for further investment in the subsidiary, rather than for dividends to shareholders of the Company.

The Company’s ability to pay dividends on

its shares is also conditioned upon the payment, on a current basis, of quarterly interest payments on the subordinated debentures underlying

the Company’s trust preferred securities.

In addition, under the terms of the Company’s fixed-to-floating rate subordinated

debt, the Company’s ability to pay dividends on its shares is conditioned upon the Company continuing to make required principal

and interest payments, and not incurring an event of default, with respect to the subordinated debt.

Transactions with Affiliates and Insiders

The Company and State Bank are separate and distinct

legal entities.

The FRB’s Regulation W and various other legal limitations restrict State Bank from lending funds to, or engaging

in other “covered transactions” with, the Company (or any other affiliate), generally limiting such covered transactions with

any one affiliate to 10 percent of State Bank’s capital and surplus and limiting all such covered transactions with all affiliates

to 20 percent of State Bank’s capital and surplus.

Covered transactions, including extensions of credit, sales of securities or

assets and provision of services, also must be on terms and conditions consistent with safe and sound banking practices, including credit

standards, that are substantially the same or at least as favorable to State Bank as those prevailing at the time for transactions with

unaffiliated companies.

A bank’s authority to extend credit to executive

officers, directors and greater than 10 percent shareholders, as well as entities such persons control, is subject to Sections 22(g) and

22(h) of the Federal Reserve Act and Regulation O promulgated thereunder by the FRB.

Among other things, these loans must be made on terms

(including interest rates charged and collateral required) that are substantially the same as those offered to unaffiliated individuals

or be made as part of a benefit or compensation program and on terms widely available to employees, and must not involve a greater than

normal risk of repayment.

In addition, the amount of loans a bank may make to these persons is based, in part, on the bank’s capital

position, and certain approval procedures must be followed in making loans which exceed specified amounts.

Federally insured banks are subject, with certain

exceptions, to certain additional restrictions (including collateralization) on extensions of credit to their parent holding companies

or other affiliates, on investments in the stock or other securities of affiliates and on the taking of such stock or securities as collateral

from any borrower.

In addition, such banks are prohibited from engaging in certain tying arrangements in connection with any extension

of credit or the providing of any property or service.

Regulatory Capital

The risk-based capital guidelines adopted by the

federal banking agencies are based on the “International Convergence of Capital Measurement and Capital Standard” (Basel I),

published by the Basel Committee on Banking Supervision (the “Basel Committee”).

In July 2013, the United States banking regulators

issued new capital rules applicable to smaller banking organizations which also implement certain of the provisions of the Dodd-Frank

Act (the “Basel III Capital Rules”).

Community banking organizations, including the Company and State Bank, began transitioning

to the new rules on January 1, 2015.

The new minimum capital requirements became effective on January 1, 2015, whereas a new capital conservation

buffer and deductions from common equity capital phased in from January 1, 2016 through January 1, 2019, and most deductions from common

equity tier 1 capital phased in from January 1, 2015 through January 1, 2019.

The Basel III Capital Rules include (a) a minimum

common equity tier 1 capital ratio of 4.5%, (b) a minimum Tier 1 capital ratio of 6.0%, (c) a minimum total capital ratio of 8.0%, and

(d) a minimum leverage ratio of 4.0%.

Common equity for the common equity tier 1 capital

ratio generally includes common stock (plus related surplus), retained earnings, accumulated other comprehensive income (unless an institution

elects to exclude such income from regulatory capital), and limited amounts of minority interests in the form of common stock, subject

to applicable regulatory adjustments and deductions.

Tier 1 capital generally includes common equity

as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred stock and related surplus, cumulative preferred

stock and related surplus, trust preferred securities that have been grandfathered (but which are not permitted going forward), and limited

amounts of minority interests in the form of additional Tier 1 capital instruments, less certain deductions.

Tier 2 capital, which can be included in the total

capital ratio, generally consists of other preferred stock and subordinated debt meeting certain conditions plus limited amounts of the

allowance for credit losses (“ACL”), subject to specified eligibility criteria, less applicable deductions.

The deductions from common equity tier 1 capital

include goodwill and other intangibles, certain deferred tax assets, mortgage-servicing assets above certain levels, gains on sale in

connection with a securitization, investments in a banking organization’s own capital instruments and investments in the capital

of unconsolidated financial institutions (above certain levels).

Under the guidelines, capital is compared to the

relative risk related to the balance sheet.

To derive the risk included in the balance sheet, one of several risk weights is applied to

different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty.

The capital amounts

and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

The Basel III Capital Rules also place restrictions

on the payment of capital distributions, including dividends, and certain discretionary bonus payments to executive officers if the banking

organization does not hold a capital conservation buffer of greater than 2.5 percent composed of common equity tier 1 capital above its

minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer

ratio was less than 2.5 percent at the beginning of the quarter.

In September 2019, the FRB, along with other federal

bank regulatory agencies, issued a final rule, effective January 1, 2020, that gave community banks, including State Bank, the option

to calculate a simple leverage ratio to measure capital adequacy if the community banks met certain requirements.

Under the rule, a community

bank was eligible to elect the Community Bank Leverage Ratio (“CBLR”) framework if it had less than $10 billion in total consolidated

assets, limited amounts of certain assets and off-balance sheet exposures, and a leverage ratio greater than 9.0%.

Qualifying institutions

that elected to use the CBLR framework (each, a “CBLR Bank”) and that maintain a leverage ratio of greater than 9.0% will

be considered to have satisfied the risk-based and leverage capital requirements in the regulatory agencies’ generally applicable capital

rules and to have met the well-capitalized ratio requirements.

No CBLR Bank was required to calculate or report risk-based capital, and

each CBLR Bank could opt out of the framework at any time, without restriction, by reverting to the generally applicable risk-based capital

Pursuant to the CARES Act, on August 26, 2020, the federal banking agencies adopted a final rule that temporarily lowered the CBLR

threshold and provided a gradual transition back to the prior level.

Specifically, the CBLR threshold was reduced to 8.0% for the remainder

of 2020, increased to 8.5% for 2021, and returned to 9.0% on January 1, 2022.

This final rule became effective on October 1, 2020.

Company did not utilize the CBLR in assessing capital adequacy and continued to follow existing capital rules.

In December 2018, the federal banking agencies

issued a final rule to address regulatory capital treatment of credit loss allowances under the current expected credit loss (“CECL”)

model (accounting standard).

The rule revised the federal banking agencies’ regulatory capital rules to identify which credit loss

allowances under the CECL model are eligible for inclusion in regulatory capital and to provide banking organizations the option to phase

in over three years the day-one adverse effects on regulatory capital that may result from the adoption of the CECL model.

Upon the Company’s

adoption of CECL effective January 1, 2023, the Company recognized a one-time cumulative effect adjustment (increase) to the ACL of $1.4 million and did not elect to utilize the three-year phase in.

The Company’s risk-based capital ratios

remained in excess of “well-capitalized” levels after the impact of the one-time cumulative effect adjustment.

At December 31, 2024, State Bank was in compliance

with all of the regulatory capital requirements to which it was subject.

For State Bank’s capital ratios, see Note 16 to the Consolidated

Financial Statements under Item 8 of this Report on Form 10-K (the “Consolidated Financial Statements”).

The FRB has adopted regulations governing prompt

corrective action to resolve the problems of capital deficient and otherwise troubled state-chartered member banks.

At each successively

lower defined capital category, a bank is subject to more restrictive and numerous mandatory or discretionary regulatory actions or limits,

and the FRB has less flexibility in determining how to resolve the problems of the institution.

In addition, the FRB generally can downgrade

a bank’s capital category, notwithstanding its capital level, if, after notice and opportunity for hearings, the bank is deemed

to be engaged in an unsafe or unsound practice, because it has not corrected deficiencies that resulted in it receiving a less than satisfactory

examination rating on matters other than capital or it is deemed to be in an unsafe or unsound condition.

State Bank’s capital at

December 31, 2024, met the standards for the highest capital category, a “well-capitalized” bank.

In April 2015, the FRB issued a final rule which

increased the size limitation for qualifying bank holding companies under the FRB’s Small Bank Holding Company Policy Statement

from $500 million to $1 billion of total consolidated assets.

In August 2018, the FRB issued an interim final rule, as required by the

Regulatory Relief Act, to further increase size limitations under the Small Bank Holding Company Policy Statement to $3 billion of total

consolidated assets.

The Company continues to qualify under the Small Bank Holding Company Policy Statement for exemption from the FRB’s

consolidated risk-based capital and leverage rules at the holding company level.

Federal Deposit Insurance Corporation

The Federal Deposit Insurance Corporation (the

“FDIC”) is an independent federal agency, which insures the deposits of federally insured banks and savings associations up

to certain prescribed limits and safeguards the safety and soundness of financial institutions.

The general insurance limit is $250,000

per separately insured depositor.

This insurance is backed by the full faith and credit of the United States government.

As insurer, the FDIC is authorized to conduct

examinations of and to require reporting by insured institutions, including State Bank, to prohibit any insured institution from engaging

in any activity the FDIC determines to pose a threat to the Deposit Insurance Fund (the “DIF”), and to take enforcement actions

against insured institutions.

The FDIC may terminate insurance of deposits of any institution if the FDIC finds that the institution has

engaged in unsafe and unsound practices, is in an unsafe or unsound condition or has violated any applicable law, regulation, rule, order

or condition imposed by the FDIC or other regulatory agency.

The FDIC assesses a quarterly deposit insurance

premium on each insured institution based on risk characteristics of the insured institution to the DIF, with institutions deemed less

risky paying lower rates.

Currently, assessments for institutions with less than $10 billion of total assets are based on financial measures

and supervisory ratings derived from statistical models that estimate the probability of failure within three years.

The FDIC may increase

or decrease the range of assessments uniformly, except that no adjustments can deviate more than two basis points from the base assessment

without notice and comment rule making.

The FDIC may also impose special assessments in emergency situations, which fund the DIF.

FDIC has established 2 percent as the Designated Reserve Ratio (“DRR”), which is the amount in the DIF as a percentage of

all DIF insured deposits.

In March 2016, the FDIC adopted final rules designed to meet the statutory minimum DRR of 1.35 percent by September

30, 2020, the deadline imposed by the Dodd-Frank Act.

The Dodd-Frank Act required the FDIC to offset the effect on insured institutions

with assets of less than $10 billion of the increase in the statutory minimum DRR to 1.35% from the former statutory minimum of 1.15%.

Although the FDIC’s rules reduced assessment rates on all banks, they imposed a surcharge on banks with assets of $10 billion or more

to be paid until the DRR reached 1.35%.

The DRR met the statutory minimum of 1.35% on September 30, 2018.

As a result, the previous surcharge

imposed on banks with assets of $10 billion or more was lifted.

In addition, preliminary assessment credits have been determined by the

FDIC for banks with assets of less than $10 billion, which had previously contributed to the increase of the DRR to 1.35%.

On June 30, 2019, the DRR reached 1.40%, and

the FDIC applied credits for banks with assets of less than $10 billion (“small bank credits”) beginning September 30, 2019.

As of June 30, 2020, the DRR fell below the minimum DRR to 1.30%.

As a result, the FDIC adopted a restoration plan requiring the restoration

of the DRR to 1.35% within eight years (September 30, 2028).

The FDIC rules further changed the method of determining risk-based assessment

rates for established banks with less than $10 billion in assets to better ensure that banks taking on greater risks pay more for deposit

insurance than banks that take on less risk.

As of September 30, 2022, the DRR was 1.26%.

Because the DRR remained below the statutory

minimum, the FDIC adopted a final rule in October 2022 increasing the assessment rate from three basis points to five basis points beginning

with the first quarterly assessment period of 2023.

In the FDIC’s most recent semiannual update for the Amended Restoration Plan

in October 2024, the FDIC noted a 6 basis point increase in the reserve ratio, from 1.15% as of December 31, 2023 to 1.21% as of June

The FDIC staff projected that the reserve ratio remains on track to reach the statutory minimum of 1.35% ahead of the deadline

of September 30, 2028.

As a result, the FDIC staff recommended no changes to the Amended Restoration Plan and all scheduled assessment

rates were maintained.

On November 16, 2023, the FDIC adopted a final

rule implementing a special assessment to recover the loss to the DIF arising from the protection of uninsured depositors following the

failures of Silicon Valley Bank and Signature Bank.

The assessment base for the special assessment is equal to an insured depository

institution’s estimated uninsured deposits reported for the quarter ended December 31, 2022, adjusted to exclude the first $5 billion

in estimated uninsured deposits.

The FDIC began collecting the special assessment at an annual rate of approximately 13.4 basis points,

over eight quarterly assessment periods, beginning with the first quarter of 2024.

Because State Bank’s uninsured deposits were

less than $5 billion for the quarter ended December 31, 2022, State Bank is not subject to this special assessment.

The FDIC is authorized to prohibit any insured

institution from engaging in any activity that poses a serious threat to the insurance fund and may initiate enforcement actions against

a bank, after first giving the institution’s primary regulatory authority an opportunity to take such action.

The FDIC may also

terminate the deposit insurance of any institution that has engaged in or is engaging in unsafe or unsound practices, is in an unsafe

or unsound condition to continue operations or has violated any applicable law, order or condition imposed by the FDIC.

Community Reinvestment Act

The Community Reinvestment Act (the “CRA”)

requires State Bank’s primary federal regulatory agency, the FRB, to assess State Bank’s record in meeting the credit needs

of the communities served by State Bank.

only to banks with consolidated assets in excess of $50 billion and so did not apply to the Company even before the enactment of the

Regulatory Relief Act.

can be no assurance as to the amount of dividends which may be declared in future periods with respect to the common shares of the Company,

since such dividends are subject to the discretion of the Company’s Board of Directors, cash needs, and general business conditions,

dividends from the Company’s subsidiaries and applicable governmental regulations and policies.

ability of the Company to obtain funds for the payment of dividends and for other cash requirements is largely dependent on the amount

of dividends that may be declared by State Bank and the Company’s other subsidiaries.

State Bank may not pay dividends to the Company

if, after paying such dividends, it would fail to meet the required minimum levels under the risk-based capital guidelines and the minimum

leverage ratio requirements.

In addition, State Bank must obtain the approval of the FRB and the Ohio Division of Financial Institutions

(the “ODFI”) if a dividend in any year would cause the total dividends for that year to exceed the sum of the current year’s

net profits and the retained net profits for the preceding two years, less required transfers to surplus.

At December 31, 2025, State

Bank had $12.1 million of excess earnings that would be available for dividends without approval of the FRB and the ODFI.

of dividends by State Bank may be restricted at any time at the discretion of the regulatory authorities, if they deem such dividends

to constitute an unsafe and/or unsound banking practice.

Moreover, the FRB expects the Company to serve as a source of strength to its

subsidiary bank, which may require it to retain capital for further investment in the subsidiary, rather than for dividends to shareholders

of the Company.

Company’s ability to pay dividends on its shares is also conditioned upon the payment, on a current basis, of quarterly interest

payments on the subordinated debentures underlying the Company’s trust preferred securities.

In addition, under the terms of the

Company’s fixed-to-floating rate subordinated debt, the Company’s ability to pay dividends on its shares is conditioned upon

the Company continuing to make required principal and interest payments, and not incurring an event of default, with respect to the subordinated

with Affiliates and Insiders

Company and State Bank are separate and distinct legal entities.

The FRB’s Regulation W and various other legal limitations restrict

State Bank from lending funds to, or engaging in other “covered transactions” with, the Company (or any other affiliate),

generally limiting such covered transactions with any one affiliate to 10 percent of State Bank’s capital and surplus and limiting

all such covered transactions with all affiliates to 20 percent of State Bank’s capital and surplus.

Covered transactions, including

extensions of credit, sales of securities or assets and provision of services, also must be on terms and conditions consistent with safe

and sound banking practices, including credit standards, that are substantially the same or at least as favorable to State Bank as those

prevailing at the time for transactions with unaffiliated companies.

bank’s authority to extend credit to executive officers, directors and greater than 10 percent shareholders, as well as entities

such persons control, is subject to Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O promulgated thereunder by the

Among other things, these loans must be made on terms (including interest rates charged and collateral required) that are substantially

the same as those offered to unaffiliated individuals or be made as part of a benefit or compensation program and on terms widely available

to employees, and must not involve a greater than normal risk of repayment.

In addition, the amount of loans a bank may make to these

persons is based, in part, on the bank’s capital position, and certain approval procedures must be followed in making loans which

exceed specified amounts.

insured banks are subject, with certain exceptions, to certain additional restrictions (including collateralization) on extensions of

credit to their parent holding companies or other affiliates, on investments in the stock or other securities of affiliates and on the

taking of such stock or securities as collateral from any borrower.

In addition, such banks are prohibited from engaging in certain tying

arrangements in connection with any extension of credit or the providing of any property or service.

risk-based capital guidelines adopted by the federal banking agencies are based on the “International Convergence of Capital Measurement

and Capital Standard” (Basel I), published by the Basel Committee on Banking Supervision (the “Basel Committee”).

July 2013, the United States banking regulators issued new capital rules applicable to smaller banking organizations which also implement

certain of the provisions of the Dodd-Frank Act (the “Basel III Capital Rules”).

Basel III Capital Rules include (a) a minimum common equity tier 1 capital ratio of 4.5%, (b) a minimum Tier 1 capital ratio of 6.0%,

equity for the common equity tier 1 capital ratio generally includes common stock (plus related surplus), retained earnings, accumulated

other comprehensive income (unless an institution elects to exclude such income from regulatory capital), and limited amounts of minority

interests in the form of common stock, subject to applicable regulatory adjustments and deductions.

1 capital generally includes common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred

stock and related surplus, cumulative preferred stock and related surplus, trust preferred securities that have been grandfathered (but

which are not permitted going forward), and limited amounts of minority interests in the form of additional Tier 1 capital instruments,

less certain deductions.

2 capital, which can be included in the total capital ratio, generally consists of other preferred stock and subordinated debt meeting

certain conditions plus limited amounts of the allowance for credit losses (“ACL”), subject to specified eligibility criteria,

less applicable deductions.

deductions from common equity tier 1 capital include goodwill and other intangibles, certain deferred tax assets, mortgage-servicing

assets above certain levels, gains on sale in connection with a securitization, investments in a banking organization’s own capital

instruments and investments in the capital of unconsolidated financial institutions (above certain levels).

the guidelines, capital is compared to the relative risk related to the balance sheet.

To derive the risk included in the balance sheet,

one of several risk weights is applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit

risk of the counterparty.

The capital amounts and classification are also subject to qualitative judgments by the regulators about components,

risk weightings and other factors.

Basel III Capital Rules also place restrictions on the payment of capital distributions, including dividends, and certain

discretionary bonus payments to executive officers if the banking organization does not hold a capital conservation buffer of

greater than 2.5 percent composed of common equity tier 1 capital above its minimum risk-based capital requirements, or if its

eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5 percent at the

beginning of the quarter.

December 2018, the federal banking agencies issued a final rule to address regulatory capital treatment of credit loss allowances under

the current expected credit loss (“CECL”) model (accounting standard).

The rule revised the federal banking agencies’

regulatory capital rules to identify which credit loss allowances under the CECL model are eligible for inclusion in regulatory capital

and to provide banking organizations the option to phase in over three years the day-one adverse effects on regulatory capital that may

result from the adoption of the CECL model.

Upon the Company’s adoption of CECL effective January 1, 2023, the Company recognized

a one-time cumulative effect adjustment (increase) to the ACL of $1.4 million and did not elect to utilize the three-year phase in.

Company’s risk-based capital ratios remained in excess of “well-capitalized” levels after the impact of the one-time

cumulative effect adjustment.

December 31, 2025, State Bank was in compliance with all of the regulatory capital requirements to which it was subject.

For State Bank’s

capital ratios, see Note 16 to the Consolidated Financial Statements under Item 8 of this Report on Form 10-K (the “Consolidated

Financial Statements”).

FRB has adopted regulations governing prompt corrective action to resolve the problems of capital deficient and otherwise troubled state-chartered

member banks.

At each successively lower defined capital category, a bank is subject to more restrictive and numerous mandatory or discretionary

regulatory actions or limits, and the FRB has less flexibility in determining how to resolve the problems of the institution.

the FRB generally can downgrade a bank’s capital category, notwithstanding its capital level, if, after notice and opportunity

for hearings, the bank is deemed to be engaged in an unsafe or unsound practice, because it has not corrected deficiencies that resulted

in it receiving a less than satisfactory examination rating on matters other than capital or it is deemed to be in an unsafe or unsound

State Bank’s capital at December 31, 2025, met the standards for the highest capital category, a “well-capitalized”

April 2015, the FRB issued a final rule which increased the size limitation for qualifying bank holding companies under the FRB’s

Small Bank Holding Company Policy Statement from $500 million to $1 billion of total consolidated assets.

In August 2018, the FRB issued

an interim final rule, as required by the Regulatory Relief Act, to further increase size limitations under the Small Bank Holding Company

Policy Statement to $3 billion of total consolidated assets.

The Company continues to qualify under the Small Bank Holding Company Policy

Statement for exemption from the FRB’s consolidated risk-based capital and leverage rules at the holding company level.

Deposit Insurance Corporation

Federal Deposit Insurance Corporation (the “FDIC”) is an independent federal agency, which insures the deposits of federally

insured banks and savings associations up to certain prescribed limits and safeguards the safety and soundness of financial institutions.

The general insurance limit is $250,000 per separately insured depositor.

This insurance is backed by the full faith and credit of the

United States government.

insurer, the FDIC is authorized to conduct examinations of and to require reporting by insured institutions, including State Bank, to

prohibit any insured institution from engaging in any activity the FDIC determines to pose a threat to the Deposit Insurance Fund (the

“DIF”), and to take enforcement actions against insured institutions.

The FDIC may terminate insurance of deposits of any

institution if the FDIC finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition

or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or other regulatory agency.

FDIC assesses a quarterly deposit insurance premium on each insured institution based on risk characteristics of the insured

institution to the DIF, with institutions deemed less risky paying lower rates.

Currently, assessments for institutions with less

than $10 billion of total assets are based on financial measures and supervisory ratings derived from statistical models that

estimate the probability of failure within three years.

The FDIC may increase or decrease the range of assessments uniformly, except

that no adjustments can deviate more than two basis points from the base assessment without notice and comment rule making.

may also impose special assessments in emergency situations, which fund the DIF.

The FDIC has established 2 percent as the

Designated Reserve Ratio (“DRR”), which is the amount in the DIF as a percentage of all DIF insured deposits.

2016, the FDIC adopted final rules designed to meet the statutory minimum DRR of 1.35 percent.

the DRR fell below the minimum DRR, the FDIC adopted a restoration plan requiring the restoration of the DRR to 1.35% within eight years

(September 30, 2028).

The FDIC rules further changed the method of determining risk-based assessment rates for established banks with

less than $10 billion in assets to better ensure that banks taking on greater risks pay more for deposit insurance than banks that take

on less risk.

The FDIC then adopted a final rule in October 2022 increasing the assessment rate from three basis points to five basis

points beginning with the first quarterly assessment period of 2023.

As of December 31, 2025, the DRR was above the statutory minimum

FDIC is authorized to prohibit any insured institution from engaging in any activity that poses a serious threat to the insurance fund

and may initiate enforcement actions against a bank, after first giving the institution’s primary regulatory authority an opportunity

to take such action.

The FDIC may also terminate the deposit insurance of any institution that has engaged in or is engaging in unsafe

or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, order or condition

imposed by the FDIC.

Reinvestment Act

Community Reinvestment Act (the “CRA”) requires State Bank’s primary federal regulatory agency, the FRB, to assess

State Bank’s record in meeting the credit needs of the communities served by State Bank.

The FRB assigns one of four ratings:

outstanding, satisfactory;

needs to improve or substantial

noncompliance.

The rating assigned to a financial institution is considered in connection with various applications submitted by the financial

institution or its holding company to its banking regulators, including applications to acquire another financial institution or to open

or close a branch office.

In addition, all subsidiary banks of a financial holding company must maintain a satisfactory or outstanding

rating in order for the financial holding company to avoid limitations on its activities.

State Bank received a satisfactory rating in

its most recent CRA examination.

On October 24, 2023, the federal banking agencies,

including the FRB, issued a final rule designed to strengthen and modernize the regulations implementing the CRA.

The changes are designed

to encourage banks to expand access to credit, investment and banking services in low- and moderate-income communities, adapt to changes

in the banking industry, including mobile and internet banking, provide greater clarity and consistency in the application of the CRA

regulations, and tailor CRA evaluations and data collection to bank size and type.

The applicability date for the majority of the changes

to the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027.

The Company is still evaluating

and cannot predict the impact the changes to the CRA may have on its operations at this time.

SEC and NASDAQ Regulation

The Company is subject to the jurisdiction of

the Securities and Exchange Commission (the “SEC”) and certain state securities authorities relating to the offering and sale

of its securities.

The Company is subject to the registration, reporting and other regulatory requirements of the Securities Act of 1933,

as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and

the rules adopted by the SEC under those acts.

The Company’s common shares are listed on The NASDAQ Capital Market (“NASDAQ”)

under the symbol “SBFG”.

As a result, the Company is subject to NASDAQ rules and regulations applicable to listed companies.

The SEC has adopted rules and regulations governing,

among other matters, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate

satisfactory;

needs to improve or substantial noncompliance.

The rating assigned to a financial institution is considered in connection

with various applications submitted by the financial institution or its holding company to its banking regulators, including applications

to acquire another financial institution or to open or close a branch office.

In addition, all subsidiary banks of a financial holding

company must maintain a satisfactory or outstanding rating in order for the financial holding company to avoid limitations on its activities.

State Bank received a satisfactory rating in its most recent CRA examination.

and NASDAQ Regulation

Company is subject to the jurisdiction of the Securities and Exchange Commission (the “SEC”) and certain state securities

authorities relating to the offering and sale of its securities.

The Company is subject to the registration, reporting and other regulatory

requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as

amended (the “Exchange Act”), and the rules adopted by the SEC under those acts.

The Company’s common shares are listed

on The NASDAQ Capital Market (“NASDAQ”) under the symbol “SBFG”.

As a result, the Company is subject to NASDAQ

rules and regulations applicable to listed companies.

SEC has adopted rules and regulations governing, among other matters, corporate governance, auditing and accounting, executive compensation,

and enhanced and timely disclosure of corporate information.

The SEC has also approved corporate governance rules promulgated by NASDAQ.

The Company has adopted and implemented a Code

of Conduct and Ethics and a copy of that policy can be found on the Company’s website at www.YourSBFinancial.com by first clicking

“Corporate Overview” and then “Governance Documents”.

The Company has also adopted charters of the Audit Committee,

the Compensation Committee and the Governance and Nominating Committee, which charters are available on the Company’s website at

www.YourSBFinancial.com by first clicking “Corporate Overview” and then “Governance Documents”.

USA Patriot Act and Anti-Money Laundering Act

The Uniting and Strengthening of America by Providing

Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”) gives the United States government

powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing

and broadened anti-money laundering requirements.

Title III of the Patriot Act encourages information sharing among bank regulatory agencies

and law enforcement bodies.

Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions.

Among other requirements, Title III and related regulations require regulated financial institutions to establish a program specifying

procedures for obtaining identifying information from customers seeking to open new accounts and establish enhanced due diligence policies,

procedures and controls designed to detect and report suspicious activity.

State Bank has established policies and procedures that State

Bank believes comply with the requirements of the Patriot Act.

The Anti-Money Laundering Act of 2020 (the “AMLA”),

which amends the Bank Secrecy Act of 1970 (the “BSA”), was enacted in January 2021.

The AMLA is intended to be a comprehensive

reform and modernization to U.S.

The Company has adopted and implemented a Code of Conduct and Ethics and a copy of that policy can be found on the Company’s website

at www.YourSBFinancial.com by first clicking “Corporate Overview” and then “Governance Documents”.

has also adopted charters of the Audit Committee, the Compensation Committee and the Governance and Nominating Committee, which charters

are available on the Company’s website at www.YourSBFinancial.com by first clicking “Corporate Overview” and then “Governance

Patriot Act and Anti-Money Laundering Act

Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot

Act”) gives the United States government powers to address terrorist threats through enhanced domestic security measures, expanded

surveillance powers, increased information sharing and broadened anti-money laundering requirements.

Title III of the Patriot Act encourages

information sharing among bank regulatory agencies and law enforcement bodies.

Further, certain provisions of Title III impose affirmative

obligations on a broad range of financial institutions.

Among other requirements, Title III and related regulations require regulated

financial institutions to establish a program specifying procedures for obtaining identifying information from customers seeking to open

new accounts and establish enhanced due diligence policies, procedures and controls designed to detect and report suspicious activity.

State Bank has established policies and procedures that State Bank believes comply with the requirements of the Patriot Act.

Anti-Money Laundering Act of 2020 (the “AMLA”), which amends the Bank Secrecy Act of 1970 (the “BSA”), was enacted

in January 2021.

The AMLA is intended to be a comprehensive reform and modernization to U.S.

bank secrecy and anti-money laundering laws.

Among other things, it codifies a risk-based approach to

anti-money laundering compliance for financial institutions;

requires the development of standards for evaluating technology and internal

processes for BSA compliance;

expands enforcement-related and investigation-related authority, including increasing available sanctions

for certain BSA violations and instituting BSA whistleblower initiatives and protections.

Office of Foreign Assets Control Regulation

Treasury Department’s Office of

Foreign Assets Control (“OFAC”) administers and enforces economic and trade sanctions against targeted foreign countries and

regimes, under authority of various laws, including designated foreign countries, nationals and others.

OFAC publishes lists of specially

designated targets and countries.

State Bank is responsible for, among other things, blocking accounts of, and transactions with, such

targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their

Failure to comply with these sanctions could have serious financial, legal and reputational consequences, including causing

applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit

such transactions even if approval is not required.

Regulatory authorities have imposed cease and desist orders and civil money penalties

against institutions found to be violating these obligations.

Executive and Incentive Compensation

The Dodd-Frank Act requires that the federal

banking agencies, including the FRB and the FDIC, issue a rule related to incentive-based compensation.

No final rule implementing this

provision of the Dodd-Frank Act has, as of the date of the filing of this Annual Report on Form 10-K, been adopted, but a proposed rule

was published in 2016, and again in 2024, that expanded upon a prior proposed rule published in 2011.

The proposed rule is intended to:

(i) prohibit incentive-based payment arrangements that the banking agencies determine could encourage certain financial institutions

to take inappropriate risks by providing excessive compensation or that could lead to material financial loss;

(ii) require the board

of directors of those financial institutions to take certain oversight actions related to incentive-based compensation;

and (iii) require

those financial institutions to disclose information concerning incentive-based compensation arrangements to the appropriate federal

Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions;

requires the development

of standards for evaluating technology and internal processes for BSA compliance;

expands enforcement-related and investigation-related

authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower initiatives and protections.

of Foreign Assets Control Regulation

Treasury Department’s Office of Foreign Assets Control (“OFAC”) administers and enforces economic and trade sanctions

against targeted foreign countries and regimes, under authority of various laws, including designated foreign countries, nationals and

OFAC publishes lists of specially designated targets and countries.

State Bank is responsible for, among other things, blocking

accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and

reporting blocked transactions after their occurrence.

Failure to comply with these sanctions could have serious financial, legal and

reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions

when regulatory approval is required or to prohibit such transactions even if approval is not required.

Regulatory authorities have imposed

cease and desist orders and civil money penalties against institutions found to be violating these obligations.

and Incentive Compensation

Dodd-Frank Act requires that the federal banking agencies, including the FRB and the FDIC, issue a rule related to incentive-based compensation.

No final rule implementing this provision of the Dodd-Frank Act has, as of the date of the filing of this Annual Report on Form 10-K,

been adopted.

Although a final rule has not been issued, the Company has undertaken efforts to ensure that the Company’s incentive

compensation plans do not encourage inappropriate risks, consistent with the principles identified above.

In June 2010, the FRB, the Office of the Comptroller

of the Currency (the “OCC”) and the FDIC issued comprehensive final guidance on incentive compensation policies intended to

ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations

by encouraging excessive risk-taking.

The guidance, which covers all employees that have the ability to materially affect the risk profile

of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive

compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively

identify and manage risks, (ii) be compatible with effective internal controls and risk management and (iii) be supported by strong corporate

governance, including active and effective oversight by the organization’s board of directors.

These three principles are incorporated

into the proposed joint compensation regulations under the Dodd-Frank Act, described above.

The FRB and the OCC review, as part of their respective

regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as the Company and State

Bank, that are not “large, complex banking organizations.” These reviews are tailored to each organization based on the scope

and complexity of the organization’s activities and the prevalence of incentive compensation arrangements.

Deficiencies will be incorporated

into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions.

Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management

control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and

effective measures to correct the deficiencies.

Public company compensation committee members

must meet heightened independence requirements and consider the independence of compensation consultants, legal counsel and other advisors

to the compensation committee.

A compensation committee must have the authority to hire advisors and to have the public company fund reasonable

compensation of such advisors.

SEC regulations require public companies to provide

various disclosures about executive compensation in annual reports and proxy statements and to present to their shareholders a non-binding

vote on the approval of executive compensation.

Following the adoption of additional listing requirements

in 2023 to comply with the Dodd-Frank Act and rules adopted by the SEC in October 2022, public companies are now required to adopt and

implement “clawback” policies for incentive compensation payments and to disclose the details of the procedures which allow

recovery of incentive compensation that was paid on the basis of erroneous financial information necessitating a restatement due to material

noncompliance with financial reporting requirements.

This clawback policy is intended to apply to compensation paid within the three completed

fiscal years immediately preceding the date the issuer is required to prepare a restatement and would cover all executives who received

incentive awards.

The Company’s clawback policy adopted in accordance with these listing standards is included as Exhibit 97.

Consumer Protection Laws and Regulations

Banks are subject to regular examination to ensure

compliance with federal consumer protection statutes and regulations, including, but not limited to, the following:

Equal Credit Opportunity Act (prohibiting discrimination in any credit transaction on the basis of any of various criteria);

Truth in Lending Act (requiring that credit terms are disclosed in a manner that permits a consumer to understand and compare credit

terms more readily and knowledgeably);

Fair Housing Act (making it unlawful for a lender to discriminate in housing-related lending activities against any person on the basis

of certain criteria);

Home Mortgage Disclosure Act (requiring financial institutions to collect data that enables regulatory agencies to determine whether

financial institutions are serving the housing credit needs of the communities in which they are located);

Real Estate Settlement Procedures Act (requiring that lenders provide borrowers with disclosures regarding the nature and cost of real

estate settlements and prohibits abusive practices that increase borrowers’ costs);

provisions of the Gramm-Leach-Bliley Act (requiring financial institutions to establish policies and procedures to restrict the sharing

of non-public customer data with non-affiliated parties and to protect customer information from unauthorized access).

The banking regulators also use their authority

under the Federal Trade Commission Act to take supervisory or enforcement action with respect to unfair or deceptive acts or practices

by banks that may not necessarily fall within the scope of a specific banking or consumer finance law.

Financial Privacy Provisions

Federal and state regulations limit the ability

of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third parties.

These limitations

require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal

information to a non-affiliated third party.

These regulations affect how consumer information is transmitted through diversified financial

companies and conveyed to outside vendors.

State Bank is also subject to regulatory guidelines

establishing standards for safeguarding customer information.

These guidelines describe the federal bank regulatory agencies’ expectations

for the creation, implementation and maintenance of an information security program, which would include administrative, technical and

physical safeguards appropriate to the size and complexity of the institution and the nature and scope of its activities.

The standards

set forth in the guidelines are intended to ensure the security and confidentiality of customer records and information, protect against

any anticipated threats or hazards to the security or integrity of such records and protect against unauthorized access to or use of such

records or information that could result in substantial harm or inconvenience to any customer.

compensation plans do not encourage inappropriate risks.

June 2010, the FRB, the Office of the Comptroller of the Currency (the “OCC”) and the FDIC issued comprehensive final guidance

on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine

the safety and soundness of such organizations by encouraging excessive risk-taking.

The guidance, which covers all employees that have

the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key

principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking

beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk

management and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board

of directors.

These three principles are incorporated into the proposed joint compensation regulations under the Dodd-Frank Act, described

FRB and the OCC review, as part of their respective regular, risk-focused examination process, the incentive compensation

arrangements of banking organizations, such as the Company and State Bank, that are not “large, complex banking

organizations.” These reviews are tailored to each organization based on the scope and complexity of the organization’s

activities and the prevalence of incentive compensation arrangements.

Deficiencies will be incorporated into the organization’s

supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions.

Enforcement actions

may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or

governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective

measures to correct the deficiencies.

company compensation committee members must meet heightened independence requirements and consider the independence of compensation consultants,

legal counsel and other advisors to the compensation committee.

A compensation committee must have the authority to hire advisors and

to have the public company fund reasonable compensation of such advisors.

regulations require public companies to provide various disclosures about executive compensation in annual reports and proxy statements

and to present to their shareholders a non-binding vote on the approval of executive compensation.

the adoption of additional listing requirements in 2023 to comply with the Dodd-Frank Act and rules adopted by the SEC in October 2022,

public companies are now required to adopt and implement “clawback” policies for incentive compensation payments and to disclose

the details of the procedures which allow recovery of incentive compensation that was paid on the basis of erroneous financial information

necessitating a restatement due to material noncompliance with financial reporting requirements.

This clawback policy is intended to

apply to compensation paid within the three completed fiscal years immediately preceding the date the issuer is required to prepare a

restatement and would cover all executives who received incentive awards.

The Company’s clawback policy adopted in accordance with

these listing standards is included as Exhibit 97 to this Annual Report on Form 10-K.

Protection Laws and Regulations

are subject to regular examinations to ensure compliance with federal consumer protection statutes and regulations, including, but not

limited to, the following:

Equal Credit Opportunity Act (prohibiting discrimination in any credit transaction on the

basis of any of various criteria);

Truth in Lending Act (requiring that credit terms are disclosed in a manner that permits

a consumer to understand and compare credit terms more readily and knowledgeably);

Fair Housing Act (making it unlawful for a lender to discriminate in housing-related lending

activities against any person on the basis of certain criteria);

Home Mortgage Disclosure Act (requiring financial institutions to collect data that enables

regulatory agencies to determine whether financial institutions are serving the housing credit

needs of the communities in which they are located);

Real Estate Settlement Procedures Act (requiring that lenders provide borrowers with disclosures

regarding the nature and cost of real estate settlements and prohibits abusive practices

that increase borrowers’ costs);

provisions of the Gramm-Leach-Bliley Act (requiring financial institutions to establish policies

and procedures to restrict the sharing of non-public customer data with non-affiliated parties

and to protect customer information from unauthorized access).

banking regulators also use their authority under the Federal Trade Commission Act to take supervisory or enforcement action with respect

to unfair or deceptive acts or practices by banks that may not necessarily fall within the scope of a specific banking or consumer finance

Privacy Provisions

and state regulations limit the ability of banks and other financial institutions to disclose non-public information about consumers

to non-affiliated third parties.

These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow

consumers to prevent disclosure of certain personal information to a non-affiliated third party.

These regulations affect how consumer

information is transmitted through diversified financial companies and conveyed to outside vendors.

Bank is also subject to regulatory guidelines establishing standards for safeguarding customer information.

These guidelines describe

the federal bank regulatory agencies’ expectations for the creation, implementation and maintenance of an information security program,

which would include administrative, technical and physical safeguards appropriate to the size and complexity of the institution and the

nature and scope of its activities.

The standards set forth in the guidelines are intended to ensure the security and confidentiality

of customer records and information, protect against any anticipated threats or hazards to the security or integrity of such records

and protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience

to any customer.

Cybersecurity

In March 2015, federal regulators issued two related

statements regarding cybersecurity.

One statement indicates that financial institutions should design multiple layers of security controls

to establish several lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer

credentials, including security measures to reliably authenticate customers accessing Internet-based services of the financial institution.

The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning

processes to ensure the rapid recovery, resumption and maintenance of the financial institution’s operations after a cyber-attack

involving destructive malware.

A financial institution is also expected to develop appropriate processes to enable recovery of data and

business operations and address rebuilding network capabilities and restoring data if the financial institution or its critical service

providers fall victim to this type of cyber-attack.

If State Bank fails to observe the regulatory guidance, it could be subject to various

regulatory sanctions, including financial penalties.

In November 2021, the OCC, the FRB and the FDIC

issued a final rule, which became effective in May 2022, requiring banking organizations that experience a computer-security incident

to notify certain entities.

A computer-security incident occurs when actual or potential harm to the confidentiality, integrity, or availability

of an information system or the information occurs, or there is a violation or imminent threat of a violation to banking security policies

and procedures.

The affected bank must notify its respective federal regulator of the computer-security incident as soon as possible and

no later than 36 hours after the bank determines a computer-security incident that rises to the level of a notification incident has occurred.

These notifications are intended to promote early awareness of threats to banking organizations and will help banks react to those threats

before they manifest into larger incidents.

This rule also requires bank service providers to notify their bank organization customers

of a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption or degradation for four

or more hours.

Furthermore, the Cyber Incident Reporting for

Critical Infrastructure Act, enacted in March 2022, will require, once administrative rules are adopted, certain covered entities, including

those in the financial services industry, to report a covered cyber incident to the U.S.

Department of Homeland Security’s Cybersecurity

& Infrastructure Security Agency (“CISA”) within 72 hours after a covered entity reasonably believes an incident has occurred.

Separate reporting to CISA will also be required within 24 hours if a ransom payment is made as a result of a ransomware attack.

State regulators have also been increasingly active

in implementing privacy and cybersecurity standards and regulations.

Recently, several states have adopted regulations requiring certain

financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including

data encryption requirements.

Many states have also recently implemented or modified their data breach notification and data privacy requirements.

The Company expects this trend of state-level activity in those areas to continue and is continually monitoring developments in the states

in which our customers are located.

On July 26, 2023, the SEC adopted final rules

that require public companies to promptly disclose material cybersecurity incidents in Current Reports on Form 8-K and detailed information

regarding their cybersecurity risk management, strategy, and governance on an annual basis in their Annual Reports on Form 10-K.

March 2015, federal regulators issued two related statements regarding cybersecurity.

One statement indicates that financial institutions

should design multiple layers of security controls to establish several lines of defense and to ensure that their risk management processes

also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing

Internet-based services of the financial institution.

The other statement indicates that a financial institution’s management is

expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the

financial institution’s operations after a cyber-attack involving destructive malware.

A financial institution is also expected

to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring

data if the financial institution or its critical service providers fall victim to this type of cyber-attack.

If State Bank fails to

observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.

November 2021, the OCC, the FRB and the FDIC issued a final rule, which became effective in May 2022, requiring banking organizations

that experience a computer-security incident to notify certain entities.

A computer-security incident occurs when actual or potential

harm to the confidentiality, integrity, or availability of an information system or the information occurs, or there is a violation or

imminent threat of a violation to banking security policies and procedures.

The affected bank must notify its respective federal regulator

of the computer-security incident as soon as possible and no later than 36 hours after the bank determines a computer-security incident

that rises to the level of a notification incident has occurred.

These notifications are intended to promote early awareness of threats

to banking organizations and will help banks react to those threats before they manifest into larger incidents.

This rule also requires

bank service providers to notify their bank organization customers of a computer-security incident that has caused, or is reasonably

likely to cause, a material service disruption or degradation for four or more hours.

the Cyber Incident Reporting for Critical Infrastructure Act, enacted in March 2022, will require, once administrative rules are adopted,

certain covered entities, including those in the financial services industry, to report a covered cyber incident to the U.S.

of Homeland Security’s Cybersecurity & Infrastructure Security Agency (“CISA”) within 72 hours after a covered

entity reasonably believes an incident has occurred.

Separate reporting to CISA will also be required within 24 hours if a ransom payment

is made as a result of a ransomware attack.

regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.

Recently, several

states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements

with respect to these programs, including data encryption requirements.

Many states have also recently implemented or modified their

data breach notification and data privacy requirements.

The Company expects this trend of state-level activity in those areas to continue

and is continually monitoring developments in the states in which our customers are located.

July 26, 2023, the SEC adopted final rules that require public companies to promptly disclose material cybersecurity incidents in

Current Reports on Form 8-K and detailed information regarding their cybersecurity risk management, strategy, and governance on an

annual basis in their Annual Reports on Form 10-K.

CYBERSECURITY.

Public companies are now required to report on Form 8-K any cybersecurity incident they determine to be material

within four business days of making that determination.

These SEC rules, and related regulatory guidance, are in addition to notification

and disclosure requirements under state and federal banking laws and regulations.

In the ordinary course of business, the Company

relies on electronic communications and information systems to conduct its operations and to store sensitive data.

The Company employs

an in-depth, layered, defensive approach that leverages people, processes and technology to manage and maintain cybersecurity controls.

The Company employs a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity,

as well as to report on any suspected advanced persistent threats.

The Company also regularly invests in new products and technology to

further enhance these tools and mechanisms.

Notwithstanding the strength of the Company’s defensive measures, the threat from cyber-attacks

is severe, attacks are sophisticated and increasing in volume, and attackers respond rapidly to changes in defensive measures.

date, the Company has not detected a significant compromise, significant data loss or any material financial losses related to cybersecurity

attacks, the Company’s systems and those of its customers and third-party service providers are under constant threat and it is

possible that the Company could experience a significant event in the future.

Risks and exposures related to cybersecurity attacks are

expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as

due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.

Effect of Environmental Regulation

Compliance with federal, state and local provisions

regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a

material effect upon the capital expenditures, earnings or competitive position of the Company.

The Company believes that the nature

of its operations has little, if any, environmental impact.

The Company, therefore, anticipates no material capital expenditures for

environmental control facilities for its current fiscal year or for the near future.

The Company may be required to make capital expenditures

for environmental control facilities related to properties which they may acquire through foreclosure proceedings in the future;

the amount of such capital expenditures, if any, is not currently determinable.

Effects of Government Monetary Policy

The earnings of the Company are affected by general

and local economic conditions and by the policies of various governmental regulatory authorities.

In particular, the FRB regulates money

and credit conditions and interest rates to influence general economic conditions, primarily through open market acquisitions or dispositions

of United States Government securities, varying the discount rate on member bank borrowings and setting reserve requirements against member

and nonmember bank deposits.

FRB monetary policies have had a significant effect on the interest income and interest expense of commercial

banks, including State Bank, and are expected to continue to do so in the future.

Human Capital Resources

Our employees are vital to our success in the

financial services industry.

As a human-capital intensive business, the long-term success of our company depends on our people.

is to ensure that we have the right talent, in the right place, at the right time.

We do that through our commitment to attracting, developing

and retaining our employees.

We strive to attract individuals who are people-focused

and share our values.

We have a comprehensive program dedicated to selecting new talent and enhancing the skills of our employees.

our recruiting efforts, we strive to have a diverse group of candidates to consider for our roles.

We have designed a compensation structure that

we believe is attractive to our current and prospective employees.

We also offer our employees the opportunity to participate in a variety

of professional and leadership development programs.

Our programs include a variety of industry, product, technical, professional, business

development, leadership and regulatory topics.

Public companies are now required to report on Form

8-K any cybersecurity incident they determine to be material within four business days of making that determination.

rules, and related regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking

laws and regulations.

the ordinary course of business, the Company relies on electronic communications and information systems to conduct its operations and

to store sensitive data.

The Company employs an in-depth, layered, defensive approach that leverages people, processes and technology

to manage and maintain cybersecurity controls.

The Company employs a variety of preventative and detective tools to monitor, block, and

provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats.

The Company also regularly

invests in new products and technology to further enhance these tools and mechanisms.

Notwithstanding the strength of the Company’s

defensive measures, the threat from cyber-attacks is severe, attacks are sophisticated and increasing in volume, and attackers respond

rapidly to changes in defensive measures.

While to date, the Company has not detected a significant compromise, significant data loss

or any material financial losses related to cybersecurity attacks, the Company’s systems and those of its customers and third-party

service providers are under constant threat and it is possible that the Company could experience a significant event in the future.

and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature

and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based

products and services by us and our customers.

of Environmental Regulation

with federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection

of the environment, has not had a material effect upon the capital expenditures, earnings or competitive position of the Company.

Company believes that the nature of its operations has little, if any, environmental impact.

The Company, therefore, anticipates no material

capital expenditures for environmental control facilities for its current fiscal year or for the near future.

The Company may be required

to make capital expenditures for environmental control facilities related to properties which they may acquire through foreclosure proceedings

in the future;

however, the amount of such capital expenditures, if any, is not currently determinable.

of Government Monetary Policy

earnings of the Company are affected by general and local economic conditions and by the policies of various governmental regulatory

In particular, the FRB regulates money and credit conditions and interest rates to influence general economic conditions,

primarily through open market acquisitions or dispositions of United States Government securities, varying the discount rate on member

bank borrowings and setting reserve requirements against member and nonmember bank deposits.

FRB monetary policies have had a significant

effect on the interest income and interest expense of commercial banks, including State Bank, and are expected to continue to do so in

Capital Resources

employees are vital to our success in the financial services industry.

As a human-capital intensive business, the long-term success of

our company depends on our people.

Our goal is to ensure that we have the right talent, in the right place, at the right time.

that through our commitment to attracting, developing and retaining our employees.

strive to attract individuals who are people-focused and share our values.

We have a comprehensive program dedicated to selecting new

talent and enhancing the skills of our employees.

In our recruiting efforts, we strive to have a diverse group of candidates to consider

for our roles.

have designed a compensation structure that we believe is attractive to our current and prospective employees.

We also offer our employees

the opportunity to participate in a variety of professional and leadership development programs.

Our programs include a variety of industry,

product, technical, professional, business development, leadership and regulatory topics.

These programs are available online and in-person.

In addition, we encourage all employees

to be involved in the communities we serve through various volunteer activities.

We seek to retain our employees by using their

feedback to create and continually enhance programs that support their needs.

We use company-wide surveys to solicit feedback from our

In addition, we encourage all employees to be involved in the communities we serve through various volunteer activities.

seek to retain our employees by using their feedback to create and continually enhance programs that support their needs.

We use company-wide

surveys to solicit feedback from our employees.

We have a formal annual goal setting and performance review process for our employees.

We promote a values-based culture, an

important factor in retaining our employees.

Our training, to share and communicate our culture to all employees, plays an important part

in this process.

We are committed to having a diverse workforce, and an inclusive work environment is a natural extension of our culture.

We are committed to ensuring that all our employees feel welcomed, valued, respected and heard so that they can fully contribute their

unique talents for the benefit of our customers, their careers, our company and our communities.

We monitor and evaluate various turnover and attrition

metrics throughout our organization.

Our annualized voluntary turnover is relatively low, as is the case for turnover of our top performers,

a record which we attribute to our strong values-based culture, commitment to career development, and attractive compensation and benefit

At December 31, 2024, the Company employed approximately

252 full-time equivalent employees to whom a variety of benefits are provided.

Management considers its relationship with its employees

We promote a values-based culture, an important factor in retaining our employees.

Our training, to share and communicate our culture

to all employees, plays an important part in this process.

We are committed to having a diverse workforce, and an inclusive work environment

is a natural extension of our culture.

We are committed to ensuring that all our employees feel welcomed, valued, respected and heard

so that they can fully contribute their unique talents for the benefit of our customers, their careers, our company and our communities.

monitor and evaluate various turnover and attrition metrics throughout our organization.

Our annualized voluntary turnover is relatively

low, as is the case for turnover of our top performers, a record which we attribute to our strong values-based culture, commitment to

career development, and attractive compensation and benefit programs.

December 31, 2025, the Company employed approximately 254 full-time equivalent employees to whom a variety of benefits are provided.

Management considers its relationship with its employees to be good.

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-K

Item 1. Business